You’ve probably seen the ads. Emotional pledges promising you’ll get all the money you deserve. Urgent warnings that a certain medication has been recalled with no more evidence than someone shouting at you to “get your money’s worth.”
In the theater of a class action lawsuit, billboard lawyers take center stage. They present themselves as champions of the injured, delivering compelling performances that promise justice for all. But behind the curtain, the story is often far less heroic.
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Individuals and businesses should be held accountable for genuine wrongdoing, and those who have been truly harmed deserve access to justice. Yet in too many cases, the incentives are misaligned.
On average, attorneys pocket nearly $1 million per judgment in consumer financial protection-related class actions while the victims receive just $32.35 each, according to a study by the Consumer Financial Protection Bureau.
The good news is there’s a faster, fairer way to handle disputes. It’s called individual arbitration, where instead of a lengthy and expensive courtroom battle, an impartial third party known as an arbitrator hears both sides and renders a decision. For individuals with relatively small claims, arbitration can provide a more practical avenue for relief. And the data back it up. Consumers win 42% of arbitrations compared to just 29% of courtroom litigations, according to the U.S. Chamber of Commerce’s Institute for Legal Reform.
The only party that doesn’t benefit from individual arbitration is billboard lawyers. No drawn-out litigation means no outsize legal fees. So, of course, the trial bar has found a way to weaponize arbitration for their own gain — mass arbitration.
Instead of individualized arbitration, trial lawyers simultaneously file tens of thousands of essentially identical arbitration demands in a mass arbitration, triggering massive up-front arbitration fees for businesses. These costs can climb into hundreds of millions of dollars, often exceeding the damages being sought and sometimes forcing a settlement due to exorbitant transaction costs. It’s legal extortion dressed up in procedural clothing. Mass arbitration prioritizes profit over justice and is just another example of how billboard lawyers routinely hunt for new, exotic ways to exploit our lawsuit system.
Whether through class actions, frivolous litigation, or now mass arbitration, the playbook is the same: use the threat of business-busting costs to force settlements that have little to do with the underlying claims.
Businesses of all sizes bear the costs of legal fees and settlements for meritless lawsuits (and arbitrations), and consumers pay the cost of higher prices for goods and services.
PROTECT SMALL BUSINESSES FROM FRIVOLOUS LAWSUITS
It’s time to take action and protect our courts. Mass arbitration cannot remain an open loophole. Applying a bellwether process to resolve mass arbitrations fairly and efficiently, reforming arbitration fee structures to eliminate perverse incentives, and directing state bar associations to investigate possible ethical violations would go a long way toward closing this loophole.
When billboard attorneys can flood the airwaves with misleading ads and cast themselves as heroes in manufactured legal crises, something is broken. Policymakers and arbitration providers have the tools to fix it. It’s time to stop the applause and close the curtain for good.