A federal appeals panel has determined Samsung doesn’t need to pay millions of dollars in arbitration fees for claims from 35,600 customers seeking to hold the company liable for alleged violations of Illinois' biometrics privacy law.
In 2023, Samsung accused Labaton Keller Sucharow, one of America’s most influential plaintiffs’ law firms, of trying to cram potentially thousands of wrongful claims under the Illinois Biometric Information Privacy Act into mass arbitration. Samsung claimed hundreds of people, whom Labaton claimed to represent for several months, appeared on a list of plaintiffs allegedly represented by another firm, leveling nearly identical claims against the electronics maker.
Samsung refused to pay more than $4 million in administrative filing fees the American Arbitration Association required. When the consumers declined to advance that sum, the Association denied their request to stall and terminated proceedings, which opened the possibility of federal litigation. But the consumers pursued a judicial order compelling arbitration, which U.S. District Judge Harry Leinenweber granted in September.
U.S. Seventh Circuit Court of Appeals Judge Thomas L. Kirsch II
| US Dept. of Justice, Public domain, via Wikimedia Commons
That ruling came despite Samsung’s contention the maneuver is an attempt to circumvent protections in the company’s standard user agreement and force it into a larger settlement it otherwise might’ve avoided.
On July 1, the U.S. Seventh Circuit Court of Appeals ruled on Samsung’s appeal of Leinenweber’s ruling. Seventh Circuit Judge Thomas Kirsch wrote the panel’s opinion; Judges Diane Sykes and Frank Easterbrook concurred.
The panel first noted Judge Leinenweber, who died in June, had subject matter jurisdiction over the dispute. It then rejected the customers’ challenge to its own jurisdiction over the appeal, writing that “once the court issues its arbitration order (leaving nothing else for it to do), it renders a final decision that is appealable.”
On appeal, Samsung said it followed the terms of the agreement the customers alleged defined their position and challenged Leinenweber’s authority to force it to pay the administrative fees.
Kirsch noted Samsung conceded any buyer or user of a Samsung device agrees to arbitration, which meant the consumers involved in the dispute needed only to show they were customers. However, it said they failed by only declaring their position as customers and not offering proof of those claims.
“The copies of Samsung’s terms and conditions and the spreadsheet containing the consumers’ names and addresses are also insufficient,” Kirsch wrote. “Again, Samsung does not dispute that its terms and conditions bind its customers to arbitration agreements. The terms and conditions the consumers identify are simply copies found in any Samsung device or on Samsung’s website, not terms and conditions reviewed and received by specific consumers. Without more, those copies do nothing to show that any of the consumers purchased a Samsung device.”
Although the Association determined the customers met filing requirements, the panel said that conclusion involves “no substantive determinations” about whether anyone entered into an agreement or if the claimants were customers. The customers argued the case should be sent back to Chicago district court, to give them a chance to amend, but the panel said a second chance isn’t allowed.
“Even if the consumers had met their evidentiary burden, the district court exceeded its authority and the scope of the arbitration agreement by ordering Samsung to pay the AAA filing fees,” Kirsch wrote, adding the Association followed its rules and had the discretion to reject a request to stay the arbitration while customers sought an order to compel.
“The Federal Arbitration Act does not grant the consumers an unfettered right to arbitrate, and nothing in the statute treats parties differently based on financial status,” Kirsch wrote. “Rather, all the law requires is that the parties arbitrate according to the terms of their agreement. The agreement here delegated fee issues to the procedures and rules of the AAA. And the AAA, using those rules, denied a stay, terminated the arbitration, and sent the claims to federal court after Samsung refused to pay its fees. The parties therefore fully ‘arbitrated’ under their agreement. …
“The consumers may view this result as unjust, but we are here because they invoked their alleged agreement with Samsung; they cannot now complain of that agreement’s terms.”
Samsung has been represented in the case by attorney Randall W. Edwards, of the firm of O'Melveny & Myers, of San Francisco, and others with that firm and the firms of Donohue Brown Mathewson & Smyth and Kopecky Schumacher Rosenburg, both of Chicago, and Skadden Arps Slate Meager & Flom, of New York.
The company did not respond to a request for comment.
Plaintiffs are represented by attorneys Jonathan Gardner, Melissa H. Nafash, Jonathan Waisnor, Shannon K. Tully and Alexander Schlow, of the firm of Labaton Keller Sucharow, of New York, and the firm of Wallace Miller, of Chicago.
Labaton Keller Sucharow also did not respond to a request for comment.