8 Powerful New Consumer Strategies Against Forced Arbitration

1. Growing List of State Arbitration Restrictions Escape FAA Preemption 

State legislation has far more leeway than generally recognized to limit arbitration while escaping Federal Arbitration Act (FAA) preemption.  In the last few years, California has enacted many statutes limiting arbitration.  Most of these statutes are not effective until 2025, 2026, or even 2027, and so have not been tested for FAA preemption.   However, many should survive a preemption challenge:

• Effective January 1, 2027, an arbitration agreement is not enforceable to the extent the agreement is not enforceable under the FAA. See Cal. Assembly Bill 2155, to be codified at Cal. Code Civ. Proc. § 1281 (West). The FAA should not preempt this provision, as it is limited to instances when the agreement is not enforceable under the FAA. The new law should prevent defendants from falling back on state law to argue that an arbitration provision is enforceable if the arbitration provision is unenforceable under the FAA. 
• Cal. Civ. Code § 1670.15 (eff. Jan. 1, 2026) prohibits applying arbitration clauses to consumer disputes that have nothing to do with the agreement containing the arbitration clause. Arbitration coverage in consumer transactions is limited to the use, payment, or provision of a good, service, money, or credit provided by that consumer agreement.  The FAA should not preempt application of the California statute, at least to the extent of the limitations in FAA §2.  (See item # 3, infra.)
• Cal. Code Civ. Proc. § 1281.97 provides that, if a business does not pay its share of the required arbitration fees and costs within 30 days after a consumer initiates arbitration,  the business is in default and waives its right to compel arbitration and the consumer can proceed in court. The California Supreme Court and federal courts have found the FAA does not preempt the statute.  See NCLC’s Consumer and Worker Arbitration Provisions § 9.4.1.4.  Rhode Island has a similar statute, 10 R.I. Gen. Laws §§ 10-3-23, 10-3-24 (West) (eff. June 29, 2024).
• Effective January 1, 2025, consumers have the option to litigate in small claims court for damages not to exceed $12,500, even when an arbitration provision requires that the action be brought in arbitration. Cal. Civ. Code § 1799.209 (West).
• Effective January 1, 2025, a seller is prohibited from requiring a consumer to arbitrate a claim arising in California in a venue outside of California or to arbitrate a controversy arising in California under the substantive law of a state other than California. Cal. Civ. Code § 1799.208 (West).
• Effective January 1, 2025, detailed discovery rights, essentially the same as those in litigation, are available in arbitration. Cal. Code Civ. Proc. § 1283.05 (West). 
• Parties to an arbitration have the right to subpoena third parties. Cal. Code Civ. Proc. § 1282.6 (West).
• Effective January 1, 2025, the state bar is required to create a certification program for “alternative dispute resolution firms, providers, or practitioners,” with different levels of certification. Cal. Bus. & Prof. Code § 6173 (West).  To date, the state bar has requested public comment on creating such a program. Because it is a voluntary certification program, the FAA should not preempt this program. 
• Arbitrators must “disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.”  The statute lists seven examples. Cal. Code Civ. Proc. § 1281.9 (West). 
• The arbitration provider cannot solicit the parties to an arbitration during the pendency of the arbitration. Cal. Civ. Proc. Code § 1281.93 (West).

Other state limits on arbitration are more widespread. For cases in state court, about half the states allow an immediate interlocutory appeal of a ruling compelling arbitration. By contrast, when a federal court stays a case pending arbitration, the FAA requires plaintiffs to resolve the arbitration proceeding before they can appeal the ruling requiring arbitration.  9 U.S.C. § 16(b).  See NCLC’s Consumer and Worker Arbitration Provisions § 2.7.5.1.

The McCarran-Ferguson Act provides that, unless a federal statute explicitly regulates insurance, a state statute regulating insurance trumps a conflicting federal requirement.  The FAA does not regulate insurance, and a surprising number of states prohibit arbitration in insurance transactions or at least for certain lines of insurance. Cases involving insurance escape FAA preemption in those states.  See NCLC’s Consumer and Worker Arbitration Provisions § 3.4. 

