Amazon has changed its policy to allow customers to file lawsuits, The Wall Street Journal reported on Tuesday.
By doing so, the retail giant is buking a trend over the last decade in which companies have forced employees and customers to resolve disputes outside the traditional court system by using secretive arbitration proceedings that don’t permit plaintiffs to win big-money payments in class-action type settlements.
Since the recent change, Amazon already faces at least three proposed class actions, including one brought last month alleging the company’s Alexa-powered Echo devices recorded people without permission.
Amazon made the change after lawyers swamped the company with more than 75,000 individual arbitration demands on behalf of Echo users, which triggered a bill for tens of millions of dollars in filing fees that are payable by Amazon under its own policies.
Although the secretive arbitration proceedings are similar to court cases in some ways, they take place in private settings paid for by the parties and do not allow appeals. The companies also pay for initial filing fees of between $100 and $2,000.
With both consumer advocates and plaintiffs’ lawyers saying this procedure is unfair towards the individuals pursuing a claim, a few well-resourced law firms have in recent years found ways to sign up consumers and employees en masse to file arbitration claims that can overwhelm the targeted companies, which are used to paying the fees for small numbers of claims but not tens of thousands at once.
"Companies thought they were getting out of liability altogether" by adding arbitration clauses, said Chicago lawyer Travis Lenkner, whose firm filed the majority of the Amazon claims. "Now they’re seeing exactly what they bargained for, and they don’t like it."
But Patrick Bannon, an employment lawyer at Seyfarth Shaw LLP who has represented clients facing mass arbitrations, said this technique "has the potential to be pretty unfair to the company," adding that the arbitration fees put intense pressure on businesses to settle "whether the claim is valid or not."
It’s "not something most people thought plaintiffs’ lawyers would or could try to do," said Bannon, because filing arbitration claims en masse takes a large amount of upfront resources and technology.
Amazon had no comment on its policy change. Few other companies have made such a switch, instead trying to find ways around paying the fees.
Last month, Amazon attorneys made plaintiffs’ lawyers aware of the switch in policy by replacing on its website what was once 350 words detailing arbitration requirements with two sentences saying disputes can be brought in state or federal court near Amazon’s Washington state headquarters.
Adam Zimmerman, a professor at Loyola Law School who studies class actions, told The Wall Street Journal that Amazon’s move could cause others to also get rid of arbitration, but said a massive change is unlikely because lawsuits create more legal exposure.
"You’ll never find as many people for a mass arbitration that you would for a class action," he said.
Brian Freeman ✉
Brian Freeman, a Newsmax writer based in Israel, has more than three decades writing and editing about culture and politics for newspapers, online and television.
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