PAGA Plaintiffs Cannot Avoid Arbitration by Bringing a “Headless PAGA Lawsuit”
California’s Private Attorneys General Act (PAGA)[1] allows “aggrieved employees” to sue their employers for Labor Code violations to collect civil penalties “on behalf of himself or herself and other current or former employees.” The issue of how to resolve PAGA claims where the employee and employer are subject to a binding arbitration agreement has been hotly contested over the last several years, as reported many times in this blog [see here, here, and here].
Until recently, the latest contention in the longstanding PAGA saga was whether the appellate decision in Balderas v. Fresh Start Harvest, Inc.[2] gave the green light for plaintiffs to pursue “headless” PAGA claims—where a plaintiff asserts a PAGA action solely on behalf of other employees, purporting to abandon their individual PAGA claim for civil penalties arising out of alleged violations against the plaintiff. Despite the obvious problems with this theory, many plaintiffs bringing PAGA lawsuits adopted this strategy in an effort to sidestep their obligation to arbitrate their individual PAGA claims before being allowed to pursue non-individual claims in court.
However, on December 30, 2024, the California Court of Appeal for the Second Appellate District published an opinion that is favorable to employers. In Leeper v. Shipt, Inc. et al.[3]the Court concluded that based on the unambiguous language of the PAGA statute, every PAGA action necessarily contains both an individual and non-individual PAGA claim, regardless of whether the plaintiff attempts to disavow their own individual PAGA claim. This means that a non-individual PAGA claim cannot exist without its individual companion, and plaintiffs cannot utilize this strategy to avoid arbitration.
Landmark Supreme Court Decisions Addressing PAGA and Arbitration Agreements
Prior to 2022, where there was an otherwise enforceable arbitration agreement, California courts generally would not allow PAGA claims to be divided into individual and non-individual claims, making it difficult to compel PAGA claims to arbitration. In 2022, the U.S. Supreme Court held in Viking River[4]that California’s rule prohibiting arbitration of individual PAGA claims violated the Federal Arbitration Act (FAA). The Court in Viking River further held that an employer can enforce an arbitration agreement in a PAGA action by dividing individual and non-individual PAGA claims and compelling arbitration as to the individual PAGA claim. Viking River defined an “individual PAGA claim” as a claim for civil penalties arising from alleged Labor Code violations committed specifically against the named plaintiff or plaintiffs.[5]
The following year, the California Supreme Court adhered to this precedent in Adolph v. Uber,[6] finding that “individual” PAGA claims are subject to arbitration. Significantly, Adolph held that under the statutory definition of “aggrieved employee,” a PAGA plaintiff whose individual PAGA claims are compelled to arbitration does not lose standing to assert non-individual PAGA claims in court.
Balderas and the Emergence of “Headless” PAGA Lawsuits
On the hunt for a means to avoid arbitrating the issue of whether a plaintiff is an aggrieved employee through an issue preclusive arbitration award on their individual PAGA claim, over the last nine months, there has been a noticeable uptick in plaintiffs purporting to abandon their individual PAGA claims—i.e., the headless PAGA action. The impetus for this strategy is the California Court of Appeal’s March 2024 decision in Balderas v. Fresh Start Harvest, Inc.[7]
In Balderas, an agricultural worker attempted to avoid an arbitration agreement by alleging PAGA claims in a non-individual capacity only. The plaintiff’s complaint alleged that she was “not suing in her individual capacity; she is proceeding herein solely under the PAGA, on behalf of the State of California for all aggrieved employees, including herself and other aggrieved employees.”[8] The trial court, on its own motion, struck the complaint because the employee “had not filed an individual action seeking PAGA relief for herself” and therefore lacked standing to pursue a non-individual PAGA claim.[9]
Addressing only PAGA’s standing provisions, the Balderas court reversed, holding that “an employee who does not bring an individual claim against her employer may nevertheless bring a PAGA action for herself and other employees of the company.”[10] In dicta, the court stated that the “inability for an employee to pursue an individual PAGA claim does not prevent that employee from filing a representative PAGA action.”[11]
Many plaintiffs latched onto this language, using it to formulate an argument that a PAGA plaintiff can side-step arbitration entirely by forfeiting their individual PAGA claim and proceeding entirely on behalf of non-party employees.
The Leeper Decision
On December 30, 2024, the Second Appellate District handed down a decision in Leeper[12] that unambiguously rejected the “headless” PAGA theory.
In Leeper, the plaintiff, an independent contractor, sued the company Shipt, Inc., alleging that her PAGA suit was brought as a “PAGA action on a representative, non-individual basis” and “in [her] representative capacity as an aggrieved employee on behalf of the [s]tate and all similarly aggrieved individuals subjected to the [alleged] violations.” Shipt petitioned to compel arbitration of the plaintiff’s individual PAGA claim pursuant to the parties’ binding arbitration agreement, but the trial court denied Shipt’s petition on the basis that plaintiff did not pursue an individual PAGA claim and thus there was no arbitrable claim.