NCLC’s Model State Consumer & Employment Justice Enforcement Act sets out ten state law provisions that are not preempted by the FAA and that limit selected abuses related to mandatory arbitration requirements.

2. Third Parties No Longer Get a Free Ride to Enforce Arbitration Requirements

Courts are reconsidering whether an arbitration provision including a delegation clause, delegating enforceability issues to the arbitrator, means the arbitrator, and not a court, decides whether a person not party to the arbitration provision can enforce the arbitration requirement.  The weight of authority now rules to the contrary, that the court should decide whether a third party can enforce the arbitration provision.  Courts now use one of two approaches to reach this conclusion.

Some courts now rule that, where the delegation clause does not clearly and unmistakably delegate to the arbitrator whether a third party can enforce the arbitration provision, the issue is for the court to decide. For example, delegation clause language may only apply to the parties to the arbitration provision and not to third parties. Other courts go further and view the issue as to whether an arbitration requirement has been formed between the consumer and the third party. Whether an agreement has been formed is always for the court.  See Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 299 (2010). 

The First, Fourth, Fifth, Seventh, Ninth, Tenth and Eleventh Circuits have adopted the formation approach. See NCLC’s Consumer and Worker Arbitration Provisions § 4.2.4. See, e.g., Sessoms v. USHealth Advisors, L.L.C., 176 F.4th 795, 803 (4th Cir. 2026); Kim v. Jump Trading, L.L.C., 2026 WL 2348464, at *3 (7th Cir. Aug. 13, 2026); Olson v. FCA US, L.L.C., 2026 WL 934267 (9th Cir. Apr. 7, 2026); Abdisalam v. Strategic Delivery Sols., L.L.C., 2026 WL 747099 (1st Cir. Mar. 17, 2026); Ransom v. Vystar Credit Union, 2026 WL 672368 (11th Cir. Mar. 10, 2026). 

3. Court First Determines Disputes Subject to Arbitration, Despite Delegation Clause

A close reading of FAA § 2 makes plain that it is limited to claims arising from the contract or transaction and does not authorize enforceability of arbitration where a claim does not arise from the contract or transaction.  FAA § 2 states:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract or as otherwise provided in chapter 4. 

(Emphasis added.)

Thus, even if the clear language of an arbitration provision extends to disputes beyond those arising from the contract or transaction, the FAA cannot be used to enforce the arbitration requirement for those disputes. 

Of perhaps more significance is that the standard view is that a delegation clause is effective to require an arbitrator, not the court, to determine if a dispute is within the coverage of an arbitration provision.  But where the question is whether FAA § 2 applies at all to enforce the arbitration provision, that question is always for the court despite any delegation clause.  The court always decides if a dispute is one arising out of the contract or transaction. 

The Supreme Court in New Prime Inc. v. Oliveira, 586 U.S. 105, 110 (2019) held:

to invoke its statutory powers under [FAA] §§ 3 and 4 to stay litigation and compel arbitration according to a contract’s terms, a court must first know whether the contract itself falls within or beyond the boundaries of [FAA] §§ 1 and 2. The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the Act authorizes a court to stay litigation and send the parties to an arbitral forum … . before invoking the severability principle, a court should “determine [ ] that the contract in question is within the coverage of the Arbitration Act.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402 … (1967). 

The Supreme Court in Viking River Cruises, Inc. v. Moriana again noted the limited nature of § 2 and indicated the need for a causal relationship between the contractual relationship and the controversy: 

Although § 2 limits the FAA’s enforcement mandate to arbitration agreements covering controversies that “arise out of” the parties’ contractual relationship, PAGA disputes satisfy that requirement. The parties’ contractual relationship is a but-for cause of any justiciable PAGA controversy between them, and “arising out of” language ordinarily denotes a causal relationship. See, e.g., Ford Motor Co. v. Montana Eighth Judicial Dist. Court, 592 U.S. ___, ___, 141 S.Ct. 1017, 1026, 209 L.Ed.2d 225 (2021).

