Recently, some big consumer-oriented firms have experienced thousands, even tens of thousands, of identical, individual consumer arbitrations filed against them, presenting the potential of enormous expense for company-paid arbitrations. While this has led some companies to rethink their embrace of consumer arbitration, anecdotal evidence suggests that, despite the rise of potentially costly “mass arbitration” proceedings, arbitration continues to occupy the mainstream of consumer dispute resolution, as specified, for example, in AT&T’s Consumer Service Agreement and Wells Fargo’s Deposit Account Agreement (effective May 9, 2022).
Because of the increase in the number of businesses, large and small, adopting consumer arbitration clauses, many lawyers without significant arbitration experience are now being introduced to the world of arbitration.
The American Arbitration Association (AAA) is the largest provider of arbitration services in the United States. This article therefore will refer to the AAA Consumer Arbitration Rules for purposes of illustration. Companies that wish to have the AAA Consumer Rules apply to consumer claims must submit their proposed consumer dispute resolution program to the AAA for approval if they want assurance that the AAA will administer arbitrations under its program. As provided in Rule R-12 of the AAA Consumer Rules, the AAA will look for minimal or no cost to the consumer, a fair process, and efficient handling of disputes.
One of the features of arbitration that makes it quicker and less expensive than litigation is that discovery is far more limited. This is especially so under the AAA Consumer Rules. Consumer Rule R-22 provides for the exchange of information between the parties as follows (emphasis added):
R-22. Exchange of Information between the Parties
(a) If any party asks or if the arbitrator decides on his or her own, keeping in mind that arbitration must remain a fast and economical process, the arbitrator may direct
1) specific documents and other information to be shared between the consumer and business, and
2) that the consumer and business identify the witnesses, if any, they plan to have testify at the hearing.
(b) Any exhibits the parties plan to submit at the hearing need to be shared between the parties at least five business days before the hearing, unless the arbitrator sets a different exchange date.
(c) No other exchange of information beyond what is provided for in section (a) above is contemplated under these Rules, unless an arbitrator determines further information exchange is needed to provide for a fundamentally fair process.
(d) The arbitrator has authority to resolve any disputes between the parties about exchanging information.
In other words, discovery in a consumer arbitration before the AAA may be as little as identifying witnesses and providing exhibits in advance of the hearing. However, Rule R-22 vests broad discretion in the arbitrator, who may direct that “specific documents” and “other information” be exchanged. The arbitrator may also determine that “further information exchange is needed to provide for a fundamentally fair process.” The rule contemplates that the information exchange is to be informal and is to be made primarily, if not exclusively, by documents. Despite this, counsel sometimes request to serve interrogatories and requests for admissions (although these are often not available even in business-to-business cases under the AAA Commercial Arbitration Rules). These requests will generally be denied.
The breadth of discovery in a consumer arbitration will be discussed at the initial preliminary hearing (almost always via conference call). Think carefully in advance about what information is needed from the other side. If possible, pick up the telephone before the preliminary hearing, call the other side, even if (indeed, especially if) the other side is unrepresented, and discuss information exchange with the other side in advance. See if you can come to agreement before the preliminary hearing. Many consumer cases are pro se, and the consumer will often not have read Rule 22. The pro se claimant probably will have no experience with discovery and may not even understand what it is.
When both sides are represented by counsel and the necessary discovery is simply to exchange relevant files with one another, discovery under the Consumer Rules is quick, easy, and cheap for the clients. Where it gets complicated is when the claimant is pro se or the consumer is complaining about a business’s process, both of which may be true in an arbitration. A dispute about a tangible product’s qualities is generally straightforward, but when a consumer asserts that a complaint was ignored or a request for correction of an account was mishandled, the business’s procedures for handling consumer issues may come into play. This can create a difficult situation for all, including the arbitrator, particularly in a pro se case.
Arbitrators must be neutral, but they often have to provide some procedural help to pro se parties who do not understand how arbitration works. It can be up to the arbitrator to decide how much discovery to provide to the less sophisticated consumer claimant. Consumers may say “give me everything about X process” (likely too broad a request for what is supposed to be a streamlined arbitration), or consumers may ask for nothing, not understanding that, to try to prove their case, they will need more information about the process that allegedly failed them. Lawyers in consumer cases should bear in mind that, often, consumers do not understand the type of evidence they need to try to prove their cases.
In short, the consumer may need something more than his or her individual contacts with the respondent but not have much of an idea of what to request. In civil litigation, defense counsel would not ordinarily suggest what the judge should require his or her own client to produce. But in consumer arbitration, under AAA Consumer Rule R-22(c), the arbitrator has to decide what, if any, “further information exchange is needed to provide for a fundamentally fair process.” How is the arbitrator to make a wise determination when the claimant cannot formulate a reasonable request? The arbitrator does not know how the respondent’s records are kept, how voluminous they are, or what the respondent may have that is truly relevant.
Unfortunately, some lawyers new to arbitration seem to have read only part (a) of Rule 22, and not part (d), which affords the tribunal broad (and essentially unreviewable) discretion as to what is “fundamentally fair.” If the respondent’s counsel adopts a “just say no” attitude about discovery, declining production of any documents beyond those personal to the claimant, counsel may put his or her client at risk of an onerous discovery order.
When advising what a client should and should not do in a consumer arbitration, it is important to consider an alternative that helps the arbitrator achieve the “fundamentally fair process” that the arbitrator is obligated to provide. If this has not been discussed with the client in advance, there is nothing wrong with asking for a bit of time to consult with the client and respond in writing. While counsel will understandably want to protect the right of the client to a fair and expeditious resolution, collaboration with the arbitrator is more likely than an unduly adversarial approach to produce a good result.
Practice Tips
- Read the Consumer Rules (or other applicable arbitration rules) with care before talking to your client or anyone else in the case.
- Remember that credibility of counsel is just as important in arbitration as it is in civil litigation.
- Getting in the way of figuring out how to provide necessary information for the matter to go forward lessens credibility.
- Appearing to work cooperatively toward the fair process required of the arbitrator enhances credibility.
- In consumer arbitration (as elsewhere), credibility influences results.
