No More Games of Cat and Mouse: Federal Court Orders Samsung to Pay AAA Fees and Participate in Arbitration of BIPA Claims – by Nicholas Daly and Prathyusha Matam

On February 15, 2024, the U.S. District Court for the Northern District of Illinois granted the petition of 806 claimants who sought to arbitrate BIPA claims against Samsung, finding that those petitioners were entitled to relief and that Samsung must pay $310,000 in initial filing fees set out by the American Arbitration Association (AAA). The case is Hoeg, et al. v. Samsung Electronics of America, Inc., et al., 2024 WL 640861 (N.D. Ill. February 15, 2024).

The Hoeg case arises out of the allegation that Samsung’s “Gallery app” violates the Illinois Biometric Information Privacy Act (BIPA) by collecting, storing, and using facial scans of Illinois residents without their consent. Based on those alleged violations of BIPA, the customers sought to file suit against Samsung. However, Samsung required its smartphone customers to sign an arbitration agreement which provided as follows:

YOU AND SAMSUNG EACH AGREE THAT ALL DISPUTES BETWEEN YOU AND SAMSUNG RELATING IN ANY WAY TO OR ARISING IN ANY WAY FROM THE STANDARD LIMITED WARRANTY OR THE SALE, CONDITION OR PERFORMANCE OF THE PRODUCT SHALL BE RESOLVED EXCLUSIVELY THROUGH FINAL AND BINDING ARBITRATION, AND NOT BY A COURT OR JURY.

In accordance with their contract, the claimants all filed individual arbitration actions against Samsung. The AAA then sent an email to Samsung’s representatives setting forth a list of each of the cases that were filed, notifying Samsung that the claimants had satisfied their initial administrative requirements (i.e. paying their filing fees), and setting forth Samsung’s responsibility for payment of initial administrative filing fees totaling $311,000 within 30 days.

Apparently now unwilling to arbitrate, Samsung refused to pay the administrative filing fees to the AAA and the case was closed on an administrative basis. The issue, then, before the Hon. Harry Leinenweber was whether the claimants could compel arbitration proceedings under Section 4 of the Federal Arbitration Act after the arbitration was administratively closed due to the opposition’s failure to pay its fees. This would effectively require Judge Leinenweber to decide whether Samsung could be ordered to pay those initial filing fees totaling $311,000.

Judge Leinenweber found that the BIPA claims fall within the arbitration agreement and that Samsung’s “scheme” of failing to pay the initial filing fees leading to an administrative closure amounts to a refusal to arbitrate under Section 4 of the Federal Arbitration Act. With respect to the fees, Judge Leinenweber specifically held that he could compel Samsung to pay the requisite fees as set by the AAA; otherwise, an order to arbitrate would effectively have no teeth and could potentially lead to a “never-ending game of cat-and-mouse” which he described as follows:

[Claimants] file their arbitration claims and pay their required share of fees, [Samsung] refuses to pay, the administrator administratively closes the case, allowing [Claimants] to again file and pay their required share of the fees, which [Samsung] will of course fail to do, and so on….

The decision in Hoeg from the North District of Illinois is significant because it is becoming more common for BIPA claimants to file mass arbitrations. This forces companies like Samsung to face significant administrative filing fees through AAA very early in the dispute, which are in addition to all the other costs of litigation. To avoid paying such high amounts, these companies may be forced to consider early resolution before even entering the arbitration stage.

Read the full opinion from Judge Leinenweber.