What You Need To Know

• Alternative dispute resolution (ADR) providers JAMS and the American Arbitration Association (AAA) have updated their mass arbitration rules, reflecting an expected rise in such cases.
• JAMS’ newly published Mass Arbitration Guidelines and Procedures, effective May 1, 2024, aims to streamline mass arbitration by assigning a Process Administrator to oversee administrative procedures.
• Both service providers' rules now demand more accountability from claimants’ counsel and more equitably distribute filing fees and costs.
• Despite process improvements, businesses may still face challenges including burdensome arbitration costs and difficulties dismissing identical, legally deficient demands.

Two of the largest alternative dispute resolution services providers—JAMS and the American Arbitration Association (AAA)—have updated or created new rules and fee schedules for mass arbitrations. This development indicates that the leading alternative dispute resolution (ADR) providers anticipate that mass arbitration filings will continue.

The new rules respond—albeit not as much as many businesses would like—to a clear need for increased vetting of mass arbitration claims and fee schedules that reduce the ability of plaintiffs’ attorneys to force businesses to choose between settling weak claims or paying millions of dollars in fees within weeks of filing. Both providers’ rules include: (1) a new requirement that claimants’ counsel attest that the claims are true; (2) options for globally addressing administrative issues, including whether all filing prerequisites have been met before individual arbitrations begin; and (3) a more equitable burden between the parties on filing fees and costs, including lower up-front fees. These changes place modest additional obligations on claimants’ counsel, create some procedures for companies to streamline disputes, and remove the Damocles’ sword of massive upfront fees formerly faced by company defendants. Despite these welcome changes, the updated AAA and JAMS rules still lack a mechanism for businesses to bring a single dispositive motion to eliminate identical, legally deficient demands. They also do not reduce the fees that businesses will be required to pay, but merely kick the bulk of those fees further down the road.

JAMS Mass Arbitration Guidelines and Procedures

Shortly after the AAA issued its updated Mass Arbitration Supplementary Rules and related fee schedule, JAMS for the first time published Mass Arbitration Guidelines and Procedures (“Procedures”), effective May 1, 2024. In JAMS’s own words, these Procedures “are intended to facilitate the fair, expeditious and efficient resolution of Mass Arbitrations.”

JAMS defines a Mass Arbitration as “75 or more similar Demands for Arbitration, or such other amount as is specified in the Parties’ agreement(s), filed against the same Party or related Parties by individual Claimants represented by either the same law firm or law firms acting in coordination.”

For these Procedures to apply, the business’s arbitration agreement must specifically invoke them, or the parties may agree to them once a dispute arises.

Under the Procedures, each claimant must file an individual demand with an affirmation that the contents are truthful and accurate. Similar to the AAA’s Process Arbitrator option, JAMS will then appoint a Process Administrator to convene an initial administrative conference as soon as practicable and establish a schedule for considering procedural issues. The Process Administrator has authority over matters left to determination by JAMS under the applicable Rules, such as Rules 6(a) (convening administrative conferences), 6(b) (determining location of hearings), 6(e) (consolidation of arbitrations based on common issues of law and fact, subject to the parties’ arbitration agreements), and 11(c) (disputes concerning the appointment of Arbitrators) of the Comprehensive Arbitration Rules & Procedures.

The Process Administrator also has authority to determine conditions precedent relating to the commencement of the Mass Arbitration, including:

1. Whether parties have met the filing requirements;
2. Whether applicable conditions precedent have been met (and how to proceed if not);
3. Which demands should be included in the Mass Arbitration;
4. Which JAMS Rules apply;
5. Whether to batch, consolidate, or otherwise group demands;
6. Either the parties or the Process Administrator can determine the selection process for arbitrators (the same arbitrator may be assigned to multiple cases);
7. Any other non-merits issues.

Decisions by the Process Administrator are binding on subsequently filed cases determined to be part of the Mass Arbitration, unless the Administrator determines (sua sponte or upon request) that case-specific decisions are required. A request for case-specific determinations must be made within two weeks of filing a claim.

Importantly, the Process Administrator does not have the ability to make merits decisions, such as ruling on a single dispositive motion to dismiss legally inadequate claims. Instead, businesses must raise those defenses in each arbitration—after paying all of the fees for an arbitration proceeding.

The Procedures include a corresponding fee schedule, the material aspects of which include:

1. Non-refundable filing fee of $7,500 regardless of the number of filings (must be paid for JAMS to assign a Process Administrator).
   a.) Consumers pay $2,500 maximum and the company pays the remainder.
2. Process Administrator will bill at the rate reflected in their General Fee Schedule.
3. Case management fee: 13% of Professional Fees.
4. $2,000 arbitrator appointment fee (assessed only once regardless of the number of cases or groups of cases the arbitrator is appointed to).
5. Fees are non-refundable (except unused time under retainer for anticipated preparation and follow-up time billed to the parties).

While the JAMS and AAA mass arbitration rules improve administrative processes for mass arbitrations and weaken the plaintiffs’ lawyers’ leverage to force businesses into quick settlements, they do not eliminate the risk or ultimate fee burden that comes with mass arbitrations. Businesses should consult experienced counsel to develop consumer dispute resolution provisions that reduce opportunities for exploitation and maintain the objective of arbitration to provide an efficient and cost-effective dispute resolution process for individuals and the business.