They will now be tried in federal court. This is a major departure from the strategy of helping companies avoid liability.
Amazon informed customers this week it will no longer ask them to settle legal disputes involving Amazon through arbitration. This is a major departure from an approach that helps companies avoid liability.
Amazon sent a short email to its customers to inform them that anyone using their products will now need to file a dispute with it in federal court rather than going through private, secretive arbitration. This is a move critics claim puts consumers at great disadvantage.
Florencia MarottaWurgler from New York University Law School, who is an expert in consumer law, said that “this is a huge deal.” “For so many years, the tide was turning the other direction, as companies added arbitration clauses in their contracts.”
Amazon customers were not informed in the five-sentence notice about Amazon’s updated “conditions for use”, but it did not provide any explanations as to why arbitration was dropped. A company spokesperson did not provide any further details when asked questions about this reasoning.
Amazon was hit with approximately 75,000 arbitration claims alleging devices such as Echo (which feature Amazon’s voice-operated assistant Alexa) were illegally recording customer conversations without their permission. Amazon could face fees of up to tens to millions of dollars to private arbitrators in order to hear those cases.
A few law firms have begun using the Alexa-related cases as a new strategy to challenge the basic reason that most companies include arbitration clauses within their contracts. This is to stop customers from filing a legal action.
In many cases, consumers would be better off not having to hire a lawyer or pursue an arbitration case as an individual. Consumers involved in similar disputes have been able for decades to pool their resources and hire a lawyer as a class to represent them in class action lawsuits.
Many companies started to include language in contracts to require customers who purchased services from almost every aspect of their lives — such as renting a car or admitting parents to nursing homes — to consent to arbitrating any dispute. This was done to prevent the possibility of class action. This meant that they could no longer be part of any class action.
This legal tactic has been upheld by the Supreme Court in part due to companies successfully arguing that arbitration would be fair for consumers and they would agree to pay many fees. The result was that few ever utilized the arbitration system.
The arbitration process was used to the advantage of lawyers representing customers in the Amazon Alexa case. Amazon was left with an enormous legal bill after filing numerous claims before the cases were resolved. Amazon spent approximately $2,900 just to find an arbitrator to start the process and for that one claim to be resolved.
According to Travis Lenkner of Keller Lenkner a lawyer representing consumers in Alexa-related cases, “Arbitration was part of an attempt to avoid liability for most companies.” This is not the first company that has turned tail. Other companies may follow their lead.”
Keller Lenkner used the same approach to challenge how DoorDash (the food delivery company) classified its employees and paid them. The firm brought thousands of claims against DoorDash workers and argued in court that the company shouldn’t be required to pay much of the fees. DoorDash was criticized by a federal judge for trying to avoid the arbitration system.
Amazon didn’t fight fees in Alexa cases but did tell Keller Lenkner that it had dropped arbitration requirements from its “conditions for use”. According to Amazon, most of these cases were ruled in Amazon’s favor.
Customers claim that Amazon devices including Echo violated state laws that require consent from individuals to record their conversations.
Warren Postman (Lead Lawyer at Keller Lenkner in Alexa-related Claims and Other Arbitration Cases) stated that “when we looked into this issue, we were certain that most people don’t realize smart speakers are recording their conversations.”
Amazon claimed that Echo’s Echo technology could detect only one “wake word”, or any word that activates the device. Customers could delete or review recordings and can choose to have them deleted.
Although mass arbitration has been successful in certain types of cases, the strategy is not universally applicable to all businesses, according to Deepak Gupta (a lawyer who represented clients in AT&T Mobility, Concepcion v. Concepcion), which established arbitration as the only way for companies to settle disputes.
Mass arbitration cannot handle more complex cases, such as those involving employees who are accused of harassment and other issues related to employment. The Supreme Court will not likely to limit the ability of businesses to arbitrate, so Mr. Gupta stated that Congress must pass legislation to ensure workers’ and consumer rights to the courts.
He said that the mass arbitration strategy still shows the “cynicism” of forced arbitration.
According to Mr. Gupta, “It wasn’t about making customers easier to settle disputes — it was all about killing claims.” Amazon realized it was going to be facing an avalanche in claims and decided to leave.
Publited at Thu 22 July 2021 21.08:34 +0000