Mass Arbitration Unpacked: Provider Rules, Court Decisions, and the Rise of AI

Chris Willis (0:05)

Welcome to the Consumer Finance Podcast. I'm Chris Willis, the co-leader of Troutman Pepper Locke's Consumer Financial Services Regulatory Practice. And on today's podcast, we're going to be checking in with some of my litigation colleagues to talk about the phenomenon of mass arbitration and recent developments affecting mass arbitrations. But before we jump into that, let me remind you to visit and subscribe to our blogs, troutmanfinancialservices.com and consumerfinancialserviceslawmonitor.com.

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Now, as I said, today we're going to be talking about mass arbitration, which in recent years has become a very important phenomenon in the litigation world for consumer financial services companies. And joining me to talk about that are two people very qualified to discuss it, and that is two of my consumer finance litigation partners, Massie Cooper and Kalama Lui-Kwan. Massie, Kalama, thanks very much for being on the episode today.

Massie Cooper (1:14)

Thanks for having us, Chris. We're really excited to be here.

Kalama Lui-Kwan (1:16)

Pleasure to be here. Thanks, Chris.

Chris Willis (1:18)

So let's start by giving the audience some background on mass arbitration. Where did it come from? How did mass arbitration come about? And why have we seen such a massive increase in it, pun intended, in recent years?

Massie Cooper (1:30)

The procedure began as a response to class action waivers and has now become a major strategic issue for companies, consumers, employees, and even the arbitration providers themselves. And lately, artificial intelligence has begun to affect both the scale of these matters and the way they are administered.

Kalama Lui-Kwan (1:49)

That's right. And I think, Chris, the simplest way to describe mass arbitration is this. Instead of one class action, claimants council will file hundreds, thousands, or sometimes even tens of thousands of individual arbitration demands based on similar allegations. Each claimant remains an individual party, but the filings are coordinated.

The pressure point is usually the contracts fee structure because the company that selected arbitration might have to pay substantial filing and administration fees for each of the hundreds or thousands of arbitrations.

Massie Cooper (2:26)

The basic tension is almost architectural. Many businesses adopted arbitration clauses to avoid aggregated litigation. Claimants council then said in effect, fine, we'll arbitrate every claim individually.

And the current developments that we're going to talk about today are about what happens when that literal enforcement creates scale, cost and verification problems that traditional arbitration rules were not designed to handle.

Chris Willis (2:53)

So speaking of those traditional arbitration rules, when you say that, Massie, I'm thinking about the traditional arbitration providers. And so I'm wondering, how are those ADR providers handling the mass arbitrations that have come their way in such great quantities in recent years?

Kalama Lui-Kwan (3:10)

The first major development is that providers have moved away from treating a mass filing as simply a very large stag of unrelated cases. So for example, AAA's supplementary rules now use a process arbitrator to address threshold and non-merit issues involving questions like whether pre-filing steps were satisfied, which agreement applies, and whether filing requirements were met. After that initial process stage, qualifying cases can move to individual merits arbitrators.

Massie Cooper (3:43)

And the data explains why that architecture matters. The AAA reported more than 104,000 new consumer demands in 2025, spread across 81 mass arbitration caseloads. Yet of those, only 3,665 consumer cases, including older inventories, advanced to the merits phase that year. And of the consumer merits cases closed in 2025, 72% settled, and 96% of those settlements occurred before the appointments of a mass arbitrator.

Kalama Lui-Kwan (4:18)

Those numbers suggest that the process stage is not just ministerial. That stage is usually where the parties will obtain rulings on basic procedural disputes, exchange enough information to value the claims, and decide whether a global resolution is rational. As Massie said, the case count dropped from 2024 to 2025, but the number of unique consumer and employment mass matters stayed roughly stable.

So the disputes are not disappearing. They've simply been restructured.

Chris Willis (4:50)

It's interesting that you say that that process stage results in a lot of dispositions of the cases, which reminds me of the fact of the way class actions resolve in court. They don't usually go to judgment. They resolve frequently even before a ruling on class certification. So I think that's an interesting parallel. Massie, what about jams?