The Second District Court of Appeal, however, reversed and found that the unambiguous statutory language in Labor Code § 2699(a) requires that “any PAGA action necessarily includes both an individual PAGA claim and a representative [non-individual] PAGA claim.” (emphasis added).[13] The Court disagreed with plaintiff’s reading of the statute, which would require it to either ignore the plain language of the statute authorizing PAGA suits to be “brought by an aggrieved employee on behalf of the employee and other current or former employees” (emphasis added), or, it would require the court to read the statute’s “and” as “and/or.” The Court found that doing either would be contrary to fundamental tenants of statutory construction, namely, that courts assign the statute’s words their usual and ordinary meaning. Further supporting its interpretation, the Court recognized that legislative history shows that the Legislature deliberately chose the word “and” in the statutory description of a PAGA action and rejected the word “or” which phrased the language in the disjunctive.
The Leeper court explained further that Balderas “addresses only PAGA standing issues and thus relies only on section 2699(c)(1)’s definition of ‘aggrieved employee,’”[14] not the language of section 2699(a) requiring PAGA actions to be brought “on behalf of the employee and other current or former employees.” (emphasis added). Thus, Balderas “did not have occasion to discuss, did not discuss, and its holding does not address, whether a plaintiff may carve out an individual PAGA claim from a PAGA action.”[15] The Leeper court held that to the extent language in Balderas “may suggest the Court of Appeal accepted the plaintiff’s and trial court’s characterization of PAGA claims as capable of being asserted on behalf of aggrieved employees other than the named plaintiff,” that discussion is dicta. As a result, even though the plaintiff’s complaint eschewed all individual PAGA claims and sought “non-individual civil penalties” only, the trial court was required to compel arbitration of plaintiff’s individual PAGA claim and stay litigation of the non-individual PAGA claim.[16]
Takeaways
Other appellate courts have been grappling with the same issues present in Balderas and Leeper, setting the stage for potential California Supreme Court review. In Sood Enterprises,[17] Garcia,[18]and Barnett,[19] the Second Appellate District and Fourth Appellate District are poised to rule on the issues decided in Leeper and Balderas.
Importantly, Balderas was decided prior to significant amendments to the PAGA statute that came into effect in June 2024 (as discussed on our blog here). These reforms heighten the showing required for plaintiffs to demonstrate standing in a PAGA case, and apply to PAGA claims made on or after June 19, 2024, but not to claims based on PAGA notices submitted to the Labor and Workforce Development Agency before June 19, 2024. In light of these amendments, the “headless” PAGA actions are likely a fleeting phenomenon.
Still, Leeper should be viewed as a notable and positive development for California employers, especially those who have recently drafted arbitration agreements to conform to the PAGA amendments. Leeper could be an indication of the impending consensus and signal an end to the “headless” PAGA action. Employers facing these PAGA claims should continue to watch the developments in this area to see if greater clarity is afforded from the Courts of Appeal, or if the California Supreme Court takes it up for review.
FOOTNOTES
[1] Cal. Lab. Code §2698 et seq.
[2] Balderas v. Fresh Start Harvesting, Inc., 101 Cal.App.5th 533 (2024).
[3] Leeper v. SHIPT, Inc., 2024 WL 5251619, Cal.App. 2 Dist., No. B339670.
[4] Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022).
[5] Id. at 649.
[6] Adolph v. Uber Technologies, 14 Cal.5th 1104 (2023).
[7] Balderas v. Fresh Start Harvesting, Inc., 101 Cal.App.5th 533 (2024).
[8] Id. at 536.
[9] Id.
[10] Id.
[11] Id. at 537.
[12] Leeper v. SHIPT, Inc., 2024 WL 5251619, Cal.App. 2 Dist., No. B339670.
[13] Id. at *1.
[14] Id. at *6.
[15] Id.
[16] Id.
[17] Sood Enterprises, Inc. v. Medina, 2024 WL 4286386, Cal. App. 2 Dist., No. B333390.
[18] Garcia v. Omni Hotels Management Corporation, 2024 WL 3843700, Cal. App. 4 Dist., No. D084151.
[19] Barnett v. First American Home Warranty Corporation, 2024 WL 4820844, Cal. App. 4 Dist., No. D084315.
Abu Dhabi Court of Cassation Reiterates the Exceptional Nature of Arbitration Agreements
Introduction
A recent judgment from the Abu Dhabi Court of Cassation (Court of Cassation) in Case No. 902 of 2024 (issued on 23 December 2024) reiterates the importance of ensuring that a signatory to a contract containing an arbitration agreement has specific authority to bind the company to arbitration.
