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Consumer Arbitration Agreements: 9.2.2 Selecting a JAMS Arbitrator
JAMS allows the parties to a consumer arbitration to choose an arbitrator from its panel, which will consist mostly of retired judges or attorneys with considerable alternative dispute resolution (ADR) experience.
Consumer Arbitration Agreements: 9.2.3 Selecting an AAA Arbitrator
In an AAA arbitration conducted under its consumer rules, the AAA appoints the arbitrator, and the parties have no say in the selection. The arbitrator will most likely be an attorney (most AAA arbitrators are attorneys). Many AAA arbitrators also have a wealth of ADR experience, but many have represented businesses when practicing law.
Consumer Arbitration Agreements: 9.3.2 AAA Minimum Standards for Arbitration Agreements
The AAA Consumer Arbitration Rules require that, before the AAA will accept an arbitration filing, the company must pay the AAA $500 to review the company’s arbitration agreement to make sure it meets the AAA’s minimum due process standards for consumer arbitrations.39 If the agreement passes that requirement and the company continues to pay the $500 annual fee, then the company appears on the AAA’s list of registered arbitration agreements.
Consumer Arbitration Agreements: 9.3.3 Forum Fee Schedules
AAA arbitration fees are very different depending on whether the arbitration is conducted under its consumer or commercial arbitration rules. Under the commercial rules, each party pays a share of all fees and costs. Under the consumer rules, the business pays almost all fees and costs.
Consumer Arbitration Agreements: 9.4.1.1 General
Arbitration forum fees and arbitrator daily costs can be considerable, and this can come as a surprise to a defendant who, under JAMS or AAA consumer rules, must pay all costs except $200 or $250. The defendant most likely required arbitration in order to avoid liability, and often has not considered the practicalities involved if the consumer actually opts to arbitrate a dispute. Defendants may simply refuse to pay the fees and costs as they can run to $5000 and more.
Consumer Arbitration Agreements: 9.4.1.2 Instructive Eleventh Circuit Decision
In Freeman v. Smartpay Leasing, L.L.C. the Eleventh Circuit in 2019 found that a business waived its right to enforce the arbitration agreement because it failed to pay the initial arbitration fee, which resulted in JAMS dismissing the consumer’s arbitration action.59 Therefore the consumer could bring the action in court, despite the arbitration agreement.
Consumer Arbitration Agreements: 9.4.1.3 Practical Considerations in Seeking Waiver
When an arbitration forum declines to arbitrate a case due to non-payment of fees, the forum will inform both parties in writing. The letter will typically explain the reason for the denial, and this notice should be sufficient evidence to go to court to argue that the arbitration requirement has been waived.
Here are excerpts from one such AAA letter to a consumer lawyer initiating an arbitration:
Consumer Arbitration Agreements: 9.4.2 Alternatives to Seeking Waiver of Arbitration Requirement for Non-Payment
An alternative approach for the consumer when the defendant fails to pay arbitration fees is to file an appropriate motion with a court for contempt, sanctions, and an order compelling the defendant to pay the outstanding arbitration fees.93 Courts have sanctioned parties who failed to pay arbitration fees, and attorneys whose obstructionist tactics have delayed arbitration.94 When sanctioning a recalcitrant party one federal court stated:
Consumer Arbitration Agreements: 9.4.3 When Arbitration Agreement Not Registered with AAA
As described in § 9.3.2, supra, the AAA requires that a company’s arbitration agreement be approved and then registered with the AAA.
Consumer Arbitration Agreements: 9.7.2 Consumer Entitled to Discovery to Vindicate Statutory Rights
Arbitration cannot substitute for a court proceeding if the arbitration is incapable of vindicating the consumer’s statutory rights. Some courts have held that it is implied that the parties get as much discovery as is necessary to vindicate their statutory rights, even when the arbitration agreement or arbitration forum rules do not provide for discovery.111 The right to discovery is implied as a matter of law.112
Consumer Arbitration Agreements: 9.7.3 Other Bases to Obtain Discovery
Some courts have held that prohibiting discovery is unconscionable.117 It is also unconscionable to require that a consumer show a substantial need for the discovery.118 In addition, some state arbitration acts mention the right to discovery.119 Defendants often claim depositions are unnecessary and then ask to take several depositions themselves, opening the door for plaintiff to argue that depositions are obviously needed.
Consumer Arbitration Agreements: 9.7.4 Number of Depositions Should Be Tailored to the Needs of the Dispute
The forum’s rules will typically provide the arbitrator with the discretion to insure that an appropriate amount of discovery is allowed.120 Arbitrators should not unreasonably limit the number of depositions a plaintiff is allowed. Just as arbitrators will allow material witness and documentary evidence to avoid an award being vacated for failure to consider material information, they should similarly allow the use of depositions when appropriate.
Consumer Arbitration Agreements: 9.7.6 Deposition of Defendant’s Employees and Agents
Because JAMS Rule 21 requires a party to produce witnesses within its employ or control at the arbitration hearing, JAMS arbitrators may require depositions of employees and agents within the defendant’s control.140 Thus arbitrators may require defendants to cooperate in the scheduling and production for deposition of collection agents/employees even if they reside in other countries, such as India or the Philippines, consistent with JAMS Rule 21.141
Consumer Arbitration Agreements: 9.7.7 Subpoenas
Section 7 of the FAA gives arbitrators the power to issue subpoenas to compel non-parties to attend arbitration hearings.142 However this power does not necessarily permit arbitrators to issue subpoenas to non-parties to require them to attend depositions.
Consumer Arbitration Agreements: 9.8.3 Discovery Motions
Any delay in providing necessary discovery may be quickly and aggressively handled by the arbitrator. Arbitration forums typically have a streamlined process to address discovery motions. JAMS Rule 17(d) states that: “The parties shall promptly notify JAMS when a dispute exists.
Consumer Arbitration Agreements: 9.8.4 Dispositive Motions
Depending on one’s point of view, a favorable aspect of arbitration may be how dispositive motions are handled. Many arbitrators require that a party seek leave to file a dispositive motion. Dispositive motions are disfavored in arbitration and are not granted as often as they are in court.
Consumer Arbitration Agreements: 9.8.5 Motions in Limine to Exclude Evidence
As with bench trials before a judge, motions in limine are of extremely limited value in cases heard by an arbitrator. “Motions in limine often require the arbitrators to read the very documents or consider the very testimony that a party desires they not see or consider in a final hearing.”181 Thus, motions in limine are generally discouraged.
Consumer Arbitration Agreements: 9.8.6 Pre-Hearing Submissions
JAMS Rule 20 states that:
Consumer Arbitration Agreements: 9.9.2 Witnesses
JAMS Rule 21 states that at “the written request of a Party, all other Parties shall produce for the Arbitration Hearing all specified witnesses in their employ, or under their control without the need of subpoena.”208 It may be helpful to provide notice to these witnesses a few weeks before the actual hearing.
Consumer Arbitration Agreements: 9.9.3 Arbitrator Questioning of Witnesses
Arbitrators may ask questions of witnesses at the hearing214 and may order that additional documentary evidence be produced.
Consumer Arbitration Agreements: 9.9.4 Remote and Video Testimony at the Hearing
Arbitration forums have embraced technology. AAA Consumer Rule 32(b), Conduct of Proceedings, states: