Amazon Faced 75,000 Arbitration Demands. Now It Says: Fine, Sue Us (wsj.com) 37
Companies have spent more than a decade forcing employees and customers to resolve disputes outside the traditional court system, using secretive arbitration proceedings that typically don't allow plaintiffs to team up and extract big-money payments akin to a class action. Now, Amazon is bucking that trend. From a report: With no announcement, the company recently changed its terms of service to allow customers to file lawsuits. Already, it faces at least three proposed class actions, including one brought May 18 alleging the company's Alexa-powered Echo devices recorded people without permission.
The retail giant made the change after plaintiffs' lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees, according to lawyers involved, payable by Amazon under its own policies. Amazon's decision to drop its arbitration requirement is the starkest example yet of how companies are responding to plaintiffs' lawyers pushing the arbitration system to its limits. Arbitration agreements are buried in the contracts consumers sign to do everything from buying a cellphone to using a ride-hailing app. Many employers also require arbitration for adjudicating issues like pay disputes or discrimination claims. The U.S. Supreme Court has repeatedly upheld and strengthened the rights of companies to mandate arbitration.
The retail giant made the change after plaintiffs' lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees, according to lawyers involved, payable by Amazon under its own policies. Amazon's decision to drop its arbitration requirement is the starkest example yet of how companies are responding to plaintiffs' lawyers pushing the arbitration system to its limits. Arbitration agreements are buried in the contracts consumers sign to do everything from buying a cellphone to using a ride-hailing app. Many employers also require arbitration for adjudicating issues like pay disputes or discrimination claims. The U.S. Supreme Court has repeatedly upheld and strengthened the rights of companies to mandate arbitration.
Probably cheaper (Score:4, Insightful)
A bunch of small arbitration jobs is probably more expensive to deal with than a big class action suit.
Class action suits are great way to screw the little guy, because after all is said and done, they get a few bucks from winning, while the company can probably prolong the case and get appeals for decades to come.
Re:Probably cheaper (Score:5, Insightful)
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I have, and I worked in class-action litigation (not as a lawyer).
I've also worked in mass tort litigation - same gig - where things were just as slow.
The wheels of "justice" turn slowly.
I don't fully understand why, and I don't have a great answer.
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OR alternatively, an overbearing sense of fairness and justice that demands that we slow down the lynchings.
Justice is slow on purpose, largely to make sure that everyone has a fair shot. And it is still not fair. Because life isn't fair. But we keep trying, often to the tune of being obtuse.
And yes, that does take MONEY to accomplish. The state has seemingly unlimited access to resources to pursue "justice", and the rich are the only people able to get their "justice" (unfair by definition).
For the record,
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Re:Probably cheaper (Score:4, Insightful)
Lots of people are probably looking for some for of restitution, but plenty are just looking at punitive damages to enforce justice. If I can bring a lawsuit against someone that wronged me and the lawyer gets all the money, but cripples the company balance sheet, I'd be ok with that.
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When you "cripple a company's balance sheet", you're not hurting the people who caused the original problem. If the problem was big enough to warrant that large a punitive punishment, then those problem people have probably already been fired or forced out (probably with a golden parachute). The only people you're hurting are
Re: Probably cheaper (Score:3)
You are hurting the owners of the company who decide who sits on the board and who runs the company. Wipe out enough companies and people will start being more careful when they invest and when they vote.
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Any punitive punishment should be directed only at the individuals (current or more likely former employees or shareholders) who caused the problem.
I couldn't disagree more. Companies are capable of malfeasance - negligence, a culture that rewards wrongdoing, or bad acts that require more than one person to commit, just to name a few. If companies are shielded from punitive measures, they have no incentive to discourage the bad behaviour of their employees.
Directing punitive punishment at innocent employees and shareholders remaining at the company isn't justice; it's punishing the people trying to clean up after someone else's mess.
Who says they're innocent? Who says they're trying to clean up a mess? If you indemnify the company, they'll simply offer up a fall guy.
Let's say a company has no policies or training around customer
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real issue is that the lawyers make an obscene amount of money and the members get some trivial coupon.
Exactly... typically the plaintiff's lawyers in a class action automatically get a percentage - something like 30% of the damage award or any settlement off the top all cash, Then after that legal costs have to be paid that includes court filing fees, but also other attorneys' fees that can be per-hour for labor, expert witnesses, business trips, and a multitude of other expenses related to cases. Yo
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The whole point of this is to make millions for the lawyers while the consumers will get coupons. Class actions suits like this never fix anything, all they end up doing is raising the prices everyone pays.
Written while driving by the $40M ocean front mansion of a class action lawyer here in Florida.
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This is a win for lawyers. It may not be a win for customers. Class actions will be easier, so lawyers will get millions while customers get a coupon for some free movies.
But individual customer complaints will be more difficult. Arbitration is faster, much less expensive, and more likely to focus on the facts rather than legal technicalities. Customers can represent themselves in arbitration, while it is very difficult for a plaintiff to win in court without paying $10k or more to a lawyer.
Re:Probably cheaper (Score:5, Interesting)
Arbitration is faster, much less expensive, and more likely to focus on the facts rather than legal technicalities.
Here's the most pertinent fact: The arbitration industry exists solely at the whim of the corporations who foist binding arbitration agreements on their customers, suppliers and employees, and the arbiters know which side of their bread is buttered.
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It would be much less expensive than everyone doing a single suit, However Class actions allow an economy of scale, to a point where if there is a lot of cheaper Arbitration it will still add up.