596 U.S. 639, 652 note 4, (2022).

The Second Circuit references Viking River Cruises for the limited nature of FAA § 2. See Davitashvili v. Grubhub Inc., 131 F.4th 109, 119 (2d Cir. 2025) (“The FAA's scope is limited to ‘agreements to arbitrate controversies that “arise out of” the parties’ contractual relationship’—that is, controversies that were ‘cause[d]’ by the relationship”).  See also Calderon v. Sixt Rent a Car, L.L.C., 5 F.4th 1204, 1212–1213 (11th Cir. 2021) (FAA § 2 did not apply to a controversy between a consumer and a rental car company because it did not “arise out of” the terms of service of the online reservation platform on which the rental-car reservation was made); Revitch v. DIRECTV, L.L.C., 977 F.3d 713, 721 (9th Cir. 2020) (O’Scannlain, J concurring) (under § 2, “the controversy that is to be settled by arbitration must be one ‘arising out of’ the contract or transaction. By negative implication, the FAA does not require the enforcement of an arbitration clause to settle a controversy that does not arise out of the contract or transaction”). 

That FAA § 2 cannot be used to enforce an arbitration provision does not mean the arbitration provision is unenforceable.  Instead, the question reverts to state law and the limits state law places on arbitration agreements. As discussed above, for example, effective January 1, 2027, Cal. A.B. 2155, to be codified at Cal. Code Civ. Proc. § 1281, provides that an arbitration agreement that is not enforceable under the FAA (including the limits in FAA § 2) is not enforceable under state law. 

4. A New Look at the Military Lending Act

The Military Lending Act (MLA), 10 U.S.C. § 987, prohibits arbitration of disputes involving consumer credit extended to a servicemember or a dependent. The statute provides that: “no agreement to arbitrate any dispute involving the extension of consumer credit shall be enforceable against any covered member [servicemember on active duty] or dependent of such a member, or any person who was a covered member or dependent of that member when the agreement was made.” 10 U.S.C. § 987(f)(4) (emphasis added). Thus, the arbitration ban applies not just to consumer credit extended while the servicemember is on active duty. Arbitration is unenforceable as to the servicemember and dependents:

• While the servicemember is on active duty, even when the consumer credit was extended prior to that; and
• For consumer credit extended while the servicemember was on active duty, to disputes after the servicemember is no longer on active duty. See Espin v. Citibank, N.A., Case No. 5:22-CV-00383-M (E.D.N.C. Aug. 6, 2026). See also Taylor v. Synchrony Bank, Case No. 5:24-CV-00313-M (E.D.N.C. Aug. 4, 2026) (reaching this conclusion but finding no proof consumers were on active duty). 

Other MLA provisions regulating credit terms apply only when a person extends credit to a person or dependent while the person is on active duty. See, e.g., 10 U.S.C. § 987(a) (“A creditor who extends consumer credit to a covered member of the armed forces or a dependent of such a member shall not require the member or dependent to pay interest…”). But the arbitration provision uses broader language to describe its coverage. That the language is so markedly different furthers the argument that the statutory language must be read literally and that the arbitration ban applies more broadly than the regulation of credit terms.

Confusion on this point is generated because of language in the implementing regulation:

Nothing in this part [i.e. the regulations] applies to a credit transaction or account relating to a consumer who is not a covered borrower at the time he or she becomes obligated on a credit transaction or establishes an account for credit. Nothing in this part applies to a credit transaction or account relating to a consumer (which otherwise would be consumer credit) when the consumer no longer is a covered borrower. 

32 C.F.R. § 232.2(a)(1).

But this limitation should only be viewed as applying to regulatory provisions dealing with credit terms and not the statutory arbitration ban, since the regulation is primarily concerned with credit terms and only repeats the statutory language as to the arbitration ban. In any event, the statutory language controls, and courts need not defer to agency interpretations of the statute.  See Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 144 S. Ct. 2244, 219 L. Ed. 2d 832 (2024).

