New Construction Arbitration Rules Promise Cheaper and Faster Construction Arbitrations

Companies involved in construction arbitration can now benefit from new rules which allow them to better predict time frames and costs to resolve disputes. The American Arbitration Association® developed new Supplementary Rules for Fixed Time and Cost Construction Arbitration effective June 15, 2014.

Companies can benefit from the new Supplementary Rules, because:

• Reduced Discovery/Document Exchange: they are ideal for disputes with distinct issues, because these disputes benefit from reduced discovery and document exchange.


• Two-Party Dispute: the rules generally only apply to two-party arbitrations.


• Surety exception: a surety can be a third-party to a dispute, if it is represented by the same attorney as its principal, and has not made a separate claim against any party.


• Time Schedules:  the rules include a schedule linking time frames to claim amounts.


• The time frames from filing to award range from 120 to 360 days – the time frame increases with the claim amount.


• Mandatory Administrative Conference: within 3 days of filing the Demand or Submission for arbitration, a mandatory Administrative Conference takes place to expedite the proceedings


• Mandatory Meet and Confer Conference:  within 14 days of the Administrative Conference, the parties must participate in a Meet and Confer Conference to select an arbitrator; hearing time, place and date; number of hearing days; and determine necessary discovery.


• Limits on Time Extensions beyond Schedule Time Frames: extensions beyond the schedule’s time frames are frowned upon – they have to be granted by the arbitrator upon request.


• Limits on Additional Hearing Days: have to be granted by the arbitrator upon request.


• AAA Fees: the rule schedule also links claim amounts to AAA fees.
  
• AAA fees range from $2,500 to $10,000
• Exclusions: arbitrator fees for hearing and study time.


• Maximum Fees: the maximum total fees range from $10,500 (claim of $75,000 –  $250,000), to $52,000 (claim of $1M – $5M). 
• Exclusions: conference calls, travel time, site visits, and post-hearing brief review.


• Expedited Award Time: arbitrators must render their award within 20 days of the hearing.

Arbitration is quickly evolving to mimic traditional litigation; therefore, companies should be aware of these new construction arbitration rules which may help cut arbitration costs and time expended on dispute resolution.


Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP, and the head of its construction law team. Katie can be reached at klipp@berenzweiglaw.com.