Mass Arbitration: The Risk Lurking in Consumer Agreements

Arbitration agreements have long offered companies and consumers an efficient alternative to litigation — streamlined procedures, lower costs, and faster resolution. In consumer markets, requiring individual arbitration and waiving class actions became standard for managing risk.

Then technology changed the equation. As attorney advertising and solicitation on social media proliferated, mass coordination became effortless. Plaintiffs’ firms began filing thousands of nearly identical consumer claims at once, turning a process built for efficiency into one straining under its own rules. The phenomenon, known as mass arbitration, can be more punishing than the class actions it replaced if companies are unprepared and haven’t built protections into their arbitration terms. Without safeguards against coordinated filings, companies face millions in administrative fees before reaching the merits of a case, creating pressure to settle weak, untested, or often frivolous claims.

Arbitration providers are adjusting their rules and companies are revising their contracts, but the way forward remains in flux. Mass arbitration has already taken hold in consumer electronics, financial services, employment, and gig economy platforms, and it’s surfacing in healthcare and telecommunications. Its reach could extend into any market in which arbitration agreements meet digital scale.

How Technology Enabled Mass Coordination

The legal structure enabling mass arbitration has existed for decades. Consumer arbitration agreements typically contain at least three provisions: mandatory arbitration clauses requiring individual arbitration, class action waivers barring collective proceedings, and fee allocation clauses under which the companies — rather than the consumers — pay most administrative fees. Courts largely upheld these provisions despite varied challenges. Now they make mass arbitration possible. What changed was technology.

The internet and social media, and now generative artificial intelligence (AI), altered the balance in favor of plaintiffs. In theory, mass filings were always possible, but assembling claimants required extensive investigation and individual outreach. The coordination costs were prohibitive, especially for plaintiffs’ firms working on contingency.

Technology gave firms another path. Plaintiffs’ firms now run targeted ads asking potential claimants to join with a few clicks. Automated forms generate retention letters. A firm can assemble 10,000 claimants in a week without vetting individual claimants or claims, then file thousands of identical demands simultaneously.

Generative AI is accelerating this shift, enabling firms to generate individualized filings at scale, increasing the size of mass arbitrations, and making them harder for companies to challenge on procedural grounds.

These technological shifts make mass arbitration viable in virtually any consumer context. Healthcare companies with patient agreements, telecommunications providers with service contracts, retailers with purchase terms or privacy policies. Any business with consumer-facing arbitration clauses faces potential exposure.

The economics shift dramatically when thousands of claims arrive at once. Arbitration providers typically charge per-case fees. Under the old American Arbitration Association (AAA) fee schedule, a company facing 10,000 demands would pay more than $15 million in administrative fees just to reach the point at which procedural challenges could be heard. Claimants pay minimal or no fees. Until companies pay administrative fees, no arbitrator is impaneled to hear dismissal motions or procedural challenges. Some providers, including the AAA, have adjusted fee schedules and adopted procedures in attempts to address mass arbitrations, but the threat remains significant and relief remains uncertain.

Arbitration infrastructure can’t handle this volume. The AAA has approximately 8,000 arbitrators. A single mass arbitration with 100,000 claims would require batching hundreds or even thousands of cases to individual arbitrators, with proceedings stretching over years even if the claims are identical. If companies haven’t planned ahead and considered the different strategies to address mass arbitrations, the calculus becomes brutal: Pay millions to arbitrate claims that may lack merit, settle quickly for less, or hunker down for a drawn-out fight.

The Strategic Dilemma

Mass arbitration creates strategic uncertainty, but the severity depends on preparation. Companies that have anticipated coordinated filings and built protections into their arbitration agreements — such as bellwether procedures, evidentiary showings, or batching protocols — maintain significant leverage and options. Those without such planning face much steeper costs and harder choices. When thousands of claims arrive unexpectedly, unprepared companies confront two difficult options.

