What This Cost the People It Happened To

There is a particular kind of insult built into this case. Not the abstract, legal kind. The personal kind.

You bought something from Kohl’s website. You saw an ad, clicked a product, paid your money. At some point in that process, buried in the fine print you had to accept to complete your purchase, you gave up your right to ever take Kohl’s to court. That was the deal, and you probably didn’t know you were making it. Most people don’t. These clauses aren’t designed to be read. They are designed to be clicked through.

When you discovered Kohl’s had misled you about what it was selling, you did exactly what the company’s own contract told you to do. You served a notice of dispute. You waited through the required mediation window. When that failed, you filed with the AAA and paid the fees you owed. You followed every rule. You did everything right.

Then Kohl’s didn’t show up.

The company whose lawyers drafted the clause, whose executives approved it, whose website made you click “agree” before you could buy a pair of jeans: that company looked at the arbitration system it built, decided it didn’t like how the numbers were stacking up, and simply refused to participate. No explanation entered the public record. The court noted there were “no facts in the record providing the reason Kohl’s refused to register its agreement.” They just didn’t. And the legal system, the same one that had already told you that you couldn’t sue in court, told you that this was fine too.

You were handed a process instead of a court. You followed that process. The process was then taken away. And the courts upheld the taking.

For the four named petitioners and the thousands of consumers they represented, this was not a procedural setback. It was a closed door with a sign that said “use this door” nailed to it.

Legal Receipts: What the Record Actually Says

These are direct quotes from the court record. Read them carefully. They do not require interpretation.

“There are no facts in the record providing the reason Kohl’s refused to register its agreement.”

• Kohl’s never had to explain itself. The company that wrote the arbitration clause, mandated that consumers use it, and then refused to comply with the arbitration body’s rules did so without ever providing a documented reason. The court acknowledged this gap and ruled in Kohl’s favor anyway.
• This means the public record contains zero accountability for why 10,000-plus consumers lost their arbitration access. The decision to obstruct was made and executed invisibly.

“Upon completion of the registration process and the confirmation from the AAA that Kohl’s is now active on the Consumer Clause Registry, … the AAA will begin to proceed with the administration of these cases.”

• This is the AAA’s own letter to the parties. The arbitration body told Kohl’s exactly what was needed for the cases to proceed. The condition was simple: register the agreement. Kohl’s refused.
• The AAA’s administration of consumer arbitrations was described in the consumer rules as “an essential term” of any agreement that incorporated those rules. Kohl’s contract incorporated those rules. Kohl’s then made that essential term impossible to fulfill.

“If [Kohl’s] does not comply, absent a court order, the AAA will be unable to provide arbitration administration to the parties to assist the parties in resolving their disputes.”

• The AAA explicitly signaled that a court order compelling Kohl’s to register was the only remaining path to arbitration. The dissenting judge noted that the consumers were seeking exactly that court order. The majority refused to grant it.
• In the dissent’s reading, this letter was an invitation from the arbitration body itself for judicial intervention. The majority treated the same letter as evidence that arbitration had been completed.

“In my view, the majority opinion stretches Wallrich’s holding too far and threatens to convert any bilateral agreement to arbitrate under the AAA’s Consumer Rules into something of a unilateral option-to-arbitrate for the business, regardless of the language of the agreement.”

• A sitting federal appeals judge, in a published dissent, warned that this ruling hands corporations a structural escape route from arbitration they themselves imposed on consumers.
• The dissent names the consequence plainly: the ruling converts “bilateral arbitration” into a one-sided option. The business can invoke arbitration to block court access, then decline to engage when the arbitration arrives.

“Petitioners and thousands of other consumers immediately filed their claims before the AAA, fronting almost $200,000 in fees.”

• Consumers paid close to $200,000 in AAA filing fees to access an arbitration system the company refused to activate. Those fees were eventually refunded, but the consumers received nothing for their claims and had no remaining legal forum available.
• Kohl’s, by contrast, paid nothing. The AAA confirmed in writing that “Kohl’s did not have any outstanding payment obligations to the AAA.”

Public Deception: The Contract Said One Thing, Kohl’s Did Another

Kohl’s Terms and Conditions made explicit promises to consumers about how disputes would be handled. The company’s conduct during the dispute directly contradicted those promises.

