As you may
have heard, on July 1, 2015, the American Arbitration Association announced the
release of updated Construction Arbitration Rules. Briefly, those changes include:
- an automatic referral to mediation for all cases
with claims exceeding $100,000 (though each party has the ability to opt out of
this process);
- time limits and additional filing requirements
for consolidation and joinder to limit the use of these time-consuming
processes to delay proceedings;
- increased arbitrator control over the exchange
of information, particularly electronic documents;
- new preliminary hearing rules providing detailed
guidance to all involved parties and arbitrators as to what issues should be
considered at the preliminary hearing;
- emergency relief rules for contracts entered on
or after July 1, 2015, to appoint an emergency arbitrator within one day of
filing the demand for emergency relief; and,
- additional authority for arbitrators to respond
to parties refusing to comply with the Rules and/or the arbitrator’s orders.
I had the opportunity to speak with
John Bulman of
Pierce Atwood LLP about these rule changes. John has been a construction lawyer
for over twenty-five years and, in that time, has served frequently as a
mediator and arbitrator through the AAA.
He is a past member of the AAA Board and has been involved in the AAA
rulemaking process for over a decade.
For this most recent revision of the rules, John served as
the American College of Construction Lawyers liaison to the
National
Construction Dispute Resolution Committee (NCDRC), an organization founded
in 1966 by the AAA and other industry and trade organizations.
Currently, thirty different industry
organizations including the Forum are represented in the NCDRC.
It is tasked with analyzing proposed rule
changes to the AAA Construction Arbitration Rules in addition to creating and
providing input on program content and faculty for proposed neutral training
and in recruiting qualified neutrals.
The way that rules are changed involves a multi-year
process. The AAA is always gathering
comments, feedback, objections, and insight about the rules. On a periodic basis, the AAA will consider
whether to revise its commercial arbitration rules or one of the industry
specific rule sets. In addition, the NCDRC intermittently provides its own
comments or proposals for possible rule changes.
With respect to this particular set of changes, the rule
changes were adopted previously by the AAA for the Commercial Arbitration
Rules. From there, the NCDRC was tasked
with determining whether to adopt similar rules for the Construction Industry.
In making this determination, the AAA Vice Presidents held eighteen different
focus groups across the country to discuss the rule changes and seek
input.
After receiving input from these
focus groups and incorporating comments accordingly, the NCDRC developed and
vetted the rules in December of 2014. From
there, the Chair of the AAA’s Practice Committee reviewed and approved the
changes. Once that approval was received, the AAA’s senior counsel and staff
review the rules to ensure that they are acceptable and consistent with AAA
policies and procedures. After that, the
rules were released to the public.
With regard to the current changes, John believes that the
checklist for preliminary hearings set forth in Preliminary Hearing Procedures
Rule P-2 are extremely important in keeping a particular arbitration proceeding
on schedule. Reviewing this checklist, one can see what John means – the
checklist is attempting to bring the parties to as early an agreement as
possible regarding the key procedural issues in the case.
It combines the most important parts of an early conference
of counsel in federal court – such as dealing with ESI at the beginning of the
case – and of a pretrial conference – discussing witnesses, exhibits, the forms
of testimony to be provided, and the form of the award. As John stated to me, failing to address
these issues at the beginning of the case only leads to problems and delays
down the road.
John also highlighted how important the consolidation
provisions are. Too often, he has seen parties wait until late in the
proceedings to try to join new parties to an arbitration or to consolidate one
arbitration with another. That procedural decision causes a separate arbitrator
to be appointed to determine whether consolidation is appropriate – a “Rule 7
arbitrator” – and waiting until late in the process to seek consolidation only
serves to delay proceedings. To address
this issue, the Rules have been revised to provide a cutoff date by which the
parties must seek consolidation and still get the benefit of having a Rule 7
arbitrator appointed to determine if consolidation is appropriate. Otherwise,
if the request comes later in the process, the arbitrators called the “Merits
Arbitrators” – the panel appointed to decide the case – will make the
determination on consolidation.
As John noted, the AAA continues to seek feedback regarding
its rules and any improvements that you might have. To that end, Michael A. Marra, who is a Vice
President with AAA in Philadelphia, welcomes your telephone calls to discuss
any rules issue you might have. He can
be reached at (215) 731-6136.
