We previously wrote about a Ninth Circuit appeal taken by Verizon Wireless, Inc. after a California district court judge held that its arbitration agreement, which required mass arbitration disputes to be resolved by multiple rounds of bellwether arbitrations, was substantively unconscionable because it effectively eliminated the claims of thousands of Verizon customers who were required to wait for up to 156 years for the bellwether arbitrations to conclude. It has now been reported that the Verizon litigation has been settled, and the Ninth Circuit docket reflects that the appeal is being held in abeyance pending final court approval of the settlement. Accordingly, the Verizon appeal will not provide much needed appellate guidance on the use of batching and bellwether procedures to resolve mass arbitration demands. While that window has closed, another one has opened. Effective January 15, 2024, the American Arbitration Association (AAA) amended its Supplementary Rules for Multiple Case Filings, renamed “Mass Arbitration Supplementary Rules,” and associated fee schedule.
Previously, the AAA had required the parties to pay a “filing fee” when a mass arbitration was initiated by consumers. The filing fee was calculated on a sliding scale, beginning with $400 per case ($100 from the consumer claimants, and $300 from the business) for the first 500 cases. However, many arbitration agreements (and some state laws) require the business to pay the entire fee. When thousands or tens of thousands of arbitration demands were asserted simultaneously, the amount of filing fees due immediately from the business was so substantial that many companies were forced to settle rather than pay millions of dollars in filing fees, while others challenged such payments in court (thus far unsuccessfully). Even if filing fees were paid, the business was also required to pay a number of additional fees as the arbitrations progressed, including (a) a $1,400 per case management fee prior to appointment of the arbitrator, (b) a minimum $2,500 per case arbitrator fee, and (c) a $500 per case hearing fee.
By contrast, the updated AAA Mass Arbitration Supplementary Rules require the parties to pay an “Initiation Fee”—a flat fee of $3,125 from the consumers, and a flat fee of $8,125 from the business—which covers an administrative review of the filing, an administrative conference call with the AAA and the appointment of a Process Arbitrator and/or a Global Mediator. If the cases proceed beyond the initiation stage, the parties are responsible for “Per Case Fees” on a sliding scale, beginning with $450 per case ($125 from the consumer claimants, and $325 from the business), for the first 500 cases. There is also an “Arbitrator Appointment Fee” of $500 per case ($50 from the consumer claimants, and $450 from the business), as well as a “Final Fee” of $600 per case paid by the business. The business must also pay the fees of the Merits Arbitrator at a rate of $300 per hour and the rates of any Process Arbitrator and/or Mediator at rates published on their AAA resumes.
The updated Mass Arbitration Supplementary Rules encourage the parties “to agree to additional processes that make the resolution of their Mass Arbitration more efficient.” That includes “[a]n agreement to assign multiple cases to a single arbitrator.” The AAA also reserves the right to assign multiple cases to a single arbitrator in certain circumstances. In a separate publication posted on its website, AAA Vice President Neil B. Currie made comments that would appear to support the concept of batching:
Agreeing to assign multiple cases to one arbitrator makes scheduling much easier and the hearings much more efficient. Even though the individual arbitrator will still decide each case individually, that arbitrator will have a lot of knowledge and expertise in working with the parties and can be extremely efficient in deciding multiple cases on an individual basis.
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An option the parties might consider agreeing to use is a concept that we call a “rotating panel of arbitrators” to decide the cases in a mass arbitration. This would require the parties to agree to a specific number of arbitrators, say 20-30 arbitrators, and then cases would be assigned individually to each of these arbitrators until all of them have been assigned a case, at which time the process starts again with this same group of arbitrators being assigned an additional case. In the end, an arbitrator would be assigned to multiple individual cases, each to be decided on its own merits. Such a process could be a more efficient way to appoint arbitrators to cases if the parties are interested and can agree.
We will be watching to see what impact the updated AAA Mass Arbitration Supplementary Rules have on the assertion of mass arbitration demands (given that the previous filing fees have been replaced with a flat and relatively modest Initiation Fee) and the batching of cases in mass arbitration proceedings.
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