Mass Arbitration - How Did We Get Here & Where Are We Now?
By: Adam Shoneck, Assistant Vice President, AAA-ICDR®
Rise of Mass Arbitrations
The U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 in 2011 laid the groundwork for mass arbitration. The decision was the first in a series upholding class action waivers in favor of individual, binding arbitration. The result was mass arbitration, where firms brought a large, coordinated group of individual cases against a company instead of one class action matter.
Mass arbitration is distinct from other forms of group arbitration because each case is decided individually on the merits and are issued individual awards. It is defined by the AAA-ICDR as a group of demands filed on behalf of or against a common party, where all parties’ representation is consistent or coordinated across the cases. Following are the groupings by case type.
Consumer/Employment/Workplace Disputes: 25 or more similar Demands for Arbitration filed against or on behalf of the same party or related parties, where representation of all parties is consistent or coordinated across the cases.
Construction/Commercial/International: 100 or more similar Demands for Arbitration filed against or on behalf of the same party or related parties, where representation of all parties is consistent or coordinated across the cases.
2024 Revised Mass Arbitration Rules for Consumer and Employment Disputes
The evolution of the original AAA® Multi-Case Filing Supplementary Rules to the 2024 Revised Mass Arbitration Rules is a case study in how a not-for-profit, public service organization carefully monitored parties’ dispute resolution needs and supplied solutions.
For example, prior to these revisions, a per-case fee was due upon filing from each party. Parties became deadlocked on how many cases had actually been filed and should be paid for. With such a critical issue unresolved, administrative fees went unpaid, and parties were forced to go to court. The AAA-ICDR’s commitment is to ensure that its fees do not interfere with its mission to resolve disputes fairly and efficiently. The revised Mass Arbitration Supplementary Rules and related fee schedules established a new, upfront flat fee not tied to the number of cases filed and reworked the authority of the Process Arbitrator to be able to determine issues that commonly arise at the outset of a mass arbitration. This way, cases can move quicker to merits hearings and ultimate resolution.
With the new rules, parties will experience several changes at the outset of any new mass arbitration filing, as follows:
- Representatives must now submit an affirmation with Demands and Answers that the information provided therein is true and correct to the best of the representative’s knowledge.
- The Initiation Fee is now a flat amount and is not based on the number of filings. Upon receipt of the Initiation Fee, the parties get immediate access to a Process Arbitrator and Global Mediator. Under the Mass Arbitration Rules, parties must mediate, but can opt out in writing.
- The authority of the Process Arbitrator has been further defined to include administrative, non-merits issues that cause the parties to deadlock in arbitration. The Process Arbitrator can now decide whether the filing requirements and any contractual pre-conditions to filing have been met, the process for selecting Merits Arbitrators, and the locale of merits hearings, among other issues.
- An abuse of discretion standard has also been added, when Merits Arbtirators are reviewing the Process Arbtirator’s decisions. Once the Process Arbitrator has ruled on any disputed issues, a per-case fee is charged for each case that proceeds. The flat initiation fees are credited to the per-case fees. When arbitrator selection is ready to begin in consumer or employment/workplace cases, a second fee is charged to each party. A final fee is charged when the evidentiary hearing is scheduled or at the time the final submission date is set. This staging of fees should give parties more control over when fees are triggered. Fee schedules are available for consumer, employment/workplace, and other types of disputes.
Changes to the Process Arbitrator and fee schedules should help parties move quickly past procedural issues to resolution on the merits. Once this phase is reached, arbitrators are assigned to individual matters to hear and decide them.
Parties may also agree to efficiencies beyond those contained in the Mass Arbitration Supplementary Rules and are encouraged to do so throughout the life of the mass arbitration process.
2024 Mass Arbitration Rules and Fee Schedule for Non-Consumer & Non-Employment/Workplace
On April 1, 2024, the Mass Arbitration Supplementary Rules again were updated, this time to include disputes beyond the consumer and employment/workplace contexts. These disputes involve commercial business-to-business relationships, construction and real estate contracts, international disputes, and any other non-consumer, non-employment/workplace matter. These could also include B2B webcommerce or homeowner/homebuilder claims. The Mass Arbitration Supplementary Rules now provide a clearer path toward the resolution of claims in this developing area.
