The Compelling Case Against Arbitration

On September 18, 2017, myself (an online activist) and my longtime friend Etan Mark (an offline litigator) filed a federal class action lawsuit against Herbalife’s fraudulent Circle of Success event system.

The suit doesn’t accuse Herbalife of being a pyramid scheme, or make any claim for damages related to the purchase of Herbalife’s products. Instead, it focuses on a cartel of shady creeps who run a dirty side business mandating that victims spend small fortunes attending a never-ending sequence of expensive events.

Live events are the backbone of the Herbalife scam, and of the scam industry in general; the draw and the glue that makes all of the life ruining possible. It can’t be “too good to be true” when you can see other people believing that it is true. The best weapon against nice people is other nice people.

I’ve spent a long time accidentally preparing myself for this moment: researching, writing, advocating, and casting a long shadow in the world of shadows. I wanted to be an innovating internet crime fighter not an old school, slow moving, self-important, self-serving, tweet printing, microsoft using, blackberry belt clip having, smarmy, networking, lame ass lawyer. The internet underworld is the edge of the edge. It’s so dark, and horrid, and ever-changing, and amazing, and awake at 3am when I’m awake, and oh my god I love it please don’t make me be a lawyer!

But around year six of The Salty Droid I started to feel like my work, while amusing and uplifting for those who had already suffered harm, was not at all effective at preventing future harms. In fact, in many instances, my putting a perp’s feet to the fire seemed to exacerbate the future harms. Wasn’t there maybe probably definitely something more effective I should be doing? I wasn’t going to be able to run from my paper-pushing destiny forever.

Help!

In 2015 I was in Miami, set to sail, undercover as entourage, on a Norwegian cruise ship full of my enemies. I arrived the night before departure in hopes of hanging with a Popstar who, appropriately, missed his plane; so I ended up sweating at a chill bar with my mate Etan instead.

I talked about what I always talk about when I’m with someone important. Am I inspiring or insufferable? Don’t answer, doesn’t matter. Etan says he wants to help. People say that to me a lot while only meaning it a little. But we go way back, and we’ve been through some shit together, so I can tell that he’s serious. It’s a turning point, the small start of a big plan.

A couple of years, dozens of interviews, hundreds of conversations, thousands of hours of work, and a seriously deep dive into a social media sinkhole the size of the Chicxulub crater - and this completely epic lawsuit was ready to file.

Just filing the beast was a huge triumph for justice, roundly applauded by everyone in the imaginary auditorium where I debut all of my latest works (while locked in the A.V. booth). Herbalife and it’s Top 40 U.S. kingpins will have to answer for what they’ve done.

The question is: Where will they have to answer?

Will it be in the Southern District of Florida where we filed the case, where most of the Plaintiffs and the largest number of Defendants are located, and where I will be the most uncomfortable wearing suits?

Will it be in the Central District of California as required by myherbalife.com’s Terms of Use and by several versions of the exploitative Herbalife contract?

Or, will it be stripped of its potential class status and kicked from court into a totally secretive forum before a single substantive detail is heard?

Obviously, that last one is crap … but it’s the one that’s happening right now in America.

The Times examined federal cases filed between 2010 and 2014. Of 1,179 class actions that companies sought to push into arbitration, judges ruled in their favor in four out of every five cases.

Not because they wanted to necessarily, but because, for most judges who are not Roy Moore, the rule of law matters. American law favors arbitration provisions; and American law pretends that consumers understand, and assent to, boilerplate legalese that is never read or understood. The results of this moon size loophole, as the New York Times detailed in a three part series, have been catastrophic.

By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination…

Cool.

Corporations said that class actions were not needed because arbitration enabled individuals to resolve their grievances easily. But court and arbitration records show the opposite has happened: Once blocked from going to court as a group, most people dropped their claims entirely.

For example:

Verizon, which has more than 125 million subscribers, faced 65 consumer arbitrations in those five years, the data shows. Time Warner Cable, which has 15 million customers, faced seven.

Richard Cordray, former head of the Consumer Financial Protection Bureau and Attorney General of Ohio, writing in support of a CFPB rule set to restore the rights of consumers to sue banks in court, put some almost unbelievable numbers to the problem.

In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total.

We let companies opt out of our legal system, so they totally did. Thankfully for the d-bag encrusted patriarchy, the CFPB rule was rolled back by a Mike Pence tiebreaker vote in the Senate before it could take effect.

Sexual harassment for everyone!

Herbalife wants to break this case into tiny irrelevant pieces and force it into arbitrations even though many, maybe most, participants in the Circle of Success haven’t signed an arbitration provision; and they want claims against the kingpins thrown into arbitration as well, even though no contracts exist between the Plaintiffs and the kingpins … because I guess just because.

No one, or ten, or fifty arbitrations would even register as a blip on Herbalife’s bottom line. But a class arbitration could lead to disastrously high damages with little recourse in appeal. Which is why, in most of these predatory contracts across most of these predatory industries, if the court or the arbitrator decides that the class action waiver is unenforceable then there is no arbitration.

Further, unless both Herbalife and Member agree otherwise, the arbitrator may not consolidate more than one person’s claims, and may not otherwise preside over any form of a representative or class proceeding. If this specific provision is found to be unenforceable, then the entirety of this arbitration provision shall be null and void.

Because, of course, Herbalife wouldn’t want some random arbitrator to decide a case that could be meaningful to it … that wouldn’t be fair.

Here’s Herbalife’s three law firm, fifteen lawyer, joint motion to compel arbitration:

And here’s our response:

Everything else is on hold until this question is decided.

What will happen?

Maybe we’ll flat lose because - get real - you don’t need to do a statistical analysis to determine that the little guy usually loses. Life just sucks like that, but no worries. David’s defeat of Goliath set expectations too high for three millennia. You don’t always have to defeat the giant; if you can just hit a dick with a rock… that’s pretty good.

Or maybe we’ll outright win because the court will decide, citing the whole history of American contract law (and English common law principles dating to the 16th century), that a contract like Herbalife’s contract is not a contract.

I mean, objectively, it’s not a good contract. Its unilateral nature is explicit. The never-ending stream of complicated amendments are like Orwellian office gag comedy. And yet, it’s the only thing standing between Herbalife’s shareholders and a long line of blackberry toting hacks ready to spam off pyramid scheme lawsuits premised on the language in the FTC’s fierce rebuke.

Our lawsuit isn’t about Herbalife. It’s about an operative level side business, and about the damages from that side business. It’s about cartels of schemers using the large group against itself. It’s about what I’ve been on about for a fucking decade now, and it did not attack their contract.

But they’re like: “Please put all of your energies into attacking our contract!”

Okay.