Forced arbitration backfires on Uber

A cautionary tale on forced arbitration:

Uber’s platform Uber Eats allows customers to order takeout from various restaurants and have it delivered by a driver for a restaurant-specific delivery fee. Customers are required to agree to Uber's Terms of Use, which contains a provision stating that any dispute between the customer and Uber will be settled by binding arbitration administered by the American Arbitration Association in accordance with AAA's rules. After the death of George Floyd in June 2020, Uber announced that it would waive its delivery fee for orders placed at qualifying Black-owned restaurants from June 4, 2020, through December 1, 2020.

Shortly after, the law firm of Consovoy McCarthy PLLC began searching for Uber Eats customers who paid a delivery fee to a non-Black-owned restaurant during the relevant time and asking them to challenge the lawfulness of Uber's policy by claiming that it constituted unlawful reverse race discrimination. The law firm eventually filed more than 31,000 substantively identical arbitration demands with AAA against Uber.

In December 2020, AAA accepted and agreed to administer the claims according to its rules, which included a fee schedule for individual cases. According to the fee schedule, for each case, Uber would owe AAA a $500 filing fee, a $1,400 standard case management fee, and a $1,500 arbitrator fee, for a total of approximately $107 million if charged the full amount. AAA exercised its discretion as to the filing fee, and reduced it to approximately $4.3 million, which Uber paid.

The parties and AAA then engaged in months of fruitless negotiations to come up with a more efficient process for dealing with the 31,500 arbitration cases. Then in April 2021, AAA told the parties that absent an agreement between them, it would administer the cases pursuant to its rules, including invoicing fees according to the fee schedule—under which Uber would owe more than $91.6 million. Uber subsequently paid a total of $667,800, for the first batch of cases. When AAA issued an invoice demanding payment of $10.879 million for case management fees for the second batch, Uber sued AAA alleging that its invoicing was unlawful.

In a decision issued last week, affirming the trial court’s denial of Uber’s motion for a preliminary injunction, the court concluded: “While Uber is trying to avoid paying the arbitration fees associated with 31,000 nearly identical cases, it made the business decision to preclude class, collective, or representative claims in its arbitration agreement with its consumers, and AAA's fees are directly attributable to that decision.”

Notably, without Uber's forced arbitration provision, the customers would have had to pay any court filing fees and surely would have filed as a single class action. The big winner from Uber's forced arbitration provision is [drumroll] AAA.

Inaugural episode of Consumer Law and Economic Justice Podcast now available

Here. The first episode features a conversation with Abbye Atkinson, professor at Berkeley Law, about her article, Borrowing Equality, published in the Columbia Law Review, and the relationship among credit, debt, social relationships, inequality, and what should be done to pave the way for a better world for borrowers.

The podcast will broadcast conversations with consumer scholars and practitioners about their work and the latest consumer and economic justice issues. The interviewers will be students. This episode's interviewer is Blair Hendricks, a third-year student at St. John's Law and president of the St. John's chapter of the National Association of Consumer Advocates.

Newsday essay calls for amending NY's UDAP law to give NY consumers the protections many red state consumers have

Here. My latest guest essay.

Study finds borrower race does not affect appraiser valuation

Brent W. Ambrose of Pennsylvania State, James Conklin of Georgia, N. Edward Coulson of California, Irvine - Paul Merage School of Business, Moussa Diop of USC, and Luis A. Lopez of the University of Illinois at Chicago have written Does Appraiser and Borrower Race Affect Valuation? Here's the abstract:

Following concerns about undervaluation of minority-owned homes, we examine the incidence of racial appraisal bias using a nationwide sample of refinanced mortgages from 2000 to 2007. A unique feature of our data is that they allow us to observe the race of the both the homeowner and the appraiser. We do not observe large, systematic differences in the ratio of appraised values to automated valuation model (AVM) estimates between Black- and White-owned homes. Moreover, the appraiser's race and its interaction with the owner's race are not related to valuations. Our findings suggest that racial appraisal bias is either uncommon in the mortgage refinance market or has a relatively minor effect on valuations, on average.

Some clothing retailers make more than half their income from their overpriced credit cards

The Conversation has an interesting piece titled Store credit cards generate corporate profits and disgruntled workers, by a pair of sociology professors, Joya Misra and Kyla Walters. Excerpt:

Major apparel companies also sell credit, often with very high fees, like The Gap’s 21.7% starting interest rate, and US$27 to $37 late payment charge. In 2019, Macy’s store credit card revenue of $771 million accounted for more than half of Macy’s operating income.

[M]any workers identified mandates to push credit card applications on customers as the worst part of their jobs. *

Why do workers find this task so troubling?

Our research shows that they know – sometimes from personal experiences – how credit cards can ruin a person’s finances.

* * *

Gabe, another American Eagle employee, refers to his store’s credit card as “a Visa that has the American Eagle logo at an extremely high interest rate,” explaining that only “gullible” customers sign up.

* * *

Tara, a shift lead at American Eagle, said she needed to sell 2.5 credit cards for every 10 transactions at the cash register.