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The expense of small arbitration jobs are exactly why Amazon chose to have an arbitration clause: typically nobody is going to hire a lawyer and pay the filing fee for whatever the damages are in this case. Superman XIV should involve a plot to impose a fee of 0.07 on every credit card transaction, and with a combination of kryptonite and arbitration clauses to ensure that the crooks get to keep the money.
Class actions are a great way to get representation for the little guy with small damages because, an
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Re: Probably cheaper (Score:3)
False. Arbitration is almost always super cheap for the consumer, typically fully paid for by the company who requires it. Arbitration hearings are almost always done by telephone, so no traveling. And there aren't arcane rules, so no lawyers necessary. They're also a third party lawyer, so they're generally fair and unbiased. In fact, companies that require arbitration lose all the time. The reason they require it is because it prevents class actions, which can cost huge amounts of money, although this can
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Class actions are designed to punish bad behavior and discourage it from continuing. If consumers fought for their rights, we wouldn’t need class actions. The average consumer, though, when wronged, will do absolutely nothing but grumble about it online. In order to win a claw suit at any level, you actually have to do a bit of work, not to mention, take some risks.
This is why the lawyers get paid and the consumers get a coupon. The lawyers do all the work. The coupon is usually more than the consu
Re:Probably cheaper (Score:4, Informative)
Class actions do not screw the little guy.
If used correctly, they allow lawsuits for cases too small for court. Even with small claims, it still costs several hundred dollars to file a lawsuit - including court filing fees, taking a day off work and presenting your case. This means it's not economical to sue over say, $120.
$120 is $5 a month for 2 years. So if your cell phone provider, or ISP, or any other service provider gets you to sign a contract, and then jacks up your price the month after by $5, your only option is to grin a bear it, cancel, or sue (breach of contract - yes you'll probably win). But at $120 in damages (and small claims doesn't do punitive damages or allow reclaiming costs), it's not worth suing over. If you want the service, you're screwed over, and if you cancel, meh. Of all the people that get screwed over, maybe a handful will bother suing, at which point the company just has to write a check for the amount being sued. They won't show up in court or anything - they'll just wait for the court order, write the check and put it in the mail
In effect, you're screwed.
With a class action, this calculation changes - suddenly it becomes worthwhile to sue - it's only $120 per person, but if you have say, 100,000 people, that's $12M in damages, plus the courts will allow punitive damages (but not costs - the costs recovery comes from the damage award).
Now, given that it wasn't worth suing over, even if you got say, $30 of that $120 back, it's still a plus for you because you wouldn't have sued over it and that $120 was effectively stolen from you.
Sometimes a bigger class action happens, like Apple releasing a bad product that gets bigger changes done, but they are much rarer. First, the damage amount is much larger, so it's more worthwhile to sue, second, the company usually will award a resolution of fixing the problem - if it was a bad computer, they'd take back the broken one and give you a free upgrade, and whatever punitive damages get awarded is usually much smaller because the companies usually settle. Here the class action is more for expediency - Apple would rather do one big lawsuit than a million little ones.
Also, judges aren't stupid - they know when settlements for $12M wit $9M going to lawyers happen - in fact, the court has to approve the distribution and disbursement of damage awards. They allow it because they know the alternatives are everyone gets no money (company wins), or everyone gets a little money (company loses), and a little money si better than none.
If you think class actions screw you over, you're always free to exclude yourself from the class - it's your right to pursue the lawsuit on your own time and money, and the laws are written that way to ensure your individual right to sue is never extinguished. It's just in general, the damage amount is too little to bother even in small claims, which is exactly why companies do it.
It is better to steal $1 from 1 million people, than it is to steal $1M from 1 person. It's the same amount of money in the end, but the 1 million people are far less likely to fight back. This can be repeated until around $500 or so, at which point some people will find it worthwhile to sue.
Parity between the class and the lawyers (Score:2)
Parity in kind. If the class gets paid in coupons, so do their lawyers. If they would prefer cash, the lawyers are free to sell their coupons on the open market.
Parity in time. The lawyers get paid when the class gets
Why did Amazon retreat? (Score:2)
It seems like Amazon should have more power to tilt arbitration in its favor. It already dictates with no appeal the rules for arbitration. Why not add a rule that the consumers have to pay for all arbitration costs? That's sort of like sticking the consumer with a huge shipping and handling charge for warranty repairs.
Re:Why did Amazon retreat? (Score:4, Interesting)
That's almost always how the forced arbitration clauses work. My guess is, the coercion of arbitration wouldn't work if the large corp also attempted to shift the cost onto the individuals.
The lack of accountability for huge scale "small" violations seems to be abused more and more by corporations attempting to squelch on their own arbitration requirements however. It would seem that these forced arbitration arrangements are trying their hardest to get the courts to undermine their current privileged condition, but like on so many issues the courts refuse to address it.
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Let's not *entirely* forget that at the end of the day it's not up to the courts to think up the rules, there's an entirely branch of government to do just that. If we don't like these rules *systematically* then that's the only place a solid fix can come from.
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Either Amazon isn't evil enough to stick consumers with arbitration cost, or that trick is barred in enough states for it to not really work.
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"Whady'a gonna do? Stab me?" (Score:2)
nice try amzn (Score:5, Informative)
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It's lovely to see these companies not just called out on their plebishite, but also hurt by it.
Arbitration is crap (Score:5, Informative)
Almost all states have provisions to appeal to trial de novo after. There is nothing 'binding' about it in those cases, so arbitration is just wasted time and expense before the regular trial after.
Weird (Score:3)