Background
An award debtor filed proceedings in the Abu Dhabi Court of Appeal (Court of Appeal) seeking to set aside an arbitral award issued in an arbitration under the rules of the Abu Dhabi Commercial and Conciliation Centre (an institution that has since been reorganized and renamed as the Abu Dhabi International Arbitration Centre) on the basis that the signatory to the agreement, the award debtor’s chief executive officer (CEO), was not authorised to bind the company to arbitration. The award debtor argued that, as it is a public joint stock company (PJSC), only an authorized signatory can bind the company to arbitration. The company’s Articles of Association authorized the Chairman of the Board of Directors to enter into arbitration agreements on behalf of the company. However, there was no express delegation of those powers to the CEO. The Court of Appeal dismissed the claim and upheld the validity of the arbitral award. The award debtor appealed this decision to the Court of Cassation.
Judgment of the Court of Cassation
The Court of Cassation accepted the appeal and set aside the arbitration award on the basis that the arbitration agreement was void. The Court of Cassation held that it was a matter of public order (which can be invoked by a party at any time or by the court on its own volition) that an arbitration agreement shall only be valid if it fulfils the mandatory requirements set by the legislature. In addition to the requirement for the arbitration agreement to be in writing (Article 7(1) of UAE Federal Law No. 6 of 2018 (UAE Arbitration Law)), the Court of Cassation emphasised that signatories to an arbitration agreement must have the necessary legal capacity to bind the respective party to arbitration. This requirement is reflected in Article 4 of the UAE Arbitration Law, which provides that an arbitration agreement may only be entered into by a representative of a corporate entity who is authorized to conclude the arbitration agreement, or, otherwise, the arbitration agreement shall be null and void. The Court of Cassation also noted that a deficiency in the signatory’s authorisation could not be remedied by demonstrating that an authorised representative of the corporate entity had participated in the arbitration, as the requirement in Article 4 relates to execution of the arbitration agreement and not what occurred thereafter. Similarly, general rules (such as those relating to a principal’s subsequent ratification of an act performed by an agent outside of the agent’s scope) do not apply as this is a special rule that is specific to arbitration agreements.
Analysis
This judgment confirms that a representative of a PJSC must have clear and specific authority to enter into an arbitration agreement on behalf of the company. It also serves as a reminder of the importance of ensuring, upon execution of a contract, that the parties’ signatories have authority to bind the company to arbitration and not simply authority to enter into the contract.
Breaking Down the Good Samaritan Act: What It Means for Hardrock Mine Remediation
In December 2024, the Good Samaritan Remediation of Abandoned Hardrock Mines Act became law. Lauded by the National Mining Association as “the final step in securing a key solution to tackle the long-overdue cleanup of legacy abandoned mine sites,” the Good Samaritan Act is the culmination of 25 years of effort and interest in addressing these legacy sites.
But as much as it may be a final step, it is also just the beginning. In an effort to incentivize cleanups long discouraged by potential Clean Water Act and CERCLA liability and to streamline the complex and time-consuming bureaucratic process to address abandoned mine sites, the Act establishes a pilot program for permitting cleanup in carefully delineated circumstances. Whether the Act’s testing grounds prove a broader, and perhaps even more streamlined, Good Samaritan program can be effective remains to be seen.
Sites Eligible for Cleanup
The Act limits “abandoned hardrock mine sites” eligible for Good Samaritan permits to sites:
On federal or non-federal land used for the production of minerals other than coal; and
Where no responsible owner or operator has been identified who is potentially liable for remediation activities under applicable law.
Sites that were previously subject to a completed response action under CERCLA or similar Federal or state cleanup and reclamation program are eligible, but sites with planned or ongoing response actions are excluded. Also excluded are mines sites:
In temporary shutdown or cessation;
Listed on the CERCLA National Priorities List;
Where there is a responsible owner or operator; or
Where active mining or mineral processing occurred after December 11, 1980.
Good Samaritan Defined
A “Good Samaritan” under the Act means a person who is not a past or current owner or operator of the abandoned hardrock mine site (or a portion of the site) and had no role in the creation of the historic mine residue. Anyone potentially liable under federal, state, tribal, or local law for remediation, treatment, or control of the historic mine residue is not eligible for a Good Samaritan permit.
Permit Mechanics
The Act establishes a pilot program that allows for the issuance of 15 Good Samaritan permits and sunsets in 7 years from the date of the law’s enactment. Permit applications are submitted to the EPA and must include (among other things) a description of baseline conditions caused by historic mine residue, a remediation plan, detailed engineering plans, and plans for monitoring to determine the success of the remediation activities. Applicants must be able to demonstrate that they have the financial resources to carry out the remediation, or are able to secure third-party financial assurance, to ensure the work is completed and carry out any long-term operations and maintenance of remediation activities.
