For-Profit Arbitration and the Race to the Procedural Bottom

By Jacob Thomas

For decades, the U.S. Supreme Court has expressed corporate favor by greenlighting mandatory arbitration clauses that modify the arbitration process to limit claims and maximize profit.[1] These modifications include everything from authorizing provisions that require consumers to waive their right to a class action, to corporate specification of the forum, rules, and relevant procedures for arbitration.[2] However, it is not only these company written arbitration clauses that are expanding corporate dominance in arbitration, there is an underexplored profit incentive helping to shape the corporate friendly structure of the arbitration process originating from the arbitration forums themselves.

The private corporate structure of many arbitration forums (e.g., JAMS, New Era ADR, NAM, ADR Services, Inc.) creates an almost unavoidable incentive to drum up business by rewriting procedure governing the disputes adjudicated in their respective forums in the most corporate friendly manner possible because, unlike courts, competition exists in the space which requires arbitration forums to respond and react to the repeat players’ feedback so they may maintain a book of clientele.[3] For example, as a response to budding issues related to mass arbitration filings, multiple corporations and their counsel have worked alongside for-profit arbitration forums to develop new corporate friendly procedures.[4] Companies, in response, change their arbitration clauses choosing the, now directly influenced, forum as their dispute resolution provider.[5] In exchange for the massive influx of business which results, that forum produces seemingly “neutral” procedural rules to stack the deck against consumers.[6] Following the lead of for-profit arbitration venues, even non-profit arbitration venues must follow these procedural trends to remain a relevant option in the space.[7] Non-profits may even be a first mover on procedural changes because their similar reliance on fees paid by corporations places them at the mercy of the clientele they must serve to remain solvent: the corporations themselves.[8]

These venue rule changes are particularly nefarious because they are (1) seemingly simple arbitration clauses which induce consent through exploitation of knowledge gaps between the parties; and (2) they provide procedural flexibility. A simple arbitration clause which specifies a venue incorporates all the rules associated with that forum merely by reference.[9] Consumers likely think they are agreeing to a neutral dispute process without a deeper understanding that those rules are subject to change and may already include procedural constraints that harm their own interests.[10] Beyond that, the flexibility of the clause could provide an avenue for companies to induce procedural changes by the forum as a response to emerging issues in the space which would bind consumers to a procedure not consented to or referenced at the time of contract.[11] This could even open the door to continued changes to the consumer contract so that companies could constantly take advantage of various forums that have slightly better rules for a given situation. This weaponization of procedure will be strategically deployed to capitalize on the knowledge gap between consumers and corporations and this type of overreach should render corporate favored procedural terms unenforceable.[12]

The result of the Court’s disinterest in rectifying corporate claim barring has created only a small window of unenforceability applying only to “baldly exculpatory provisions.”[13] This limited unenforceability doctrine for arbitration provisions has greenlit clever corporate terms limiting out causes of action through a variety of procedural bars like high filing fees, abnormally short statutes of limitation, limitations on what arbitrators may offer as relief, appointment of a directly biased arbitrator, or prohibition of evidence required to make a certain claim.[14] With the already scarce chance that corporations would see the consequences of these blatantly exculpatory procedures, they will be further insulating themselves from accountability by being able to blame procedural bars to consumer claims on the forum, arguing that they are equally at the whim of those institutions changing the rules.[15] Forums themselves will likely be legitimized by the industry as a whole moving in the same direction which may give the appearance of neutrality, when this is actually attributable to the common profit incentives of the competing forums.[16]

Until the court revisits the incredibly broad application of the sentiment that “parties are generally free to structure their arbitration agreements as they see fit,”[17] and enumerates minimum standards required to make arbitration an equitable method of dispute resolution, the dual profit incentive of arbitration forums pursuing clientele and their corporate clients aiming to bar claims through procedure, will continue to push consumers farther and farther away from a chance at obtaining a remedy through arbitration. 

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[1] See generally AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (holding that a state law prohibiting class action arbitration is preempted and invalid under the Federal Arbitration Act of 1925).

[2] Id. at 336.

[3] See Allison Frankel, The Problem with Outsourcing Justice to Mass Arbitration Services, Reuters (Feb. 27, 2020), https://www.reuters.com/article/legal-us-otc-mass-arbi-lawsuits/the-problem-with-outsourcing-justice-to-mass-arbitration-services-idUSKCN20M00Z [https://perma.cc/7YTX-M9RP].

[4] Richard Frankel, Fighting Mass Arbitration: An Empirical Study of the Corporate Response to Mass Arbitration and Its Implications for the Federal Arbitration Act, 78 Vand. L. Rev. 133, 171­ (Jan. 2025).

[5] Id. at 172.

[6] See id. at 168–171.

[7] See id. at 171 (“The corporations that draft and impose arbitration clauses on their customers and employees are the ones that choose which arbitration provider to use. Accordingly, arbitration providers have an incentive to draft rules that favor the companies that are the source of their business.”).

[8] See Frankel, supra note 3.

[9] David Horton, The Arbitration Rules: Procedural Rulemaking by Arbitration Providers, 105 Minn. L. Rev. 619, 628 (2020).

[10] See id. at 646 (describing how opaque arbitration rulemaking permits company “arbitration clauses [that] erase entitlements that were created by elected representatives” even while “nobody reads the fine print.”).

[11] See Frankel, supra note 3. This happened in a mass arbitration suit filed by DoorDash workers at the AAA where the company changed the forum selected in the contract so that they could pay less in fees at a different venue with favorable procedural rules. Id.

[12] Horton, supra note 9, at 646, 667–672.

[13] Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 241 (2013) (Kagan, J., dissenting).

[14] Id.

[15] In reality, those corporations are likely NOT at the whim of those institutions. See supra notes 3–8 and accompanying text.

[16] The Supreme Court, in the cases referenced above, has determined that creation of unique rules by individual corporations has been acceptable. It seems reasonable to infer that an ‘industry standard’ of arbitration may be even more legitimate because they are less likely to be purely self-serving provisions if they apply more generally,

[17] Volt Info. Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989).