On Jan. 15, the American Arbitration Association amended its mass arbitration supplementary rules and implemented a new consumer mass arbitration and mediation fee schedule.

In its press release announcing the updated rules and fees, the AAA stated that it "listened to the needs of the individuals and business involved in mass arbitrations" and articulated that the updates would benefit the parties by bringing more order into the mass arbitration process, empowering a process arbitrator to make more substantive decisions, and changing the consumer case fee structure and timing.^[1]

The impact of these changes is unclear. However, at first glance, it appears these amendments may reduce consumers' ability to counteract the mandatory arbitration agreements that businesses have been forcing upon them for years to deter claims.^[2]

While the shift from filing fees to an initiation fee and per-case fees may result in fewer companies refusing to honor their fee obligations and delaying mass arbitration proceedings, these rule and fee changes appear to focus on reducing costs for businesses while also increasing the demands on consumers.^[3]

The combined effect of these updates may diminish the very provisions of the AAA's rules and fee structures that have served as a check against businesses' efforts to keep consumers out of court on allegations of mass harm.

If this proves accurate, it will give credence to allegations that big business finally got to the AAA by refusing to honor their arbitration fee obligations and causing the AAA to administratively close mass arbitration cases.

Ultimately, how the AAA and its arbitrators apply these rules in the field will determine whether consumers will realize the claimed benefits and if the AAA remains a true neutral in these cases. This article summarizes the relevant changes and sheds light on their possible implications.

Mass Arbitration Supplementary Rules

Per the AAA, the updates to the mass arbitration supplementary rules^[4] will increase process efficiency through an expanded role for the process arbitrator, reduce friction through attestation requirements for pleadings and filings, and streamline the arbitration process.^[5]

Specifically, the updated rules require "an affirmation that the information provided for each individual case is true and correct to the best of the representative's knowledge" for demands for arbitration, amended claims, answers and counter-claims.

The rules also expand and clarify the process arbitrator role by allowing the AAA-International Centre for Dispute Resolution in its sole discretion to appoint a process arbitrator who has the authority under Section MA-6(c) to determine, in part:

• Whether the parties have met "the filing requirements in the parties' contract";
• "Disputes over any applicable conditions precedent and, if applicable, how the parties can meet the conditions precedent and how to proceed if they do not";
• "Which Demands for Arbitration should be included as part of the mass arbitration filing," including "subsequently filed cases";
• In cases proceeding under the Consumer Arbitration Rules, whether cases should be closed so that the parties proceed in small claims court and whether the merit arbitrators shall review the cases only on the documents or hold hearings; and
• "Whether any previously issued rulings by the Process Arbitrator are binding on the subsequent cases."

Furthermore, under Section MA-6, the updated rules clarify that the process arbitrator shall resolve disputes, including whether the disputes are nonfact specific or are fact-specific and, therefore, must be determined on an individual basis; and allow merit arbitrators to review rulings by process arbitrators under an abuse of discretion standard.

Under Section MA-9, the rules permit the AAA-International Centre for Dispute Resolution to "in its sole discretion, appoint a mediator to facilitate discussions between the parties on processes that may make resolution of the cases more efficient." Under Section MA-5, the rules provide that "[v]irtual hearings are the preferred method of evidentiary hearings" instead of in-person hearings.

Consumer Mass Arbitration and Mediation Fee Schedule

The new mass arbitration supplementary rules accompany amendments to the fees charged by the AAA to consumers and businesses in mass arbitrations.

The consumer mass arbitration and mediation fee schedule^[6] replaces the previous filing fees due at the time of filing of a demand for arbitration with new initiation fees and stages the additional costs of the arbitration to the parties based on the case's procedural posture. The AAA states that the staged fees will provide cost predictability in cases through transparency and manageability.^[7]

Under the new fee structure, individual consumers must now pay a $3,125 initiation fee upon filing a mass arbitration.^[8] Once the individual consumers have met the filing requirements for the case, the business will be required to pay its $8,125 initiation fee.^[9]

The new initiation fees are nonrefundable and will cover the administrative review of the filing, an administrative conference call with the AAA, and the appointment of a global mediator or process arbitrator.^[10] The initiation fees replace the previous sliding scale for filing fees due at or near the time of case filing.^[11]

If the cases proceed past the initiation stage, per-case fees are then assessed based on a sliding scale similar to before. For the first 500 cases, individual consumers and businesses are responsible for per-case fees of $125 and $325, respectively.^[12]

For consumers, the per-case fees decrease to $75 per case after 500 cases and decrease for businesses to $250, $175 or $100 per case, depending on the applicable tier.^[13] The new fee schedule credits the initiation fees towards any per-case fees.^[14] Thus, the new per-case fees effectively shift the timing of the previous fee structure's filing fees to later in the case excepting the initiation fee amounts.^[15]

The new fee schedule has generally decreased the per-case fees for businesses. The previous fee structure charged businesses case management fees of $1,400 per case for one arbitrator and $1,775 for a panel of three arbitrators.^[16]

The new fee schedule replaces these fees with a per-case arbitrator appointment fee with shared assessments of $450 to a business and $50 to an individual consumer if the merit arbitrator is selected by direct appointment or $600 to a business and $75 to the consumer if the selection is by the list and rank process.^[17] A final fee of $600 per case assessable to the business replaces the former $500 per-case hearing fee.^[18]

Whether AAA Updates Truly Benefit Businesses and Consumers

In its press release announcing the changes, the AAA's senior vice president of dispute resolution services stated that the revised rules and fees are "crafted to save time, reduce costs, and foster constructive dialogue from the start."^[19] Whether this is true will ultimately depend on their application, but a few observations can be made now.

