What to become a AAA Arbitrator / Mediator? But don't know how? Join Us on June 30th at 3PM ET

Have you ever thought about what it would take to serve as a Construction Arbitrator or Mediator? Do you think you have to wait until the end of your career to pursue an ADR Practice? You don’t. Most arbitrators on the American Arbitration Association (AAA) Construction Panel still maintain a full-time practice. 

On June 30th, Division 1 (Litigation & Dispute Resolution) is teaming up with the AAA, Construction Litigation Committee of the ABA Section of Litigation, and the Forum's Diversity + Inclusion Committee for a virtual program on how you can design your career path to have a successful neutral practice.  Our panelists from the AAA, Forum/D1, and CLC will discuss what it takes to be an arbitrator or mediator with the AAA's Construction Panel, give tips for building the type of experience that the AAA looks for and offer insight and advice for building a successful ADR practice. Understanding that parties often seek diverse viewpoints in dispute resolution, the AAA has made a concerted effort to attract and mentor diverse arbitrators and mediators. During this session, the Panelists will discuss the training and continuing education offered by the AAA to its panelists, as well as its mentoring program.

It is never too early to start planning your career goals and aspirations.  We hope you join us for this discussion.  There will be time for questions at the conclusion of the program.  

REGISTER

Questions about this program or Division 1 in general, contact me, Tom Dunn, Division 1 Chair, at rtdunn@PierceAtwood.com.  

AAA Releases Discovery Best Practices for Construction Arbitration

 The American Arbitration Association (“AAA”) recently released an important new document, “Discovery Best Practices for Construction Arbitration: Recommendations for AAA Construction Advocates and Arbitrators.” These best practices are intended to “educate advocates and arbitrators to better manage pre-hearing exchanges of information in construction disputes.” 

Generally, the seven-page document seeks to promote the speed and efficiency of resolving construction disputes through arbitration. While observing that construction disputes are often very document-intensive, the best practices note that the format of arbitration does not allow for unlimited discovery:

Therefore, arbitrators should, consistent with their authority, manage arbitration proceedings to achieve the goal of providing a simpler, less expensive and more expeditious process, and discovery decisions should be proportional to the size and complexity of the matter being heard. The arbitrator should stress how, due to the number of documents, discovery in a construction dispute is different than in a typical commercial dispute.

These best practices were developed in conjunction with the AAA’s National Construction Dispute Resolution Committee (“NCDRC”), advocates, arbitrators and construction industry professionals. The guidance and suggestions in the best practices are recommended for use in all construction cases administered by the AAA under the Construction Industry Arbitration Rules or Commercial Arbitration Rules. It is important to note that these best practices are in no way intended to replace the Rules.

Document Exchange

The best practices suggest filing a detailed statement of claims and defenses as early as possible. This can help narrow the focus of discovery, identify critical documents, and avoid disputes. Whenever possible, “the scope of documents should be narrowly tailored and proportionate to the disputes at hand.” Further, a scheduling order can be an effective tool to establish deadlines and avoid delays.

The best practices also address the growing importance of e-discovery. Today’s construction disputes commonly involve a high-volume of emails, drawings, submittals, and other electronically stored information (“ESI”). The new guidance suggests addressing e-discovery during the pre-hearing conference. The size and complexity of the dispute should be the driver of the ESI protocol. In situations where the cost to produce electronic documents appears excessive, arbitrators are encouraged to consider requiring the party demanding that production to pay for the costs.

Site Inspections

Site inspections can play an important role in resolving construction disputes. They can also be expensive and time-consuming. The best practices suggest arbitrators carefully weigh the benefits of agreeing to a site inspection and establish a protocol in advance. Likewise, arbitrators are encouraged to consult photographs of the site prior to a visit to help become familiar with the project. Any tour of the project site should be conducted without attorney commentary.

Disputes and Sanctions

Discovery disputes happen. Parties should make a good-faith effort to meet and confer to resolve these disagreements. If these consultations are unsuccessful, arbitrators are encouraged to schedule a telephonic conference. Hopefully many of these disputes can be precluded from arising in the first place through appropriate planning and communication.

It is important to remember that arbitrators have the authority to order sanctions. Courts may uphold these sanctions when sufficient cause exists. Arbitrators can choose to order sanctions either immediately at the time of the action, or they can choose to wait to do so in the final award. However, precluding proof should only be considered in the most extreme circumstances.

Other Considerations

The new AAA guidance suggest that depositions be used only when there are clear and compelling grounds to demonstrate they will contribute to the speed and efficiency of the arbitration process.

Third-party discovery can be a complicated and thorny issue in an AAA arbitration. Courts have reached different conclusions as to whether Article 7 of the Federal Arbitration Act allows for an arbitrator to subpoena a third-party to produce documents prior to a hearing. In any event, third-party discovery should be limited to the largest, most complex cases.

Conclusion

These best practices seek to balance the almost inherently complex nature of construction disputes with the efficiency offered by AAA arbitration. This new document is a valuable resource for arbitrators, attorneys, and construction professionals. The summary contained in this article discussed only a few of the highlights and is not meant as a comprehensive survey.

Parties interested in more information on AAA construction arbitration rules and procedures are encouraged to visit adr.org/construction.

Author Patrick McKnight is an associate in the Litigation Department at Klehr Harrison Harvey Branzburg LLP in Philadelphia, Pennsylvania. Patrick also serves on the Klehr Harrison Coronavirus Task Force. He can be reached at pmcknight@klehr.com.

