One litigation industry industry problem is that foolish actions by one litigant can harm many other similarly situated litigants. This reality arises for parties on either side of the versus.
A new example from the corporate defense side arises from the “bad faith” actions of Fitbit and MoFo (Morrison & Foerster) related to a consumer fraud arbitration. In short, Fitbit forced a would be class action into arbitration but then refused to arbitrate, after sending the plaintiff an amount it viewed as “resolving the case.” Plaintiff, however, would not take the money, and went back to federal court for relief. Ultimately, a federal judge issued an opinion strongly rapping Fitbit and MoFo for bad faith, ordered the payment of fees and costs, and also ordered Fitbit to submit his opinion to the parties in all motion to compel arbitration cases arising in the next year. The longer story is in an August 2, 2018 article at Northern California Record. The slip opinion, McLellan v. Fitbit, is online, and is from Judge Donato of the Northern District of California. Set out below are key excerpts from the opinion, at 1-2, and 10″
“Fitbit would like to treat this incident as a misunderstanding, but it is much more than that. It moved McLellan’s claims out of court and then undertook a course of conduct intended to shut her out of arbitration as well. It abandoned that plan at an early stage only because McLellan was diligent in sounding the alarm, and the Court expressed its concerns in plain terms at the hearing. Fitbit’s conduct has multiplied the proceedings in this case for no good reason and at the expense of plaintiffs’ and the Court’s resources. It has also bolstered the perception that arbitration is where consumer lawsuits go to die. While the merits of that view can be debated, it’s no surprise that many people, including judges, are skeptical about arbitration agreements in light of situations like this one. Fitbit’s conduct undermines the public’s confidence in getting a fair shake when arbitration is compelled.
McLellan has asked to be relieved of her arbitration agreement, and more broadly to strike down Fitbit’s arbitration clause for all users. Although there is some equitable appeal in those requests, the record here does not support terminating the arbitration. Nevertheless, the Court finds that Fitbit and its counsel engaged in bad-faith tactics that warrant corrective action.”
“To help ensure that Fitbit does not again impose “pointless and wasteful burden[s] on the supposedly summary and speedy procedures prescribed by the Arbitration Act,” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 27 (1983), it is ordered to file a copy of this decision in all cases where it seeks to compel arbitration under its Terms of Service with consumers. This duty is imposed for a period of one year from the date of this order.”