On The Case

Ex-judge atop controversial mass arbitration program: Give it a chance to work

(Reuters) - The International Institute for Conflict Prevention and Resolution announced last week that Shira Scheindlin, a former Manhattan federal judge who now specializes in arbitration and mediation at Stroock & Stroock & Lavan, will serve as the administrative arbitrator of CPR’s new mass claims program.

CPR’s program, which was developed to address the phenomenon of employees filing arbitration claims by the thousands, is under scrutiny in California federal court litigation by couriers for the delivery service DoorDash. The couriers allege that the arbitration service developed its mass resolution protocols with help from DoorDash in-house lawyers and outside counsel from Gibson Dunn & Crutcher. As a result, they contend, CPR may not be a neutral forum for workers' claims.

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The arbitration service, as I’ll explain, maintains that it consulted with “a variety of stakeholders,” including lawyers who represent employees, to develop “a procedurally and substantively fair and neutral process.”

Judge Scheindlin said in an interview on Friday that she hopes that her involvement will reassure skeptics. “I think I have credibility with both sides of the bar, maybe making it more attractive than it might otherwise have been,” the judge said. “Maybe they’ll say, ‘Well, if Judge Scheindlin is willing to be involved in this, maybe it’s worth our try.’”

Scheindlin said she was only contacted by CPR a few weeks ago and was not involved in the drafting of the service’s protocols for handling masses of claims by workers whose contracts require them to assert claims in individual arbitration. As you know if you’ve been reading my columns over the past year, some plaintiffs’ firms have figured out how to turn that contractual requirement to workers’ advantage, filing hundreds or thousands of arbitration demands and putting companies on the hook for millions of dollars in arbitration fees.

In November, CPR published its newly developed rules for mass employment arbitration, which can be invoked when 30 or more substantially identical claims are filed against an employer. In a nutshell, the CPR procedure calls for 10 randomly selected cases to be arbitrated, with the possibility of each side picking an additional five cases apiece to be tried. The results of those arbitrations would inform negotiations before a CPR mediator. If mediation produces a global settlement, individual workers can opt out and pursue individual claims in arbitration. If there’s no global deal, employees can either proceed with arbitration or can go to court. So far, according to a CPR spokeswoman, the service has not received arbitration demands that have triggered the mass claims protocol.

Scheindlin, who presided over several multidistrict litigation proceedings when she was a judge, said the CPR protocols resemble the settlement process in MDLs. “You make the benchmark arbitration. That’s similar to what I call bellwether trials,” she said. “You make that available to the mediator. Then the mediator tries to resolve everything. And then you have opt-outs.”

Under the CPR process, employees would lose the leverage of multimillion-dollar arbitration fees, but would be permitted unilaterally to choose arbitrators from a roster selected by CPR and approved by both sides. Judge Scheindlin said companies that adopt the CPR protocol would also be making a concession to workers by allowing them to go to court if the arbitration process does not result in a global settlement, although she said that concession doesn’t require employers to permit class actions.

Her role, she said, will be to decide whether the mass arbitration protocols are to be invoked and whether the two sides can pick test cases to supplement the randomly selected arbitrations.

The judge said she believes workers who file arbitration demands en masse are only following the rules imposed upon them by employers, who are, in turn, capitalizing on U.S. Supreme Court decisions endorsing arbitration. Scheindlin said she is aware that some employers and defense firms claim that plaintiffs’ lawyers are abusing the system, filing unwarranted claims to pressure companies with millions of dollars in filing fees. But it is defendants, she said, that made the rules.

“The situation that’s been created really leaves a plaintiff with no other choice,” she said. “The choice is to abandon your claim or bring it one by one in arbitration. I’d like to hear from (employers) what they think the third choice is … You made this bed, now you have to sleep in it.”

Judge Scheindlin said she is not involved in the California DoorDash litigation, in which more than 2,200 couriers sued in federal court in San Francisco to compel the delivery service to arbitrate their claims at AAA. The workers also sought an injunction to bar DoorDash from imposing a new contract that required workers to bring arbitration claims at CPR, which had previously been known primarily for arbitrating commercial claims between businesses. The plaintiffs’ firm Keller Lenkner dropped the injunction demand after DoorDash said workers could continue to arbitrate at AAA. But U.S. District Judge William Alsup of San Francisco authorized Keller Lenkner to conduct limited discovery to determine what role DoorDash’s lawyers played in the development of the CPR mass arbitration protocols.

In a Dec. 13 filing, Keller Lenkner asserted that CPR began to consider adopting the protocols after Gibson Dunn reached out to the service on behalf of Door Dash, which was facing the prospect of millions of dollars in arbitration fees. CPR itself told Judge Alsup in a Dec. 12 letter brief that Gibson Dunn “expressed concern over the current options for administration of a mass of claims and the fee structures being imposed.” CPR said it “was eager to innovate in the area of mass claims and, rather than just focusing on alternative fees, took the opportunity presented to lend its expertise and resources to think anew and find an efficient and fair process for resolving these claims.” According to CPR’s lawyers at Morgan Lewis & Bockius, the arbitration service consulted with Gibson Dunn and DoorDash in-house lawyers as it came up with rules for administering mass claims by employees. But CPR said it also talked to lots of other sources, including plaintiffs’ lawyers. In the end, according to the arbitration service, CPR – and not Gibson Dunn – “conceived, wrote the terms and controlled the protocol’s development.”

CPR and Keller Lenkner have sparred over the range of discovery to which DoorDash couriers are entitled from the arbitration service. At a hearing Friday, Judge Alsup said CPR must turn over documents relating to its communications with Gibson Dunn and DoorDash and must produce a witness to be deposed about those communications.

Judge Scheindlin said that to her, the end result is more important than the development process, or, in her analogy, to sausage-making. “It almost doesn’t matter to me how it got created,” she said. “If it’s fair, if it’s good, if it works, then it’s a good hotdog. It should at least be tried.”