The AAA Permitted to Pull Rank to Disqualify a Named Arbitrator

In the recently decided case, LD Miller Construction, Inc. V. Kirschenbaum, - P.3d - (N.M. App. Dec. 1, 2016) the Court of Appeals of New Mexico affirmed the hearing justice's order that the American Arbitration Association ("AAA") indeed could disqualify an arbitrator from arbitrating a dispute between a contractor and homeowners for the failure of the arbitrator to follow the AAA Rules.

The Homeowners hired the Contractor to do concrete and framing work on their property in Santa Fe, New Mexico.  Contractor completed the work, but the Homeowners disagreed that is was done properly.  They hired someone else to correct the work.  A short time later, the Contractor submitted an invoice for the concrete and framing work to the Homeowners.  The Homeowners only paid half of what was claimed owed by the Contractor.  Apparently in recognition that a dispute had arisen, about two weeks later, the Homeowners and Contractor entered into an arbitration agreement:

Contractor and Owner agree to binding arbitration under AAA (American Arbitration Association) for any dispute (claim, work, material, etc.) between Contractor and Owner . . . . Contractor and Owner agree that the designated arbitrator shall be Roger Lengyel.

Fast forward two years later, the Contractor filed a complaint in court for the unpaid amount.  The Homeowners answered with an affirmative defense that the action must be dismissed in light of the arbitration agreement. The Court agreed and issued an order that stated in pertinent part:

the parties are compelled to arbitrate this matter pursuant to the terms of the arbitration agreement, requiring binding arbitration under the [AAA] with . . . Roger Lengyel as the designated arbitrator.

The parties attempted arbitration but it quickly devolved with the Contractor sending a letter to the AAA requesting disqualification of the arbitrator for non-neutrality.  According the Contractor, the arbitrator was having ex parte communications with the Homeowners and setting rules that only served to delay the arbitration (which benefited the Homeowners). The Homeowners insisted that the Court's order had designated the named arbitrator and usurped AAA's power to disqualify him.  The AAA sought clarification from the court.  The hearing justice concluded based on the language of the order that the AAA could disqualify. AAA did just that.  The Homeowners appealed.

On appeal, the court applied New Mexico contract law for the interpretation and construction of the agreement. Because neither party argued that the agreement was ambiguous, the court simply was to determine "what do the words of the agreement mean and what is their legal effect"? The Homeowners argued for an "integral-ancillary" bifurcation of the agreement under the Rivera v. Am. Gen. Fin. Servs., Inc., 259 P.3d 803 (N.M. 2011).  They claimed that because the designation of the arbitrator was introduced with the precatory "shall be Roger Lengyel," this provision is integral and must be abided, whereas the "under the AAA" was merely ancillary. The Court explained that Rivera was limited to its facts, where the parties had "clearly intended to use a designated institutional arbitration provider" but that provider no longer existed. As a result, the Rivera court held that the arbitration provision would have to stricken in its entirety because arbitrating with the chosen provider was integral to the agreement and the section could not be rewritten by the court.  The Court continued that the instant dispute was much different. To treat the two cases as the same "would unreasonably treat as equivalent an unavailable arbitration provider and a disqualifiable arbitrator" with an available provider. Plus the Court noted that Rivera did not even get to the issue presented by the Homeowners -- weighing the relative value of two, separate provisions.

In the Court's de novo review of the agreement's language, the Court held that "most reasonable construction of this language is that 'under AAA' incorporates all of the AAA rules normally applicable to proceedings held under AAA's auspices." There was nothing in the agreement that limited the AAA's powers or made certain rules inapplicable.  The Court acknowledged that the use of "shall" to designate the arbitrator is strong evidence that the parties agreed to use him. However there was nothing in agreement that this arbitrator could be non-neutral, which is contrary to the AAA rules. If this arbitrator could be non-neutral in violation of the AAA Rules, then it would "potentially cause [the Rules] to have no meaning." In sum, the Court held that "The most natural construction of the Arbitration Agreement is that the parties intended to arbitrate disputes between them concerning [the Contractor's] construction work under all of the AAA rules, with Lengyel serving as a neutral arbitrator. To interpret the Arbitration Agreement designating Lengyel to trump the AAA rule permitting replacement of a neutral arbitrator in certain circumstances would risk rendering the AAA Rules meaningless." Accordingly, the hearing justice's order and the AAA's disqualification were affirmed.

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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

Guided Choice CLE Program

Paul Lurie

Back in the Fall of 2014 at the Chicago meeting, we were fortunate to have Paul Lurie speak about the concepts of Guided Choice Dispute Resolution. I moderated the session and learned a great deal from Paul and about Guided Choice being a way for our clients to resolve their disputes more quickly and more cost effectively.  

In concert with the American Arbitration Association, Paul has developed a webinar called "Using Guided Choice to Increase Satisfaction with the Value of Mediators." The instructor staff includes multiple luminaries in the world of dispute resolution and construction law, including (of course) Paul Lurie as well as Adrian Bastianelli, Steve Paul, Peter van Osselaer, Michael Leech, Karl Bayer and Denise Madigan. 

Once you register for this webinar, the other great thing about this program is that you can view it at any time on your computer or on your tablet or smartphone. It is a 1.6 hour presentation with slides, and it is available currently (and until the end of February, 2016) for just $50 by going to the AAA's Education Services website.

If you are not sure what Guided Choice is, Paul has also launched a new Guided Choice Mediation/Early Dispute Resolution website. There, you can find out the basic principles of Guided Choice, learn how to choose a mediator consistent with early dispute resolution, and see what role a lawyer plays in this process. In addition, there is a full bibliography for articles discussing and advocating for Guided Choice (including the blog post I wrote for the Dispute Resolver in anticipation of the Chicago meeting).

Finally, if you have specific questions about Guided Choice, I have found that Paul Lurie is very willing to respond to any inquiries. You can e-mail him here.