New AAA Supplementary Rules for Fixed Time and Cost Construction Arbitration

Recently, the American Arbitration Association (AAA) issued a new set of Supplementary Rules for Fixed Time and Cost Construction Arbitration in response to concerns by counsel and litigants wanting more predictability when estimating and anticipating the maximum amount of fees, costs and time needed to complete construction arbitration proceedings.  It is important to note that since AAA still offers parties the option to adjudicate cases under the Construction Industry Arbitration Rules and Mediation Procedures, the new Supplementary Rules are more useful for cases involving discrete issues where the parties will benefit from a proceeding involving limited discovery and document exchanges.

Effective immediately, where parties to a contract agree to resolve their disputes under the new Supplementary Rules, AAA has the exclusive right to administer any arbitration proceeding, by and through the members of the AAA’s Roster of Construction Neutrals.

Once parties decide to initiate arbitration proceedings under the new Supplementary Rules, there are several key features designed to yield a more time- and cost-effective proceeding.  For instance, the new Supplementary Rules (except in two instances) shall apply only to arbitrations involving two parties.  In addition, each party is required to provide the arbitrator with the contact information (including address, telephone number, and email address) of a “designed employee,” or client representative, who will be copied on all correspondence in the case, to ensure real-time updates on the progress of the arbitration proceeding.

Prior to the actual hearing, the new Supplementary Rules call for the parties to develop a discovery plan, for the arbitrator’s review and approval, which adheres to the tenets of minimizing cost and time.  One other key feature of the new Supplementary Rules is that once the parties take part in the arbitration hearing and finish presenting evidence, the arbitrator is required to issue an award no more than 20 days from the close of the hearings, in writing and in the manner required by law, that is no longer than three pages.

The features and procedures outlined in the new Supplementary Rules can result in significant cost-savings over arbitrations conducted under the traditional AAA construction industry rules.  As set forth in the series of fee schedules under the new Supplementary Rules, for cases that do not require site visits, pre-hearing conferences or consideration of post-hearing briefings, the maximum fees can range between $10,500 and $52,000, exclusive of travel expenses.  As such, contractors and design professionals might want to discuss with their clients whether they want to include or amend the dispute resolution provisions of their contracts, so that certain disputes are resolved under these new, time- and cost-effective Supplementary Rules offered by AAA.