The American Arbitration Association (“AAA”) revised its Construction Industry Arbitration Rules and Mediation Procedures (“Rules”) as of July 1, 2015. Many of the changes are designed to streamline the arbitration process, making it more efficient and cost-effective. While there were many noteworthy changes in the rules, we summarize the most significant and far-reaching revised and new rules below. It is important to note that not all the revised or new rules will apply to contracts in effect before the rules took effect, so the following provisions may or may not apply to existing claims.
Possibly the most significant change in the rules is the addition of a phase of mediation in disputes in Rule R-10. Previously only an option, parties to a dispute are now required to mediate the disputes in a fashion prescribed in the AAA’s construction mediation procedure if any claim in the dispute exceeds $100,000 during the pendency of an arbitration. Parties may opt out of mediation after giving notice unless there is an agreement that requires mandatory mediation.
Concerns about speed and need for intervention led to the creation of new Rule R-39. Under new Rule R-39, a party may apply for emergency relief if it believes it will be subject to immediate and irreparable loss or damage. Within one business day of such notice for emergency relief, the AAA will appoint an emergency arbitrator, and that arbitrator will set a schedule for consideration of the application for emergency relief within two business days. The emergency arbitrator may then award such relief as he or she deems necessary. This rule only applies to arbitration agreements entered into after July 1, 2015.
New Rule R-7 fills a prior gap in the arbitration rules concerning joinder, setting the deadline of submission of requests for joinder or consolidation prior to the later of the selection of a Merits Arbitrator or within 90 days of the AAA determining that all filing requirements have been satisfied. Written responses to these requests must come within 10 or 14 days, respectively, of the AAA’s notice of such a request. Failure to object to joinder waives such objections.
If a party does not comply with obligations under the arbitration rules or any order of the arbitrator, new Rule R-60 allows the opposing party to request that the arbitrator impose sanctions on the noncompliant party.
Rule F-1 has been revised to apply to two-party cases where no claim or counterclaim exceeds $100,000. The earlier rule capped the applicability of fast tracking to claims of not more than $75,000.
Rule R-23 has been rewritten, providing that the timing of the preliminary hearing is at the arbitrator’s discretion and points to new Rules P-1 and P-2 to flesh out general and specific topics, respectively, to be discussed.
Pre-Hearing Exchange of Information
Rule R-24 has been revised so that an arbitrator may act on his or her own initiative or at the request of a party to (a) require the parties to exchange any information on which they will rely at the hearing, (b) update exchanges of information as more documentation becomes known to the parties, (c) require the parties to respond to document requests from the seeking party, and (d) require the parties, when documents to be produced are in electronic form, to make such documents available in the form most convenient and economical to the party in possession of such documents unless the arbitrator determines that the documents should be in a different form. The size and scope of such an electronic production of documents should be considered, and search parameters should be established at the outset of the exchange at the agreement of the parties or the determination of the arbitrator.
New Rule R-34 allows an arbitrator to now consider motions that would dispose of part or all of a claim or would narrow the issues in a claim.
There are other changes to the rules that will serve to effectuate a more streamlined arbitration process, and these revisions should have a profound effect on the construction industry. The attorneys of McBrayer can assist with understanding how the new arbitration rules will affect alternative dispute resolution in construction claims. Contact us today for more information on how the new arbitration rules will affect you.
Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or firstname.lastname@example.org. This article is intended as a summary of federal and state law and does not constitute legal advice.