Amazon Removes Forced Arbitration Clause – Why?

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“Hi, I’m Danny Karon, your Lovable Lawyer here with your quick shot of legal wellness. Did you hear what Amazon did? I’m going to tell you all about it because it is really important and it absolutely affects you.

Amazon recently got rid of its forced arbitration clause in the contracts it has with you, the customers. Baked into every arrangement you have with Amazon, whether it is buying a product or a service, is what’s called forced arbitration. It means that if you have a gripe or grievance with Amazon, such as them not giving you what you ordered or giving you a broken item, you can’t take them to court. Instead, you have to submit your claim to private arbitration, a private tribunal, where Amazon hires and pays for the arbitrator. The arbitrator almost invariably will rule for the person who hired them, in this case Amazon because if they don’t, they’re probably not going to get hired again. Basically, if you have a problem, you forfeit your 7th amendment right to a jury trial. The U.S. Supreme Court says that if you have something like that in a contract, it’s legit and binding.

So, if Amazon is probably going to win most of the time, why did they take the clause out? Well, because a bunch of consumers represented by a bunch of lawyers finally gave Amazon what they asked for. They gave them so many arbitrations that Amazon couldn’t even keep up with it. They gave them 75,000 arbitrations. And remember, Amazon has to pay for those arbitrations. So, if arbitrations are $2,000 each plus different add-on costs, that’s going to be a lot of money. It was crippling and Amazon couldn’t take it anymore. They decided to pull the clause and will now face folks in court.

You might be wondering what claim was so important to 75,000 people that they decided to file arbitration requests. The case involved Amazon Echo. It was a privacy case. All states have privacy statutes and the statutes say what you can and can’t do when it comes to recording people’s voices. Think about what happens with an Amazon Echo when you make requests. In some manner, it records your voice. The claim was that Amazon violated privacy laws in several states. That’s why so many people got worked up about it across the country and filed arbitration requests as required under the contract. Even if Amazon ends up winning these claims, they are still out a ton of money because they have to pay for the arbitrations. The consumers and their lawyers gave Amazon precisely what they wanted. This prompted one lawyer in Chicago who was working for Amazon to say that it’s not really fair to Amazon.

I worked on one of these mass arbitrations once involving a restaurant. It’s a ton of work because it’s unlike a class action where there’s one person who sues as a representative for everybody else. In my case, it was 5,000 workers and every single arbitration was its own file. This helps get the message across to the defendant. Because their employment agreement required arbitration, we were going to seek justice for all of those folks individually. We ended up resolving it but not without a ton of work.

The same type of practice was happening with DoorDash before the Amazon case. DoorDash was requiring workers to go to arbitration for workplace grievances but it got to be too much to handle and to pay for. They asked the court to let them back in even though they said they didn’t want to be there in the first place. This prompted a judge in San Francisco to say “No doubt DoorDash never expected that so many would actually seek arbitration. Instead, an irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers to avoid its duty to arbitrate. This hypocrisy will not be blessed.” You have to be careful what you wish for.

What this all means going forward is that you don’t have to worry about arbitrating your claims against Amazon anymore because that clause is gone. They did it very quietly because they didn’t want the publicity that I’m hoping we’re generating here. This may mean that other companies, such as Uber, Visa, Spectrum, Time Warner, or T-Mobile, will pull their arbitration clauses.

Hopefully this allows you to be more empowered and know what to look for in contracts. Be careful and stay safe!”

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