The AAA's new fee schedule increases per-case fees for consumers while decreasing them for businesses. Importantly, these increased fees do not include the additional costs consumers may incur when complying with the new attestation rules or delays defending against any expanded and material procedural challenges businesses will undoubtedly bring before the process arbitrators.

This new regime will incentivize respondents to introduce delays with procedural hurdles that, when combined with the postponement of fees, will likely discourage respondents from engaging in constructive dialogue and result in fewer early resolutions.

As per-case fees are only assessable after the initiation phase is complete, cases may be vetted and excluded from the mass arbitration by the Process Arbitrator before the per-case fees are due.

Although not assessing fees for cases that the AAA will not arbitrate is reasonable, delaying the assessment of the per-case fees on businesses, as opposed to implementing a refund policy for later excluded claims, may trigger protracted and expensive vetting litigation before the legitimate consumers can get to the merits of their case.

This shift to per-case fees may reduce businesses' willingness to engage in meaningful discussions with consumers before they file a mass arbitration. All this may increase costs and delay resolutions.

The updates also appear to focus on assuaging businesses' concerns about the substantial filing fees the AAA levies upon them when claimants file mass arbitration cases.

Before the fee changes, businesses were responsible for paying filing fees to the AAA after the individual's filing was confirmed to meet the AAA's filing requirements.^[20]

When 25 or more claimants brought similar arbitration demands against a business, the AAA's previous fee structure for multiple case filings placed much of the responsibility to pay on the businesses who chose the AAA forum and its procedures for dispute resolution over the class action litigation mechanisms that could be adjudicated in court for a fraction of the cost of arbitration.

This cost of adjudication, compared to the cheaper class action alternative for mass wrongs, served as an important check on businesses and incentivized them to explore resolutions before the filing of mass arbitration demands and the assessment of nonrefundable fees.^[21]

The recent updates appear to have been influenced by the businesses that select the AAA as their arbitration forum but then balk at paying the necessary arbitration fees when more than a handful of consumers are affected.

Over the past few years, companies have refused to pay the costs of adjudicating arbitrations before the AAA,^[22] even though such refusals may result in the AAA declining to administer future consumer arbitrations for that business.^[23]

In a setback to businesses, claimants have successfully compelled companies, such as DoorDash Inc. and Samsung Electronics America Inc., to arbitrate thousands of arbitration demands and to pay millions of dollars in AAA's administrative fees — when these companies failed to honor the very same arbitration clauses they mandated upon claimants and refused to pay their AAA fees — so the mass arbitrations could not proceed.^[24]

Claimants have also successfully fought arbitration clauses that sought to curb the collective power of consumers filing multiple arbitration demands and impose unfair associated fees.^[25]

Some companies, such as Amazon.com Inc., have recognized that arbitration might not be an appropriate forum to resolve mass wrongs and elected to drop mandatory arbitration clauses from their contracts in favor of litigating the claims in federal or state court.^[26]

Other companies chose not to compel arbitration when faced with lawsuits in court. These continued conflicts between businesses and individuals over mass arbitration fees have resulted in likely unwanted attention for the AAA from the media and the nonprofit organizations who have joined the foray on the side of consumers.^[27]

By enacting the updates, it appears, at least for now, the AAA is looking to appease businesses' concerns about the AAA's rules and fees that have taken center stage in court proceedings.

How the AAA and its arbitrators apply these updates will determine whether they are truly neutral when adjudicating mass arbitration disputes.

Eduard Korsinsky is a founding partner at Levi & Korsinsky LLP. He heads the consumer mass arbitration and mass filings practice at the firm. Alexander Krot is an associate at the firm. The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Press Release, American Arbitration Association, AAA Announces Updated Mass Arbitration Supplementary Rules (Jan. 16, 2024, 9:17 ET), https://www.prnewswire.com/news-releases/aaa-announces-updated-mass-arbitration-supplementary-rules-302035818.html ("AAA Press Release").

[2] See, e.g., Katherine V.W. Stone and Alexander J.S. Colvin, The arbitration epidemic: Mandatory arbitration deprives workers and consumers of their rights, Econ. Policy Inst. (Dec. 7, 2015), https://files.epi.org/2015/arbitration-epidemic.pdf.

[3] See Abernathy v. DoorDash, Inc., 438 F. Supp. 3d 1062, 1064 (N.D. Cal. 2020) (company refusing to pay AAA's fees resulting in the AAA administratively closing the arbitration cases); Wallrich v. Samsung Elecs. Am., Inc., No. 22 C 5506, 2023 WL 5935024, at *3 (N.D. Ill. Sept. 12, 2023) (same).

