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Quick summary

How does a consumer file a demand for arbitration to AAA, when the fee is covered by the business?

Context

Some terms of use for business services impose to the consumer the use of arbitration instead of courts, yet the business pays the fees for arbitration. This is the case for example with Uber (https://www.uber.com/legal/terms/us/):

Your responsibility to pay any AAA filing, administrative and arbitrator fees will be solely as set forth in the AAA Rules. However, if your claim for damages does not exceed $75,000, Uber will pay all such fees, unless the Arbitrator finds that either the substance of your claim or the relief sought in your Demand for Arbitration was frivolous or was brought for an improper purpose

A Consumer Demand for Arbitration Form can be obtained from AAA: Consumer Demand for Arbitration Form. The manual states that:

The filing fee must be paid before a matter is considered properly filed . If the court order directs that a specific party is responsible for the filing fee, it is the responsibility of the filing party either to make such payment to the AAA and seek reimbursement as directed in the court order or to make other such arrangements so that the filing fee is submitted to the AAA with the Demand.

The question

What does this mean in practice, it seems there are two options? Does it mean the consumer should pay the fee, and will somehow be reimbursed at some point? Or does the consumer has the choice to go for the second option (cf either), and ask the business to pay directly the fee? Finally, what is a frivolous claim or relief? Could a dispute over a small amount be considered frivolous?

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What does this mean in practice, it seems there are two options? Does it mean the consumer should pay the fee, and will somehow be reimbursed at some point?

The clause about the filing fee being submitted with the Demand is largely inconsequential.

If the filer pays out of pocket and prevails in the proceedings, he is entitled to reimbursement. Or it could also occur as you outline: The client could ask the business to pay upfront (although the latter may deny the request, leaving the client no option but to cover the filing fee if he wishes to initiate proceedings).

what is a frivolous claim or relief?

The term frivolous claim refers to accusations where the alleged "misconduct" does not merit the pursuit of proceedings (in this case, arbitration). An example of frivolous claim would be a client's complaint that the Uber driver's saying of the F-word hurt the client's feelings and caused him or her severe emotional distress.

By the same token, frivolous relief generally refers to the pursuit of compensation that is unreasonable or vastly disproportionate for the misconduct at issue. An example of frivolous relief would be a client's grievance that "the Uber driver was late and I missed my flight to Disneyland, so I want an indemnification of $400,000,000, and that the driver's license be revoked".

Although common sense dictates that proceedings should be brought only for meritorious causes, some ignorant people and many lawyers boasting their so-called "good standing" are incredibly fond of making frivolous claims/allegations. Uber's clause is a gentle reminder to both sorts of individuals.

Could a dispute over a small amount be considered frivolous?

If the entire grievance is about a very small amount and nothing else, the dispute might be considered frivolous from the standpoint of the disproportionate waste of (quasi-)judicial resources needed to address it.

The context helps determining whether a small amount leads to the conclusion that a claim is frivolous. An Uber client's complaint that the change given to him was a nickel instead of a dime would be frivolous, whereas the nature of Uber's business makes it reasonable that grievances may stem from allegedly improper surcharges of --say-- $20.

  • great answer, thanks a lot! The only point that is not clear is that you mention that the filing fee is "reimbursed if the consumer prevails". My understanding is that the fee will be reimbursed in any case, even if the filer looses the case (Uber will pay all such fees)? Thanks! – Matifou Aug 29 '18 at 17:29
  • @Matifou "My understanding is that the fee will be reimbursed in any case, even if the filer looses the case" That is most likely accurate, and it is a good point. But notice how the Uber webpage cites FRCP 11(b) in that clause. Although Uber refers only to when the "Demand for Arbitration was frivolous or was brought for an improper purpose" (thereby comprising items (1) and (2) of FRCP 11(b)), it makes me wonder whether Uber would pursue recovery of filing fees pursuant to FRCP 11(b)(3), an item which is purely evidentiary. – Iñaki Viggers Aug 29 '18 at 18:49
  • great, thanks again! Excuse my weak knowledge, but I am not to understand sure what you mean by purely evidentiary? Thanks so much! – Matifou Aug 30 '18 at 17:33
  • @Matifou You're welcome. By "purely evidentiary" I mean that item (3) of FRCP 11(b) considers (and thus, the arbitrator would consider) the evidence that was obtained or which --realistically speaking-- could have been obtained. Uber might opt to pursue recovery of the filing fee by arguing that there was no way the complainant could ever have obtained any evidence to support his or her allegations/claims. To me it seems unlikely that Uber would pursue that recovery, but I don't know Uber's actual practices in this regard. – Iñaki Viggers Aug 30 '18 at 19:08

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