The American Arbitration Association (AAA) has released a set of stand-alone rules that apply to arbitrations involving consumer disputes. The rules go into effect September 1, 2014. To date, the AAA has been administering consumer arbitrations under its Consumer-Related Disputes Supplementary Procedures and its Commercial Arbitration Rules.

Beginning September 1, 2014, all companies must register their consumer arbitration clauses with the AAA before the AAA will administer a consumer arbitration. The AAA will maintain a publicly accessible online Consumer Clause Registry (Registry) consisting of consumer arbitration clauses that have been submitted for review and that have been determined by the AAA to substantially and materially comply with the AAA's Consumer Due Process Protocol guidelines.

Arbitration clauses may be submitted at the time of a consumer arbitration and need not be submitted in advance of September 1. The AAA will charge a fee for the review of arbitration clauses, as well as an annual fee for maintaining a clause in the Registry. Companies that make substantial changes to registered clauses will be required to have their clauses reviewed again (for an additional fee). The AAA reviews the arbitration clause primarily for terms that deviate substantially from the guidelines. If the AAA identifies any issues, it will notify the submitting company and ask the business either to delete the offending clause or to revise it. Revised clauses will undergo a further review process.

The Consumer Due Process Protocol guidelines, established by the AAA's National Consumer Disputes Advisory Committee in 1998, provide for the following:

There is a fundamentally fair ADR process;
A statement is made at the time of contracting regarding whether participation in the ADR program is mandatory or optional, and there are reasonable means by which consumers may obtain additional information regarding the program;
The ADR program uses independent or impartial neutrals and is independently administered;
Neutrals are qualified and competent, and standards are maintained to govern the qualifications and conduct of neutrals;
Parties retain the right to seek relief in small claims court for disputes or claims within the AAA's jurisdiction;
ADR programs are provided at reasonable cost to consumers, and the payment of fees is administered by an independent ADR institution;
Proceedings are conducted at a location that is reasonably convenient to the parties;
Proceedings occur within a reasonable amount of time, including ADR rules established to govern the ADR process;
Parties have the right to be represented by a spokesperson of their own choosing;
Consumers provide knowing, informed consent to arbitration agreements;
Arbitration hearings are fundamentally fair, which includes adequate notice of hearings and an opportunity to be heard and to present evidence to impartial decision-makers;
Binding arbitration allows for arbitrator-supervised exchange of information prior to arbitration;
The arbitrator is empowered to grant relief that would be available in court under law or in equity; and
Arbitration awards are subject to review under applicable law, and a written explanation of the award is provided at the timely request of either party.

For more information on the review process and Registry, see here. The AAA has published a guide (available here) highlighting some of the more significant changes and clarifications. Notably, under the AAA's new Consumer Arbitration Rules, consumers will pay a filing fee of $200 and companies will be responsible for any remaining administrative fees, including arbitrator fees.

Clicking "I agree" renders mandatory arbitration provision enforceable

Holland & Knight LLP
Richard Raysman

Day in and day out, Internet users sign various forms of agreements for a variety of reasons, from joining a dating site, to participating in an online auction, to uploading media to a storage locker. These agreements, sometimes known as browse-wrap or click-wrap agreements, are necessary to memorialize and expedite the use of a website pursuant to well-defined rules. More often than not, these agreements substitute for more "traditional" contracts, and they are thus construed as such when contested in court.

A fundamental question intrinsic to contracts is whether an enforceable agreement exists at all. A dispute over the enforceability of an online agreement, and the arbitration provision therein, arose recently in state court in Texas. See Momentis U.S. Corp. v. Weisfeld, No. 05-13-01250-CV (Tex. App. July 23, 2014). Momentis involved a dispute between a marketing company and two of its "independent representatives." To sell its products, Momentis U.S. Corp. (Momentis) contracted with third-party independent contractors called independent representatives (IRs). Bishop and Weisfeld (collectively, Plaintiffs) signed up to be IRs. In order to be accepted as such, prospective IRs must complete and sign Momentis' IR agreement (the Agreement), Policies & Procedures, and submit an application fee. Once the prospective IR pays the application fee, Momentis sends the recruit a "welcome email" which it believes is tantamount to an acceptance of the application. Both the Agreement and the Policies & Procedures contained binding arbitration provisions.

