Arbitration Agreements Help Mitigate Risk of TCPA Class Action Lawsuits

Arbitration agreements can be a powerful weapon to protect against class action lawsuits. An arbitration agreement is a written contract in which two or more parties agree to settle a dispute outside of court and can be used to dismiss a plaintiff’s ability to claim class action status. For example, they also may allow that if one party sues the other in court, the party that has been sued can invoke the arbitration agreement to require the matter to proceed in arbitration instead of court. Finally, an arbitration agreement may also contain a provision that prohibits the consumer from bringing claims as a group to a business. Therefore, without a certified class, the potential financial penalties following a TCPA suit can be significantly reduced.

Case in Point

In November of 2018, Uber technologies (“Uber”) was able to use such an agreement to move a TCPA class action out of the courthouse and into arbitration potentially saving them a significant amount of punitive damages (Johnson v. Uber Technologies, Inc.). The court explained that when users download the app and create an account, they are provided a conspicuous disclosure that clearly notifies them that they are agreeing to its Terms of Service, which was accessible through a hyperlink. Within the Terms of Service, a section titled “Dispute Resolution” included an arbitration agreement that stated:

“You and Company agree that any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of the Service or Application (collectively, ‘Disputes’) will be settled by binding arbitration … You acknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding.”

Uber’s summary judgment motion was granted by the District Judge, and the case is “stayed” pending the resolution of arbitration proceedings.

How to ensure they hold up

Make sure your agreements:

• Are clear and conspicuous at the outset of entering into an agreement
• Do not provide an unclear advantage to the company
• Do not deny or limit benefits to consumers if harm is done
• Are placed in such a way that it is easily accessible and written to ensure it is easily understood

Because arbitration agreements can be a powerful line of defense against class action lawsuits, it is important to follow best practices to ensure legal compliance at the time of user agreement.

While an arbitration agreement likely cannot prevent TCPA lawsuits from occurring, it can certainly curb the possibility of class actions and substantial fines. A well written agreement can reduce legal costs and allow for companies to recover attorney’s fees. In today’s litigious climate, it’s highly recommended that companies take a look at their contracts and polices to ensure a binding arbitration agreement is in place should they seek the privileges such an agreement provides.