Jandos Rothstein
It really is true that karma knows everyone’s address. Consider the mayhem that’s ensued in the arbitration world, where workers and consumers are driving Corporate America nuts by dumping thousands of hearing requests at a time into a system set up to hear cases one by one.
Befitting a practice where employees descend like hornets on unsuspecting managements, the legal strikes have been dubbed “arbitration swarms.” The threat has been so great that one defense lawyer reached out to an arbitration forum to write new rules because their client was “scared to death” of the mass filings, according to court documents unsealed on Wednesday An official at the forum, the International Institute for Conflict Prevention & Resolution, told the defense lawyer that she’d be willing to consider discounted fees in exchange “for a large book of business.”
It’s well-established by now that most consumers and workers have lost their right to fight back in the courts if they are ripped off, sexually harassed, or stiffed of their full wages by the company in question. Thanks to arbitration clauses in everything from funeral contracts to employment agreements, mostly gone are the days when aggrieved little guys could plunk down $400 and file a case in federal court. Ditto for the ability of a gaggle of little guys to join together and file a class-action lawsuit, or even a group case heard by an arbitrator. Those, too, often are prohibited in companies’ must-sign agreements—a practice that conservative courts, including the Supreme one, have upheld.
For management, it’s been a can’t-miss strategy, because plaintiffs’ lawyers can’t make any money on a $500 rip-off complaint from one consumer or a one-off $1,000 wage and hour claim. Banning access to the courts for individual matters—while barring group claims even in arbitration—is a near-guarantee that sleazy operators won’t be held accountable.
Until now. lawyers whose cases hit a dead-end when companies began banning class actions are using advertising, social media, and word-of-mouth among employees to track down plaintiffs and file mass arbitrations. That means that, these days, exploited employees with very similar cases can turn the arbitration game against employers. (The strategy is workable for cookie-cutter complaints, not for more complicated cases.) And judges are calling companies out for their hypocrisy when they throw a fit about terms of the closed-door proceedings they insisted on in the first place.
Consider the couriers who deliver food for San Francisco-based DoorDash.
A year ago, lawyers for a large group of “Dashers,” as the drivers are known, let the company know that they were planning to file claims with the American Arbitration Association on behalf of thousands of people. The drivers’ gripe was that the company was classifying them as contract workers when they were actually working as employees. Ultimately, more than 6,000 claims came in.
It was DoorDash management, of course, that had specifically chosen the AAA to resolve such complaints. Employees have no say in such decisions, and the DoorDash drivers are compelled to “agree” to certain terms and conditions the very first time they sign in on their phones to start their workday, as a condition of working for DoorDash at all. The company did have an arbitration “opt-out” that it described 51 paragraphs into its 62-paragraph, 6,000-word agreement. But Chicago lawyer Travis Lenkner, who represents the couriers, said in an interview that he estimates the option (buried as it was and requiring a snail-mail request signed in ink within 30 days—to a technology company, no less) has been used by fewer than one percent of his clients.
So arbitration it was for the drivers. The AAA’s rules stipulate that each claimant in an employment disputes pays a $300 filing fee while the company pays $1,900. The Dashers ponied up $1.2 million to satisfy their portion of the bill. And then they waited.
But the check never arrived from DoorDash, whose filing fee came to more than $11 million. After much back-and-forth between the company’s lawyers, lawyers for the Dashers, and the AAA’s administrator, ultimately DoorDash missed its payment deadline and the AAA had to cancel the case.
Then, man bit dog: The Dashers went to court to compel arbitration. It’s a strategy that, for decades, we’ve watched managements use against consumers and employees. But workers litigating to get their bosses to arbitrate? “This is like judo,” said F. Paul Bland, executive director at Public Justice and a longtime critic of mandatory arbitration. “You take the power of the other side and use it to throw them over your shoulders. This is an exciting thing for workers’ rights.”
DoorDash wasn’t about to give up the fight, though, so it proposed an alternative idea to federal judge William Alsup in San Francisco: Let’s put the Dashers’ arbitration cases on hold, because we’re working to settle similar allegations in a separate class-action case. Who knows? Maybe some of the Dashers who are trying to compel arbitration would wind up liking the terms of that settlement and abandon their demands, the company suggested.
Never mind, of course, that DoorDash’s employee policy specifically prohibited class actions.
In an order earlier this month, Alsup could barely contain his derision at the company’s suggestion. “In irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate,” the judge wrote. “This hypocrisy will not be blessed, at least by this order.” He ordered the company to “immediately” proceed to arbitration for the 5,010 Dashers who had submitted the proper paperwork. (Among the more than 6,000 who originally filed, more than 1,000 failed to meet the judge’s requirements.)
“We stand ready and willing to defend legitimate arbitration demands,” said a DoorDash spokesperson in an email. But as the court recognized, “the company should only be responsible for arbitrating legitimate claims.”
“These companies are desperately trying to find a way out of a predicament they created for themselves,” said Cliff Palefsky, a San Francisco lawyer who has litigated cases against mandatory arbitration since the 1990s. “It’s fairly ironic, but it’s fun to watch.”
Lenkner said the AAA has reopened the case. The DoorDash spokesperson said the company intends to pay the filing fees by a March deadline set by the AAA.