.....

The court noted that, given the statutory provision within the Texas business code that states that a transaction by electronic means "is determined from the context and surrounding circumstances," Momentis had evidenced the existence of a valid transaction.

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Notice 12-30 Click Here

Our Take on Americo: Faithful to the "First Principle" of Arbitration Law, the Texas Supreme Court Shores up the "Cornerstone of the Arbitral Process"

-- Philip Loree Jr.

Ordinarily arbitration awards should be upheld, but an arbitration award that is "fundamentally at war" with the parties agreement must be vacated, for confirming such an award is the functional equivalent of not enforcing the parties' agreement-the very antithesis of what the Federal Arbitration Act commands. That is all the more so where the award was made by a panel that was not constitut

ed according to the parties' agreement.

In Americo Life, Inc. v. Meyer, a divided Texas Supreme Court held that such an award should have been vacated, and in so doing so was faithful to the FAA and its objective of promoting arbitration. Five members of the nine-member court resisted a temptation that the four dissenting Justices could not: "interpreting" the parties' agreement in a hyper-technical way-not to give effect to the parties' intentions, but to justify confirming the award, even though the cost of that result would have been an implausible conclusion about what the parties intended.

Sometimes the understandable desire to confirm an award for fear of discouraging arbitration, or flooding court dockets with still more challenges to awards, overshadows the FAA's command that arbitration agreements be enforced as written and according to their terms. Confirming an arbitration award does not always result in enforcing an arbitration agreement, and when courts confirm awards that are not a plausible byproduct of the parties' agreement.

The award at issue in Americo was not a plausible byproduct of the agreement. Upholding it would have required a majority of the Court to conclude, quite implausibly, that that, at the time the parties entered into their agreement they (a) agreed to allow party-appointed arbitrators to be partial-provided they were independent-but they nevertheless (b) intended that their consent to party-appointed partial decision makers could be negated unilaterally by the AAA in the event the AAA decided to amend its Commercial Rules in a way that changed the whole premise of the parties' arbitrator selection and qualification agreement.

Read more about Americo here:

Want to arbitrate employee disputes? Keep your paperwork!

Foley & Lardner LLP
Rebecca R. Hanson

Abstract:

Arbitration agreements, and their use as a means to avoid class action disputes in particular, have been repeat news items in the last several years, and many companies continue to consider their use as a means to mitigate class action litigation risks. For companies who have implemented such agreements, a recent federal court decision reminds them of a seemingly simple - but nonetheless critical - point: keep accurate records of such agreements because courts may require proof before allowing a party to compelarbitration. (See Barkley, et al. v. Pizza Hut of America, Inc., et al., USDC, MDFL, Case No. 6:14-cv-376-Orl-37DAB.)

In the case, an employer moved to compel arbitration, noting that the representative employees had signed arbitration agreements, and asked the court for a ruling that individual arbitration - as opposed to classarbitration - was appropriate. All but a handful of the class members went to individual arbitration proceedings, but the employer could not locate signed arbitration agreements for those few members of the class. The employer told the court, by way of a declaration, that the employees "must have signed the agreements" because doing so was required by company policy and asked the court to find that the employees "bear the burden to create a genuine issue as to the existence of the arbitration agreement."

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In an effort to recognize the specialization in the ADR community, we are creating 3 separate newsletters broadly covering these areas: Mediation - Arbitration - International ADR.

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Thank you for reading my newsletter, and as always, if you have any questions on any of the articles listed, do not hesitate to contact me.

Sincerely,

Thomas Valenti

Attorney, Arbitrator (ACIArb), Mediator

Thomas P. Valenti, P.C.

300 N. LaSalle St., Suite 4925

Chicago, IL 60654-3406

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