Benefits of a Good Samaritan Permit
To incentivize Good Samaritan cleanups, the Act provides important benefits to permittees:
No Clean Water Act permitting. Permittees do not need to obtain certain Clean Water Act permits, including discharge permits under Sections 402 or 404 of the Clean Water Act. Permitting can be a lengthy and complex process. This provision will save permittees considerable time and process in pursuing cleanup activities.
CWA and CERCLA liability protections. During the life of a Good Samaritan permit and after the permit’s termination, Good Samaritans are considered to be in compliance with the Clean Water Act and CERCLA for remediation activities authorized by the permit. These protections also extend to any past, present, or future releases or discharges from the permitted site. These protections do not apply if a permittee fails to comply with the permit and makes environmental conditions worse than baseline conditions at the site.
Grant funding. Good Samaritans are eligible for grant funding under the Clean Water Act and CERCLA for permitted remediation activities.
Practical Considerations
The Act doesn’t remove all practical difficulties in pursuing cleanups at abandoned hardrock mine sites. A Good Samaritan must still put in the effort to identify any responsible owners or operators and make a demonstration to the EPA that no such entity exists. Additionally, the issuance of a Good Samaritan permit is considered a major federal action under the National Environmental Policy Act (“NEPA”). That means EPA will need to go through the steps of preparing an environmental assessment under NEPA and determining if the action requires an environmental impact statement.
It is also worth noting that Good Samaritan permits do not allow mining or exploration at the site. A permittee can reprocess materials recovered only if the land is owned by the U.S. and proceeds from reprocessing are used to defray costs of remediation with the remainder going into the Good Samaritan Mine Remediation Fund established by the Act (for use by federal land management agencies and the EPA).
Court Holds That Mental Competence Claims Regarding the Execution of Documents Containing Arbitration Clauses Should Be Determined in Arbitration
In In re Est. of Moncrief, certain parties alleged that the decedent was mentally incompetent, was unduly influenced, and was defrauded into executing certain documents that contained arbitration clauses. 699 S.W.3d 315 (Tex. App—Fort Worth 2024, pet. filed). The trial court held that the capacity issues should be resolved by the trial court, and the arbitrations were stayed and the opposing parties were enjoined from pursuing the arbitrations. The court of appeals reversed, holding that those claims should be decided in arbitration.
The court discussed the law regarding challenging arbitration clauses:
If the challenge is to the validity of a broader contract (container contract) but not to the arbitration provision contained within the container contract, then courts must enforce the arbitration agreement and require the arbitrator to decide the validity or scope of the arbitration agreement. However, if a party challenges the scope or validity of an arbitration provision within a container contract, courts generally resolve the issue of whether the parties agreed to arbitrate the controversies. An exception to this rule exists when parties to an agreement agree to arbitrate disputes in accordance with third-party arbitration rules that provide that the arbitrator has the power to determine the arbitrability of any claim. In such a case, the parties are considered to have “clearly and unmistakably” intended to delegate arbitrability issues to the arbitrator.
Id. The court held that the incapacity issues in the case were defensive issues to the entire contact, not just the arbitration clause, and that the arbitrators should determine those issues, not the trial court:
Based on clear precedent from both Texas and Delaware, we hold that the arbitration agreement in the MPA clearly and unmistakably delegated arbitrability to the arbitrator, not the court. Despsite Moncrief Partners’ and CBM’s dismissals from the case when their interventions were struck, Appellants, as facially designated Trustees of Management Trust, were still parties to the MPA arbitration with Moncrief Partners and CBM that was based on an arbitration provision in the MPA.8 Tex’s capacity issues, as defenses to Appellants’ status as rightful Trustees with authority to bring the arbitration claims on behalf of Management Trust, were defenses to MPA (the container contract)—not the arbitration provision—and were for the arbitrator to decide.
Id. The court addressed three different documents and held that the incorporation of AAA rules meant that the arbitrators should determine competence claims.