• The Terms and Conditions stated that disputes “shall be resolved only by final and binding, bilateral arbitration.” In practice, when consumers filed for bilateral arbitration, Kohl’s refused to fulfill its side of the bilateral process by declining to register with the AAA.
• The agreement specifically named the AAA as the required arbitration forum and incorporated AAA’s Consumer Arbitration Rules. While settlement discussions were active, Kohl’s rewrote its terms to replace the AAA with the National Arbitration and Mediation tribunal, a different body with different mass-arbitration procedures.
• The new 2023 Terms and Conditions Kohl’s issued mid-dispute purported to cover “any dispute including claims that arose before [a customer] entered into these Terms of Use or out of a prior agreement with Kohl’s” and even disputes “subject to ongoing litigation.” Kohl’s attempted to retroactively apply new rules to existing complaints.
• Consumers were told that by clicking “agree” they were entering a neutral dispute resolution system. The reality was a system the company could exit at will while consumers remained locked out of the courts.

Regulatory Gray Zones: The Legal Architecture That Made This Possible

Kohl’s did not need to break any law to shut out more than 10,000 consumers. It exploited gaps in how arbitration law, arbitration rules, and court authority interact.

• The Federal Arbitration Act (FAA) was written to promote arbitration and limit courts from interfering. That anti-interference posture, which courts interpreted broadly, became the mechanism by which consumers were blocked from seeking relief. The same law meant to protect agreement enforcement was used to shield a company from an agreement it helped draft.
• The AAA’s Consumer Arbitration Rules require businesses to register their arbitration agreements and pay a fee. But the rules built no mechanism for a consumer to substitute for a business’s refusal to register. In the fee nonpayment context, consumers can advance the other party’s fees. There is no equivalent option when a company refuses to register. The dissenting judge specifically flagged this asymmetry as critical: the registration requirement allowed Kohl’s to unilaterally force the AAA’s hand in a way that fee nonpayment does not.
• When the AAA terminated the proceedings, that termination was treated by the majority as the intended outcome of a completed arbitration, despite the fact that no arbitrator ever reviewed any consumer’s claim on its merits. The distinction between “arbitration ended according to its rules” and “arbitration actually happened” was effectively erased.
• The contract clause delegating “any dispute” about the arbitration agreement’s “interpretation, applicability, enforceability or formation” to the arbitrator was used to insulate Kohl’s conduct from judicial review. Because the AAA was deemed to have exercised its discretion when it closed cases, courts concluded there was nothing left for them to compel.

Profit-Maximization at All Costs: Rewriting the Rules Mid-Game

The documented sequence of events shows a company that, when faced with a mass consumer arbitration action for false and deceptive marketing practices, chose escalating obstruction over engagement.

• On December 22, 2022, 10,000 consumers served notices of dispute on Kohl’s simultaneously, alleging its marketing practices violated California consumer protection laws. Rather than engaging with those claims, Kohl’s ran out the clock through settlement discussions that lasted until May 22, 2023.
• On that same day, May 22, 2023, while those settlement discussions were still described as “ongoing,” Kohl’s issued new Terms and Conditions replacing the AAA with a different arbitration forum. The timing was not coincidental. The new forum had “far different mass-arbitration procedures,” according to the dissent. The move was an attempt to change the rules of engagement after seeing the scale of the claims.
• On April 10, 2023, an additional 44,656 notices of dispute had been served on Kohl’s. The company was looking at tens of thousands of individual consumer arbitration claims. The financial exposure from that volume, under AAA rules designed to protect consumers, was apparently a sufficient motive to exit the system entirely.
• Kohl’s paid no AAA fees. The AAA confirmed in writing that Kohl’s had “no outstanding payment obligations.” Consumers, by contrast, collectively paid close to $200,000 in filing fees to pursue claims Kohl’s then made unreachable.

Time as a Corporate Weapon: How Delay Buried These Claims

From the first notice of dispute to the final appeals court ruling, more than three years elapsed. During that time, Kohl’s never had to address any consumer’s claim on its merits.

• The required 30-day pre-arbitration mediation window became a five-month settlement period running from December 22, 2022 to May 22, 2023. It is during this extended window that Kohl’s rewrote its Terms and Conditions.
• After consumers filed with the AAA in May 2023 and Kohl’s refused to register its agreement by June 20, 2023, the legal process consumed nearly three more years before the May 1, 2026 appeals court ruling. The underlying false marketing claims remain unresolved.
• The layered procedural architecture, pre-arbitration notice requirements, settlement periods, arbitral forum registration steps, district court proceedings, and appellate review, provided multiple points at which the corporation’s non-compliance could be re-litigated as a procedural question rather than addressed as a substantive wrong. Each layer added time. Time benefits the party with resources. Kohl’s has resources. Individual consumers do not.

