AAA Issues Supplementary Rules for Multiple Case Filings

The arbitration provision in Lamps Plus, Inc. v. Varela [PDF] (139 S. Ct. 1407 (2019)) was silent regarding class arbitration, but it included vague references that arbitrators and prior courts had decided implied party consent. The Supreme Court held that ambiguous statements did not provide the necessary contractual basis for compelling class arbitration. In reaching its decision, the Court focused on the “fundamental difference between class arbitration and the individualized form of arbitration envisioned by the FAA.” Going forward, to be enforceable, agreements must explicitly authorize class arbitration.

Consequences of the Supreme Court Decision

The outcome of the Court’s decision has been the filing of thousands of individual cases with the  American Arbitration Association (AAA) for disputes where the Employment/Workplace Fee Schedule or the Consumer Fee Schedule apply. Companies, such as PayPal and Postmates, have unsuccessfully challenged the coordinated filing of individual arbitrations by law firms. (See Terrell Abernathy v. DoorDash, Inc., No. C 19-07545 WHA related to No. C 19-07646 WHA (N.D. Cal. Feb. 10, 2020); Postmates v. 10,356 Individuals, [PDF] No. CV 20-2783 (Apr. 15, 2020)).

Representing users of Amazon’s Echo devices, lawyers mass-filed 75,000 arbitration demands. In response, Amazon recently decided to remove the arbitration provision from its conditions of use page. Future disputes involving Echo users must be resolved in state or federal court in King County, Washington.

AAA Issues New Supplementary Rules

In response to the coordinated mass filing of individual arbitrations, the AAA issued Supplementary Rules for Multiple Case Filings [PDF] effective August 1, 2021. The AAA developed the Supplementary Rules to streamline the administration of large-volume filings involving the same or related party, parties, and party representative(s) for disputes where the Employment/Workplace Fee Schedule or the Consumer Fee Schedule apply.

Prior to filing separate demands. Prior to filing multiple cases with the AAA, parties are encouraged to discuss and agree on additional processes that would make resolution more efficient; for example, mutual agreement to

• set deadlines for submission of documents and witness lists, completion of discovery, and filing of motions;
• appoint a special master to oversee procedural issues common to the cases, such as choice of law and statute of limitations;
• hear cases on the documents, rather than by in-person, telephone, or videoconference hearings;
• assign multiple cases to a single arbitrator who will individually hear and decide each case.

Completion of the intake data spreadsheet. When multiple case filings reach the 25-case threshold, the filing party is to submit a fully completed Multiple Case Filings Intake Data Spreadsheet to AAA and opposing parties. The filing party will be required to update the spreadsheet with the filing of additional cases.

Initial determination of applicability. The AAA will initially determine if a group of 25 or more cases constitute “multiple case filings” as defined by the Supplementary Rules. A party may challenge AAA’s decision regarding applicability. Within 30 calendar days after AAA’s commencement of administration, a party may seek judicial intervention. AAA will suspend administration for 60 calendar days to permit the party to obtain a stay of arbitration from the court.

Or, after the AAA filing requirements have been met but prior to the appointment of arbitrators to determine the merits, the AAA may in its sole discretion, following receipt of a party’s written notice of disagreement, decide to appoint a process arbitrator to hear and determine a number of administrative issues, such as the applicability of the Supplementary Rules. Compensation of the process arbitrator will be at the rate set forth on the process arbitrator’s résumé.

Fixing of locale. Where in-person hearings are required, and in the absence of party agreement, the AAA will identify one or more locales where hearings may take place. The AAA will consider the positions of the parties and the relative ability of the parties to travel, as well as a number of other factors, such as the location of any prior court proceedings.

Appointment of arbitrators to decide the merits. Absent a contractual process or party agreement, the AAA will provide a list of proposed arbitrators to the parties unless the AAA determines that the cases are too numerous for lists to be used. If the AAA decides not to send lists, the AAA will have the authority to administratively appoint arbitrators to determine the merits of the cases. Under certain circumstances determined solely by the AAA, such as the number of individual cases exceeds the number of qualified arbitrators in the locale, the AAA may assign multiple cases to a single arbitrator, who will decide each case on its own merits.

Global mediation. Within 120 calendar days from the established due date for the answer, the parties are to initiate a global mediation pursuant to the applicable AAA mediation procedures or as otherwise agreed to by the parties. Any party may unilaterally opt out of mediation.

Conclusion

It is unclear how many companies will decide to litigate rather than arbitrate future employment or consumer disputes. What is clear, however, is that it could take years to resolve all the potential mass filings arising from existing contracts that do not clearly authorize class arbitration. Prior to submitting multiple demands, attorneys should carefully review the AAA Supplementary Rules and, if possible, discuss with opposing counsel ways in which the parties can, by mutual agreement, make the process more efficient and economical.