Significant Changes to AAA's Construction Arbitration Rules Effective July 1, 2015
The American Arbitration Association (AAA) recently issued several significant revisions to its Construction Industry Arbitration Rules, which became effective July 1, 2015. The revised rules apply to construction arbitration cases initiated on or after July 1, 2015. For contracts entered prior to July 1, 2015, most of the revised Rules apply retroactively if the contract contains an arbitration clause incorporating or subject to AAA Construction Industry Rules.
According to AAA, the revised Rules are intended to make the arbitration process more streamlined, cost-effective, and tightly managed to better control the often high expense of litigation. AAA believes these goals will be accomplished primarily by giving arbitrators additional tools and authority to better manage the arbitration process.
The following is a summary of the most significant revisions:
- A "mediation step" has been added for cases involving claims exceeding $100,000 (subject to "opt-out" for certain circumstances).
- Prior to the appointment of the arbitrator, requests for "consolidation and joinder" of other parties and claims--such as joining other subcontractors and/or the owner in the arbitration--must be made within certain time frames and handled through certain filing requirements.
- "Preliminary case management" requirements have been added to provide better and earlier scheduling and organization to set the arbitration process on the right track from the beginning.
- "Information exchange and production" measures have been added to give arbitrators greater control over the exchange of documents and other information, including electronic information.
- "Emergency measures of protection" (similar to court-issued temporary restraining orders prohibiting harmful conduct) are now available for matters where the contract was effective on or after July 1, 2015 (this is one of the exceptions to the retroactive application of the revised Rules).
- "Enforcement power of the arbitrator" and "Sanctions" are new rules enabling arbitrators to issue orders and sanctions to parties that refuse to comply with the Rules or other standing orders.
- "Dispositive motions" is a new rule allowing arbitrators greater latitude to dispose of all or part of a claim, or to narrow the issues in a claim, prior to hearing.
- "Fast track" applicability has been revised to allow fast track procedures for two-party cases where the claims do not exceed $100,000 (increased from $75,000). For matters not exceeding $25,000, the Rules require a "documents only hearing" (no live testimony or presentation of evidence, but oral argument can be requested after documents are submitted).
About the author: Mark Bogard is a construction law attorney at the Phoenix law firm of Jaburg Wilk. For nearly 20 years he has assisted suppliers, contractors, owners/developers, lenders and registered professionals in virtually all areas of construction law, including payment remedies such as mechanics' liens, payment bonds, stop notices, and "prompt pay" on private and public projects. Got a construction law question for Mark? Contact him directly.
This article is not intended to provide legal advice and only relates to Arizona law. It does not consider the scope of laws in states other than Arizona. Always consult an attorney for legal advice for your particular situation.