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Data Privacy Litigation Trends (and Common Defense Strategies) Part 2: Attack of the mass arbitrations

7/23/24

arbitration; agreements

By: Danielle A. Ocampo

Plaintiffs are using a company’s website arbitration clauses in the Terms of Service to launch mass arbitration attacks. As a result, even where companies want to waive arbitration to litigate and dismiss the class, they are bound to their own terms with Plaintiffs’ enforcement. Plaintiffs’ counsel claim to have hundreds or thousands of individual arbitration agreements demanding defendant to pay six to seven figure fees under the arbitration rules of procedure. This year, JAMS and AAA recently implemented new mass arbitrations procedure rules. Will these rules eliminate these problems? Will Plaintiffs continue to drum up mass arbitration attacks?

The Trend: Filing Mass Arbitrations

In the data breach and pixel tracking context, Plaintiffs’ counsel are getting even more eager to identify potential consumers or former employees to serve as named Plaintiffs before a company can even deliver breach notice or update TOS. In both cases, Plaintiffs’ counsel claim to have individual TOS agreements with enforceable arbitrations clauses. For employees, plaintiffs make employee records requests to obtain signed individual arbitration agreements.

In a premature class action litigation, Plaintiffs’ counsel tend to file a complaint with the courts and immediately request for the parties to pursue mediation. As “leverage” to settle, Plaintiff’s counsel demands defendant to cover the filing fees, which can amount to $2,000 a filing for hundreds or thousands of individual claimants.1

The Effectiveness of New Mass Arbitration Rules

To alleviate the exorbitant burden of fees, AAA announced its new Mass Arbitration Supplementary Rules in January 2024 with a filing fee schedule of $8,125 for businesses where 25 or more similar demands are made.2 JAMS later announced its new Mass Arbitration Procedures rules in May 2024 that requires a fixed $7,500 filing fee regardless of the number of cases above 75 claims.3 But it’s not always clear whether the rules would apply to any given arbitration agreement. With the rules being new, neither AAA or nor JAMS have guidance. And there isn’t a body of decisions to assess.

Preparing (and Defending) Against Attacks

Now is the time for companies to revisit their arbitration agreements or TOS arbitration clauses. Companies should consider their risk tolerance for simultaneous class action litigation and mass arbitration under the new rules. Should there be a fee-shifting provision? Should data breach or pixel tracking claims be excluded from arbitration? Should the non-consolidation clauses remain? Should there be a named ADR selection, and if so, who?

For more information, please contact Danielle A. Ocampo at danielle.ocampo@fmglaw.com or your local FMG attorney.

  1. JAMS International Arbitration Schedule of Fees and Costs ↩︎
  2. AAA Mass Arbitration Supplementary Rules; see also AAA Consumer Mass Arbitration and Mediation Fee Schedule and Employment/Workplace Mass Arbitration Fee Schedule ↩︎
  3. JAMS Mass Arbitration Procedures and Guidelines; JAMS Mass Arbitration Procedures Fee Schedule ↩︎

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