Effective May 1, 2025, the American Arbitration Association (“AAA”) amended its Consumer Arbitration Rules, including Rule 12 dealing with the registration of consumer arbitration clauses. The AAA stated that its goal was to “clarify” the rules in order to maintain “fairness” and “transparency.” Nevertheless, the recent Eleventh Circuit in its opinion Merritt Island Woodwerx, LLC v. Space Coast Credit Union raises the question whether Rule 12, as applied by the AAA in practice, has been clarified enough.
The AAA’s clause registration requirement has been part of the Consumer Rules since 2014. When adopted, Rule 12 provided in relevant part:
Beginning September 1, 2014, a business that provides for or intends to provide for these Rules or another set of AAA Rules in a consumer contract … should
1. Notify the AAA of the existence of such a consumer contract or of its intention to do so at least 30 days before the planned effective date of the contract.
2. Provide the AAA a copy of the arbitration agreement.
Upon receiving the arbitration agreement, the AAA will review the agreement for material compliance with due process standards contained in the Consumer Due Process Protocol and the Consumer Arbitration Rules …. There is a nonrefundable fee to conduct this initial review and maintain a publicly-available clause registry ….
If a business does not submit its arbitration agreement for review and a consumer arbitration then is filed with the AAA, the AAA will conduct an expedited review at that time. Along with any other filing fees that are owed for that case, the business also will be responsible for paying the nonrefundable review and Registry fee (including any fee for expedited review at the time of filing) for this initial review …. The AAA will decline to administer consumer arbitrations arising out of that arbitration agreement if the business declines to pay the review and Registry fee.
In Space Coast, the Eleventh Circuit affirmed a Florida district court decision denying arbitration on the ground that Space Coast waited too long before attempting to comply with the AAA clause registration requirement in Rule 12. The facts were as follows:
- On March 27, 2023, plaintiff Woodwerx filed an arbitration demand against Space Coast with the AAA alleging that the credit union improperly assessed overdraft and insufficient funds fees.
- On April 20, 2023, the AAA sent a letter to the parties declining to administer the arbitration and stating that:
Prior to the filing of this arbitration, Space Coast Credit Union failed to comply with the AAA’s policies regarding consumer claims …. Accordingly, we must decline to administer this claim and any other claims between Space Coast Credit Union and its consumers at this time. Please note that, for cases proceeding under the Consumer Rules, the AAA reviews the relevant arbitration agreement for material compliance with the [Consumer Due Process] Protocol and the Consumer Rules ….
We have administratively closed our file ….According to Rule R-1(d) of the Consumer Rules, should the AAA decline to administer an arbitration, either party may choose to submit its dispute to the appropriate court for resolution.
If Space Coast Credit Union advises the AAA in the future of its intention to comply with the AAA’s Consumer Rules and Protocol and, if applicable, resolves any outstanding payment obligations, the AAA may consider at its sole discretion, accepting newly filed consumer cases going forward. Therefore, if Space Coast Credit Union wishes for the AAA to consider accepting consumer disputes going forward, Space Coast Credit Union must, at a minimum, register its clause on the Consumer Clause Registry on our website …. Upon completion of the registration process and confirmation from the AAA that Space Coast Credit Union is now active on the Consumer Clause Registry, Space Coast Credit Union is responsible for informing all parties that Claimant may re-file their claim.
- On April 25, 2023, counsel for Space Coast sent an email to the AAA indicating that Space Coast would like to proceed with arbitration and requesting that the AAA provide the specific bases for administratively closing the arbitration.
- On June 7, 2023, Woodwerx filed a putative class action against Space Coast in the Middle District of Florida based upon the same allegations that improper fees were assessed.
- On June 9, 2023, Space Coast filed its arbitration clause with the AAA for review and paid the AAA’s registration fee.
- On July 24, 2023, the AAA approved Space Coast’s arbitration clause and said it was prepared to administer consumer-related disputes.
- Space Coast then moved to compel arbitration of the Middle District case filed by Woodwerx. The district court denied its motion on the ground that Space Coast had failed to take the steps necessary for the AAA arbitration until more than a month after the AAA had declined Woodwerx’s arbitration demand and only after Woodwerx filed suit in the Middle District, thereby waiving its contractual right to arbitrate.
On May 21, 2025, the Eleventh Circuit affirmed, emphasizing that “Space Coast’s potentially curative conduct [i.e., registering its clause] occurred during the course of the litigation” and that “post-filing conduct cannot cure the prior non-compliance.” Moreover, it held, “by ignoring the AAA’s letter for a month and a half until after a lawsuit was filed against it, Space Coast acted inconsistently with the intention to vindicate its contractual arbitration rights; the fact that it later attempted to comply with the AAA policies doesn’t resurrect the waived contractual right to arbitrate.”
The foregoing facts, however, do not explain why the AAA—before administratively closing its file—did not conduct an “expedited review” of Space Coast’s arbitration clause after Woodwerx filed its arbitration demand. Was not such a review required under Rule 12, which provided that businesses “should” register their clauses before they are implemented, but “[i]f a business does not submit its arbitration agreement for review and a consumer arbitration then is filed with the AAA, the AAA will conduct an expedited review at that time.”
While the AAA’s May 1, 2025 revision of its Consumer Rules amended some of the language of Rule 12, it did not shed further light on the mechanics of how the “expedited review” process operates, in particular, how a business can avail itself of an “expedited review” of its arbitration clause before the matter is administratively closed. In fact, it retained the same “should” and “will” language as the original version of the rule:
- A business that provides for or intends to provide for arbitration pursuant to these Rules or another set of AAA rules in a consumer contract … should register its consumer arbitration clause with the publicly accessible AAA Consumer Clause Registry….
(f) If a business does not submit its arbitration agreement for review prior to an arbitration being filed under that clause, the AAA will conduct an expedited review for the specific arbitration case. In addition to any standard filing fees that are owed for that case, the business also will be responsible for paying a one-time, nonrefundable expedited review fee. Subsequent registration of the agreement with the Registry requires a separate review and fee. The AAA will decline to administer consumer arbitrations arising out of that arbitration agreement if the business declines to pay the fees and waive any provision that the AAA determines does not comply with the Consumer Due Process Protocol.
The Eleventh Circuit’s opinion illustrates that companies can pay a heavy price when they are charged with not complying with the AAA Rules. Additional guidance from the AAA on how businesses can comply with the requirements for a Rule 12 expedited review before the administrative file is closed would eliminate confusion, promote the uniform application of Rule 12 and thus greatly benefit the countless businesses that have selected the AAA as their arbitration administrator.
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