A recent column by David Lazarus in the Los Angeles Times, “Microsoft Ending Consumers’ Ability to File Class-Action Suits,” reports that Microsoft is implementing arbitration provisions with class action waiver provisions. The article discusses a blog post by Tim Fielden, Assistant General Counsel of Microsoft regarding this change. Fielden’s blog post explains:
When a customer in the United States has a dispute about a Microsoft product or service, many of our new user agreements will require that, if we can’t informally resolve the dispute, the customer bring the claim in small claims court or arbitration, but not as part of a class action lawsuit. Many companies have adopted this approach, which the U.S. Supreme Court permitted in a case it decided in 2011. . . .
We think this is the right approach for both Microsoft and our U.S. customers. Our policy gives Microsoft powerful incentives to resolve any dispute to the customer’s satisfaction before it gets to arbitration, and our arbitration provisions will be among the most generous in the country. For instance, we permit arbitration wherever the customer lives, promptly reimburse filing fees, and, if we offer less to resolve a dispute informally than an arbitrator ultimately awards, we will pay the greater of the award or $1,000 for most products and services—plus double the customer’s reasonable attorney’s fees. Most important, this approach means customer complaints will be resolved promptly, and in those cases where the arbitrator agrees with the customer’s position, the customer will receive generous compensation, and receive it quickly.
David Lazarus’ article argues that Microsoft’s action, and the Supreme Court’s decision in AT&T v. Concepcion, are unfair to consumers. He writes:
[D]espite the company’s assertions of increased customer satisfaction, the reality is that Microsoft is telling people they can stuff it if they want to join together in exercising their constitutional right to a jury trial.
And the company has the full backing of the U.S. Supreme Court in staking out this arrogant, deeply consumer-unfriendly position.
. . .
So Microsoft’s barring of class actions will only serve to encourage other tech heavyweights to follow suit. As it stands, people can file a class-action lawsuit against Google. They can file a class action against Apple, and Facebook, and Twitter.
Anyone want to bet how long that’ll last?
I don’t think Lazarus is correct. Taking my class action defense lawyer hat off for a moment, when I, as a consumer, buy a product that I’m really unsatisfied with for one reason or another, and expect that other consumers also are unhappy, my current options are: (1) taking the product back to the store and getting a refund, if that is an option; (2) calling the 800 number and arguing with the person on the other end of the line (which these days is often someone overseas) for a refund; or (3) waiting until someone brings a class action (it’s pretty unlikely I want to deal with the hassle of being a named plaintiff myself), then waiting years for that case to work its way through the court system and eventually settle, if that happens, and then waiting months while the settlement works its way through the approval process until a check for some small amount of money, far below the purchase price of the product, finally arrives in my mailbox (while the lawyers representing the class pocket millions of dollars in attorneys’ fees). The jury trial that Lazarus talks about is largely a fiction because class actions almost never go to trial, and those that do often result in settlement while on appeal. In my mind, if options (1) and (2) are unavailable or unsuccessful, a quick-and-easy arbitration would be more preferable, and give me a better chance of obtaining significant relief for myself than waiting for a class action to materialize, if it does.
Another question that Microsoft’s new adoption of arbitration brings to mind is whether insurance companies will follow what AT&T and now Microsoft have done. I’ve written on that subject before on this blog a number of times, see my August 22, 2011 post, and the Arbitration/Appraisal topic area on this blog. Insurers have a number of things to think about that differ from AT&T and Microsoft, including potential state statutory and regulatory obstacles, and the fact that insurance contracts tend to lead to more litigation and different types of litigation than cases that tend to be filed under a “shrinkwrap” software contract or a cell phone contract. Arbitration may or may not be a successful strategy for the insurance industry. Only time and trial and error will tell for sure, if any insurer adopts it (and it would likely have to be a major carrier that takes the lead since it would need to be a carrier that regularly faces class actions). One risk that insurers have is that, if most or all of the other major industries that today are large targets for consumer class actions adopt arbitration provisions with class action waivers, insurers could see an uptick in class action filings against them simply because they have not implemented arbitration.