Reuters carries a good "hoist on their own petard" story about textbook company CHEGG, which imposes a forced arbitration clause on students using its products. When CHEGG's negligence exposed the sensitive financial information of thousands of students, some filed suit, and CHEGG obtained a ruling that they all had to be kicked out of court and go file in arbitration.
And guess what, more than 15,000 of them did.
Suddenly CHEGG sees the wisdom of class actions, which allow people with similar cases to band together to have one procedure determine the result for all, at far less expense. Except that CHEGG also imposed a class action ban along with its forced arbitration clause!
So now CHEGG is trying to evade the $7.5 million arbitration filing fee it agreed to pay for all those students it forced to file arbitration demands.
More proof (as if more was needed at this point) that companies don't use forced arbitration for any of the reasons they claim they do -- it's not "better for our customers" or any of that crap these companies like to spew. They use forced arbitration because, most often, consumers will throw up their hands and walk away, letting the wrongdoers keep their ill-gotten gains.
But in this case, CHEGG's greed is going to get the better of them. Good.
And guess what, more than 15,000 of them did.
Suddenly CHEGG sees the wisdom of class actions, which allow people with similar cases to band together to have one procedure determine the result for all, at far less expense. Except that CHEGG also imposed a class action ban along with its forced arbitration clause!
So now CHEGG is trying to evade the $7.5 million arbitration filing fee it agreed to pay for all those students it forced to file arbitration demands.
More proof (as if more was needed at this point) that companies don't use forced arbitration for any of the reasons they claim they do -- it's not "better for our customers" or any of that crap these companies like to spew. They use forced arbitration because, most often, consumers will throw up their hands and walk away, letting the wrongdoers keep their ill-gotten gains.
But in this case, CHEGG's greed is going to get the better of them. Good.
The background: As I told you in May, the plaintiff firm Z Law filed a class action in 2019 on behalf of millions of Chegg customers whose personal information was allegedly compromised in a 2018 data breach. Chegg’s lawyers at Orrick Herrington & Sutcliffe moved to compel arbitration, citing a mandatory arbitration provision in the user agreement its customers are required to accept. In April 2020, U.S. District Judge Richard Bennett of Baltimore granted Chegg’s motion.
Z Law then filed more than 15,000 individual demands at the American Arbitration Association, asserting a claim of $25,000 for each Chegg customer. Z Law principal Cory Zajdel told me at the time that he sent six boxes of filings, containing individual demands by all of his 15,000 clients, to Chegg, hoping to foreclose arguments that his clients were not Chegg customers or did not exist.
In June, according to a July 1 letter from Zajdel to the AAA, the arbitration service instructed Chegg to pay about $7.5 million in fees to launch the arbitrations. (Chegg’s arbitration clause requires the company to pay the initial fees.)
I should say here that Chegg counsel Douglas Meal did not respond to my detailed email request for comment, so this account is based on Zajdel’s letter to the AAA.
Instead of paying the requisite fees and beginning the process of arbitrating with its customers, Chegg said those customers had breached their user agreements by asserting frivolous or improper demands for arbitration. Chegg unilaterally purported to terminate the agreements. The company then informed AAA that it was under no obligation to arbitrate with those customers, or, for that matter, to pay any fees associated with their arbitration demands.
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