Arbitration: Should It Be Sought Rather Than Fought?

by Roger L. Mandel

Mr. Mandel is an attorney at Stanley, Mandel and Iola of Dallas, Texas. CL&P invited him to discuss the following original and provocative proposal, which he presented at a panel on class actions & arbitration at the NCLC Class Action Symposium in Miami last month. This post is the second in a series based on that panel; in the first post, Mike Quirk discussed judicial decisions striking down class arbitration bans.

Plaintiffs’ class action lawyers have long fought tooth and nail against mandatory arbitration clauses. Today, in some instances they may be advised to file arbitrations rather than fight the arbitration clauses in court.

Class Arbitration Rules

Many arbitration clauses specify or allow use of the American Arbitration Association (“AAA”) or JAMS as arbitration providers. Both of those providers have specifically enacted class arbitration rules, which are available on their websites, www.adr.org and www.jamsadr.com, respectively. Both sets of rules provide for a three-step process in class arbitration:

1. A clause construction phase during which the arbitrator decides whether the arbitration clause in question allows for class arbitration;

2. If the arbitrator finds that class arbitration is allowable under the arbitration clause, a class certification phase pursuant to standards identical to Federal Rule of Civil Procedure 23; and

3. Decision on the merits of either the classwide or individual claims.

At the end of both phase 1 and phase 2, the arbitrator enters interim awards and is required to stay the proceedings for thirty (30) days to allow either party to appeal the interim award in court. If an interim award is appealed, the arbitration remains stayed during the pendency of the appeal.

In addition to its class action rules, AAA has a class arbitration policy. Under that policy, it will place on its class arbitration docket any claim involving an arbitration clause that is silent as to class arbitration. It will refuse, however, to place on its class arbitration docket a case that contains an explicit class arbitration ban. JAMS does not have such a policy and will place on its class arbitration docket any claim that is filed as a class action, regardless of the contents of the arbitration clause.

Both providers maintain special national panels of class action arbitrators. Based on my review of those panels, most plaintiffs’ lawyers would prefer the JAMS panel, although there are a number of acceptable choices on the AAA panel.

Running the Numbers: The Role of the Arbitrator's Incentives

AAA maintains on its website its entire class arbitration docket, which is extensive. It posts the claims (complaints) and all of the interim and final awards entered by the arbitrators. This allows research into trends in AAA class arbitration.