There was a dissenting justice, who would have held that the mental competence and undue influence claims should be determined by the trial court and not referred to arbitration:
I would affirm the rulings of the statutory probate court in all respects because the mental incapacity of a contracting party is a contract formation defense, not a merits defense, and a question for adjudication by a court, not an issue of arbitrability for an arbitrator. Sousa v. Goldstein Faucett & Prebeg, LLP, No. 14-20-00484-CV, 2022 Tex. App. LEXIS 5277, 2022 WL 2976820, at *5 (Tex. App.—Houston [14th Dist.] July 28, 2022, no pet.) (mem. op.) (“The supreme court has concluded that the issue of mental incapacity is for the court to decide rather than the arbitrator, because it is a formation defense calling into question the very existence of a contract.” (citing In re Morgan Stanley & Co., 293 S.W.3d 182, 189-90 (Tex. 2009) (orig. proceeding)); Sanders v. Sanders, No. 02-08-00201-CV, 2010 Tex. App. LEXIS 8308, 2010 WL 4056196, at *1 (Tex. App.—Fort Worth Oct. 14, 2010, no pet.) (mem. op.) (“Mental incapacity is a common law contract formation defense.”). Moreover, as I observed in Moncrief, the testamentary capacity of the decedent, William Alvin “Tex” Moncrief, Jr., was the subject of litigation in the probate courts and no party has yet argued that “his testamentary capacity is meaningfully different from his capacity to contract during the same time frame.” Moncrief, 672 S.W.3d at 174 n.6. Because the majority’s arbitrability holding deprives the statutory probate court of its exclusive jurisdiction to probate the last will and testament of the decedent—and thereby to adjudicate whether he lacked testamentary capacity or, alternatively, was subject to undue influence at the time of its execution—I would additionally hold that, as a matter of law, the questions of testamentary capacity and undue influence cannot be the subject of arbitration but must always be determined by a court with probate jurisdiction.
Id.
Employment Law This Week – PAGA in California, NLRB Authority, New Employment Laws in 2025 [Video, Podcast]
This week, while recognizing that it’s far from “business as usual” in California and keeping our friends and clients in mind, we look at a new ruling in California regarding Private Attorneys General Act (PAGA) arbitrations.
We also examine a federal appeals court decision limiting the authority of the National Labor Relations Board (NLRB) and the flurry of new employment laws taking effect in 2025.
California Court of Appeal Ends Headless Paga Actions in Leeper v. Shipt
The California Court of Appeal, Second Appellate District, in Leeper v. Shipt, Inc., No. B339670, 2024 WL 5251619 (Cal. Ct. App. Dec. 30, 2024) (Leeper) issued a significant decision benefiting employers seeking to enforce arbitration agreements in cases involving the Private Attorneys General Act (PAGA). Ever since Balderas v. Fresh Start Harvesting, Inc., 101 Cal. App. 5th 533 (2024) (Balderas), a decision concerning PAGA standing by the same appellate district, plaintiffs began to artfully plead “headless” PAGA actions, wherein they allege PAGA claims purely on behalf of the state and other employees to avoid arbitration of their individual PAGA claim. However, in Leeper, the court confirmed that by statute, every PAGA claim includes both an individual and representative claim and, thus, a plaintiff cannot choose to abandon the individual component to avoid arbitration.
Balderas v. Fresh Start Harvesting: Rise of the Headless PAGA Actions
In Balderas, the plaintiff’s complaint alleged that she was “not suing in her individual capacity” but “solely under the PAGA, on behalf of the State of California for all aggrieved employees.” 101 Cal. App. 5th at 536. Balderas did not involve an arbitration agreement. Nonetheless, the trial court, on its own motion and in accordance with the US Supreme Court’s analysis of PAGA standing in Viking River Cruises, Inc. v. Moriana, 596 US 639 (2022), struck the plaintiff’s complaint for lack of standing because she had not specifically and separately alleged an individual claim under PAGA. Id. at 536-537.
The Second District reversed and held that the trial court improperly relied on the US Supreme Court’s “observations about PAGA standing,” which had since been corrected by the California Supreme Court in Adolph v. Uber Technologies, Inc., 14 Cal. 5th 1104 (2023) (Adolph). Id. at 538-539. The Second District further noted that, under Adolph, “the inability for an employee to pursue an individual PAGA claim does not prevent that employee from filing a representative PAGA action.” Id. at 537. Plaintiffs have since pointed to this language to support headless PAGA actions to circumvent arbitration of their individual PAGA claim.
Leeper v. Shipt
As with other headless PAGA actions, Plaintiff Christina Leeper (Plaintiff) filed a PAGA lawsuit against Shipt, Inc. (Shipt) in “a representative, non-individual” capacity only. Leeper, 2024 WL 5251619 at *2. Accordingly, when Shipt moved to compel Plaintiff’s individual PAGA claim to arbitration, Plaintiff argued that her arbitration agreement did not apply because she did not seek any individual claims against Shipt. Id. Plaintiff relied on Balderas to argue that she can choose not to bring or abandon her own individual PAGA claim. Id. at *5. The trial court, in denying Shipt’s motion, agreed and found that there were no individual claims to compel to arbitration because the “action [was] solely a representative PAGA suit without any individual causes of action.” Id. at *2.
