Arbitration clauses are standard in commercial contracts, investment agreements, and the online terms of service that govern millions of consumer relationships. But an arbitration clause is only as valuable as a company’s ability to enforce it and to manage the disputes that follow. Whether a company faces a single high-stakes commercial claim or a steady stream of consumer demands, these five questions are worth asking before the next one arrives.
1. Can you prove that your users agreed to arbitrate?
For consumer-facing companies, the first battle is often whether the arbitration agreement in the terms of service binds the user at all. Courts look closely at whether users received reasonably conspicuous notice of the terms and took an action that unambiguously signaled assent. Design choices that seem minor to a product team can decide the outcome.
Just as important is proof. Companies must be able to show the specific screens a particular user saw, when the user saw them, and what the user clicked, often years after the fact. That evidence usually lives with product, engineering, and data teams, not the legal department. A company that has not built that record before a motion to compel is contested may find it difficult, or impossible, to reconstruct. Updated terms raise their own questions about which version binds which user.
2. Does the agreement actually cover this claim and these parties?
Even an enforceable agreement can be narrower than a company expects. Courts and arbitrators regularly confront whether a claim falls within the clause, whether the court or the arbitrator decides arbitrability, whether non-signatories such as affiliates, officers, or assignees can enforce or be bound by it, and whether provisions purporting to limit remedies are unconscionable or waive rights that California law treats as unwaivable, such as the right to seek public injunctive relief.
In commercial disputes, waiver deserves particular attention. Both the U.S. Supreme Court and the California Supreme Court have held in recent years that a party opposing arbitration need not show prejudice to establish that the other side waived its right to arbitrate through litigation conduct. Morgan v. Sundance, Inc., 596 U.S. 411, 417 (2022); Quach v. California Com. Club, Inc., 16 Cal. 5th 562, 583 (2024). A company that litigates first and moves to compel later may find that it has given up the right.
3. Are you prepared for a mass arbitration campaign?
In a mass arbitration, a claimants’ firm files or threatens hundreds or thousands of nearly identical individual demands at once. Because provider rules and most consumer arbitration agreements place most of the fees on the company, the filing and administrative fees alone can create pressure to settle regardless of the merits.
The major providers have responded. The American Arbitration Association (“AAA”) and JAMS have each adopted procedures specifically for mass arbitrations, with their own fee schedules, administrative steps, and mechanisms for addressing threshold issues across many cases at once. Whether a company’s agreement works with these rules or against them is a question best answered before demands arrive. Response windows can be short, and decisions made in the first few weeks often shape the outcome. If a firm is advertising for claimants against your company, that is the time to talk to counsel who has handled these campaigns.
4. Is your fee-payment process built for California’s deadlines?
California law imposes strict deadlines on the company that drafted the arbitration agreement to pay arbitration fees in consumer and employment arbitrations. Under Code of Civil Procedure sections 1281.97 and 1281.98, fees generally must be paid within 30 days after the due date, and nonpayment can allow the consumer or employee to withdraw from arbitration and proceed in court, and can expose the company to sanctions.
In 2025, the California Supreme Court held that a late payment does not automatically forfeit the right to arbitrate where the nonpayment resulted from a good-faith mistake, inadvertence, or other excusable neglect, rather than willful, grossly negligent, or fraudulent conduct. Hohenshelt v. Superior Ct., 18 Cal. 5th 310, 343–44 (2025). That is welcome relief, but it is not a safe harbor. In a high-volume docket, invoices arrive from multiple providers on different schedules. A single missed invoice can cost a company its chosen forum, and the process for catching every one should be tested before it is needed.
5. Are you managing the docket as a portfolio?
Consumer claims against technology companies take many forms: contract and payment disputes; claims under California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act; property damage and personal injury claims arising from platform transactions; content disputes; and discrimination and privacy claims. Individually, these claims are often modest. Collectively, they can be costly, and the outcome of one can invite the next.
That is why consumer dockets are best managed as portfolios, with consistent positions and claims valued across the whole docket rather than case by case. In our experience, early investment in assembling the record can lead claimants to dismiss once they see it. When claims fail as a matter of law, dispositive motions in arbitration can resolve them before a hearing, and platforms often have defenses that claimants, and sometimes companies themselves, overlook. And when settlement makes sense, how it is structured can matter as much as the amount.
The bottom line
The best time to evaluate an arbitration program is before it is tested. A review of contract clauses, terms of service, sign-up flows, notice procedures, and claims-handling processes can reduce the volume and cost of disputes and position a company to win the ones that are filed. If any of the five questions above gives your company pause, that is a good reason to start the review now.
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