Mass arbitration is the new thorn in companies’ sides, and signs point to rapid growth on the horizon for this area of law. Plaintiffs’ firms use this strategy of enrolling hundreds, thousands, or even tens of thousands of consumers to file coordinated yet individual arbitration claims against a company, pressuring them to pay quick settlements or face daunting filing fees. Eimer Stahl’s Collin Vierra is at the forefront of mass arbitration defense, guiding clients through this dangerous and unfamiliar territory. In this interview, Collin shares strategies companies can employ to shield themselves from this emerging threat and provides a glimpse into the future trajectory of the rapidly growing tactic.
Q: You’ve carved out a niche in this somewhat unfamiliar area. How did you get started handling mass arbitrations?
A: Initially, one of our clients faced individual arbitrations which evolved into a mass arbitration under California anti-discrimination law. Multiple plaintiffs’ firms solicited tens of thousands of claimants, turning manageable cases into a dispute with potential exposure in the tens or hundreds of millions of dollars. There aren’t many law firms specializing in defending these cases, especially the highly complex ones where we're talking about up to $100 million in exposure, rather than merely nominal exposure. We handled those cases first, and have handled many more since, ranging from a few hundred to nearly fifty thousand individual claims per case.
Q: What factors make companies vulnerable to becoming targets of mass arbitration, and how can they lessen their risk?
A: The biggest factor by far is having bad terms of service, particularly the use of JAMS as an arbitration provider. Until this month, JAMS was the only major arbitration provider not to have different filing fee structures for mass arbitrations, charging $2,000 per claimant for companies. And even its late-released terms purport to require the explicit consent of the consumers—which their attorneys would never grant ex post, because it would destroy their fee leverage—so these new terms do little to aid companies that are not yet aware of mass arbitration risks. So in-house counsel should update their terms immediately if they’re using JAMS.
The second thing is avoiding California law and venue whenever possible. California law has been particularly unfavorable towards companies and arbitration. Some other jurisdictions, like New Jersey, are also unfriendly towards arbitration, but California continues to be a huge favorite for choice of law and venue clauses notwithstanding its unfavorable law.
In addition to getting out of JAMS and California, if possible, companies should consider adopting bespoke mass arbitration terms that can be a significant improvement over the providers’ default terms. Those include solutions like pre-filing dispute resolution processes which can help achieve early settlements, if appropriate. These processes can also help separate plausible or legitimate claims from frivolous or fraudulent ones. Companies should also consider batching arbitrations or bellwether arbitrations or some combination of the two, which can significantly reduce filing and process fees once arbitrations proceed. Companies must be wary of drafting pitfalls that can render these solutions unenforceable, but if implemented correctly, they can help companies resolve legitimate disputes with claimants without prejudicing either side through undue procedural burdens or unconscionable filing fees.
Q: If a company is targeted, what are the best strategies to emerge from the situation with minimal damage?
A: The top priority is fixing your terms of service to avoid becoming a target in the first place. However, if you are targeted, act quickly. Delays of even a few weeks can transform a case from a manageable, sub-million-dollar dispute to a $50+ million ordeal. If you unfortunately find yourself facing a substantial claim, broadly speaking, there are three options. One is to challenge the statutes and tactics allowing such abuses in court, although this option is high-risk and rarely attempted. The second option is to engage in settlement discussions, often with the aid of a mediator. The arguments made and data presented in mediation can make tens of millions of dollars of difference, so this is not an option to be pursued half-heartedly, particularly for companies that are averse to high-stakes litigation for one reason or another. We’ve had major successes through developing new arguments and tactics in the context of settlement discussions and mediation. The third option is to pay the fees and fight. That is expensive and grueling, but where a reasonable settlement isn’t possible, sometimes it’s necessary to call the claimants’ bluff and force them to arbitrate their claims, as many will recover nothing. You may be out your filing fees, but sometimes it’s important to lay down a marker that frivolous filings will not be rewarded. There are other procedures that can be employed under various arbitration providers’ rules and certain states’ laws to also put settlement pressure on individual claimants and their counsel.
Q: Where do you see mass arbitration heading?