An important feature of the MLA is that it prohibits arbitration not only for MLA claims, but any claims related to “any dispute involving the extension of consumer credit” with a servicemember or dependent. See, e.g., Burrison v. Floatme, Corp., 2026 WL 444638 (D. Mass. Feb. 17, 2026); Revell v. Grant Money, L.L.C., 2025 WL 3167318 (N.D. Cal. Nov. 5, 2025); Vickery v. Empower Fin., Inc., 2025 WL 2841686 (N.D. Cal. Oct. 7, 2025); Moss v. CLEO AI Inc., 2025 WL 2592265 (W.D. Wash. Sept. 8, 2025).

The Fourth Circuit in Espin v. Citibank, N.A. did not hold otherwise when it remanded to the district court the question whether the MLA provided a basis to avoid arbitration only for the MLA claims, not other claims.  It did not include other claims in the remand because “we include the other claims [as being not subject to arbitration] because the plaintiffs’ only ground for avoiding arbitration of them was based on the SCRA.”  126 F.4th 1010, 1019 (4th Cir. 2025). The plaintiffs never argued the MLA arbitration ban would apply to other claims. 

Whether the MLA arbitration restriction applies to a transaction is for the court, despite any delegation clause.  The delegation clause, like the main arbitration provision, should be unenforceable pursuant to the MLA.  See Steines v. Westgate Palace, L.L.C., 113 F.4th 1335 (11th Cir. 2024); Burrison v. Floatme, Corp., 2026 WL 444638 (D. Mass. Feb. 17, 2026); Russell v. Dave Inc., 2025 WL 3691977 (C.D. Cal. Dec. 12, 2025); Moss v. CLEO AI Inc., 2025 WL 2592265 (W.D. Wash. Sept. 8, 2025). 

5. California Consumer Laws Allow Broad-Based Relief Despite Arbitration Requirement

California law allows injured consumers to seek both private and public injunctions and other equitable relief under three consumer statutes: the Consumers Legal Remedies Act (Cal. Civ. Code § 1750), the unfair competition law (Cal. Bus. & Prof. Code § 17200), and the false advertising law (Cal. Bus. & Prof. Code § 17500). 

Private relief redresses or prevents injury to an individual plaintiff—or to a group of individuals similarly situated to the plaintiff.  Public relief prohibits unlawful acts that threaten future injury to the public. See McBurnie v. RAC Acceptance E., L.L.C., 95 F.4th 1188 (9th Cir. 2024).  A public injunction need not be applicable to all members of the public, but only to a portion of the public, such as current and future customers of a particular company. Kramer v. Coinbase, Inc., 326 Cal. Rptr. 3d 217 (Cal. Ct. App. 2024). 

McGill v. Citibank holds that an arbitration provision cannot limit the right to public equitable relief in all possible forums, both in court and in arbitration. 393 P.3d 85 (Cal. 2017). The Ninth Circuit has found the FAA does not preempt this doctrine.  See McBurnie v. RAC Acceptance E., L.L.C., 95 F.4th 1188 (9th Cir. 2024); Blair v. Rent-A-Center, Inc., 928 F.3d 819 (9th Cir. 2019).  See generally NCLC’s Consumer and Worker Arbitration Provisions § 10.6.2.

Following McGill v. Citibank, California courts rule that if arbitration provisions keep claims for public relief out of court, they must allow consumers to arbitrate claims for such broad-based relief.  Most defendants prefer that a court and not an arbitrator hear claims for public relief and draft their arbitration provision to allow public injunctive relief in court, not in arbitration.

Although statutes allowing for public injunctive relief are rare, they are also found in the District of Columbia.  See D.C. Code § 3905(k).