Who Was Connected to What: The Structure of the Obstruction

Societal Impact Mapping: What This Ruling Does to Everyone

Public Health of Consumer Rights

The decision in this case has direct, documented consequences for how consumer protection law functions in the United States.

• Consumers who agreed to arbitration clauses in Kohl’s Terms and Conditions, and in any other corporate agreement following the same AAA-incorporation structure, now face a documented exit mechanism available to the business but not to them. The dissenting judge named this clearly: the ruling converts bilateral arbitration into a unilateral corporate option.
• California consumer protection laws, which the petitioners alleged Kohl’s violated through false and deceptive marketing, have still not been applied to Kohl’s conduct in any adjudicative forum. The legal framework designed to deter this kind of harm has produced no deterrent result in this case.
• The 10,000-plus consumers who served initial notices of dispute in December 2022, and the additional 44,656 who served notices in April 2023, have no documented remaining path to relief for their underlying claims under this ruling.

Economic Inequality

The financial asymmetry in this case illustrates how litigation cost structures favor corporations over individuals.

• Consumers collectively paid close to $200,000 in AAA filing fees. Those fees were refunded after Kohl’s refusal shut down the process, but consumers spent years in litigation without their underlying claims being heard, incurring legal costs and time that are not refundable.
• Kohl’s, a national retailer with the resources to employ legal teams capable of executing a multi-stage procedural defense across multiple courts over multiple years, paid zero arbitration fees and zero penalties in connection with this case as documented in the source record.
• The practical effect of this ruling is that mass consumer arbitration, the mechanism courts and legislators have endorsed as the alternative to class action lawsuits, can now be neutralized by a business with enough legal resources to stonewall long enough for courts to declare the stonewalling legitimate.

No Penalty, No Admission, No Accountability

There is no settlement in this case. That is itself the story. No fine, no damages, no injunctive relief, no admission of wrongdoing has been documented in the source record.

• Kohl’s was accused of false and deceptive marketing practices that allegedly violated California consumer protection laws. After more than three years of proceedings, that allegation has never been tested on its merits in any forum.
• The consumers followed the exact dispute process Kohl’s required: pre-arbitration notice, mediation window, formal AAA filing, fees paid. The company circumvented every step without consequence.
• The only financial consequence for Kohl’s documented in the record is the AAA’s note that future registration would require payment of a registration fee. Kohl’s can continue operating without an AAA-registered arbitration agreement. Consumers who buy from Kohl’s today still face an arbitration clause in the Terms and Conditions.

This Is the System Working as Intended

This case is not a malfunction. The documented outcome follows directly from choices made at every level of the legal and regulatory architecture.

• The Federal Arbitration Act was applied exactly as courts have interpreted it: to limit judicial intervention in arbitration processes and to honor agreements as written. That interpretation, applied here, produces a result where a company faces no consequence for refusing to participate in the very system it required consumers to use.
• The AAA’s Consumer Arbitration Rules contain a registration requirement with no consumer-side workaround. That gap, documented by the dissent, is a feature of the ruleset that a business sophisticated enough to identify it can exploit. Kohl’s identified it.
• Mandatory arbitration clauses in consumer contracts were upheld and promoted by courts as an efficient alternative to class actions. That promotion foreclosed class-action remedies. When the arbitration alternative is then neutralized by corporate non-compliance, and courts decline to intervene, consumers have no forum at all. Both exits were used against the same group of people.
• A dissenting federal judge documented the structural problem in a published opinion. That dissent is now part of the record. It has produced no change in outcome for the affected consumers.

What a Legitimate Fix Looks Like

The core structural failure this case exposes: mandatory arbitration clauses strip consumers of court access, but the arbitration system they’re funneled into has no enforcement mechanism when the corporate party refuses to participate.