A: Mass arbitrations have accelerated dramatically over the last year, and I think we’re at the early stage of a rapid growth period. The $100 million boondoggles are going to be harder to come by as the major arbitration providers improve their terms, although even those are not done yet. But even if they were, there would still be lots of money to be made, either for legitimate claims or—unfortunately, more commonly—for frivolous claims that impose extortionate costs on companies that don’t settle. Moreover, many plaintiffs' firms are tapping into statutes that others haven't yet realized are plausible grounds for claims, but once one or two plaintiffs’ firms find a statute that works, others copy them in short order. By the end of the year, I would expect dozens of plaintiffs’ firms to make mass arbitration a regular, if not nearly exclusive, part of their practice. Many of these cases will likely center around data and website privacy statutes, which are on the rise as more states adopt them. And unfortunately, I think this is going to get a lot worse before it gets better.
Q: What else should in-house counsel do to be prepared?
A: They should be aware of case law in this area and follow the litigation. Plaintiffs’ firms—some of which have hundreds of attorneys on staff—are heavily invested in shaping favorable case law and are willing to invest substantial resources to achieve that. Lawsuits pending right now will determine critical issues about the enforceability of various mass arbitration solutions and other issues, so in-house counsel should monitor published case law and talk with their outside counsel to stay informed. For example, if there’s a decision that invalidates a certain type of mass filing provision, plaintiffs’ firms are going to be aware of it, and they’re going to identify every company that has that invalid provision and go after them. Companies need to be ready to fix their terms overnight if necessary to ensure they do not become an easy target again.
Q: What’s the most dangerous thing about mass arbitrations?
A: Companies need to understand that mass arbitration exposure exists even if they have not violated a single state or federal law. That’s what makes this practice so invidious. It’s not enough for companies to comply with the law. They also need to protect themselves from procedural risk. There’s merits exposure and there’s procedural exposure, and when it comes to mass arbitrations, the latter often dwarfs the former. So to take one popular statute for plaintiffs’ firms, for example—the Illinois Biometric Information Privacy Act, or BIPA, which we’ve also litigated extensively—companies should take heed not to violate BIPA and face its massive statutory penalties, but they should also ensure that if they are falsely or even frivolously accused of violating BIPA, that they don’t face an even greater penalty just for the right to defend themselves.
Q: Your practice moves at a fast pace, but you’ve found a fulfilling way to unwind from work. Tell us about your ranch and how it all began.
A: My grandfather was raised on his family’s dairy farm that his grandfather started, so farming has been in my family for a long time. When I was a teenager and in my early 20s, I worked at another dairy in Salinas, California, which is an area near where I grew up made famous by John Steinbeck. My grandfather’s dairy farm ceased operating decades ago, but my father and I have both long wanted something like it. Some years ago, we found a small ranch a few minutes from where I live—where I now spend much of my time—which is too small for cows, but which is large enough for a small flock of black Welsh mountain sheep, five donkeys, a couple of goats, many geese and chickens, and some livestock guardian dogs. So if there’s ever baaing, braying, or bleating in the background of my Zoom calls, it means I’m working from the ranch that day.
Q: Balancing life on a ranch with life as a lawyer sounds like an interesting mix. Becoming a lawyer wasn’t always your plan though, right?
A: No, I went to undergrad at MIT to study engineering and then I started working at the Harvard Environmental Law Program on projects involving fracking, the Clean Power Plan, and solar costs, but I was intending mostly to do math, not legal research. While I was there, I became interested in the legal aspects of the projects on which I was working, so I eventually went to law school thinking I would go back to working in energy and environmental policy. While still working on those projects, I got an offer for a summer associate position and thought I should give it a go, since it’s not really in my nature to turn down a job. I found that I enjoyed litigation, and have been doing that ever since.
Fortunately, our firm works with clients in many industries, and it’s enjoyable for me—and, I think, helpful to our clients—that I constantly get to learn about new technologies and businesses. This is often especially true in arbitrations, which are more likely to involve resolution on the merits—rather than pure issues of law—and therefore where it is critical to understand the technology or business at issue. It’s always our preference to learn our clients’ businesses as best we can, both to give them better counsel on existing cases, but also to help them avoid unforeseen threats.
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