7th Circuit Stays Order Compelling Samsung to Pay Mass Arbitration Fees it Agreed to Pay

Corporate defendants have long pretended that their interests in mandatory, individual arbitration clauses are directed at the fact that arbitration provides an efficient, adequate forum for consumers to vindicate their claims for relief– not in effectively blocking consumers from obtaining any meaningful relief. As more and more plaintiffs have been taking such defendants at their word, and filing in arbitral forums per such agreements, though, corporate defendants have taken new tacks. Where large groups of consumers have filed in arbitral forums, per their agreements with defendants (so-called “mass arbitration”), defendants claim it would be unfair to require them to pay the fees associated with private arbitration (i.e., the fees they agreed to pay in the arbitration agreement) for so many cases.

In Wallrich v. Samsung Corp., nearly 50,000 consumers filed arbitration demands against Samsung for violations of the Illinois Biometric Information Privacy Act. Samsung’s chosen arbitration provider, the American Arbitration Association, per the terms of the forced arbitration agreement, directed Samsung to pay its share of fees for these individual cases–more than $4 million. Samsung thought this was unfair, so declined. Thus, the AAA closed the arbitrations for nonpayment.

The consumers moved to compel arbitration — and pay the fees — in federal district court. The district court agreed that Samsung couldn’t shirk its own agreement and thus ordered it to return to arbitration and pay the fees owed. Samsung appealed to the Seventh Circuit which, this week, entered a stay pending appeal, expedited the appeal, and ordered the parties to address questions of both the district court’s jurisdiction and appellate jurisdiction.

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