January 03, 2019 Articles

Litigate Today, Arbitrate Tomorrow? Not So Fast, Big Business!

By Alexander Bachuwa

The issue in Dasher v. RBC Bank (USA), 882 F.3d 1017 (11th Cir. 2018), was whether the defendant could compel arbitration in a case, where consumers were actively engaged in a lengthy pending litigation, simply by updating its customer-account agreement to include an arbitration provision. The plaintiff artfully characterized the defendant’s motion to compel as “litigation-protracting sandbagging.” Id. at 1024 n.4. Unsurprisingly, the defendant took the exact opposite position, arguing that it amended its agreement containing an arbitration provision only for account holders who continued to use their accounts and did not opt out. Id. at 1021 n.3. On appeal, the Eleventh Circuit held that the defendant’s motion “failed to demonstrate the requisite meeting of the minds to support a finding that the parties agreed . . . to arbitrate their then-pending litigation.” Id. at 1021.

What This Means for Consumers

This case serves as a reminder to consumers that it takes two to go to arbitration. Consumers have been conditioned to believe that corporations can do as they please and that consumers have no way of fighting back against the fine print. The consensus among consumers is that if it is in the contract, it must be enforceable.

This submissive approach was not taken in Dasher. While it is settled law that arbitration agreements are constitutional, that does not mean that companies can invoke them unilaterally when it is advantageous for them to do so. Remarkably, arbitrability was first argued in August 2010, almost one year before the Concepcion decision, but was not resolved until February of 2018. In re Checking Account Overdraft Litig. [Login Required], Nos. 09-MD-02036-JLK, 2010 U.S. Dist. LEXIS 94532, at *1 (S.D. Fla. Aug. 23, 2010); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 333, 131 S. Ct. 1740, 1742 (2011). Consumers should remain vigilant and be prepared to challenge whether disputes are subject to arbitration merely because the terms and conditions say that they are.

What This Means for Consumer Attorneys

It is fair to say that plaintiff-side attorneys are less than thrilled with mandatory arbitration in consumer disputes. While this case in way weakens the enforcement of valid arbitration agreements, it does send a clear message that claims that arose before the shift from litigation to arbitration will be enforced.

Strategically, consumer attorneys should focus their efforts on challenging the arbitrability of claims where there was a past agreement to litigate, instead of obsessing over the constitutionality of standard form contracts for claims where a consumer has agreed to resolve disputes through arbitration.

What This Means for Corporations

The consensus among corporations is that consumer arbitration is an effective way of managing disputes while reducing a company’s legal liability. With the elimination of most class action lawsuits, companies do not have to be fearful of the next headline-grabbing jury award. Having said that, corporations should not be so brash as the defendants in Dasher to believe that arbitration can be used as a procedural ploy to escape litigation. Courts will not sympathize with corporations that try this new take on forum shopping in order to protract the resolution process.

At the same time, companies should not be so self-assured as to believe that compelling arbitration in consumer claims relieves them from financial liability. Though it does not have the media appeal that a class action judgement has, the result of filing and winning thousands of individual arbitrations might change a corporation’s strategy on how it handles consumer disputes. This is especially true given the fact that corporations are responsible for paying almost all the fees in a consumer arbitration claim, which can add up quickly.

The Way Forward

Dasher was a unique case because it predated Concepcion, when consumer arbitration agreements were not the norm that they are today. Following this ruling, it is unlikely that corporations will be successful should they try to impose arbitration agreements on consumers when they are in the midst of litigation. Such a maneuver does little to garner public support for consumer arbitration. Instead, it perpetuates the belief that consumer arbitration is skewed in favor of big businesses. Furthermore, consumers will continue to be skeptical and wonder why corporations are so adamant about compelling arbitration if there is no decided advantage.

Simultaneously, when it is determined that arbitration is the proper forum for handling such disputes, consumer attorneys should embrace the process and understand that consumers can find meaningful results through arbitration. Pending a dramatic shift in public policy and the makeup of the Supreme Court, consumer arbitration will be around for the foreseeable future. It would behoove all parties involved to avoid the bluster from Dasher and focus on the reason alternative dispute resolution was developed in the first place: to resolve disputes.

Alexander Bachuwa practices at Bachuwa Law in New York City, New York.


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