The Second District reversed and confirmed that the plain language of the statute requires a PAGA action to be “brought by an aggrieved employee on behalf of the employee and other current or former employees.” Id. at *3 (emphasis added). The court noted that the word “and” unambiguously requires all PAGA actions to be brought on both an individual and representative
basis. Id. at *4. The Second District further clarified that while Balderas, Adolph, and Kim v. Reins International California, Inc., 9 Cal. 5th 73 (2020) (Kim) addressed various issues of PAGA standing, they did not endorse a plaintiff’s ability to excise their individual claim from PAGA actions. Id. at *5-6.
Leeper rejects the argument that a PAGA plaintiff may disclaim the individual component of their PAGA action to avoid arbitration. Id. at *6. But it does not conflict with Balderas. Balderas does not disturb the statutory requirement that an aggrieved employee must bring the PAGA action on behalf of themselves in order to do so on behalf of other employees. Rather, Balderas implicitly recognized that a representative complaint under PAGA includes both components, thereby eliminating the need to separately file an individual claim to maintain standing. 101 Cal. App. 5th at 538-539.
Leeper marks a pivotal moment for California employers defending PAGA claims, effectively putting an end to the “headless” PAGA cases and loophole to circumvent mandatory arbitration.
WRONG PERSON: Arbitration Denied in TCPA Suit As Camping World Looks to Have Texted a Reassigned Number– But Why?
Another day, another difficult TCPA ruling involving an online webform submission.
This time arbitration was denied in a putative TCPA class action arising out of a webform submission on campingworld.com.
In Conrad v. Camping World Holdings, 2025 WL 66689 (N.D. Al. Jan, 9, 2025) the defendant moved to compel arbitration contending Plaintiff had signed up for a recurring text program on its website, supplied his phone number and agreed to arbitration in the process.
Just one little problem– the Plaintiff claims he did not even own the phone number at the time the form was submitted. So–in his view–it would be impossible for him to have filled out the form.
The Court agreed and determined given camping world’s lack of evidence that Conrad himself filled out the form arbitration must be denied. (This also means any consent disclosure on the website would also not apply to Plaintiff!)
Conrad once again highlights the trouble with online web submissions– you never really know who is filling out the form. But the Camping World flow apparently did not collect the name of the submitted party–just relying on a double opt in to assure TCPA compliance. That is a somewhat risky maneuver.
The real risk, however, is in reassigned numbers. The number was subscribed onto the text program in 2022 but plaintiff received the texts after he obtained the number in September, 2023. This suggests to me the number changed hands and the texts went to the wrong number.
The simply way to avoid such issues is just to use the FCC’s reassigned numbers database!
If you are sending text messages on a recurring basis to numbers you obtained more than 90 days ago you simply must be using this database to avoid inevitable TCPA risk when numbers change hands.
Mass Arbitration 101
In today’s legal landscape, understanding both the power and the limitations of mass arbitration is crucial. Mass arbitration has been employed as a strategy for giving major corporations a taste of their own medicine. Recent precedents suggest that it can succeed in recovering compensation and holding a company to task even when a consumer’s or employee’s ability to sue is restricted by prior agreements or internal policies. However, when done incorrectly, mass arbitration can lead to excessive fees and higher costs, without benefit to the claimant.
What Is Mass Arbitration?
If you work for a corporation, you may well have signed an arbitration agreement as part of your employee onboarding. As a consumer, you are often bound by agreements with arbitration clauses when you accept terms of use for online accounts or apps such as Uber, Tinder, StubHub, and more. By clicking through and acknowledging those terms, you might be forced to give up your right to file a lawsuit in court against the company or to participate in a class action lawsuit. Instead, you would have to resolve disputes through arbitration – a legally binding process that takes place outside the courtroom and can be very expensive. It centers around the use of a private arbitrator (a neutral third party) who is paid by the parties to act similarly to a judge by hearing each party’s arguments and making a decision.
The right to agree that conflicts must be settled through arbitration stems from the 1925 Federal Arbitration Act, originally designated for intra-business use. Arbitration between two parties with equal power and resources can be a useful tool, allowing for the private resolution of conflicts with less time or resources than those needed for court proceedings and a trial. Corporations soon realized that they could impose arbitration clauses upon less powerful entities, forcing employees and consumers to accept their terms, often not realizing they are doing so. This can make it extremely difficult if not impossible to pursue their claims because of the cost of arbitration and because they cannot proceed as part of a group. In 2011, the Supreme Court case AT&T Mobility LLC v. Concepcion, 563 U.S. 333, largely upheld this tactic by enforcing an agreement in consumers’ cell phone contracts saying they could not participate in a class action. But savvy lawyers have fought back through mass arbitration. This is a strategy that involves filing multiple similar claims in arbitration together at once to leverage the strength of a group of legal claims, like a class action does. By filing many claims together, this creates a burden on the company that insisted upon the arbitration process, shifting the power dynamic back toward the consumers or employees.
