United States: AAA Arbitration Rule Changes

Last Updated: July 1 2015
Article by Daniel Douglass

The Construction Industry Arbitration Rules of the American Arbitration Association (AAA) have long been referenced in American Institute of Architects (AIA) and other construction agreements and are commonly used in the arbitration of construction disputes.  The AAA periodically updates these rules and is introducing amended rules effective July 1, 2015, to enhance the effectiveness and efficiency of the arbitration process.  The changes focus primarily on consolidation and joinder, mediation, effective management of proceedings, dispositive motions, emergency measures and objectionable conduct.  They provide valuable additional tools to arbitrators and parties engaged in the arbitration process.

Rule R-7 deals with consolidation of cases and joinder of parties.  Questions of whether to consolidate separate cases or join additional parties come up often, can be complex, and can disrupt proceedings if not addressed early and with full input from all parties.  The amended rule addresses these concerns by adding time frames and filing requirements.  Under the new rule, requests for consolidation or joinder must be made within the first 90 days or before appointment of the arbitrator(s) for the case.  A request for consolidation or joinder must spell out the reasons for the request and be provided to all parties when made, including parties sought to be joined.  Other parties must respond promptly (10 days for consolidation, 14 days for joinder) with their input.  The AAA can stay the proceeding if necessary.

Rule R-10 deals with mediation, which has proven effective in resolving construction disputes with less time and expense.  However, mediation as a prerequisite to arbitration can sometimes delay proceedings.  Under the amended rule, mediation is required for all disputes exceeding $100,000, but takes place concurrently with the arbitration to avoid delay.  Given the consensual nature of mediation, a party may unilaterally opt out if their agreement does not include mandatory mediation.

Effective and efficient management of the arbitration process has always been a priority.  Amendments to rules R-23, 24 and 25 give arbitrators additional tools and authority to manage proceedings.  These include a checklist for preliminary hearings to make sure issues are covered early, greater control over the exchange of information (including electronically stored information) to minimize delay and cost, and arbitrator authority over such things as reasonable electronic search parameters and allocation of costs.

Dispositive motions such as motions to dismiss or for summary judgment tend to be creatures of court litigation and less appropriate in arbitration.  They can even waste time and expense and make the arbitration process less efficient.  However, there can be instances where a pre-hearing motion disposing of a claim makes sense in arbitration, such as if a claim is clearly barred by the applicable statute of limitations.  A new rule R-34 reflects this tension and gives some guidance to parties considering a dispositive motion.  It provides that upon prior written application, an arbitrator may permit motions that dispose of all or part of a claim or narrow the issues in the case.

Emergency interim relief (such as a temporary injunction) is typically available in narrow circumstances under rules governing court litigation, but not arbitration.  A new Rule R-39 provides a procedure if a party needs emergency interim relief in an arbitration case.  It is modeled on a rule adopted and well received in commercial and international arbitration.  Its provisions include appointment of an emergency arbitrator within one business day of receipt of a request for emergency relief, expedited determination of whether immediate and irreparable loss or damage requires emergency relief, and authority to require posting of security as a condition for an interim award of emergency relief.

Objectionable or abusive conduct by a party can be disruptive and difficult to address in arbitration.  In response to industry requests, a new rule R-60 provides arbitrators with authority to order sanctions where a party refuses to comply with its obligations under the rules or an order.  Any sanction limiting a party's participation or adversely deciding an issue must allow submission of evidence and legal argument prior to entry and must be explained in writing.

Other changes enhance the effectiveness of existing rules.  Rule R-19 is amended to provide that failure to disclose a potential conflict may waive the right to object on that ground.  R-36 is revised to clarify the handling of affidavit testimony and unavailable witnesses.  R-45 is amended to streamline decisions on discovery disputes.

All of these amendments to the AAA construction industry arbitration rules are clearly aimed at providing parties and arbitrators the tools they need to enhance the efficiency and effectiveness of the arbitration process and maintain its desirability as an alternative to court litigation.  Their success will be measured in the months and years to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Daniel Douglass
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