Old Navy managers also expected cashiers like Danielle to sell two cards per shift. Special sales events intensify these goals. For example, Danielle was told to sell five to 10 credit cards during Black Friday shifts.

Meirav Furth's important article: Retail Race Discrimination

Meirav Furth of UCLA and Tel-Aviv University has written Retail Race Discrimination. Here's the abstract:

This Article investigates everyday race discrimination while shopping in clothing stores of different price ranges. It reports on an original field experiment which examines the combined effects of race and gender on consumers’ shopping experiences and outcomes. Nineteen testers—Black and white females and males, were recruited and trained to return pre-purchased, unworn clothing items (without receipts) to approximately sixty retail stores in Chicago. Overall, more than 200 audits were conducted and analyzed in this study. The findings show that, controlling for all other variables, Black customers receive worse treatment in retail stores than do comparable white customers seeking to return identical goods, and that Black females are particularly vulnerable to discrimination. Implications for law and policy are discussed.

I think this is a very important article and I hope the findings lead to changes in the law.

John Oliver tackles consumer privacy

Or click here.

Lawyer who created use of arbitration clauses to prevent class actions doesn't read consumer contracts

by Jeff Sovern

Probably my favorite podcast is Ballard Spahr's Consumer Finance Monitor Podcast. I learn a tremendous amount from it. Yes, it favors the industry view, as it is certainly entitled to do, but many episodes are devoted to interviewing consumer advocates as well. If you don't listen to it, and you like this blog, you are missing out.

Which brings me to the latest episode, titled "Has America’s civil justice system crashed? A conversation with special guests and consumer advocates Harvey Rosenfield, President of the Consumer Education Foundation, and Laura Antonini, Policy Director of #REPRESENT."  About eleven minutes into that episode, Alan Kaplinsky, a leading industry lawyer, and the person credited with inventing the strategy of using arbitration clauses to prevent class actions says: "I acknowledge that very few people actually read [consumer contracts]. I know I don't read contracts that I sign or become subject to." I suppose this shouldn't be a surprise given that consumer law professors often don't read consumer contracts and that other legal luminaries, like Chief Justice Roberts and Hillary Clinton have said they don't read fine print. But given that the Supreme Court has said arbitration is a matter of consent, it is hard to reconcile the fact that not even the industry lawyers read these things with the idea that everyone nevertheless consents to them. Courts often impose a duty to read but when we will accept--and act upon--the reality that this is a duty practically no one ever lives up to? 

"We don't talk about claims rates," in case you don't want to talk about something besides Bruno

Here, from the Edelson firm. Or click below

 

Do Copyright Holders Get a Free Pass to Identify Alleged Infringers?

by Paul Alan Levy

Suppose that, on June 4, 2022 the owner of a China-based Twitter account were to post this 2005 photo of the Gate  of Heavenly Peace, with text calling for remembrance of the martyrs of Tiananmen Square.

 

Suppose further that, the following week, a previously unknown company based in China and claiming ownership of the copyright in the 2005 version of the iconic painting of Mao’s bust that sits over the main entrance to the Gate  (a new version is hung annually), or falsely claiming copyright in the photo, were to issue a DMCA takedown to Twitter, followed by a subpoena demanding to know the identity of the account holder, claiming that the information is needed to enforce that copyright. Would Twitter be legally obligated to hand over the name of the account holder without delay, knowing that the likely result could be an all-expenses paid trip for the Twitter user to a re-education camp in Xinjiang?

That is what Big Copyright, represented by the Copyright Alliance and by a coalition of trade associations of professional photographers, argues in a pair of amicus briefs that they have filed in the controversy over Twitter postings by CallMeMoneyBags. The case presents the latest challenge in the Northern District of California to the well established rule, first established in 2001 in Dendrite International v. Doe, previously followed in that district as well as in federal and state courts across the country, that a would-be plaintiff claiming that its rights have been violated by anonymous online speech has to make a showing, supported by both legal argument and an evidentiary showing, that it has a tenable claim before it gets to identify the anonymous speaker and thus obtain the ability to serve the speaker with a summons and complaint and litigate its claim to a conclusion, and that assuming the plaintiff has made these showings, the court has to balance the right to enforce substantial claims through litigation against the prospective costs of breaching the right to speak anonymously.

The Facts of the Case

The case arises in somewhat peculiar circumstances. Over a period of a few days in October 2020, a Twitter user using the handle “CallMeMoneyBags,” who specialized in tweets about private equity figures, posted a series of photographs of nubile women to which he appended texts suggesting that Brian Sheth, a private equity billionaire, was now investing his wealth in such women (the tweets and photos appear at pages 3 to 5 here). A mysterious entity named Bayside Advisory, LLC, which appears to have been first formed in Delaware that same month, and was not even registered to do business in California until January 2021, served a DMCA takedown notice on Twitter, contending that the tweets infringed its copyright in the photos, and followed that notice with a subpoena that it obtained under section 512(h) of the DMCA, seeking to identify CallMeMoneyBags for the claimed purpose of enforcing its copyright.