This article first appeared on Consumer Finance Monitor, here.
A litigation phenomenon that has recently surged is the simultaneous filing of hundreds or even thousands of individual arbitration demands against the same company by the same law firm, requiring the company to pay the substantial up-front filing fees typically charged by arbitration administrators. Initially used in the context of employment arbitration claims, such “mass arbitrations” are now also being pursued against consumer businesses.
The American Arbitration Association (“AAA”) recently implemented a sliding scale for filing fees in “multiple consumer cases.” The fees will apply when the AAA determines, in its sole discretion, that 25 or more similar arbitration claims have been filed by or against the same party by the same counsel or coordinated counsel. The rules took effect on November 1, 2020.
Under prior AAA rules, in an arbitration commenced by an individual consumer, the filing fee was as high as $1,900. The business was required to pay $1,700 of that amount, and the consumer $200. Failure to timely pay the filing fee could result in dismissal of the arbitration, enabling the consumer to sue in court. When thousands of individual arbitrations were made or threatened against a company, as has happened on several occasions, the up-front filing fees totaled millions of dollars. Under the new rules, the following filing fees are payable by businesses in “multiple consumer cases”: (a) $300 per case for the first 500 cases; (b) $225 per case for cases 500 to 1,500; (c) $150 per case for cases 1,501 to 3,000 and (d) $75 per case for cases 3,001 and beyond. Consumers pay $100 per case for the first 500 cases, and $50 per case for cases 501 and beyond.
It is too early to tell whether the new AAA rules will have an impact on the filing and administration of mass arbitration claims. The AAA rules also require businesses to pay a $1,400 case management fee prior to the appointment of an arbitrator, a minimum $2,500 arbitrator fee, half of which is payable once a preliminary management conference is held, and a $500 hearing fee. The rules do not clarify whether these additional amounts must be paid in each case or if and how they are adjusted if there are multiple consumer cases. Nor do they clarify whether multiple consumer cases must be filed at the same time or can be aggregated over a period of time. In any event, this is clearly a step in the right direction as it seeks to balance the rights of all parties to the arbitration agreement.
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