Mass Arbitration vs. Individual Arbitration
Individual arbitration often pits individuals against powerful corporations. Unlike traditional court proceedings, arbitration limits the rights of employees and consumers by removing opportunities for discovery and appeal. Although arbitrators play a similar role to judges, they are not bound by the same rules. Arbitration is also kept private, allowing companies to settle claims of fraud, harassment, or bad behavior without negative press. In addition, arbitration fees often make filing a claim more costly than any potential recovery.
As an example, imagine you are an employee who is owed overtime pay in the amount of $475. If you are bound by an arbitration clause, it will likely cost you more than that amount to present your claim, once you account for arbitration filing fees and possible attorney’s fees. The company you work for will also pay fees but can afford to do so more than the employee with fewer resources at their disposal. Individual arbitration banks on this imbalance in the power dynamic to dissuade employees and consumers from following through on their claims.
Mass arbitration turns the tables on companies to uphold consumer and employee rights. In a mass arbitration effort, each employee who is owed overtime pay can file their claim together at the same time. In doing so, they put the company on the hook for thousands or even millions of dollars in arbitration fees at once, similar to what they might face from an in-court lawsuit. Meanwhile, the claimants themselves are represented by a firm that is able to shoulder the upfront fees while seeking to recover a higher amount in the long run from a settlement. Bringing people with similar claims together creates an economy of scale, decreasing the administrative cost and easing the burden of the individual claimants.
Mass Arbitration vs. Class Action
A class action lawsuit is a legal process in which a group of people who have been harmed in a similar way by someone’s actions come together to file one shared claim for compensation in a court of law. Class action lawsuits provide rights to plaintiffs that arbitration does not, such as allowing for the discovery process as well as the option to appeal.
In a typical class action lawsuit, proceeds are divided amongst plaintiffs, with exceptions made for those who have seen a disproportionately higher degree of harm. An example of a class action settlement is when a bank pays a settlement to all of its customers who paid unlawful overdraft fees. Everyone who is a class member may be awarded part of the settlement, but those who paid more in fees will likely receive a higher share than others.
Mass arbitration can provide a similar recourse for harmed people who are unable to join a class action lawsuit due to an arbitration clause, but who have similar claims. Unlike a class action lawsuit, in order to benefit from mass arbitration, the harmed people must generally affirmatively sign up to participate.
Do I Have a Case?
In order to see whether you can file an arbitration claim, you will need to look into your specific contract with the company to verify if you are bound by an arbitration clause. If you work in the private sector and are a non-union employee with a corporation, you may well be bound by a mandatory arbitration clause in the event of a dispute. Many consumers are also bound by arbitration clauses in the event that they suffer harm due to a company’s practices, from false advertising to unlawful charges.
If arbitration is your only option, contact a law firm with experience in mass arbitration to see if there are others who may be able to join you in your claim. Mass arbitration has a much higher success rate than individual claims but comes with a high administrative cost and generally requires a minimum number of claimants. This number may differ depending on the specific arbitration firm that contracts with the company. Mass arbitration does not have a limit on the maximum of claims that can be filed at once, which means there may be hundreds or even thousands of other individuals who allege similar harm and can join the process.
Mass Arbitration Procedures
Mass arbitration is largely done through private companies like the American Arbitration Association (AAA) and the Judicial Arbitration and Mediation Services, Inc. (JAMS). The rules of each service differ, and working with a skilled attorney is crucial to ensure that the required procedures are followed appropriately to give your claim the best chance of success.
Companies often specify in their arbitration clauses which third party arbitrator service will be used, prior to any dispute being filed. When an arbitration claim is filed, both parties pay the arbitrator a filing fee in order to begin the proceedings. The amount of the fee differs based on the type of case, the arbitrator used, and the number of claims filed. The final decision of the arbitrator (or panel of arbitrators) is legally binding.
Consumer or workplace disputes filed under the AAA must involve at least 25 demands for arbitration filed at once to be considered “mass arbitration.” Under the rules of FEDARB, a minimum of 20 claimants must file together to be considered under its ADR-MDL framework for mass arbitration.
Are There Benefits to Mass Arbitration?
Mass arbitration can be both efficient and cost-effective compared to an individual claim, leveraging the power of collective action. Mass arbitration has recovered over $300 million for employees and consumers, much of which would never have been on the table due to the restrictive structure of individual arbitration agreements. Under mass arbitration, companies can also be incentivized to pay higher settlements to claimants in order to avoid the fee structure of arbitration.
