Dave Hoffman on the Chamber of Commerce’s Take on Mass Arbitration
In a recent Substack, Dave Hoffman (below) recalls his assertion that “consumer arbitration is the third rail of the legal academy.” Indeed, the legal academics that I have read on the subject of mass arbitration, seem pretty jazzed about the plaintiffs’ lawyers heroically combatting class action waivers with mass arbitration. But does this legal innovation make consumers better off or incentivize vendors to improve their products or bargaining tactics? Gosh, I don’t know.
The Chamber of Commerce has a view, and unlike most of the academic writing on this topic, it has an empirical basis. Professor Hoffman summarizes the insights of this 100-page assessment, witten by Michael W. McTigue Jr. and Meredith C. Slawe of Skadden, Arps and published by the U.S. Chamber of Commerce’s Institute for Legal Reform. The title, Private Power, Public Harm: The Coercive Dynamics of Mass Arbitration suggests a strong thesis.
I have to admit that I was thrilled when I first came across Maria Glover’s work and learned of the existence of mass arbitration. Once the Supreme Court blessed class-action waivers in consumer contracts, even if the face of state laws prohibiting the practice, mass arbitration seemed like rough justice to me. Vendors made escaped accountability for some claims that were too expensive to bring on an individual basis. They could arbitrate other kinds of small claims with the tiny sliver of counterparties harmed by their practices who exercise their contractual right to individual arbitration. But vendors leverage their power to escape precedent-settng decisions, and so they can keep unenforceable provisions in their contracts and benefit from the in terrorem effect. Mass arbitration puts the shoe on the other foot. Now it is the plaintiffs’ attorneys who have the upper hand, forcing settlement of mass claims that are too expensive for the vendors to arbitrate.
Professor Hoffman calls attention to the abuses that have arisen as identified by pro-industry attorneys. The executive summary gives a sense of their conclusions:
An update to 2023’s Mass Arbitration Shakedown research, Private Power, Public Harm highlights a comprehensive series of examples of abusive claimants’ lawyer behavior in mass arbitrations. From questionable client solicitation practices resulting in serious claimant confusion, to barebones vetting of claims, to little-to-no communication from lawyers to claimants, this research paints a picture of a mass arbitration cottage industry intent on rapidly building up claimant lists to leverage companies into quick settlement, regardless of the merits of the underlying claims.
As Professor Hoffman points out, many of us in the legal academy, myself included, have jumped on the mass arbitration bandwagon without asking some of the hard questions about its efficacy as a tool that both disciplines vendors to prevent abuses and wins for ordinary consumers the remedies they seek. The rhetoric of the Chamber of Commerce piece puts me off, but like Professor Hoffman, I hope that it generates clear-eyed empirical assessments of the efficacy of mass arbitration as a tool for consumer protection.
At the annual AALS meeting earlier this month in New Orleans, I heard a presentation by Stephen Ware (below), who has for decades advocated for a middle path between the academy’s hostility to arbitration and the Supreme Court’s embrace of something bordering on “arbitration for all.” He pointed out that the U.S. is not the outlier it seems to be on consumer law. European states do not allow for mandatory arbitration of consumer claims, but for the most part, European states have no analog to class actions, civil juries, and discovery driven by plaintiff-side attorneys. Those of us who decry mandatory consumer arbitration do so precisely because it rules out those very same elements of our legal culture. Europe gets to roughly the same place through different mechanisms.
It’s an arresting insight. It suggests a common theme with insights to which Professor Hoffman alludes. In Europe, I think a strong regulatory state provides a necessary backdrop to the comparative analysis. We needed class actions and multi-district litigation more as our regulatory state receded. Class-action waivers removed those alternative regulatory tools. Mass arbitration was the next response. It all could go away if we had state or federal regulators who would enforce consumer protection laws, but we have struck a different balance in the U.S. Mindful of the potential of government regulation to stifle growth and innovation, we opt for private enforcement mechanisms, and they too have their downsides.
As Cass Sunstein points out on his Substack, tribalism colors our response to new information about matters in which we are invested. Tribalism infects debates about mandatory arbitration. As I was taking in the information about mass arbitration on Professor Hoffman’s Substack, my brain was generating counterarguments and devising ways to minimize the seriousness to the challenges raised. It is an impulse that is nearly impossible to resist. Cass Sunstein warns that tribalism shuts down thought, so I applaud Professor Hoffman for resisting it. As I look at the polarized world around me, I increasingly wonder if some version of tribalism is not the dominant mode of thought. I learned a lot about heuristics from reading Cass Sunstein, but I have never come across any literature that imagines what it would be like to try reasoning without them.