Litigation pending before a federal district court in Minnesota provides a next chapter in the response to consumer contracts that prevent class arbitrations. Those following these developments have seen in the past couple of years law firms filing numerous individual claims, each small in amount, which have served to impose upon the defendants substantial arbitration filing fee obligations on top of the need to defend.
CenturyLink’s efforts to resolve a class action matter involving 17 million class members has presented the most recent judicial development in this arena. The CenturyLink class resolution required it to address claims by 1000 consumers represented by a law firm that filed simultaneous, individual arbitration claims on their clients’ behalf.
CenturyLink responded by purporting to exercise a contractual right to terminate and revoke the arbitration contracts, claiming that the mass filing of individual arbitration claims constituted a waiver of the arbitration agreement’s prohibition against class actions. Disputing this, the consumers’ counsel filed a motion to compel on behalf of six of its clients, challenging CenturyLink’s attempt to abrogate the arbitration provision.
Siding with the consumers, the court ruled as follows:
“The Court holds that Movants did not materially breach the Arbitration Contract by breaching the class action waiver … and simultaneously filing a large number of individual demands for arbitration. [Counsel] attempted to leverage a mass settlement on behalf of all of its clients and refused to individually negotiate each claimant’s claim. However, [counsel] filed individual arbitration claims for each claimant. None of its claimants assert that they represent anyone else or seek recovery beyond the damages which they claim that they are individually owed. Moreover, there is no allegation that any claimant who has filed an arbitration claim waited too long to do so, so the fact that [counsel] “stockpiled” claims and then filed 1, 000 timely claims at one time does not to violate any provision of the Arbitration Contract. CenturyLink wrote the Arbitration Contract; if its system is overwhelmed by 1, 000 individual claims being filed simultaneously, it can alter its system or the filing requirements in the Arbitration Contract.”
CenturyLink also asserted that the movants failed to adequately comply with a requirement of the arbitration agreement providing that “[b]efore commencing arbitration you must first present any claim or dispute to CenturyLink in writing to allow CenturyLink the opportunity to resolve the dispute. If the claim or dispute is not resolved within 60 days, you may request arbitration.” The court held that issues surrounding the fulfillment of this obligation are for the arbitrators to decide.
The court’s imprimatur of the mass filing of individual arbitration claims likely will lead those with arbitration provisions precluding class actions to rethink and restructure their contractual arbitration protocols.