Employers may get more than they asked for in arbitration

Following a series of U.S. Supreme Court decisions making it easier than ever for employers to compel arbitration, some plaintiffs' attorneys have adapted by filing for arbitration en masse to inflict financial pressure on companies.

Since employers carry responsibility for arbitration costs above those that a court proceeding would incur, if an attorney can corral enough plaintiffs the fees can start to hurt.

"In the employment context, the employer has to pay all of the arbitration costs once it begins," said Glenn A. Danas of Robins Kaplan LLP. "It can become extremely expensive for the defendant."

As the Supreme Court issues decision after decision strengthening arbitration, plaintiffs have sought ways around it. In California, actions filed under the Private Attorneys General Act are one way. The high court also recently issued a decision that excepted certain transportation workers from the Federal Arbitration Act.

In Abadilla v. Uber Technologies Inc., 18-CV07343 (N.D. Cal., filed Dec. 5, 2018), 12,501 drivers filed arbitration claims over three months in groups ranging from 400 to 2,194. The filing fees alone, according to court documents, would cost Uber more than $18 million.

In another case in Colorado federal court, 2,814 plaintiffs in a class action against Chipotle Mexican Grill were carved out after their class action waivers were upheld in Epic Systems Corp. v. Lewis. Shortly afterward, hundreds retained the same lawyer and filed for arbitration in multiple jurisdictions at the same time. Turner v. Chipotle Mexican Grill, Inc., 14-CV02612 (D. Colo., filed Sept. 22, 2014).

In the two cases, defendants tried different responses. In Abadilla, Uber started filing the arbitrations slowly, starting off with less than 1 percent of the total demands addressed. That spurred a rare plaintiffs' motion to compel arbitration, in which attorneys accused the company of "dilatory, bad faith conduct" as a delay tactic.

"Uber's decision to not participate in more than 12,000 petitioner arbitrations is unjustified, frivolous, and done for improper purposes," the motion said.

In its reply brief, Uber said it did so to avoid "gamesmanship" by the plaintiffs, who say they were misclassified as independent contractors.

Chipotle attacked the propriety of the plaintiffs' attorney retaining clients carved out from his class action.

U.S. District Judge John L. Kane rejected that argument as an attempt by the company to slow down a train that it had started itself. He did so in his motion dismissing the plaintiffs from the certified class.

"Chipotle's attempts to delay and obfuscate the claims of the arbitration plaintiffs in both the courts and in arbitration (the forum to which it required these employees to submit) are unseemly," wrote Kane in a Nov. 11 order. The company requested Kane certify the motion to dismiss as a final judgment, so it could appeal and get another shot at the plaintiffs' attorney.

Further, Kane pointed out that allowing Chipotle to slow down arbitration flies in the face of its purported advantage over the courts: expediency.

"Congesting the federal courts with countless appeals to prolong arbitration proceedings for numerous employees provides no benefit to the public and flouts the efficient resolution Chipotle professes to seek," Kane wrote.

While the court has not reached a disposition in the Uber case, the plaintiffs' briefs echo Kane's tone toward the defendants: You asked for this.

James M. Finberg of Altshuler Berzon LLP pointed out, as did plaintiffs' attorneys in the Uber case, that the ride share company has repeatedly leaned on arbitration.

"This strategy is bold and fascinating. Uber should not be able to have it both ways," he said. In the Abadilla case before U.S. District Judge Edward M. Chen, "they said these cases should be arbitrated. If so, they should be paying the arbitration fees."

Despite its appeal, the tactic has one glaring weakness that limits its applications: access to names. Cases like Chipotle are uncommon, where a class is certified and arbitration is compelled afterward.

"The class list is something that both sides fight hard over, precisely for reasons like this -- because it provides a basis for additional litigation, and a litigation advantage to the plaintiffs," Finberg said.

Otherwise, an attorney would have to find a way to gather enough plaintiffs by sheer legwork or word of mouth before taking a shot at a mass filing.

While usable in a relatively narrow set of circumstances, the near-universal deployment of arbitration by employers virtually guarantees cases like these will have similar tones. Even if the company did not compel arbitration first, the presence of a mandatory arbitration agreement sends the message that arbitration is its preferred venue.

"If a group of employees were filing a bunch of arbitrations without ever having filed a case in court, it might give the employer such an argument," Danas said. "But if there's an arbitration agreement that the employer presumably foisted on the employees, I don't think such an argument would get much traction."