Taming the Mass Arbitration Lion: Seventh Circuit Reins in Fee Obligations in High-Volume Cases

In the evolving landscape of dispute resolution, mass arbitration has emerged as a formidable tool wielded by consumers and their counsel—often as an alternative to class actions in response to increasingly prevalent arbitration clauses. Yet, courts are beginning to define clearer limits around these tactics, particularly concerning fee-shifting provisions and burdens of proof.

A recent ruling from the U.S. Court of Appeals for the Seventh Circuit in Wallrich v. Samsung Electronics America, Inc. (No. 23-2842) offers significant guidance for parties navigating mass arbitrations. The court’s decision provides clarity on what is required to compel arbitration—and who is responsible for the often-substantial administrative costs associated with it.

This ruling marks a pivotal moment in balancing contractual arbitration rights with procedural fairness, particularly in high-volume consumer disputes.

The Case: Nearly 36,000 Arbitration Filings

The dispute arose when a single law firm filed nearly 36,000 individual arbitration demands with the American Arbitration Association (AAA) against Samsung. These filings, submitted on behalf of individual consumers, triggered a massive financial obligation under Samsung’s own arbitration terms. The AAA calculated administrative fees owed by Samsung at over $4 million—a figure consistent with the fee structure set forth in the AAA's Consumer Arbitration Rules, which often place cost burdens on the company when consumer agreements require arbitration.

Samsung, despite having agreed to those rules in its terms and conditions, refused to pay. In response, the AAA administratively closed the cases, citing Samsung's noncompliance. The consumers—referred to as the “Claimants”—then sued in federal court, seeking an order to compel arbitration and force Samsung to pay.

While the U.S. District Court initially granted that relief, the Seventh Circuit reversed in a detailed and consequential opinion.

Key Holding: Proof of Agreement is Step One

The most impactful part of the Seventh Circuit’s ruling is procedural. The court made it clear that Claimants bear the initial burden of establishing the existence of a valid arbitration agreement.

The evidence submitted to meet that burden included:

1. Copies of the individual arbitration demands filed with the AAA

2. A spreadsheet listing the names and addresses of the Claimants

3. Samsung’s terms and conditions

4. A letter from the AAA stating that Claimants had satisfied the filing requirements under its rules

But the court found this insufficient. While these materials demonstrated the Claimants’ intent to arbitrate and Samsung’s general arbitration terms, they did not establish that each individual Claimant had agreed to those terms. Without a more concrete link—such as signed contracts, receipts, or account confirmation—there was no basis to compel arbitration for the thousands of consumers named.

Fee Obligations: Not the Court’s to Mandate

Another critical element of the ruling addressed the court’s authority to compel a party to pay arbitration fees. The District Court had ordered Samsung to pay, based on the AAA’s administrative rules and Samsung’s prior agreement. However, the Seventh Circuit ruled that such an order exceeded the court’s powers.

Courts may compel parties to arbitrate only after confirming the existence of a valid arbitration agreement. In this case, because the Claimants failed to meet that threshold, the issue of fees was moot.

Further, the court noted that the AAA’s closure of the cases—triggered by both Samsung’s refusal to pay and the Claimants’ decision not to front the fees—was appropriate under the AAA’s own procedures. Importantly, the court clarified that Claimants retained the right to pursue their claims in court, should they choose not to pay the arbitration fees.

Administrative Fees: AAA’s Updated Framework

Mass arbitrations have placed pressure on institutional arbitration providers like the AAA to revise fee structures. As previously written about here, the AAA has implemented new rules and administrative protocols designed to:

• Avoid abuse of mass filings

• Allow for early assessment of agreement validity

• Provide scalable and fair administrative structures

These changes seek to balance access to arbitration for consumers with predictable, equitable processes for companies that may otherwise be overwhelmed by tens of thousands of individual demands.

Strategic Implications for Businesses

This decision will likely embolden companies to:

• Challenge mass arbitration demands on procedural grounds

• Require clearer identification of each claimant’s agreement to arbitrate

• Resist fee payment until minimal evidentiary thresholds are met

To prepare for these challenges, companies should revisit their:

• Contract formation processes (e.g., clickwrap clarity, documentation of agreement)

• Arbitration clauses (especially with respect to fee-shifting provisions)

• Data retention policies (to ensure agreement records are available for future disputes)

Considerations for Consumers and Their Counsel

On the other side, consumer advocates will need to ensure:

• Each arbitration demand is supported by documentary proof of agreement

• Spreadsheets or boilerplate filings are not substitutes for individual evidence

• Mass filings are strategically coordinated with the evolving rules of arbitral forums

The tactic of leveraging filing fees as pressure points—while still viable in some contexts—faces greater judicial scrutiny post-Wallrich.

Key Takeaways from Wallrich v. Samsung

1. Courts Require Specificity – Filing tens of thousands of claims won’t suffice without evidence tying each claimant to a valid arbitration agreement.

2. Fee Shifting is Not Guaranteed – Courts cannot compel payment of administrative fees absent proof of arbitration agreement formation.

3. AAA's Autonomy Affirmed – The AAA’s choice to close the cases when neither party paid the fees was upheld as proper under its rules.

4. Claimants Still Have Options – The ruling allows Claimants to pursue litigation in court if arbitration fails due to fee nonpayment.

The Bigger Picture: Arbitration and Procedural Integrity

Mass arbitration is not going away. It will remain a tool in consumer advocacy and dispute resolution. But decisions like Wallrich make clear that courts will demand procedural rigor even in large-scale filings. That rigor extends to:

• Proving agreement formation

• Understanding fee obligations

• Ensuring good-faith compliance with arbitral forum rules

Strategic ADR Starts with Clear Agreements

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