AAA Arbitration Now Requires Annual Payments -- Is It Time to Reconsider Your Arbitration Clause?

Recently, the American Arbitration Association (AAA) updated its Consumer Arbitration Rules to require pre-registration of consumer arbitration clauses and the payment of an annual fee for the ability to use its arbitration service. Now may be a good time to review your company’s arbitration clause if it currently provides for AAA arbitration of consumer disputes. Why Review The Arbitration Clause Now?

Under the AAA’s recent change, companies using AAA for the arbitration of consumer disputes must pay to have their clause reviewed and included in the AAA’s registry. If a company wishes to continue using AAA arbitration, it may wish to ensure that it has the best clause for its needs before formally registering it with the AAA. This would also avoid the need to pay a change fee in the future. For companies opposed to paying an annual fee for the privilege of using AAA arbitration, a change in the dispute resolution mechanism may be warranted. If a consumer serves a demand for arbitration of a clause that the AAA had not previously reviewed, a company would need to pay an expedited fee for the review of the arbitration clause, and a risk also exists that the AAA may decline to arbitrate a dispute arising under that clause.

How Much Will These Changes Cost?

If a company wishes to keep AAA as its arbitrator – or to switch to AAA –it should be aware of the following fees:

• Initial Registration: For arbitration clauses submitted anytime during the 2014 calendar year, a company must pay $650 for review of the clause and maintenance of that clause in the AAA’s registry through the end of 2015. Companies submitting their clause any time during 2015 must pay $500 for review and inclusion of the clause in the registry through the end of 2015.
• Annual Renewal Fee: The annual renewal fee to maintain the clause in AAA’s registry is $500.
• Changes to a Registered Arbitration Clause: If a company makes changes to a previously-registered clause, it must be resubmitted for review, and the AAA will assess an additional $500 charge.
• Expedited Review Fee: If a consumer makes a demand for arbitration under a clause that the AAA had not previously reviewed and included in the clause registry, the company must pay a $250 fee for an expedited review, in addition to any other applicable fees.

What Do These Changes Mean for My Company?

Many companies have chosen to include arbitration clauses in their consumer contracts and online terms after the U.S. Supreme Court ruled strongly in favor of the enforceability of arbitration agreements in 2011 and 2013. Now that an annual fee is required for the ability to use AAA, companies may wish to conduct a cost-benefit analysis of using AAA for arbitration.

Infrequent users of arbitration – such as small companies and those that do not often face disputes with their customers – are those that stand to be hurt the most by the AAA’s changes. These companies must now pay a recurring fee solely for the assurance that the AAA would be willing to arbitrate a dispute under the pre-approved arbitration clause.

Companies opposed to paying an annual fee to AAA may wish to explore other options. JAMS, another large arbitration provider, may be a viable option for some companies, and other smaller arbitration firms also exist. Finally, it may be worthwhile to reconsider whether the company’s objectives can be met through more-traditional dispute resolution terms (e.g., choice of law and forum, and perhaps a class waiver). A full discussion regarding the pros and cons of any dispute resolution mechanism are best had with qualified counsel.