Ninth Circuit Allows Arbitrator to Rule on Postmates’ Challenge to Mass Arbitration Tactics
In response to the increased use and enforcement of class and collective action waivers, plaintiffs’ attorneys are now relying on a new strategy to gain leverage over businesses. More specifically, they have started to commence mass arbitrations by simultaneously filing hundreds—and in some cases, thousands—of individual arbitration demands in an effort to trigger a business’ obligation to pay its share of filing fees for the arbitrations.
Depending on the number of arbitration demands at issue, the filing fees alone can add up to tens of millions of dollars.
Postmates has been the target of such an approach in California. And as we wrote about here, Judge Saundra Brown Armstrong of the United States District Court in Oakland previously ordered Postmates to conduct more than 5,000 individual arbitrations. Postmates later appealed that order to the Ninth Circuit.
Among other things, Postmates has argued that because the claimants’ arbitration demands were generic, and lacked specific information required by the parties’ arbitration agreement, the demands amounted to de facto classwide arbitration proceedings, in contravention of the parties’ class action waiver. Postmates has further argued that in light of a provision that carves out disputes relating to the class action waiver from the arbitration provision’s delegation clause, the court (as opposed to an arbitrator) must decide the threshold issue of whether the parties agreed to a de facto classwide arbitration.
On September 29, 2020, the Ninth Circuit affirmed Judge Armstrong’s decision, concluding that “the district court correctly held that an arbitrator [as opposed to the court] must decide whether [the claimants] have violated the [c]lass [a]ction [w]aiver.” The Ninth Circuit reasoned that Postmates’ challenge to the claimants’ mass arbitration tactics fell outside the scope of the only exception to the delegation clause, which the Ninth Circuit determined is limited to claims that the class action waiver is “unenforceable, unconscionable, void, or voidable.”
As a result, the Ninth Circuit did not address Postmates’ argument that the thousands of generic arbitration demands amounted to de facto classwide proceedings. Per the Ninth Circuit’s order, that issue must be decided in arbitration.
While it remains to be seen how this issue will unfold in arbitration, the Ninth Circuit’s decision serves as another reminder for businesses to carefully evaluate the pros and cons of class and collection action waivers before implementing an arbitration program.