On March 1, 2024, the American Arbitration Association (the “AAA”) amendments to its Construction Industry Arbitration Rules (the “Rules”) became effective. The newly amended Rules seek to modernize aspects of the arbitration process (e.g., removing references to fax numbers and providing for video conference hearings) and to further streamline the arbitration process as a cost-efficient alternative to litigation.
Key changes to the Rules include the following:
R-2. Rule 2 now requires that parties and their representative conduct themselves in accordance with the AAA’s Standards of Conduct for Parties and Representatives. Failure to do so may result in AAA declining to further administer a case.
R-7. Rule 7 now requires a request for consolidation or joinder be submitted to the AAA before a Merits Arbitrator is appointed. Previously, such a request could be filed within 90 days of the date the AAA determined that all administrative filing requirements were satisfied even if a Merits Arbitrator had been appointed. In addition, after the initial timeframe for consolidation and joinder has passed, a party requesting consolidation or joinder must now show not only that good cause exists to grant the request, which was all that was required under the previous rules, but must also establish that prejudice will result if the request is not granted.
R-14. Rule 14 now allows the AAA, at its discretion, to limit the number of arbitrator strikes a party is permitted during the arbitrator selection process.
R-15. Rule 15(a) now requires that all party-appointed arbitrators must be on the AAA’s National Roster of Arbitrators unless the parties agree otherwise or AAA determines in its sole discretion that the AAA National Roster of Arbitrators does not have the requested expertise.
R-23. With the emergence of using video conference in the practice of law, Rule 23(a) now provides for the use of video conference, in addition to in person and by telephone, for preliminary management hearings.
R-29. Rule 29 now allows for a record of a hearing to be made via transcription, whereas the previous rule denoted the use of a stenographic record.
R-34. Demonstrating that the AAA seeks to emphasize arbitration as being a cost-effective alternative to litigation, Rule 34 now requires an arbitrator to consider the time and cost associated with dispositive motion practice when deciding whether to allow any such motion—the focus being to achieve an efficient and economical resolution of the dispute.
R-45. An entirely new rule, Rule 45, titled Confidentiality, establishes that AAA and the arbitrator shall keep all matters relating to the proceeding confidential, and a party may request that the arbitrator issue an order concerning the confidentiality of the proceeding.
R-52. Rule 52 now provides that a party may request that the arbitrator clarify an award issued.
R-59. Under Rule 59, if a party joined in the arbitration through Rule 7 fails to provide the required deposit, the party that joined the non-paying party is now responsible for covering such deposit.
R-61. Rule 61 now allows an arbitrator to order sanctions upon a party’s request and/or the arbitrator’s own initiative, whereas previously sanctions could only be ordered upon a party’s request.
The Rules were also amended to increase ceiling to qualify for the Fast Track Procedure from $100,000 to $150,000. Under the amended Rules for Large, Complex Construction Cases, when parties cannot agree on the number of arbitrators to hear the case, if a claim or counterclaim has at least $3,000,000 at issue, then three arbitrators is the default number of arbitrators to preside over the arbitration. Previously, cases exceeding $1,000,000 at issue defaulted to a three-arbitrator panel.
With contracting parties often agreeing to resolve disputes through AAA arbitration conducted in accordance with the Rules, it remains important to evaluate how the Rules will impact the arbitration process. Owners, developers, contractors, subcontractors and other industry professionals should consider the Rules, as well as other factors, when determining what dispute resolution procedures best fit their needs and goals.
