$91 million in AAA filing fees? Another Lesson in Being Intentional in Drafting Class Action Waivers in Arbitration Agreements | Carlton Fields
We’ve blogged in the past about the importance of companies being intentional in drafting their arbitration agreements. It is important to consider questions such as: Should we include a class action waiver? Should we include a class action waiver? Who decides the scope of arbitration and interprets the scope of these waiver provisions: a court or an arbitrator? How susceptible are we to a massive number of repeat complaints?
I have personally been involved in a litigation horror story in which a home building company failed to include a class action waiver in its arbitration agreement, and a runaway arbitrator decided to conduct a class arbitration and to certify a class of homebuyer customers even though the plaintiffs were anything but similarly situated.
Now comes the reverse horror story. On April 14, at Uber Technologies Inc. v. American Arbitration Association Inc., a New York Court of Appeals ruled that Uber was required to pay the American Arbitration Association the costs of filing 31,500 individual claims for arbitration over allegations that Uber’s waiving of delivery charges Eats in 2020 for black-owned restaurants constituted “unlawful reverse racial discrimination” against customers who order from other businesses who must pay delivery charges. The AAA filing fee alone is expected to exceed $91 million.
The court made this clear in upholding the denial of Uber’s motion to pre-empt the application fee:
The balance of shares leans in favor of AAA. As Uber tries to avoid paying arbitration costs associated with 31,000 nearly identical cases, it has made a business decision to exclude class, class, or representative claims in its arbitration agreement with its consumers, and AAA’s costs are directly attributable to this decision.
So, we say it again: Be intentional about how your draft arbitration agreements. There are both costs and benefits to including class action waivers. For some companies, the benefits will outweigh the costs, but for some companies, especially those that are more susceptible to a large number of repeat claims that plaintiffs’ attorneys will actually file in arbitration, perhaps not so much . Enter with your eyes wide open. Uber would have liked to.