Anyone using the tech giant's products raised litigation in federal court, a significant step back from a strategy that often helps companies avoid liability.
Amazon told customers this week that it will no longer require them to resolve their legal complaints involving the tech giant by way of 'arbitrage, a retreat from a strategy that often helps companies avoid liability.
In a brief e-mail to customersts, Amazon said anyone using its products should now pursue disputes with the company in federal court, rather than going through the private and covert arbitration process, which critics say puts consumers ta huge disadvantage .
" This is a big problem, "said Florencia Marotta-Wurgler, professor at the law school from New York University, which focuses on consumer law. "For so long the wind was going the other way, with companies adding arbitration clauses to their contracts. " His updated 'terms of service' did not explain the reasons for abandonment of arbitration. Asked about the reasoning behind the change, a spokesperson for the company did not give details.
The move comes after the tech giant was hit by around 75,000 arbitration requests alleging that devices, such as the Echo, have a voice-activated system Amazon Assistant Alexa, were registering customers without their consent.
Amazon is potentially facing tens of millions of dollars in fees. will have to pay private arbitrators to have these cases heard.
Alexa-related cases are part of a relatively new tactic that is being used by a handful of law firms. Lawyers seeking to overturn the fundamental reason why most companies include arbitration clauses in their contracts: to prevent clients from pursuing legal action.
For many disputes involving relatively small amounts of money, there is noIt doesn't make financial sense for most consumers to go to the trouble of hiring a lawyer and pursuing an arbitration claim as an individual. For decades, several consumers involved in similar disputes have been able to pool their resources to hire a lawyer to represent them as a group in class actions.
To avoid class action lawsuits, many companies have started inserting wording into their contracts requiring customers purchasing services in almost every aspect of life - from car rental to car admission a parent in a nursing home - accept arbitration in case of dispute. This meant giving up their opportunity to be part of a class action lawsuit.
The Supreme Court upheld this legal tactic, in large part because the companies have argued with sucthis would ensure that the arbitration was fair to consumers, including agreeing to pay many of the fees associated with the process. But the result is that very few people have ever used the arbitration system. Daily Business Briefing
In Amazon business Alexa, lawyers representing clients have taken advantage of this user-friendly feature of the arbitration system. By filing claims en masse, the strategy left Amazon with a hefty legal bill even before the cases were resolved. Simply engaging the arbitrator and initiating the process for a single claim costs Amazon around $ 2,900.
"For most companies, arbitration was always part of an effort to evade liability, not just to evade class action lawsuits, ”said TravisLenkner, a lawyer at Keller Lenkner, which represents consumers in complaints related to Alexa. “This is the first company to turn around. Others might well. "
Keller Lenkner a used a similar approach to challenge the classification of DoorDash, the food delivery service. and compensated its workers. When the company filed thousands of arbitration claims on behalf of the DoorDash workers, the company argued unsuccessfully in court that it did not shouldn't have to pay most of the upfront costs for the cases. DoorDash was reprimanded by a federal judge for what he said was an effort to evade the arbitration system.
Customers claim that Amazon devices, including the Echo, have broken rules in states where people must give consent to be registered.
" When we looked at the problem, we were convinced that most people don't realize that smart speakers are recording them, "said Warren Postman, Keller Lenkner's lead attorney on Alexa claims. and other businessarbitrage.
Amazon has stated that its Echo technology is intended to detect only a chosen "sleep word ". or a word that triggers the device. The company said customers can view and delete recordings at any time and can choose to have recordings never backed up.
While the Mass arbitration has worked in some types of cases, it probably cannot be "widely replicated in the economy," said D. eepak Gupta, a lawyer who has represented clients in a landmark case of Supreme Court in 2010, AT&T Mobility v. Concepcion , which established arbitration as a means by which companies can seek to resolve disputes.
The cases pComplexes involving workers who claim to be victims of harassment or other employment issues at work probably cannot be ruled out in mass arbitration. Because the United States Supreme Court should not weaken the right of companies to use arbitration, Mr Gupta said Congress must pass laws to protect the rights of workers and consumers to go to court.
Nonetheless, he said, the mass arbitration strategy shows the "cynicism of forced arbitration " .
"easier for customers to resolve disputes, it was about killing claims," Mr. Gupta said. "A Once Amazon saw that it would have to face an avalanche of complaints, it decided to walk away. "