6. Arbitration Provisions Subject to Challenge When Revised to Avoid Mass Arbitration 

“Mass arbitration” involves bringing many individual arbitrations on behalf of individuals with the same fact pattern and legal claims against the same defendant before the same arbitration provider at the same time.  How to conduct a mass arbitration and responding to business approaches to limit the use of mass arbitration is examined at NCLC’s Consumer and Worker Arbitration Provisions § 10.7. 

In response to the fear of mass arbitration, many companies have revised their arbitration requirements.  Some companies are removing their arbitration requirement entirely. More commonly, companies are drafting their arbitration provisions and selecting arbitration providers to avoid the expense and potential liability of mass arbitration. 

Courts confronted with these obvious attempts to avoid mass arbitration have found the procedures to evade mass arbitration unconscionable.  See, e.g., O'Malley v. Williams-Sonoma, Inc., 2026 WL 2640697, at *8 (N.D. Cal. Sept. 8, 2026); Gustin v. Club Demonstration Services, Inc., 2026 WL 1948873 (E.D. Cal. July 6, 2026); Ortiz v. T-Mobile USA, Inc., 2026 WL 712958 (C.D. Cal. Mar. 9, 2026); McKeown v. SAS Retail Services, L.L.C., 2025 WL 3563717 (N.D. Cal. Dec. 12, 2025); Rios v. HRB Digital L.L.C., 2025 WL 3003768 (N.D. Cal. Oct. 27, 2025); NCLC’s Consumer and Worker Arbitration Provisions § 10.7.4.4.

Before challenging the mass arbitration procedures as unconscionable, first challenge any delegation clause as also being unconscionable. The delegation clause requires the same unconscionable mass arbitration procedures as the main arbitration provision.  Moreover, where the unconscionable procedures are found in the rules of the arbitration provider selected in the arbitration provision, application of that delegation clause is unconscionable since it requires the arbitrator to determine whether their own procedures are unconscionable. 

Courts finding the procedures unconscionable may respond simply by stripping out the unconscionable mass arbitration procedures, thus affecting a mass arbitration, but not affecting actions brought in court. More commonly though, courts throw out the whole arbitration requirement, allowing class and individual actions to be heard in court. See, e.g., Pandolfi v. Aviagames, Inc., 2025 WL 2463742, at *2 (9th Cir. Aug. 27, 2025); Heckman v. Live Nation Ent., Inc., 120 F.4th 670 (9th Cir. 2024); O'Malley v. Williams-Sonoma, Inc., 2026 WL 2640697, at *8 (N.D. Cal. Sept. 8, 2026); Gustin v. Club Demonstration Services, Inc., 2026 WL 1948873 (E.D. Cal. July 6, 2026). 

Courts find the whole arbitration provision unenforceable based on the unconscionable mass arbitration procedures for several reasons, including: 

• Concern about creating a patchwork agreement, which could lead to confusion, both in the same case and in future cases.
• Severing the provisions gives companies an incentive to retain those provisions and attempt to enforce them, with the hope that at least some potential litigants would be deterred from pursuing their rights in court.
• The provisions are part of a larger, systematic effort by a more powerful actor to force people in an inferior bargaining position into an inferior forum, where they may not obtain broad-based relief for many individual consumers.
• The provisions are fundamental to the agreement.

7. Multiple Grounds to Challenge Digital Arbitration Consent 

Increasingly consent to arbitration is a digital process, on a website or even on a tablet at the point of sale. Extensive case law governs whether a consumer’s digital actions on a click-wrap, browse-wrap, or hybrid website are logically associated with consent to arbitration.  SeeNCLC’s Consumer and Worker Arbitration Provisions § 4.3.4.  More recently, four additional challenges to digital consent have emerged. 

  —Has the Business Produced Evidence of the Digital Process as Viewed by the Plaintiff?

To show that the consumer’s digital action was logically associated with consent to the arbitration provision, the business must provide evidence of how the digital process looked to the consumer, not just how the business intended the process to look. The burden is on the defendant to show to the court the specific digital process as viewed by the consumer.

