American Arbitration Association Issues Revised Construction Industry Arbitration Rules and Mediation Procedures Effective July 1, 2015

The American Arbitration Association ("AAA") recently issued its revised Construction Industry Arbitration Rules and Mediation Procedures, which went into effect on July 1, 2015 (the "Rules"). The Rules are available for review at adr.org/construction. Since AAA mediation and arbitration are often the preferred method for alternative dispute resolution in construction contracts, understanding the impact of the revised Rules is important.

The AAA's stated purpose for revising the Rules was to "reflect preferences for a more streamlined, cost-effective and tightly managed process." The revision highlights include:

R-7 – Consolidation or Joinder, now provides that all requests for consolidation or joinder of related arbitrations or parties must be submitted to the AAA prior to the appointment of an arbitrator pursuant to R-14 through R-16, or within 90 days of the date the AAA determined that all administrative filing requirements were satisfied, whichever is later. Requests for consolidation or joinder beyond this time period will not be permitted absent a determination by the arbitrator "that good cause was shown for the late request."

With regard to requests for consolidation of arbitrations, the other parties must provide their written response to the request for consolidation within 10 days after receipt of the request for consolidation from the AAA. With regard to requests for joinder of parties, the other parties and the party that is sought to be joined must provide their written response to the request for joinder within 14 days after receipt of the notice from the AAA. Any party that fails to object to the joinder request shall be deemed to have waived their objections.

Pending the determination on a consolidation or joinder request, the AAA may stay the arbitrations impacted by the consolidation or joinder request.

R-10 – Mediation, now provides for mediation of all disputes that exceed $100,000, with the mediation taking place concurrently with the arbitration, "shall not serve to delay the arbitration proceedings." However, while mediation is now the default provision, unless the parties' contract provides for mandatory mediation, any party to the arbitration may unilaterally opt-out of mediation upon notice to the AAA and other parties.

R-23 – Preliminary Management Hearing, now directs parties to Sections P-1 and P-2, which contain a detailed checklist of the topics to be considered at the preliminary management hearing. The text of P-1 cautions that, "[c]are must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive and more expeditious.

R-24 – Pre-Hearing Exchange and Production of Information, now opens by providing the arbitrator with authority to "manage any necessary exchange of information … with a view to achieving an efficient and economical resolution of the dispute, while at the same time promoting equality of treatment and safeguarding each party's opportunity to fairly present its claims and defenses."

In addition to providing the arbitrator with the authority to require the parties to exchange documents, update their document exchanges, and to produce requested documents, R-24 also addresses electronically stored information. The Rule permits the arbitrator to "require the parties, when documents to be exchanged or produced are maintained in electronic form, to make such documents available in the form most convenient and economical for the party in possession of such documents, unless the arbitrator determines that there is good cause for requiring the document to be produced in a different form." The arbitrator, with consultation from the parties, may determine reasonable search parameters, and is cautioned to "balance the need for production of electronically stored documents relevant and material to the outcome of disputed issues against the cost of locating and producing them."

R-25 – Enforcement Powers of the Arbitrator, is a new Rule and provides that the arbitrator shall have authority to issue any orders necessary to enforce the provisions of R-23 (preliminary management conference) and R-24 (pre-hearing exchange and production). In addition to the already discussed ability of the arbitrator to impose reasonable search terms for electronic productions, the Rule also allows the arbitrator to allocate costs for producing documentation, including electronically stored documents. Where a party is willfully non-compliant with an arbitrator's order, the Rule allows the arbitrator to draw "adverse inferences," to exclude evidence and other submissions, and to impose cost sanctions arising from the non-compliance as an interim award.

R-34 – Dispositive Motions, is now a stand-alone Rule and provides that the arbitrator may permit motions that dispose of all or part of a claim, or narrow the issues in a case.

R-39 – Emergency Measures of Protection, is a new Rule which applies only to arbitrations conducted under arbitration clauses or agreements entered on or after July 1, 2015. The Rule provides that a party "in need of emergency relief" prior to assembling the panel, can notify the AAA and all other parties in writing of the nature of the relief sought and the reasons why it is an emergency. Within one business day of receipt of the notice, the AAA "shall appoint" a single emergency arbitrator to rule on the application. Within a maximum of two days after appointment, the emergency arbitrator must establish a schedule for consideration of the application, including reasonable opportunity for all parties to be heard.

If the arbitrator is satisfied that the party seeking emergency relief has shown "immediate and irreparable loss or damage," the arbitrator may enter an interim award granting the relief. The Rule provides that any interim award for emergency relief may be conditioned on a party providing appropriate security.

While this Construction Alert does not summarize each and every change to the Rules, these highlights demonstrate the need to carefully review the 2015 revisions and the impact they have on a party's agreement to arbitration. If you would like additional information on these revised Rules or arbitration in general, contact your Clark Hill attorney.