Shapiro, Lifschitz & Schram

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Q&A About the 2015 Amendments to the AAA Construction Rules

This article was originally published in Under Construction Vol. 17 No. 3 (Winter 2016).

On July 1, 2015, the American Arbitration Association (AAA) amended the Construction Industry Arbitration Rules and Mediation Procedures (Rules), Under Construction’s Associate Editor, Tom Dunn, spoke with Forum member Daniel A. Kapner of Shapiro, Lifschitz & Schram regarding the amendments.

What is the process by which the Rules were amended?

According to the AAA, the AAA conducted focus groups across the country to discuss refining the existing Rules, which were last amended in October 2009.  The AAA also based certain changes on the October 2013 amendments to the Commercial Arbitration Rules and Mediation Procedures.  The AAA evaluated the comments of the focus groups and also sought input from the AAA’s National Construction Dispute Resolution Committee (NCDRC) to develop the amendments. 

Which of the July 2015 amendments are most likely to affect construction attorneys before the AAA? 

There are several key changes likely to affect how construction lawyers practice in disputes adjudicated by the AAA, and in disputes before ad-hoc tribunals administering proceedings under the Rules.

a. Emergency Measures of Protection

Under the revised Rules, parties now have the right to seek “emergency measures of protection” from the AAA before the tribunal is constituted in any dispute involving an arbitration agreement entered on or after July 1, 2015.  Although the Rules previously granted the tribunal the right to order interim measures, the amended Rules create a process for emergency relief before the tribunal is constituted.  The Rules set forth a process for the appointment of a single emergency arbitrator and adjudication of an application for emergency relief.  The arbitrator may grant relief if the requesting party has shown that it is entitled to emergency relief and that the absence of such relief will cause “immediate and irreparable loss or damage.”

b. Sanctions

The AAA has also granted tribunals the right to order sanctions where a party fails to comply with its obligations under the Rules or an order of the tribunal.  Before issuing sanctions, the tribunal is required to accept evidence and legal arguments from the requesting party, and provide the party subject to a sanction the opportunity to respond.  The tribunal is also required to render the award in writing.

c. ESI Information Sharing

The rule also permits the tribunal to weigh in on the exchange of electronically stored information (ESI), for example the tribunal can impose ESI search parameters if the parties are unable to reach agreement. 

d. Preliminary Hearing Checklist

The AAA has proposed a detailed checklist for the parties and tribunal to address during the preliminary hearing.  Prior to the July 2015 amendments, a similar checklist existed only in the Procedures for Large, Complex Construction Disputes.

e. Joinder and Consolidation

The amendments also refine the process for requesting and objecting to a request for joinder or consolidation, which in my opinion provides needed clarity.  Last year, for example, our firm submitted three requests for consolidation of related AAA proceedings involving disputes concerning a large-scale federal construction project.  The October 2009 rules did not specify a timetable for parties to respond to requests for consolidation and joinder or indicate whether a party waives its right to object to consolidation or joinder if it fails to respond by a certain date.  The amendments resolve these ambiguities.

What amendments are likely to enhance the cost-effectiveness or efficiency of proceedings administered under the Rules?

The July 2015 amendments refer in multiple places to the AAA’s goal of achieving a fair, efficient, and economical resolution of disputes, and some changes are clearly intended to support this goal.  For example, the amendments include a new rule on mediation, R-10.  This rule provides that parties shall mediate all disputes involving a claim or counterclaim exceeding $100,000.  However, any party may unilaterally opt out of R-10 unless the parties’ agreement requires mandatory mediation (and presumably not an agreement requiring mediation as a condition precedent to the arbitration).  In our practice, arbitration is not necessarily—and often is not—faster, cheaper, or better than litigation.  Whether the July 2015 amendments have any practical effect on the cost or duration of a proceeding remains to be seen.  It is also worth noting that the AAA’s fees have modestly increased.  Previously, the fees were attached to the rules, whereas the revised Rules refer to an AAA website that provides the most up-to-date fee schedule.

Do you have any additional observations that may be of interest to forum members? 

One theme in the amendments worth noting is an increase of arbitrators' powers.  This is most apparent in the tribunal’s new right to issue sanctions and the procedure for emergency relief.  In addition, under new rule R-25, the tribunal is expressly granted “the authority to issue any orders necessary" to enforce the rules regarding the preliminary hearing and the pre-hearing exchange and production of information. 

This article was originally published in Under Construction Vol. 17 No. 3 (Winter 2016).

Found In: Articles, Construction

Did You Know . . .

Members of the SLS trial group have tried in excess of 50 jury trials and 75 bench trials?

The SLS construction group has worked on sports stadiums across the country including Orioles Park in Baltimore and Paul Brown Stadium in Cincinnati?

The SLS construction group has worked on power plant projects across the country?

In 2007 SLS was selected for an Honorable Mention as one of the Best Places To Work in Washington DC?

Ron Shapiro, Steve Schram and Judd Lifschitz have all been selected as SuperLawyers by Law and Politics?

The SLS office building is an historic townhouse constructed in the late 1800s?

SLS has been selected by Martindale-Hubbell as a Preeminent Law Firm?

SLS trial lawyers have argued appeals in the U.S. Circuit Courts of Appeal for the 4th, 5th, 9th, D.C. and Federal Circuit?

SLS trial lawyers have been lead trial counsel in cases in Arizona, California, District of Columbia, Florida, Louisiana, Maryland, New Jersey, New York, North Carolina, Oregon, Texas, and Virginia, - to name just a few?

Virtually all the cases that SLS trial lawyers mediated have been favorably settled at mediation?

The transactional group at SLS was lead counsel on one of the largest, most complex mixed-use projects in downtown Washington, DC involving 4 lenders and 6 property owners?

In appreciation for the outstanding efforts of each of its employees during 2007, SLS gave everyone (attorneys, paralegals, and staff) a 4 day/3 night expense paid trip to Key West, Florida?

The transactional group at SLS has represented tenants in more than 200 retail leases in the Mid-Atlantic region?

Every attorney in the transactional group at SLS has at least 15 years experience?

The transactional group at SLS has represented developers in the purchase, construction, financing and/or sale of more than 75 multi-family apartment projects?

The transactional group at SLS has represented real estate investors and developers with respect to property in Pennsylvania, West Virginia, Delaware, Maryland, the District of Columbia, Virginia, North Carolina, South Carolina, Georgia, Florida, Texas, Tennessee, Michigan and the U.S. Virginia Islands?

Attorneys in the transactional group at SLS have represented eight national banks in commercial real estate loans?

Attorneys in the transactional group at SLS have represented the FDIC, the Resolution Trust Corporation and several banking institutions in loan workout transactions throughout the Mid-Atlantic region?

The transactional group at SLS has represented homebuilders and commercial real estate developers in work-outs of individual loans and also for work-outs of large portfolios involving dozens of properties in several states?

The trial lawyers of SLS have numerous reported decisions to their credit?