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US court blocks order requiring Samsung to front millions in arbitration fees

U.S. appeals court has blocked for now a decision requiring Samsung Electronics to pay millions of dollars in administrative fees to initiate arbitration proceedings with consumers who claim the mobile device maker violated their privacy rights.

In a brief ruling, the Chicago-based 7th U.S. Circuit Court of Appeals paused the arbitration fee order and agreed to fast-track Samsung’s appeal seeking to overturn it. Lawyers for the consumers suing Samsung had urged the court to allow the fee order to take effect.

The 7th Circuit’s ruling sets up what is likely to be a closely watched fight over the role and power of U.S. courts to force companies to pay arbitration fees in cases involving thousands or more individuals.

Samsung is contesting an order that it said could require the company to pay more than $100 million in arbitration fees for nearly 50,000 individual claims.

The court on Wednesday did not say how it might rule on the arbitration issue.

A Samsung spokesperson and an attorney for the company at Skadden, Arps, Slate, Meagher & Flom did not immediately respond to requests for comment.

Lawyers for the consumers at Labaton Sucharow also did not immediately respond to a similar request.

The consumers pursuing arbitrations against Samsung claim its facial recognition software violated Illinois’ stringent state law restricting the collection and use of biometric information such as facial scans and fingerprints. Samsung has called the privacy claims “frivolous.”

Attorneys for the consumers sued Samsung in Chicago court to force the company to pay for the initiation of arbitration, pointing to the terms of their arbitration agreement.

Samsung countered that the decision of which side pays is up to the arbitrator hearing the dispute.

In September, U.S. District Judge Harry Leinenweber ruled against Samsung and directed it to pay initial administrative filing fees of $4.1 million.

Leinenweber said Samsung had made a business decision to mandate individual arbitration, even if “the company may not have expected so many would seek arbitration against it.”

The consumers’ attorneys told the 7th Circuit that Leinenweber’s ruling “is consistent with recent decisions from multiple courts addressing arbitration fees.”

As part of its appeal, Samsung is disputing that each of the thousands of individuals seeking arbitration actually agreed to such a forum for deciding their claims.

The 7th Circuit has not set an argument date.

The case is Paula Wallrich et al v. Samsung Electronics America et al, 7th U.S. Circuit Court of Appeals, No. 23-2842. Reuters

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