FairShake automates the individual arbitration process

Years ago, Teel Lidow arrived at the airport to take a standard, eight-hour flight from Santiago, Chile to New York City. The journey ended up taking three days, involved an emergency landing, and passengers entering two countries (Ecuador and Peru) they never planned to enter.

When they finally arrived in New York, the airline handed out a piece of paper that offered passengers $300 in exchange for their signature. The release was meant to protect the airline from passengers taking legal action against it.

That’s how FairShake was born. The startup looks to simplify and automate the process of going through individual arbitration with big companies in just these types of situations. Lidow, a lawyer, went through the process on his own and ended up getting an apology from the airline, $2,000 in cash and $1,600 in flight vouchers.

FairShake uses machine learning to automate that process. Lidow equates FairShake to Turbo Tax. The individual arbitration process doesn’t require a lawyer — anyone can do it, just like taxes. But most people don’t want to do their taxes, sorting through the forms and paperwork and doing the math, all on their own.

FairShake is looking to bring the same ease of use to filing individual arbitration, letting the user input the relevant information and then spitting out the appropriate documentation and coaching to guide the user through the entire process.

The impetus for FairShake is, in part, based on changes to the legal system. In 2011, the Supreme Court made a ruling in AT&T Mobility LLC v. Concepcion that companies are allowed to enforce mandatory arbitration in their TOS or service contracts.

Translated: When you sign up to use a service or buy a product, the contract you sign most likely has an arbitration clause. That clause takes away the consumer’s right to file a class action suit, and instead settle any disagreements with the brand via individual arbitration.

Before this ruling, class action settlements covered 350 million Americans over a five-year period. After arbitration, only a few hundred individual claims were filed per year.

Many people don’t even know they have access to this individual arbitration, and those who do may find it cumbersome and tedious.

FairShake is looking to help automate a good deal of that process and coach customers through the process, which would otherwise take about 10 hours of research and document gathering and creation.

The company charges 20 percent of any cash or credits the consumer wins in arbitration from the company, and 10 percent of any amount deducted from what the consumer owes the company. At minimum, FairShake will take $20 for any resolved claim. That said, FairShake has a 100 percent satisfaction guarantee, meaning the consumer pays nothing if they aren’t happy with the outcome.

FairShake has $3 million in funding led by First Round Capital with participation from Founder Collective, BoxGroup and the founders of Warby Parker, Harry’s, AllBirds and LegalZoom.