The American Arbitration Association (AAA), the country’s largest consumer arbitration administrator, is seeking public comment on proposed revisions to its Consumer Arbitration Rules through the end of the month.
New rules include a mediation rule (Rule 11), a confidentiality rule (Rule 42), and a rule for invoking AAA’s appellate arbitration process (Rule 58). In addition, the AAA proposes incorporating by reference the ethical guidelines in the American Arbitration Association-International Centre for Dispute Resolution Standards of Conduct for Parties and Representatives (AAA-ICDR Standards of Conduct) (see Rule 10).
The AAA also proposes several notable changes to existing rules, including:
- Increasing the claim/counterclaim threshold for documents-only disputes from $25,000 to $50,000 (Rule 1);
- Imposing a 90-day arbitration suspension, instead of the previously allowed 30 days party when a party seeks judicial intervention, and authorizing the arbitrator to further “extend that time period on its’ own initiative or at the request of a party for good cause shown” (Rule 2);
- Affording the AAA discretion to administratively consolidate multiple claims filed by the same party arising out of the same contract into one case or require that multiple claims filed by the same party arising out of separate contracts be filed as individual cases (Rule 4);
- Clarifying that arbitration demands that do not satisfy filing requirements (e.g., party names and contact information, nature of claim, amount and nature of relief sought) will be returned and not be considered to have been filed with the AAA. Such cases may be resubmitted later with the necessary information, materials and fees (Rule 4); and
- Authorizing the AAA and arbitrator to resolve any dispute between the parties regarding “which party or parties should be the claimant(s) and which party or parties should be the respondent(s)” (R-4(b)(ii)).
Furthermore, the AAA proposes to expand arbitrator authority in some instances while restricting it in others. For instance, the arbitrator may soon be able to award sanctions against parties (Rule 57), and, in the event a witness is unable or unwilling to testify, to “order the witness to appear in person for examination before the arbitrator” at an appropriate time and location (Rule 32). On the other hand, where arbitrators have previously held unbridled discretion to apportion fees and expenses (including attorneys’ fees) amongst the parties in an eventual award, the proposed revisions would restrict the fees that can be awarded to a business solely to “administrative fees [and] arbitrator compensation or expenses” (i.e., no attorneys’ fees). (Rule 46).
The proposed revisions also reveal the AAA’s response to emerging party tactics to thwart or delay the arbitral process – several of which have been highlighted recently in the context of mass arbitration. For example, the AAA may soon have the discretion to “decline to administer future consumer arbitrations” with any business that fails “to pay their portion of the arbitration costs” (Rule 56). The AAA may also have the right to decline to accept a Demand for Arbitration “where a party or the party’s representative fails to abide by the [AAA-ICDR Standards of Conduct]” (Rule 10). Notably, the AAA-ICDR Standards of Conduct expressly prohibit parties from “repeatedly fil[ing] unmeritorious demands for arbitration, pleadings, or other papers,” or engaging in other “frivolous,” “harassing,” or other behavior “intended to cause unnecessary delay or increased costs.” See AAA-ICDR Standards of Conduct. In addition, the AAA proposes to effectively make annual clause registration mandatory. Previously, a business could simply pay for the AAA to conduct an expedited review of the clause and pay the registration fee at that time of filing an arbitration demand. Under the proposed revisions, however, “[c]harging an expedited review fee as an alternative is not permissible” and “the AAA will decline to administer consumer arbitrations arising from [an unregistered] arbitration agreement” (Rule 12).
Although the AAA is not proposing revisions to its Mass Arbitration Supplementary Rules or Fee Schedule, these changes will inevitably impact the nature of these proceedings and the parties’ conduct going forward. See Keller Postman LLC v. Jenner & Block LLP et al., Los Angeles County Superior Court, No. 24STCV32754. Moreover, the AAA’s efforts to aggregate data on clause drafting trends across industries and institutions are likely to attract significant public comment following recent challenges to the enforceability of consumer arbitration clauses. See, e.g., Heckman v. Live Nation Ent., Inc., 120 F.4th 670, (9th Cir. 2024); Wallrich v. Samsung Elecs. Am., Inc., 106 F.4th 609 (7th Cir. 2024).
If you would like further information or are interested in submitting a comment to the AAA, please contact Bo Rutledge and Hillary Lukacs at Morris, Manning & Martin. The period for comment will close on February 28, 2025. We will continue to monitor this matter and provide updates on important developments.