[4] Mass Arbitration Supplementary Rules (Jan. 15, 2024), Am. Arb. Ass'n, https://www.adr.org/sites/default/files/Mass_Arbitration_Supplementary_Rules.pdf ("Supplementary Rules").

[5] AAA Press Release.

[6] Consumer Mass Arbitration and Mediation Fee Schedule (Jan. 15, 2024), Am. Arb. Ass'n, https://www.adr.org/sites/default/files/document_repository/Consumer_Mass_Arbitration_and_Mediation_Fee_Schedule.pdf ("Consumer Fee Schedule").

[7] AAA Press Release.

[8] Consumer Fee Schedule at 1.

[9] Id.

[10] Id.

[11] Compare Consumer Fee Schedule at 2 with Consumer Arbitration Rules Costs of Arbitration, Am. Arb. Ass'n, 3 (Aug. 1, 2023), https://www.adr.org/sites/default/files/Consumer-Fee_Schedule.pdf ("Consumer Costs of Arbitration").

[12] Consumer Fee Schedule at 2.

[13] Id.

[14] Id.

[15] Compare id. with Consumer Costs of Arbitration at 3.

[16] Consumer Costs of Arbitration at 1.

[17] Consumer Fee Schedule at 2.

[18] Compare Consumer Fee Schedule at 2 with Consumer Costs of Arbitration at 1.

[19] AAA Press Release.

[20] Consumer Costs of Arbitration at 1.

[21] See Alison Frankel, Verizon's $100 million fee settlement is setback for mass arbitration critics, Reuters (Jan. 16, 2024), https://www.reuters.com/legal/litigation/column-verizons-100-million-fee-settlement-is-setback-mass-arbitration-critics-2024-01-16/.

[22] See, e.g., cases cited supra note 3; Plaintiff's Complaint, Family Dollar, Inc. v. American Arbitration Association, Inc., 2:20-cv-00248-RBS-RJK (E.D. Va. May 15, 2020), ECF No. 1(Family Dollar, Inc. suing for a declaratory judgment that it had no obligation to pay the AAA any portion of the $2.57 million in administrative fees when the claimants withdrew their demands before conducting any arbitration proceedings before the AAA).

[23] See Consumer Costs of Arbitration at 1 ("Where the AAA determines that a business's failure to pay their portion of arbitration costs is a violation of the Consumer Arbitration Rules, the AAA may decline to administer future consumer arbitrations with that business."); Consumer Fee Schedule at 1 (same).

[24] Abernathy, 438 F. Supp. 3d at 1067–68 (granting DoorDash's couriers' motion to compel AAA arbitration after DoorDash refused to pay $12 million in fees to the AAA, including filing fees); Wallrich, 2023 WL 5935024, at *13 (granting motion to compel arbitration and to pay its filing fees noting that "Samsung was surely thinking about money when it wrote its Terms & Conditions. The company may not have expected so many would seek arbitration against it, but neither should it be allowed to 'blanch[ ] at the cost of the filing fees it agreed to pay in the arbitration clause.'" (citing Abernathy, 438 F. Supp. 3d at 1068)).

[25] See MacClelland v. Cellco P'ship, 609 F. Supp. 3d 1024, 1040–44 (N.D. Cal. 2022) (finding arbitration clause substantively unconscionable that sought a bellwether proceeding by arbitrating claims in "batches" and setting a cap on the number of arbitration demands that can proceed against Verizon at any one time before additional arbitration demands could proceed).

[26] Sara Randazzo, Amazon Faced 75,000 Arbitration Demands. Now It Says: Fine, Sue Us, Wall St. J. (June 1, 2021, 7:30 AM ET), https://www.wsj.com/articles/amazon-faced-75-000-arbitration-demands-now-it-says-fine-sue-us-11622547000.

[27] See e.g., Alison Frankel, Uber loses appeal to block $92 million in mass arbitration fees, Reuters (April 18, 2022), https://www.reuters.com/legal/litigation/uber-loses-appeal-block-92-million-mass-arbitration-fees-2022-04-18/; Michael Hiltzik, Column: DoorDash thought it was smart to force workers to arbitrate but now faces millions in fees, L.A. Times (Feb. 11, 2020, 2:48 PM PT), https://www.latimes.com/business/story/2020-02-11/doordash-arbitration-blunder; Alison Frankel, Samsung ordered to pay arbitration fees for 36,000 biometric privacy plaintiffs, Reuters (Sept. 14, 2023), https://www.reuters.com/legal/transactional/column-samsung-ordered-pay-arbitration-fees-36000-biometric-privacy-plaintiffs-2023-09-14/; Brief for Amici Curiae Public Justice, American Association for Justice, National Consumer Law Center, Woodstock Institute, and Public Investors Advocate Bar Association in Support of Appellees, Wallrich v. Samsung Electronics Am., Inc., No. 23-2842 (7th Cir. Dec. 19, 2023).