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Blowing Up the Arbitration Process

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A recent article in The New York Times recounts how some companies that use arbitration clauses are facing an onslaught of arbitration claims, with the assistance of some entrepreneurs with a financial stake in the claims. Here’s a little bit more information about two of the individuals interviewed in the article.

Teel Lidow’s FairShake company is an online filing service for arbitration claims, but not a law firm. Consumers may submit claims through FairShake’s website, which then submits the claims to the American Arbitration Association for processing. Users of the service have to handle the arbitration themselves, or retain an attorney to do so. In return FairShake takes 20 percent of any recovery. In March 2020, when it secured $3 million in seed funding, the company claims to have helped 5,000 consumers recover “over $1 million” on their claims, and that 65 percent of claims resulting in settlement. Its site does not claim to help employees with claims against their employers.

The Keller | Lenkner firm referred to in the article has filed thousands of arbitration claims on behalf of workers for DoorDash (5,010 claimants) and Postmates (5,257 claimants), which challenge their classification as independent contractors. The claims against the companies have resulted in federal litigation, in which the workers are seeking to compel arbitration, and the companies are resisting, claiming that the demands for arbitration do not have enough specifics and are an attempted end run around the class action waivers included in the arbitration clauses. The companies have not been faring well. In the DoorDash case (Case No. 19-cv-07545, in the Northern District of California), Judge William Alsup has ordered the company to proceed to arbitration of the claims, at a cost of $1,900 per claim. In the Postmates case (Case No. 19-cv-03042, also in the Northern District), Judge Saundra Brown Armstrong granted the workers’ petition to compel arbitration, but declined to order it to post the arbitration fees, ruling that it was a matter for the arbitrator to decide in the first instance. The company appealed to the Ninth Circuit (Case No. 19-17362), but Judge Armstrong declined to stay her order during the pendency of the appeal.

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  • Pasadena Office
    3020 East Colorado Boulevard
    Pasadena, California 91107
    Phone: 626-449-2300
    Fax: 626-449-2330
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