The Mass Arbitration Illusion

Mass arbitration has emerged as the latest battleground in the ongoing tug-of-war between corporations and their consumers and employees regarding binding mandatory arbitration clauses. After businesses succeeded in shielding themselves from liability by using mandatory arbitration clauses to ban class actions, plaintiffs struck back. By filing large numbers of individual arbitrations against a corporate defendant all at once, they have increased their leverage and induced alarmed companies to come to the settlement table. By and large, corporate defendants like mandatory arbitration, but do not like mass arbitration. Recently, defendants have discovered a weapon that allows them to continue to force consumers and employees into arbitration, but to maintain for themselves an escape hatch for mass arbitrations that they would prefer to defend in court. Simply put, they violate the arbitration provider's rules. This can take several forms, but most commonly, defendants have refused to pay their share of arbitration fees, or they have refused to register their arbitration clause with the arbitration provider. When that happens, the arbitration provider closes the case, and so the plaintiffs no longer can proceed in arbitration, giving the non-complying defendants exactly what they want. Although refusal to follow arbitration provider rules may look like gamesmanship, three recent circuit court decisions have blessed this practice. As a result, even though plaintiffs are required to arbitrate all disputes, defendants are able to unilaterally decide whether a case will proceed in court or in arbitration. This essay argues that allowing defendants to unilaterally back out of arbitration by refusing to comply with arbitration provider rules is unfairly one-sided, imposes significant costs on plaintiffs, and runs contrary to the purpose of the Federal Arbitration Act, which was adopted to prevent parties from strategically avoiding arbitration when they thought they would do better in court.