Corporate America’s Favorite Legal Trick Is Backfiring (Arbitration)

Victims of corporate malfeasance are turning to mass arbitration because it offers a way to force companies to pay up for their misdeeds — and, in a world where many companies forbid customers and employees from suing them, it is often the only way to do so.

This new grassroots strategy suggests that corporate America’s favorite trick of using arbitration rules to avoid liability could be losing some of its potency. This legal tactic was further watered down earlier this week, when the Supreme Court unanimously ruled that companies could lose their right to arbitrate if they fail to invoke that privilege in a timely manner.

The costs and fees associated with responding to a single arbitration claim are not particularly high. But when a company is hit with tens of thousands of such claims at once, they mount quickly. Faced with tens or even hundreds of millions of dollars in fees, many companies choose to settle out of court, or permit a class action lawsuit against them instead, leading to hundreds of millions of dollars in restitution for wronged customers and employees over the past several years.

“What we’ve been seeing, and may continue to see, is relatively quick resolutions of claims with claimants reporting receiving something along the lines of what they thought they were owed,” said Georgetown Law School professor Maria Glover, an expert in mandatory arbitration law.

A few law firms, most prominently the Chicago-based Keller Postman, started filing thousands of arbitration claims against Peloton, Family Dollar, TurboTax, and other major companies employing mandatory arbitration agreements.

Jacobinmag Corporate America’s Favorite Legal Trick Is Backfiring