Beginning September 1, 2014, the American Arbitration Association (“AAA”) will require that any business using or intending to use the AAA rules in a consumer contract register the arbitration clause with the AAA. Upon submitting the clause, the AAA will review it for “material compliance” with the AAA’s due process standards contained in its Consumer Due Process Protocol and its newly-adopted Consumer Arbitration Rules (which will replace the AAA Consumer-Related Disputes Supplementary Procedures effective September 1, 2014).
If the AAA is satisfied that such compliance has been met, then the business will be included in the AAA’s publicly-accessible Consumer Clause Registry, which will contain a copy of the arbitration clause along with the business’s name and address. If the clause is determined non-compliant, then the AAA may decline to administer the case, and the parties may then submit their dispute to the appropriate court.
The AAA rules further require that the clause be submitted for registry at least 30 days before the planned effective date of the contract; but if a business does not submit its arbitration clause for review in advance of an arbitration being filed, the AAA will conduct a review at that time, for an expedited fee of $250, in addition to the standard initial registry fee of $650. The AAA also requires payment of a yearly, non-refundable fee of $500 to keep each clause registered. Any different arbitration clauses used by the same business or its subsidiaries must be separately registered and maintained, and any subsequent changes to a registered arbitration clause must be resubmitted. The AAA rules also provide that it will decline to administer an arbitration if the business has failed to pay the required fees.
An arbitration clause that satisfies the Federal Arbitration Act, along with a class action waiver, can effectively impede the use of class actions seeking recovery for individual de minimus claims. The U.S. Supreme Court has validated the enforceability of arbitration clauses for such purposes in a series of recent cases. It is therefore important to ensure that the clause is well drafted, and properly registered with the AAA so that it won’t be set aside when the business needs it most.
The AAA registry process can be found on their site at www.adr.org.