Data Breach Defense: Mobilizing Against Weaponized Mass Arbitration

Most companies have experienced or will experience a data breach. Increasingly, companies also face the risks associated with mass arbitration weaponized by the overwhelming volume of claims after a breach. This article explores:

• Mass arbitration's emergence as a class action alternative in data breach cases;
• The risks and liabilities associated with mass arbitrations;
• The limited options for mounting an effective response to mass arbitrations;
• The ways companies can minimize their mass arbitration exposure; and
• Mass arbitration settlement strategies in data breach cases.

Prevalence of Arbitration Clauses and the Rise of Mass Arbitrations

Arbitration can provide an effective and efficient means of resolving disputes for all parties involved. The prospect of efficient, out-of-court resolution has prompted many companies to insert a binding arbitration clause in most of their consumer contracts. Following the Supreme Court decision in AT&T Mobility LLC v. Concepcion, companies have included consumer-friendly and conscionable arbitration provisions that require the company to pay any arbitration filing fees regardless of which party initiates the arbitration. These arbitrations usually come packaged with class action and jury trial waivers.