The mass arbitration process has resulted in significant wins for consumer rights over the years. For instance, in 2021 Amazon received over 75,000 arbitration claims alleging that their Echo devices had recorded consumers without their consent. In the wake of these claims, Amazon removed its mandatory arbitration clause from its terms of use. This way, consumers can once more file class action lawsuits, resetting the playbook and resulting in a significant check on corporate power.
Challenges and Criticisms of Mass Arbitration
While mass arbitration is a useful process for holding companies accountable for harm, it is not a silver bullet. At the end of the day, arbitration is still structured to take place on the defendant’s terms. Some of the main pitfalls of mass arbitration include:
Companies Avoiding Fees
Companies that attempt to shirk paying filing costs change the rules of the game that they established. For instance, Uber and Family Dollar both sued their own arbitrators, alleging excessive fees compared to the settlement amounts that were being debated in arbitration. A recent Samsung mass arbitration claim resulted in the company refusing to pay arbitrator fees after being hit with over $2.5 million in filing fees for two separate sets of claims, Wallrich and Hoeg—even after the consumers had paid their filing fees. This led the AAA to close the proceedings, depriving claimants of the opportunity to present their claims in arbitration. It may be only a matter of time before fee structures are further amended in order to benefit corporate interests once more.
High Fees and Costs
Mass arbitration involves prohibitively high upfront fees for many lower-dollar claims, limiting what kinds of claims are best suited to this type of recovery process. It often involves limited or no discovery, which can mean the consumer or employee may not have access to critical evidence to support their claims, particularly ones that are factually complex like employment discrimination or sexual harassment cases. On the other hand, more straightforward cases like unpaid overtime claims hinge mostly on mathematical calculations for proof, and can thus be more easily pursued through mass arbitration.
Delays
Mass arbitration can take a long time when thousands or hundreds of thousands of claims are involved, which can delay results for claimants. For instance, JAMS guidelines point out that the few hundred arbitrators it employs cannot reasonably work through 50,000 claims in a fair span of time, limiting the scope of mass arbitration as a tool for consumers.
Illegitimate Claims
Finally, critics argue that mass arbitration can become a tool of extortion, leading companies to settle simply because of the threat of high fees and not because of the legitimacy of the claims. Mass arbitration comes with the risk of frivolous claims being lumped into consideration in order to increase the overall cost to the corporation, thus de-legitimizing the process.
Choosing a respected law firm to represent you is necessary to increase the likelihood of all claims being thoroughly vetted so you can avoid penalties or possible legal action down the line. A mass arbitration law firm must have the resources to credibly discover, contact, investigate, and communicate with what can amount to hundreds or thousands of clients, as well as file each of their individual claims in the appropriate manner.
What Does the Mass Arbitration Process Look Like?
The mass arbitration process is typically structured based on guidelines from the arbitration company and may include the following steps:
Initiating a mass arbitration: By working with a qualified law firm, your claim will be filed under the appropriate guidelines and timelines set by AAA, JAMS, or another arbitration company, including filing the proper documents and paying the appropriate fees.
Selecting arbitrators: Each arbitration provider has specific rules and processes for selecting the specific arbitrator(s) who will hear the claim or claims.
Evidence gathering: There is usually a limited discovery process to investigate the legitimacy of the claims and defenses.
Hearing: Claims under certain amounts (for example, $100,000 under FEDARB guidelines) will be held virtually. Compelling circumstances or higher penalty amounts may result in an in-person hearing.
Award: If the parties do not choose to settle in advance, you will receive a ruling determining the claim or claims. There is no guaranteed right of appeal with an award from arbitration.
How Long Does the Arbitration Process Take?
Mass arbitration typically takes less time than a case filed in court. When statutory damages are involved, most mass arbitration cases are decided in around a year, according to FEDARB.
Notable Mass Arbitration Cases
Recent years have seen a wave of high-profile mass arbitration cases as consumers turn to law firms to protect their rights. Some claims include apps and services that have threatened consumer privacy by allegedly collecting sensitive, financial, or identifying information from their users. For instance, a mass arbitration case involving Bumble accused the dating app of violating the Biometric Information Protection Act (BIPA) by scanning user selfies. Meanwhile, tech giants Google and Meta have been accused of aggregating tax information from H&R Block in order to advertise financial services to their users. Other claims involve hidden fees and higher costs passed onto consumers, like those filed against Spotify, Valve, Uber, Amex, and Peloton.
What Should I Do If I Have a Mass Arbitration Case?
As companies attempt to block or circumvent high arbitration fees, change their policies, and generally escape liability for harm done, mass arbitration continues to be a complex and rapidly changing area of law. If you have been injured or have suffered adverse effects due to a company’s actions, contact an arbitration lawyer to find out if you are eligible to join a class action lawsuit or if you are bound by an arbitration clause. If so, mass arbitration may be a viable path toward your recovery.