For quite some time, there has been a growing trend paralleling the continuing use of arbitration to resolve disputes, and the inclusion of arbitration provisions in contracts, with an onslaught of mass arbitration demands being filed by the “plaintiffs bar.” There are many benefits to using alternative means to resolve disputes such as a streamlined process and expedited time frames, lower economic costs and a level of confidentiality/privacy. The filing of mass arbitration claims and the misuse of the arbitration process by mass claimants vitiates those benefits at times to the detriment of both parties. For example, the filing of illegitimate claims lacking in merit, or even real claimants, undermines the integrity of the process. Concomitantly, the potential exponential costs that can result in having to defend hundreds, if not thousands, of claims can at times force respondents to settle claims that otherwise may be lacking in merit in order to avoid the costs of having to defend them.

How does this issue arise? The plaintiffs bar, which often relies on bringing a class action to redress claims, cannot commence one action on behalf of all claimants in an arbitration. Not only do many contracts contain class action waivers, but the U.S. Supreme Court has made it clear that the Federal Arbitration Act (FAA) protects the rights of individuals to bring claims on an individualized basis. For example, the Supreme Court held in AT&T Mobility v. Concepcion, 563 U.S. 333, 351-52 (2011), that the FAA protects the enforceability of agreements providing for individualized dispute resolution, and preempts state law rules [referring to a California Supreme Court case Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005)] that would invalidate those agreements. More recently, the Supreme Court in Epic Systems v. Lewis, 584 U.S. 497, 497 (2018) rejected the argument that the National Labor Relations Act prevented employers and employees from agreeing to arbitrate their disputes on an individualized basis. Thus, in order to bring claims on behalf of a large group of claimants, the paintiffs bar files multiple demands (often numbering in the hundreds, if not, thousands), containing nearly identical claims. While legitimate claims, even in large numbers, have a place in the arbitration process, there are those who file claims for nonexistent claimants or customers (former customers) who do not actually have a valid claim. These “mega filings” create large up-front arbitration fees for the responding businesses and even if the claims are meritless, the businesses are pressured to either settle, abandon arbitration, or pay unnecessary fees in order to defend the action. See U.S. Chamber of Com. Institute for Legal Reform, Mass Arbitration Shakedown: Coercing Unjustified Settlements, Feb. 2023, //instituteforlegalreform.com/wp-content/uploads/2023/02/Mass-Arbitration-Shakedown-digital.pdf.