Research shows that consumers and employees win more money, more often, and more quickly in traditional arbitration than in litigation. It’s why plaintiffs’ lawyers don’t like arbitration—they don’t make as much money as they would through class action lawsuits. Unfortunately, opportunistic plaintiffs’ lawyers have found a workaround by taking some of the most abusive parts of the class action system to create “mass arbitrations.”
Recent ILR research lays out the serious ethical problems of mass arbitrations and suggests that state bar associations look into any potential violations.
One group, the Civil Justice Association of California (CJAC), is asking the State Bar of California to do just that. In a letter dated July 6, CJAC outlines how mass arbitrations could lead to potential ethical violations and urges the California Bar to launch an investigation into these issues that have been raised from reports about publicly disclosed mass arbitrations, almost all of which include arbitration demands or threatened arbitration demands involving California claimants or defendants.
Here are some of the potential ethical violations addressed in the letter:
Failure to Vet Claims
Since complaints or arbitration demands and threats to file them make factual assertions about a client’s claim at the time of filing, lawyers are required to investigate and disclose whether their clients are legitimate claimants. Businesses have alleged that they have faced arbitration demands or threatened arbitration demands that have not been properly vetted by plaintiffs’ attorneys.
Failure to Convey Settlement Communications and Offers
When lawyers claim to represent thousands of individual clients in mass arbitration filings, they are potentially unable to meet their ethical obligations to communicate with each of their individual clients. For example, ethics rules require lawyers to notify clients promptly of all settlement offers. There is reason to doubt that at least some lawyers threatening or filing mass arbitration filings are engaging in the thousands—or even tens or hundreds of thousands—of individualized communications needed to meaningfully convey and discuss settlement offers with each of their clients.
Unauthorized Practice of Law
Regardless of where an attorney is licensed to practice, some lawyers still file claims or solicit consumers across the country, including in California, to maximize the number of arbitrations they can threaten to file. This approach is highly likely to result in the unauthorized practice of law. Many states do not permit law firms to prepare or file arbitration demands or negotiate settlements on behalf of claimants who live in states where their lawyers are not admitted to practice. For example, California’s Out-of-State Attorney Arbitration Counsel (OSAAC) program requires the out-of-state attorney to associate with a California attorney, complete an application process for each arbitration taking place in California, and obtain the arbitrator’s approval.
Mass arbitration benefits only one group—plaintiffs’ lawyers—instead of the groups arbitration is intended to serve—employees, consumers, and businesses.
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