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.

Major Court Ruling Protects Subcontractors’ Right to Get Paid

The right of subcontractors to get paid on federal projects is more iron-clad thanks to a recent decision out of the Ninth Circuit Court of Appeals, handed down on April 29, 2014. The decision explains that state law cannot frustrate the federal statute providing subcontractors and other companies an avenue to payment for their work.

The federal law that provides companies and persons with such a remedy is the Miller Act. This Act protects persons who contribute to the performance of a federal construction contract, including subcontractors and those who directly contract with subcontractors, such as sub-subcontractors. Recently, a Ninth Circuit case confirmed that state law cannot bar a contractor’s federal Miller Act lawsuit for payment.

The Miller Act makes general contractors on federal construction projects provide a payment bond “for the protection of all persons supplying labor and material in carrying out the work provided for in the contract.” 40 U.S.C. § 3133(b)(2). Under the Miller Act, any person who has furnished labor or materials for work on a federal construction project, and who has not received full payment within 90 days after their last day of work or furnishing of materials or supplies can bring a civil lawsuit on the project’s payment bond for the amount due at the time the lawsuit is filed. 40 U.S.C. § 3133(b)(1).

The federal Miller Act is remedial in nature, and the Supreme Court has confirmed that its rights and remedies cannot be conditioned by state law. The Ninth Circuit recently affirmed this principle in a case of first impression, joining the Supreme Court and the Eighth and Tenth Circuits.

In Technica, LLC v. Carolina Cas. Ins. Co., No. 12-56539 (April 29, 2014), the prime contractor and surety for the federal payment bond at issue tried to argue that Technica, a sub-subcontractor on the federal government project, could not maintain its Miller Act lawsuit because it lacked a California contractor’s license. A California law precluded any unlicensed contractor from filing a lawsuit to collect for unpaid services, but the Technica Court held that the California law could not limit Technica’s rights under the federal Miller Act.

While many construction laws have strict time limits and procedural requirements, the Technica Court made it clear that state laws attempting to limit a claimant’s rights and remedies under the federal Miller Act will be struck down. The construction lawteam at Berenzweig Leonard has experience navigating the complexities of the federal Miller Act and its intersection with local state laws.

Katie Lipp is an attorney with the Washington, DC regionalbusiness law firm Berenzweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.