First, pay to defend. This means absorbing administrative fees and litigating thousands of individual cases over several years. Arbitration agreements require individual proceedings for each claimant. Cases can be batched for efficiency, but each still requires individual attention. The process can stretch over years, forcing companies to consider spending amounts that dwarf potential damages. However, for companies with strong defenses or facing weak claims, this can be a viable strategy — demonstrating they won’t settle under pressure and, when allowed, seeking recovery of attorneys fees for meritless claims, potentially deterring future mass filings.

Second, settle. Plaintiffs’ firms typically demand settlements at a fraction of administrative fees, without regard to the merits of the claims. A company facing $20 million in up-front costs might settle for $10 million. No one tests whether the claims had merit. This approach rewards questionable filings and encourages more mass arbitrations, but, for unprepared companies, it may be the most economical path in the short term.

Regardless of how companies handle existing claims, they should revisit their arbitration agreements and consider strategies to prepare for possible mass arbitrations. Amendments can define coordinated claims and provide alternative mechanisms such as bellwether procedures (resolving a few representative cases first), evidentiary preconditions (requiring claimants to provide some proof before arbitration begins), affirmation requirements (each claimant or counsel certifying the authenticity of the claim before arbitration proceeds), and batching protocols (grouping similar cases instead of handling each one individually). These amendments can help manage ongoing mass arbitration campaigns and deter future filings, making them powerful tools for stemming the tide.

The Ecosystem Responds

Arbitration providers and courts are adapting, but changes are incremental and their effectiveness is uncertain.

The AAA revised its mass arbitration rules in January 2024, dramatically reducing up-front costs.¹ Instead of per-case filing fees totaling millions, companies pay flat fees to initiate the administrative process plus per-case fees once cases begin. The revised rules also require claimants’ counsel to affirm that the claim information is accurate. A “process arbitrator” can now hear preliminary challenges and design batching protocols or bellwether procedures before cases proceed to the merits arbitration.

JAMS (formerly, Judicial Arbitration and Mediation Services) followed the AAA with similar procedures but with a key difference.² JAMS rules apply only if both parties agree to follow them in writing. In certain cases, this gives claimants leverage to refuse the updated procedures and preserve the old fee structure. The AAA rules, by contrast, apply at AAA’s discretion.

Courts are also scrutinizing mass arbitrations. The U.S. Court of Appeals for the Seventh Circuit’s 2024 decision in Wallrich v. Samsung raised the pleading standard for arbitration demands and held that administrative closure for nonpayment could exhaust a claimant’s arbitration rights. These holdings make it harder to maintain mass arbitrations without factual support, but their application remains limited.

Despite these changes, the fundamental tension persists. Revised fee schedules reduce but don’t eliminate cost pressures. Under the AAA’s new rules, companies facing 10,000 claims could pay nearly $6 million before reaching the merits — enough to encourage settlement.

Affirmation requirements imposed by mass arbitration rules may deter some questionable filings, but enforcement depends on sanctions that haven’t yet been tested. How courts ultimately treat amended arbitration agreements to account for mass arbitrations — and whether they withstand challenges — remains unsettled.

What to Watch

Several developments will determine the future of mass arbitration.

First, monitor judicial treatment of amended arbitration agreements. Companies are revising agreements to address mass arbitrations with new procedural safeguards. These include bellwether procedures, evidentiary showings and preconditions to filing, timing requirements for arbitration fee payments (addressing statutes like the California Code of Civil Procedure section 1298), and other protective measures. Early court challenges will establish whether these protections effectively manage risk.

Second, observe whether arbitration providers continue refining their rules. The AAA and JAMS changes represent initial responses, but additional adjustments — mandatory bellwether procedures, stricter claim verification, or further fee reductions — could follow as competing providers try to capture market share from established players.

Third, consider potential legislative responses. Some states have proposed or enacted laws regulating arbitration agreements. If mass arbitration attracts legislative attention, reforms could validate amended agreements or impose restrictions.

Fourth, watch how courts enforce new affirmation requirements. Meaningful sanctions on firms filing inadequately vetted claims could shift the economics, though these issues are unlikely to reach courts unless companies refuse to engage in arbitrations.

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