American Arbitration Association’s New Rules Governing Construction Disputes Go Into Effect
Posted on July 10, 2015
In February, this blog discussed American Arbitration Association’s (“AAA”) release of “Supplementary Rules for Fixed Time and Cost Construction Arbitration” for the resolution of construction disputes. Those rules made substantial changes to the way in which construction disputes are arbitrated in an attempt to make the process faster and cheaper.
Specifically, the supplemental rules: (1) Placed limits on the time and maximum fees allowed in an arbitration; (2) Limited arbitration demands and corresponding answers are to five pages; and (3) Required arbitration awards be made within twenty days from the close of a hearing.
Last week, on July 1, 2015, the AAA’s Revised Construction Industry Arbitration and Mediation Procedures went into effect, further modifying the way in which such disputes are handled. These are the highlights to the new procedures:
- Under revised Rule 7, all requests for consolidation or joinder must be submitted prior to the appointment of an arbitrator or within 90 days of the date AAA determines all administrative filing requirements have been satisfied.
- Pursuant to revised Rule 10, “parties shall mediate their dispute” where the claim or counterclaim is in excess of $100,000. Mediation is to take place concurrently with the arbitration, but, unless the parties have otherwise agree to submit to mandatory mediation, either can opt out of the rule upon notification to the AAA and other parties to the arbitration.
- New Rule 23 provides, in the discretion of the arbitrator and depending on the size and complexity of the matter, for the scheduling of a preliminary hearing as soon as practicable following the appointment of the arbitrator. The Rule also identifies 20 specific issues to be considered at the preliminary hearing, such as: the possibility of other non-adjudicative methods of dispute resolution, including mediation pursuant to R-10; whether all necessary or appropriate parties are included in the arbitration; whether a party will seek a more detailed statement of claims, counterclaims, or defenses; whether any measures are required to protect confidential information; and whether the parties intend to present evidence from expert witnesses.
- New Rule 24 clarifies the former version of the rule, and provides the arbitrator greater control over the exchange of information with a “view toward achieving an economical resolution, while also balancing each party’s ability to present their case.” The new rules allows electronically stored information to be produced in the manner most convenient and economical for the producing party.
- New Rule 39 affords parties the ability to apply for emergency interim relief before an arbitrator that will be appointed within 24 hours of the AAA’s receipt of the request for emergency relief. This rule will only apply where the underlying contract has been entered into on or after July 1, 2015.
- New Rule 25 grants provides arbitrators with specific enforcement authority and powers to issue orders “necessary to accomplish the goals of a fair and efficient arbitration process.” The rule addresses orders involving confidential documents and information, imposes reasonable search parameters for electronic and other documents. Paragraph (c) allows the arbitrator to allocate the costs of producing documentation, and specifies the type of actions that an arbitrator may take in the case of willful non-compliance with any order.
- New Rule 34 provides that upon prior written application, the arbitrator may permit motions that dispose of all or a part of a claim, or narrow the issues in a case.
As the new rules are little more than a week old, it is yet to be seen whether they will have any noticeable impact on the manner in which arbitration is handled and perceived. The decision whether to submit a dispute to arbitration, and the terms of an arbitration is something that should be discussed with experienced legal counsel. For questions regarding arbitration, or any other aspect of Ohio construction law, please contact Todd Harpst or Nick Horrigan, at Harpst Ross, Ltd. – Business Lawyers for the Construction Industry®, at (330) 983-9971 or firstname.lastname@example.org or email@example.com.