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Ninth Circuit:
Party Is Not ‘Aggrieved’ by Consolidation of Arbitral Filings
Opinion Raises Concern That ‘True Motivation’ Behind Demand for Individual Resolution Is to Raise Costs for Other Side, Says Joint Consideration of Thousands of Identical Claims Is Not Prevented by Agreement
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals on Friday rejected a plaintiff’s objection to the consolidation of her arbitration filing with that of thousands of other claimants—all of whom are represented by the same firm and assert identical privacy law claims against Starz Entertainment LLC—saying she is not entitled to individual resolution under the agreement in question or federal law.
Noting that the plaintiff, Kiana Jones, failed to pursue an avenue available to her to help remedy the delays she attributes to consolidation, the court said:
“The fact that Jones has not pursued this path casts serious doubt over the true motivation underlying the mass arbitration tactic deployed here, which appears to be geared more toward racking up procedural costs to the point of forcing Starz to capitulate to a settlement than proving the allegations of data breach to seek appropriate redress on the merits.”
After Jones signed up for the defendant’s video streaming service, she initiated a dispute-resolution process in January 2023 by submitting a “Demand for Arbitration” form to Judicial Arbitration and Mediation Services (“JAMS”), pursuant to Starz’s terms of use, which provide:
“All controversies, disputes or claims arising out of or relating to these Terms of Use will be determined pursuant to the mediation and arbitration procedures of JAMS….”
She alleges that Starz violated the federal Video Privacy Protection Act and California Civil Code §1799.3 by disclosing her identity, and the videos she selects, to third-party companies like Meta Platforms Inc. and Google LLC. Her demand was one of 100,978 identical demands, all submitted by the national law firm Keller Postman LLC (“Keller”), with headquarters in Chicago.
Mediation Request
After attempts to mediate some of the claims stalled over a fee dispute, Keller sought to initiate 7,300 individual arbitrations, including one for Jones. Each arbitration requires a filing fee of $2,000, $1,750 of which is the responsibility of the defendant.
Allowing 7,300 separate arbitrations would have resulted in charges to Starz totaling $12,775,000. The arbitration provider, acting through its National Arbitration Committee, consolidated the filings under a JAMS rule providing that “[u]nless the Parties’ Agreement or applicable law provides otherwise, JAMS, if it determines that the Arbitrations so filed have common issues of fact or law, may consolidate Arbitrations.”
Following consolidation, each time an arbitrator was appointed, Keller would serve notices of disqualification on behalf of thousands of claimants, but not Jones, resulting in significant delays.
JAMS eventually suggested that Keller file a petition in superior court to ask that an arbitrator be appointed pursuant to California Civil Procedure Code §1281.91(b)(2). Under that section, each party has a single peremptory challenge to a court-appointed arbitrator, after which a subsequent appointee may only be removed for cause.
Represented by Keller attorneys Warren D. Postman, Albert Y. Oak, and Patrick A. Huber, Jones instead petitioned the U.S. District Court for the Central District of California to compel arbitration under 9 U.S.C. §4, which says:
“A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction…for an order directing that such arbitration proceed in the manner provided for in such agreement.”
District Court Judge Kenly Kiya Kato denied the motion, saying that Jones had “failed to demonstrate she is an ‘aggrieved’ party” within the meaning of §4 and that the consolidation by JAMS did not present a gateway question of arbitrability for the court to decide.
Friday’s opinion, written by Senior Circuit Judge Richard R. Clifton and joined in by Circuit Judges Gabriel P. Sanchez and Ronald M. Gould, affirmed the decision.
No Failure, Refusal
Addressing §4, Clifton said that “[b]y its plain terms, the provision conditions a district court’s authority to compel arbitration upon a showing that a party has failed, neglected, or refused to arbitrate,” a burden Jones had not met. Pointing out that “it was JAMS…that made the decision to consolidate,” he reasoned that “it is not clear how that decision can be characterized as a refusal by Starz to arbitrate.”
Jones argues that the fact that the governing arbitration agreement precludes a party from proceeding in a representative or class action undermines consolidation of multiple filings in arbitration. Rejecting this assertion, the jurist opined:
“Consolidation is not the same as class or representative arbitration….In a class or representative arbitration, an individual brings claims on behalf of others, whereas a claimant in a consolidated arbitration brings the claim in her individual capacity. It is that representative feature, not the mere numerosity of parties, that forms the critical element….”
Questioning whether “Jones is aggrieved at all,” he noted that “there remain avenues of relief available to Jones” to ensure prompt resolution of her claims, as she may file a petition in state court under §1281.91(b)(2).
Committee Decision
The plaintiff also takes issue with the consolidation order coming from the JAMS National Arbitration Committee rather than an appointed arbitrator. Clifton responded:
“It strains credulity to believe that it is the business of a federal court to second-guess an independent arbitration provider’s application of its own rule—a rule incorporated into the parties’ agreement—to consolidate thousands of identical arbitration demands. As Jones’s counsel acknowledged during oral argument, no court would tolerate having to try 7,300 identical cases separately. No arbitration provider should have to, either.”
Characterizing her contention as one that attempts to raise “gateway questions of arbitrability,” he remarked:
“We cannot be made to do the bidding of every unhappy arbitration claimant, and especially not one who is already in arbitration. Jones’s invocation of the courts’ responsibility…rings hollow where the circumstances simply present no dispute about arbitrability. We therefore need not reach the question of whom the Terms authorized to order consolidation as between an arbitrator or an administrator.”
Addressing her alternative contention that the terms containing the arbitration provision are unconscionable if they permit pre-arbitration consolidation, Clifton commented:
“We are aware of no precedent where the party petitioning to compel arbitration under…§4 simultaneously characterizes as unconscionable the same arbitration agreement that the petitioner seeks to enforce. Jones makes the novel request that we use unconscionability doctrine to chisel an arbitration agreement into a version that suits her preferred contractual interpretations and then order the other party to comply with those modified terms. This we cannot do.”
The case is Jones v. Starz Entertainment LLC, 24-1645.
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