FIGHTING MASS ARBITRATION: AN EMPIRICAL STUDY OF THE CORPORATE RESPONSE TO MASS ARBITRATION AND ITS IMPLICATIONS FOR THE FEDERAL ARBITRATION ACT

Abstract

Mass arbitration represents the newest battleground between corporations and consumer and employee advocates over mandatory arbitration and access to justice. Companies thought they had finally won the arbitration wars after the Supreme Court ruled that they could insert class action bans into their arbitration clauses, bestowing companies with widespread immunity from a large swath of consumer and employee claims. Recently, however, consumer and employee advocates have responded to class action bans by filing thousands of individual arbitration demands, which have exposed companies to millions of dollars in filing fees and resulted in large settlements. This practice has become known as "mass arbitration." Although corporations have cried foul, courts so far have allowed mass arbitrations to occur. No one expects companies to accept this latest development without a fight. Yet, scholars have not comprehensively examined how companies have adapted their arbitration provisions to try and squelch mass arbitration. This article provides an empirical study of the arbitration clauses of 106 large consumer-facing companies. It reveals that most companies now require claimants to exhaust pre-arbitration procedures prior to initiating an arbitration. Many companies also require cases to be arbitrated in sequential batches rather than all at once, allowing companies to spread their fee obligations and liability risk over a longer time horizon. Other companies have chosen arbitration providers who offer companies lower fees. Most alarmingly, some companies ban mass arbitration altogether. The study's findings have several important implications. First, companies' new responses to mass arbitration have claim-suppressing effects. Pre-arbitration requirements make it easier for companies to dismiss claims if those requirements are not satisfied. Arbitrating claims in staggered batches delays proceedings, forcing claimants to wait longer to seek relief for their injuries.

Keywords: dispute resolution, civil procedure, arbitration, access to justice, corporations, mass arbitration, mass torts, alternative dispute resolution, user contract, terms of acceptance, terms of use

JEL Classification: K41