Amazon Ends Use of Arbitration for Customer Disputes

The Supreme Court has upheld this legal tactic, in large part because companies have successfully argued that they would make sure arbitration was fair for the consumers, including agreeing to pay many of the fees associated with the process. But the upshot was that very few people ever used the arbitration system.

In the Amazon Alexa cases, lawyers representing the customers turned this consumer friendly feature of the arbitration system to their advantage. By filing claims en masse, the strategy left Amazon with a large legal bill even before any cases had been resolved. Just to hire the arbitrator and to get the process started for a single claim cost Amazon about $2,900.

“For most companies, arbitration was always part of an effort to evade liability, not just to escape class actions,” said Travis Lenkner, a lawyer at the firm Keller Lenkner, which is representing the consumers in the Alexa-related claims. “This is the first company to turn tail. Others may well do so.”

Keller Lenkner has used a similar approach in challenging how DoorDash, the food delivery service, classified and compensated its workers. When the firm filed thousands of arbitration claims on behalf of DoorDash workers, the company argued unsuccessfully in court that it shouldn’t have to pay many of the initial fees for the cases. DoorDash was scolded by a federal judge for what he said was an effort to evade the arbitration system.

In the Alexa-related cases, Amazon did not fight the fees in court, but told Keller Lenkner in May that it had dropped arbitration requirements as part of its “conditions of use.” Many of the Alexa arbitration claims are still proceeding and, according to Amazon, many of the cases have been ruled in the company’s favor.

The customers are claiming that Amazon’s devices, including the Echo, violated rules in states where people must give their consent to be recorded.

“When we looked into the issue, we were convinced that most people don’t realize smart speakers are recording them,” said Warren Postman, the lead lawyer at Keller Lenkner on the Alexa-related claims and other arbitration cases.