For example, evidence of how a consumer would view the consent process on a company’s website is not applicable where the consumer used a mobile app on their phone.  See Dilanyan v. Hugo Boss Fashions, Inc., 2025 WL 3549869 (C.D. Cal. Dec. 3, 2025); Rushing v. Williams-Sonoma, Inc., 2025 WL 2391394 (N.D. Cal. Aug. 18, 2025).  Nor is it sufficient evidence to show a screenshot of how a website looks now if the consumer visited the site some time ago.

Where a defendant seeks to exclude certain consumers from the class definition because of their consent to arbitration, things can get complicated.  A company may not just change its website over time but have different websites or different consent processes within one website. The defendant must show the actual digital view for each individual to be excluded.  See Rushing v. Williams-Sonoma, Inc., 2025 WL 2391394 (N.D. Cal. Aug. 18, 2025).

  —Has the Business Produced for the Court the Correct Arbitration Provision?

The defendant must produce the arbitration agreement binding on the plaintiff, not just a boilerplate agreement or an agreement found on the website some time after the consumer’s visit. See NCLC’s Consumer and Worker Arbitration Provisions § 4.3.4.1a. One tactic to rebut the version the defendant presents to the court is to use the Internet Archive’s “Wayback Machine” to see if the contract the defendant produced matches the version that the Wayback Machine recorded on the date the consumer visited the site. See, e.g., Jones v. Homeaglow Inc., 2025 WL 2816792 (N.D. Tex. Oct. 1, 2025).  Instructions for use of the “Wayback Machine” can be found online as companion material to NCLC’s Consumer and Worker Arbitration Provisions under the heading “Practice Tools.”

  —Was It the Consumer Who Visited the Website?

The defendant has the burden to show the consumer was the one visiting a website and providing digital consent. See Dobronski v. Rocket Mortgage, L.L.C., 2026 WL 2296669, at *2 (E.D. Mich. Aug. 10, 2026) (consumer disputed using IP address associated with website user who allegedly agreed to arbitration provision, did not ever use the name associated with the visitor, and defendant claimed same person was at two different IP addresses); Weingrad v. Everquote, Inc., 2026 WL 2056767, at *3 (D. Mass. June 29, 2026) (defendant offered no evidence); Aurandt v. Range View Mgmt., L.L.C., 2026 WL 1693810 (W.D. Wash. June 11, 2026) (conflicting evidence as to whether consumer visited the site requires determination by factfinder); NCLC’s Consumer and Worker Arbitration Provisions § 4.3.4.2.

Even when the defendant presents evidence that the consumer visited the site, the evidence may be bogus or fraudulent. “Affiliate marketers” paid by the click have a financial incentive to purchase consumer information and use bots and “human click farms” to create fictitious traffic. A business can have the consumer’s contact information—and even the consumer’s IP address—without the consumer having visited a particular site. Alternatively, if the only proof of a consumer’s visit was entering a phone number, another person could have typed the wrong number, or a bot could have entered the number randomly. Weingrad v. Everquote, Inc., 2026 WL 2056767, at *3 (D. Mass. June 29, 2026). 

The defendant’s evidence of the site visit can be countered by the consumer’s evidence to the contrary, such as that the consumer was offline at the time of the alleged visit. Where the plaintiff presents evidence challenging the fact of the site visit, there should be a trial to determine the facts, or the court should order further discovery.  Office v. Broadpeak Ins. Servs. L.L.C., 2026 WL 1905792, at *3 (M.D. Fla. July 2, 2026); Aurandt v. Range View Mgmt., L.L.C., 2026 WL 1693810 (W.D. Wash. June 11, 2026); Hightower v. Alertzpro L.L.C., 2026 WL 1077626 (D. Md. Apr. 21, 2026). 

  —Must Digital Consent Comply with the Federal E-Sign Act?

FAA § 2 provides that an arbitration provision is enforceable if it is a “written provision ... in a contract.” Does FAA § 2 even apply to a digital arbitration provision and not a written one?

