WASHINGTON (Legal Newsline) - Fox Broadcasting’s Tubi unit has sued Keller Postman, accusing the law firm of filing thousands of fraudulent arbitration claims in an effort to extort a $71 million settlement.
Keller Postman used Instagram ads, YouTube videos and other advertising to recruit nearly 24,000 clients who filed arbitration demands against Tubi for offering targeted ads based on their age, sex and other demographic data, Tubi said. The firm’s business strategy is to swamp companies with mass arbitration so they will pay a quick settlement instead of $2,000 or more per claimant in arbitration fees – in Tubi’s case, some $48 million.
“Normally a lawyer does not benefit from bringing a frivolous claim, but Keller Postman does: Frivolous or not, Keller Postman gambles that a company will pay a global settlement with all claimants that allows Keller Postman to profit greatly, all to make the claims go away to avoid paying the arbitration fees,” Tubi said in the lawsuit filed in federal court in Washington D.C.
Keller Postman boasts on its website that its clients “turn the arbitration game against the companies that harm them,” using “the latest technology to pursue thousands of arbitration claims all at once.”
Tubi accused Keller Postman of deliberately neglecting to collect basic information from its clients, however. A third of the claims have emails that don’t correspond to any Tubi customers, the company said, 11% never received streaming ads and many others claim they received service in states where Tubi doesn’t operate.
Tubi also accused Keller Postman of violating ethics rules by advising its clients to ignore a contractual requirement to provide basic information before filing arbitration claims.
Keller Postman managing partner Warren Postman, in an emailed statement, said “Tubi is pursuing a frivolous claim as a desperate tactic to evade liability for its discriminatory advertising practices.”
Tubi “imposed an arbitration agreement on its customers to eliminate consumers’ rights to efficient dispute resolution through class action,” he said. “But when a large number of consumers pursued arbitration under that agreement, Tubi tried to enforce unconscionable and unenforceable pre-conditions to arbitration and refused to proceed according to the terms of its own agreement.”
Keller Postman, like most plaintiff firms, opposes arbitration in favor of class actions, which can provide more lucrative fees and involve less work for the lawyers who file them. A 2015 report by the Consumer Financial Protection Bureau, however, found that settled class actions between 2010 and 2013 delivered around $32 per consumer while the lawyers took in $425 million in fees. The much smaller number of arbitrations that went to a decision delivered an average of $5,389 per consumer. Class actions also took about twice as long to resolve as arbitrations, according to that study.
Some law firms turned to mass arbitration because of the clauses in many arbitration agreements – added to prevent courts from finding such agreements unconscionable – requiring companies to pay arbitration fees up front. Mass arbitration places stricter ethical requirements on plaintiff lawyers, however, since they represent thousands of individual clients each entitled to advice on their particular case and whether to accept or reject a settlement offer.
Tubi says Keller Postman has ignored those requirements, using the very targeted ad technology it accuses Tubi of abusing to recruit clients it then presents with take-it-or-leave-it settlement offers. The law firm has been sued several times by disgruntled clients as well as companies accusing it of abusing the arbitration process.
In this case, Tubi says, the threat of imposing hefty arbitration fees went away after JAMS, the leading arbitration service, changed its rules on May 1 to streamline mass arbitration. That change lowered the up-front fee in mass arbitration to $7,500, no matter how many claims are filed. Tubi still seeks money for tortious interference in its agreements with customers and legal fees.
The claims against Tubi follow a California court ruling allowing Facebook users to sue over targeted ads they claim discriminate against them by not offering certain products including insurance.
In its lawsuit against Keller Postman, Tubi says the law firm uses an affiliate firm, Troxel Law, to recruit clients. Until recently, Tubi says, Troxel Law had a Better Business Bureau A+ rating logo on its website when the firm’s actual grade is F from client complaints about failing to provide services promised in its ads.