In a similar case in federal court in Oakland, California, Judge Saundra Brown Armstrong in October told another food delivery company, Postmates, that she was compelling it to arbitration in cases brought by 5,200 couriers. Like DoorDash, Postmates had failed to pay millions in fees after its workers filed their demands. But not even a judge’s order was enough to get them to comply. When the AAA reopened the case and asked Postmates for payment by November 25, the company failed to pay. Now the drivers are awaiting Armstrong’s decision on their request to hold the company in contempt. The same two law firms represent the parties in both Postmates and DoorDash: Gibson Dunn represents PostMates and DoorDash, while Keller Lenkner represents the couriers at both companies.
With the stakes so obviously high, it’s no surprise that the companies that have been targeted are cooking up ways to get around the very rules they devised and that once served them well.
On a Saturday morning in November, DoorDash drivers checking in for work did what they always do, clicking “agree” on their phones to the mind-numbing terms and conditions of their jobs. But something had changed. The once 6,000-word agreement had grown slightly to 6,085, and there was new language describing an entirely new arbitration company to hear their grievances. No longer was there a reference to the American Arbitration Association, which had to close its files on DoorDash cases because the company didn’t pay its bills. Now the International Institute for Conflict Prevention & Resolution, known as CPR, was the forum of choice. And the new forum was offering a whole new program: Plain-vanilla arbitration was available to the Dashers, as it always had been. But so was something called the “CPR Employment-Related Mass Claims Protocol.”
Lenkner said he and his team had no idea that the AAA had been replaced with CPR until his clients started calling about the change. But his adversaries at Gibson Dunn sure did, and the new protocol had less punishing filing fees than the AAA. With its client DoorDash freaked out by the specter of paying millions to the AAA, Gibson had approached CPR to find a solution to prevent what it called “an abuse of process” by Dashers, according to court documents. By last fall, CPR was sending Gibson a draft of a new protocol for “mass arbitration” that would require less onerous filing fees for companies facing an arbitration swarm.
CPR—a purportedly independent arbitration forum—engaged in extensive back-and-forth communications with the company’s lawyers, Alsup wrote in his November ruling, referencing documents that came to light after he allowed the Dashers to demand the documents that Gibson and CPR had exchanged.
In a response to questions from the Prospect, CPR president Alan Waxman said in a statement that his organization sought feedback from a variety of professionals apart from Gibson Dunn, including lawyers with experience representing employees. (Lenkner said that CPR did not reach out to him or his firm.) And Gibson Dunn was hardly accommodated on all its wishes, Waxman said. For example, he said, Gibson Dunn objected that the protocol allowed claimants to go back to court if initial “test” arbitrations of 10-to-20 cases, followed by a mediation, didn’t work. In November, after the court became aware of DoorDash’s change in arbitration forums, the company’s lawyers told Alsup that it would allow drivers to opt out of the CPR agreement and use the AAA if they wished.
Alsup said in his ruling that previously sealed communications between CPR and Gibson Dunn would be released if no one filed an appeal. “There’s a public interest in the world at large knowing that someone like CPR that holds itself out to be an impartial agency is actually being guided by the employer side,” he wrote.
None of this bodes well for managements, which face the continued threat of being hoist with their own arbitration petards. “These cases are going to be a real problem for defendants,” said Bland. “You are going to see more and more arbitration swarms.”
UPDATE: The documents in the case were unsealed on Wednesday, revealing that the defendants were so involved in the protocol that CPR would not publish it until DoorDash and its lawyers gave the go ahead, including a sign off on the fee structure by DoorDash’s head of litigation, Gregg Farano. In his written approval of the Protocol in an Oct. 31 email to Waxman, Farano asked that CPR let him know when the new rules were published “so that we may link to it in our terms and conditions.”
Unsealed internal emails among CPR executives showed that, after hearing from a Gibson Dunn lawyer last May, CPR immediately saw the potential for new revenues. Under the subject line “Potential Business,” senior vice president Helena Erickson wrote to then-president Noah J. Hanft last May to say she’d just spoken with a Gibson Dunn lawyer whose client was unhappy with the AAA’s filing fees and “scared to death about being inundated with mass arbitration filings.” Erickson told Hanft that she’d told the lawyer, Michael Holecek, that CPR “would be willing to discuss discounted fees for a large book of business.” As the discussions got more serious in the Fall, Waxman wrote to board chairman Thomas Sabatino and board member John S. Kiernan of the law firm Debevoise & Plimpton to say that he wanted to explore a way to work on the DoorDash problem, and mentioned that it “could be an important source of funding going forward.”
On Nov. 6, CPR issued a press release about its new protocol for mass arbitrations. The release said nothing about the intimate involvement of DoorDash and its lawyers in developing the new rules, instead saying it had “harnessed the experience of its members and neutrals knowledgeable” in mass arbitrations to develop the rules. Three days later, DoorDash changed its terms and conditions with drivers to include the new deal with CPR.
The revelations of the obvious conflicts of a defense team being so intimately involved in developing new rules in a purportedly neutral forum could make it tricky for other defendants who might consider using CPR’s new protocol.
