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).