Efficiencies in Mass Arbitration
When it comes to mass arbitration, efficient and fair resolution is key. Mass arbitrations can range from hundreds to thousands (and potentially tens of thousands) of cases, especially in the consumer context. Most parties will want some efficiencies once they enter the merits arbitration phase, and there are many options for streamlining and customizing their process. The suggestions below relate solely to post-dispute agreements between counsel, who should consider the following options:
Mediation – Resolution on even one global issue could save significant time trying remaining issues. Mediation is the most efficient and fair method of resolving cases because both parties agree to the outcome. Mediation can help parties resolve substantive and procedural issues, including what efficiencies to employ going forward. Parties are required to mediate under the AAA-ICDR’s Mass Arbitration Supplementary Rules but can opt out.
Process Arbitrator – Process Arbitrators can resolve many issues, and parties can agree to submit additional issues common to the cases to the Process Arbitrator for a resolution, effectively expanding their jurisdiction. Parties are also free to agree to appoint a separate neutral to govern aspects of the cases like discovery. Having one neutral decide those issues can significantly streamline the merits arbitrator phase; otherwise, the parties must raise those disputes directly to each merits arbitrator for resolution.
Merits Arbitrator Selection – Parties can agree to have multiple cases assigned to one merits arbitrator for resolution. Although it may be a reality that arbitrators have numerous cases from the same mass arbitration (depending on several factors), the more cases the parties agree to submit before a single arbitrator, the more efficient hearings will be. Common issues can be argued and briefed once rather than once per case, saving significant time for parties. Although each case would have an individual award, to the extent common issues can be decided together, the process will be faster.
Joint Scheduling Order – Where the parties can agree on a joint scheduling order, they can eliminate the need for a preliminary hearing on each case. This saves counsel and arbitrators time not attending the hearing, determining deadlines, and writing the Order.
Documents-only/Virtual Hearings – Many parties now prefer virtual hearings, and parties can resolve some mass arbitrations on the documents without a hearing. If the parties can agree on what format of hearing is appropriate for the cases at hand, they can save time over individual arbitrators needing to decide the issue. Virtual hearings save travel time for all participants, which is especially important with mass arbitrations where claimants may be located across the country or globe.
Form of Award – The AAA-ICDR’s Mass Arbitration Supplementary Rules allow parties to agree to a form of award different from those in the rules. Parties can even create their own agreed-upon award template to save the arbitrator’s time writing it.
Agreements to limit briefs, motions, and discovery requests can effectively streamline the merits arbitration phase.
Agreements to allow alternative forms of testimony, such as via affidavit or recorded deposition, save parties’ and witnesses’ time instead of live testimony.
Bellwether/Batching – If counsel can agree to hear a certain number of cases in an upfront “batch,” it can give them a good sense of how future arbitrators will rule on the issues. This informs settlement discussions and can lead to resolution of the entire caseload while only having to argue a subset.
Leveraging Technology in Mass Arbitrations
Recognizing the large volume of individual case documents that are exchanged in a mass arbitration, the AAA-ICDR has developed an API (Application Programing Interface) allowing for two-way document transmission between parties and the AAA-ICDR. This means that as soon as a document goes into the AAA-ICDR’s file, it goes into the user’s, and vice-versa, with controls set by the AAA-ICDR and user. This API can help avoid the need to transmit case documents via email. The value of this tool scales with larger volumes of filings. These technologies are free for all parties to use on AAA-ICDR cases and can significantly increase efficiency in mass arbitration.
The AAA-ICDR also offers a case-filing-API, allowing firms to file their cases without the requirement to submit them individually to the AAA-ICDR. Based on parameters set by the user and the AAA-ICDR, information from the user’s system is directly mapped to the AAA-ICDR’s, creating an instant filing. In the future, the AAA-ICDR will also be able to offer parties a case status- and neutral appointment-API, so parties always know the status of individual matters and the information regarding neutrals appointed to each case.
The Future of Mass Arbitrations
Reuters Legal recently published a statistic that 71.3% of the federal civil caseload as of the end of the 2023 fiscal year is comprised of MDLs (Multi-District Litigations)1. If this is an indication, it could mean more mass actions of all types.
To learn more about AAA-ICDR administration of mass arbitrations, visit www.adr.org/mass-arbitration.
1https://www.reuters.com/legal/government/us-judicial-panel-approves-first-rule-govern-federal-mass-torts-2024-04-09/ (last visited April 12, 2024)