Arbitration
Wallrich v. Samsung Electronics America Inc.
Date: Nov. 21, 2023
Issue: Whether the district court erred in ordering Samsung to pay $4 million in individual arbitration fees on behalf of 35,651 customers alleging it illegally collected biometric data.
Case Summary: ABA and trade groups (Amici) filed an amicus brief urging the Seventh Circuit to reverse a district court decision requiring Samsung to pay $4 million in arbitration costs.
Mass arbitration typically involves thousands of coordinated—but individual—arbitration demands filed against the same party, and with those claimants usually represented by the same counsel. Because many arbitration providers immediately charge more than a thousand dollars in administrative fees for each arbitration demand, companies requiring arbitration to resolve disputes typically pay millions of dollars up front, regardless of the merits of the individual claims.
In 2022, nearly 50,000 claimants filed with the American Arbitration Association (AAA) individual arbitration demands against Samsung for privacy violations. The AAA invoiced Samsung its share of arbitration fees totaling more than $4 million. Samsung declined to pay, initially citing discrepancies in the arbitration demands, but the AAA administratively closed the arbitrations for nonpayment. The claimants then filed suit in federal court to compel Samsung to arbitrate and pay the fees, which the court granted.
On appeal, Amici filed its amicus brief supporting Samsung. First, Amici argued the district court improperly assumed arbitration agreements existed rather than requiring petitioners to satisfy their burden to prove they agreed to arbitrate. Amici emphasized petitions to compel arbitration are assessed first under the summary-judgment standard.
Amici also explained that the district court erred in ruling that petitioners had met their prima facie burden to prove they have an arbitration agreement with Samsung. The petitioners needed to show that no “material fact” was disputed and each petitioner was entitled to judgment as a matter of law. Amici asserted that the petitioners submitted no witness statements or declarations that required the word of 30,000 individuals to be accepted.
Next, Amici argued the district court’s decision facilitates the abusive use of mass arbitrations to obtain unjustified settlements. Amici emphasized this case is one example of a growing phenomenon of the abusive use of mass arbitrations to coerce settlements regardless of the claim’s merits. Amici also explained the district court’s approach—essentially relieving claimants of their obligation to prove the existence of arbitration agreements—is particularly concerning because it will compound the harm of this abusive practice. Amici asserted mass arbitration has emerged as a vehicle for abusive gamesmanship.
Finally, Amici underscored individual arbitrations and the issues mass arbitrations pose. Multiple studies confirm that consumers who arbitrate fare at least as well, if not better, than ones who litigate in court. Amici explained arbitration reduces the cost of dispute resolution, and in turn, a company’s overall cost of doing business is also reduced. According to Amici, the district court’s ruling threatens to deprive consumers, workers, companies and courts of the significant benefits provided by resolution of disputes through arbitration.
Bottom Line: Appellee’s brief is due Dec. 12, 2023.
Documents: Brief
