American Arbitration Association Issues Updated Rules for Construction Industry Arbitration and Mediation
March 26, 2024
In this Surety Today: The Blog post we discuss the American Arbitration Association’s (AAA) new Construction Industry Arbitration Rules and Mediation Procedures that went into effect on March 1, 2024. The AAA stated that the new rules reflect its “commitment to efficiency, modern technology adoption and the evolving demands of the construction industry.” The new rules and changes were developed with input from the National Construction Dispute Resolution Committee, advocates, in-house counsel, arbitrators and industry professionals from across the country. As a result of the changes some of the rule numbering has changed and some rules have been consolidated together, so one must be careful in citing or referencing the AAA rules going forward.
In this blog post, I will generally summarize the majority of the changes made by the AAA, however, this is intended to be a guide and a summary and not a substitute for actually reading the specific changes in the rules.
Regular Track Procedures
Rule 2 – A new subsection (b) has been added confirming that the parties and their representatives are required to abide by the AAA’s Standards of Conduct throughout the arbitration process.
Rule 7 – Regarding consolidation and joinder have been revised to provide that requests for consolidation and joinder must now be filed before the Merits Arbitrator appointment is confirmed. The “90 days after filing” option has been removed. Further, the Rule now specifies that if an R-7 Arbitrator is required, the AAA will make an administrative appointment. Parties now have 14 days (increased from 10 days), to reply to consolidation requests. Rule 7(a).
With respect to joinder under Rule 7(b), a party requesting leave to file a joinder request after the Merits Arbitrator has been confirmed will now need to establish not only good cause, as was required under the prior version of the Rule, but also prejudice if the request is not permitted. The Rule now specifies that a copy of any joinder request must be provided to all parties and any party’s failure to reply within the required time frame shall be deemed a waiver of any objections.
Rule 14 – Has been revised to provide that the AAA now has the authority to limit the parties’ strikes regarding arbitrator selection and any “party appointed arbitrators” must be on the AAA’s National Roster of Arbitrators, unless the parties agree otherwise or the AAA determines that members of the AAA Roster do not meet the requested expertise required by the parties’ ADR provision.
Rule 16 – Regarding appointment of the Chairperson of a panel now specifies that the Panel Chair must be appointed from the AAA National Construction Panel, unless the parties agree otherwise.
Rule 23 – Now provides that Preliminary Management Hearings may be held via videoconference in addition to by telephone and in person.
Rule 34 – Regarding Dispositive Motions, now provides a requirement for arbitrators to consider the cost of a dispositive motion in determining whether to grant leave for a party to file such a motion.
Rule 39 – Regarding Emergency Measures of Protection the Rule has been amended to specify that the AAA will appoint the Emergency Arbitrator as soon as practicable, but no later than three business days (instead of one). The Emergency Arbitrator now has the same time frame to set a schedule to address the request for emergency relief and clarifies that a request for emergency relief may be filed regardless of any condition precedent to arbitration that may exist in the parties’ contract.
Rule 44 – Regarding Serving of Notice has been amended to permit the AAA, the arbitrator, and the parties to use “alternative methods of communication or other platforms” to exchange communications or other notice during the course of the arbitration.
Rule 45 – Makes explicit the requirement for the AAA and the arbitrator to keep all matters confidential (unless otherwise required by applicable law, court order, or the parties’ agreement), and grants arbitrators the specific authority to issue confidentiality orders.
Rule 52 – Regarding Modification of Awards (Previously Rule R-51), has been amended to grant arbitrators the authority to “clarify” their awards in addition to addressing clerical, typographical, technical, or computational errors. The Rule still provides that the merits of the award may not be reconsidered and now specifies that any modification or clarification requests are to be made through the AAA, rather than to the arbitrator directly.
Rule 59 Regarding deposits (Formerly Rule R-58), in a newly added section (b) specifies that, if a party joined under Rule R-7 fails to make deposits required under these Rules, the party that sought their joinder will be responsible for covering those costs, subject to later reapportionment in the award.
Rule 60 – Has been amended to grant the arbitrator the authority to impose sanctions on their own initiative, so long as the party against whom sanctions are to be imposed is provided an opportunity to be heard before any such order issues.
Fast Track Procedures
Rule F-1 – Regarding Fast Track Applicability, now applies to any case where no disclosed claim or counterclaim exceeds $150,000. This is an increase from the prior limit of $100,000.
Rules F-8 and F-9 – Have been combined into a single Rule which now specifies that motions are not permitted except for good cause shown and the combined Procedure retains the requirement that discovery is to be provided only in extraordinary circumstances, and adds that a case may be removed from the Fast Track if discovery is permitted.
Rule F-13 – Regarding the Form of the Award in a Fast Track case, now provides that, if the parties request a reasoned award, an abbreviated opinion, or findings of facts and conclusion of law, the case will be removed from the Fast Track and the arbitrator may charge their regular rates.
Procedures For Large, Complex Construction Disputes
Under Rule L-3, the threshold for the appointment of a three-arbitrator panel has been increased from $1 million to $3 million.
Click here to view the amended AAA Construction Industry Arbitration Rules and Mediation Procedures.
Click here to view the complete AAA Summary of Changes for the Construction Industry Arbitration Rules.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.viewmysitenow.com) or any member of the Surety and Fidelity Practice Group.