A recent lawsuit filed by Fox Corp. subsidiary Tubi against Keller Postman LLC highlights the pressing issues surrounding the practice of mass arbitration. This case exemplifies the urgent need for reforms to address the growing concerns associated with mass arbitration tactics that undermine the integrity of the legal system.
As we have highlighted before, mass arbitration has emerged as a strategy where plaintiffs’ law firms file thousands of arbitration demands simultaneously on behalf of individuals against a single company. While arbitration was designed to be a streamlined alternative to court litigation, providing a faster and less expensive way to resolve disputes, the mass arbitration approach has distorted this purpose. The lawsuit alleges that Keller Postman LLC engaged in unethical practices by filing nearly 24,000 arbitration demands without proper vetting and in breach of contractual agreements, aiming to leverage the threat of substantial upfront fees to coerce settlements.
These allegations illustrate the various problems with mass arbitration. Firstly, it encourages the filing of meritless or frivolous claims, as law firms may not conduct even the most basic investigation into each individual case due to the sheer volume of claims. This not only burdens the arbitration system but also damages the reputations and financial standing of businesses with baseless claims.
Secondly, mass arbitration can create conflicts of interest between attorneys and their clients. In the pursuit of quick settlements, law firms may prioritize their financial gain over the best interests of the individuals they represent. This can result in resolutions where individual claimants’ circumstances and the merits of their cases are not adequately considered, potentially leading to unfair outcomes for those claimants.
Thirdly, mass arbitration can result in significant additional costs to consumers as companies face millions of dollars in non-refundable arbitration fees. The prospect of having to pay such fees can force companies to settle claims regardless of their validity, effectively turning arbitration into a tool for extortion rather than a means of fair dispute resolution – like the problems associated with class actions. Consumers ultimately pay the costs to settle frivolous claims in the form of higher prices for goods and services.
To mitigate these problems, reforms are necessary. One potential reform is the implementation of stricter ethical guidelines for attorneys engaging in mass arbitration to ensure that each claim is properly vetted and that the interests of individual claimants are adequately represented.
Additionally, arbitration providers could further revise their fee structures and rules to prevent the exploitation of the system by discouraging the filing of large volumes of claims without proper basis. Two of the largest arbitration providers, the American Arbitration Association and JAMS recently made some limited changes to attempt to address mass arbitrations, but more should be done.
Another reform could involve the introduction of a bellwether or batching process, modeled on the multidistrict litigation process, where a small number of representative cases are selected for arbitration first. The outcomes of these cases can then inform the resolution of remaining claims, ensuring that each case is evaluated on its merits and reducing the incentive for law firms to file large numbers of unsubstantiated claims.
Tubi’s lawsuit against Keller Postman LLC serves as a stark reminder of the urgent need to address the abuses of mass arbitration. It is imperative that the legal community and policymakers work together to preserve the integrity of arbitration as a fair and efficient dispute resolution mechanism rather than allow it to be turned into the latest extortionate version of jackpot justice. We must ensure that arbitration remains a viable option for individuals and businesses alike, without becoming a tool for manipulation and coercion.