Regulatory Track

• The Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and state attorneys general (particularly in California, where these claimants resided and where their consumer protection claims arose) should investigate whether Kohl’s conduct in refusing to register its agreement while simultaneously asserting that agreement against consumers constitutes an unfair or deceptive trade practice under existing consumer protection statutes.
• The AAA and other arbitral bodies should be required by regulators to maintain public, real-time registries of corporate arbitration agreements, with automated suspension of any company’s ability to invoke an arbitration clause against consumers if the company is not currently registered and compliant. The current system requires consumers to discover non-compliance after filing. That sequence should be reversed.
• The AAA’s Consumer Arbitration Rules should be amended to create a consumer-accessible remedy when a business refuses to register its agreement, equivalent in function to the fee-advancement mechanism available in non-payment cases. The documented gap between those two situations is the technical vulnerability this case exploited.

Legislative Track

• Congress should amend the Federal Arbitration Act to specify that a corporation’s refusal to fulfill its own arbitration agreement’s procedural prerequisites, including registration and fee payment requirements established by the named arbitral forum, constitutes a refusal to arbitrate under 9 U.S.C. § 4, subject to court compulsion. The majority opinion’s reading of existing law forecloses this; a statutory fix is required.
• Legislation should prohibit corporations from modifying arbitration clauses in consumer agreements in ways that affect pending or pre-arbitration disputes. The documented attempt to replace AAA with a different forum mid-settlement should be prohibited as a matter of law, not left to case-by-case judicial review.
• Any corporation that invokes an arbitration clause to block a consumer from court, then refuses to participate in arbitration, should face automatic reinstatement of the consumer’s right to sue in court and liability for the consumer’s legal costs. The current framework strips the court right and provides no substitute remedy. That result should be legally impossible.

Corporate Governance Track

• Kohl’s board of directors should require public disclosure of all pending consumer dispute notices received, arbitration registrations maintained, and any decisions to modify or replace arbitration forum designations while consumer disputes are pending. The decision to refuse AAA registration was made without any public accountability or explanation. Governance structures that make such decisions invisible to shareholders and the public are a documented failure mode.
• Executive compensation structures at Kohl’s and similarly situated retailers should not reward litigation outcomes that result in consumer claims being extinguished on procedural grounds without merits review. Tying any portion of legal department performance metrics to consumer dispute resolution rates, rather than dispute termination rates, would create at least a partial structural counterweight.

What Now? Where to Direct Your Energy

Kohl’s Corporation and Kohl’s, Inc. are headquartered in Menomonee Falls, Wisconsin. The company’s Chief Executive Officer, Chief Legal Officer, and Board of Directors made and approved the decisions documented in this case. Their contact information is publicly available through Kohl’s investor relations disclosures.

Watchlist: Regulatory Bodies That Should Be Paying Attention

• Federal Trade Commission (FTC): jurisdiction over deceptive practices in commerce, including the false and deceptive marketing practices alleged by consumers in the underlying dispute.
• Consumer Financial Protection Bureau (CFPB): authority over arbitration practices in consumer contracts; has previously researched and proposed rules limiting mandatory arbitration in consumer financial products.
• California Attorney General’s Office: the petitioners were California residents asserting claims under California consumer protection statutes; state-level enforcement authority is directly applicable.
• Senate and House Judiciary Committees: the Seventh Circuit’s ruling creates a circuit-level precedent that affects the rights of all consumers bound by AAA-incorporated arbitration clauses. Congressional oversight of the FAA’s scope is appropriate.

Grassroots Action

• Before purchasing from any retailer, locate and read the Terms and Conditions dispute resolution clause. If it contains a mandatory arbitration clause, document it. Organizations like Public Citizen and the National Consumer Law Center track forced arbitration practices and accept case submissions.
• Contact your U.S. Senators and Representatives directly about the FAIR Act (Forced Arbitration Injustice Repeal Act), legislation that has been introduced in prior sessions of Congress to ban mandatory arbitration in consumer, employment, and civil rights disputes. Whether or not the bill has been reintroduced in the current session, constituent pressure on this issue is documented to affect legislative scheduling.
• If you have purchased from Kohl’s online and believe you experienced false or deceptive marketing practices, consult a consumer protection attorney in your state. The Seventh Circuit’s ruling affects federal court options in certain jurisdictions, but state-court remedies and state attorneys general complaints remain potential avenues depending on your specific circumstances and location.
• Support mutual aid networks and community legal aid organizations in your area that provide free or low-cost consumer protection legal assistance. Individual consumers lack the resources to fight multi-year procedural battles. Collective legal infrastructure narrows that gap.