The defendant can argue that the federal E-Sign Act allows for a digital substitute, because it provides that “if a statute ... requires that information ... be provided ... to a consumer in writing, the use of an electronic record … satisfies the requirement that such information be in writing if ... the party has complied with the [E-Sign consumer consent protections].” 15 U.S.C. § 7001(c)(1).  If E-Sign can save a digital provision, then for consumer transactions the E-Sign consumer consent protections require—before receipt of an electronic record—that the consumer consent to receiving electronic records after receiving disclosures about the right to receive the information in a non-electronic form, how to retain the information in electronic form, and other rights. 

No reported decision has challenged FAA § 2’s application to digital provisions or whether such a provision in a consumer transaction must comply with E-Sign consumer consent protections. Nonetheless, under the plain terms of FAA § 2, providing the arbitration provision in writing is “required” if the provision is to be enforceable under the FAA § 2.

8. The Best Way to Get into Court Sometimes Is to Proceed to Arbitration 

As consumer cases increasingly are filed in arbitration under AAA or JAMS consumer arbitration rules, defendants are increasingly refusing to participate in the arbitration after discovering how expensive arbitration can be. Under AAA rules, the defendant must pay thousands of dollars in fees and costs (often over $5,000), must  register its arbitration provision, and the provision must meet AAA due process protocols. If a defendant has failed to pay AAA filing fees in the past, AAA also may refuse arbitration involving that defendant in the future.

When the business refuses to participate in arbitration, courts find that the defendant is either in default or has waived the arbitration requirement, allowing the consumer to litigate in court.  See, e.g., 5-Star Gen. Store v. Am. Express Co., 2026 WL 2425580 (1st Cir. Aug. 19, 2026); Merritt Island Woodwerx, L.L.C. v. Space Coast Credit Union,137 F.4th 1268 (11th Cir. 2025); Holden v. Systems & Services Technologies, Inc., 2025 WL 2457633 (S.D. Fla. July 22, 2025).

When the consumer raises waiver or default for the defendant failing to participate in arbitration, defendants have been known to argue that the delegation clause requires the case to go to the arbitrator to decide if there is a waiver or default of the arbitration proceeding—despite having refused to arbitrate!  This argument does not fly well. See, e.g., 5-Star Gen. Store v. Am. Express Co., 2026 WL 2425580, at *3 (1st Cir. Aug. 19, 2026).

Calling the defendant’s bluff is not the only reason to file an arbitration proceeding. Before the right arbitrator with the right facts, consumers do well in arbitration.  See, e.g., Duncan v. PNC Bank, N.A., 2025 WL 1461926 (W.D. Pa. May 21, 2025) (denying motion to vacate interim award of $1.4 million against Experian, consisting of $400,000 in actual damages, $700,000 in punitive damages, and $50,000 for each month that Experian continued to report the “PNC information” on the individual up to a maximum of another $300,000. The arbitrator will determine attorney fees later in the proceeding). 

Any punitive damages award in an arbitration will have far more limited judicial review than one in court.  Supreme Court due process standards for punitive damages should not apply in a private arbitration proceeding. See NCLC’s Consumer and Worker Arbitration Provisions § 9.13.

Another interesting question is whether a standing requirement applies in arbitration.  Being a private proceeding, cases for statutory damages that do not meet federal court standing requirements, for example, should still be able to be brought in arbitration.

For practical advice as to how to proceed at every stage of an arbitration proceeding, see NCLC’s Consumer and Worker Arbitration Provisions Chapter 9.  Even if the consumer does not want to litigate a case’s merits in arbitration, filing arbitration still may make sense where the court has deferred the enforceability of the arbitration provision to the arbitrator.  Asking the arbitrator to rule on enforceability will cost the consumer about $250, but the business may have to pay over $5,000 in arbitration fees and costs, potentially giving the defendant second thoughts about enforcing the delegation clause.