New AAA Construction Rules Expand Arbitrator Powers


The American Arbitration Association (AAA) recently revised its Construction Industry Arbitration Rules and Mediation Procedures, effective July 1, 2015. Some changes are relatively modest, but others expand the powers of the arbitrator and may alter traditional assumptions underlying the selection of arbitration as a dispute resolution process for construction projects.

AAA’s website provides a brief overview of the revisions, along with a summary by Rule.  Briefly, thought, some of the revisions provide arbitrators the necessary teeth to enforce their orders:  Rule R-25 permits the arbitrator to draw adverse inferences, exclude evidence, and award costs in the event of a party’s “willful non-compliance” with an order of the arbitrator concerning case management or discovery, and Rule R-60 provides the arbitrator with the authority to sanction a party for failure to comply with its obligations under the Rules or the arbitrator’s orders, including by “limit[ing a] party’s participation in the arbitration” and adversely determining issues.

The Rules also now include a mechanism for appointment of an emergency arbitrator to grant emergency relief:  Rule R-39 provides that the AAA will appoint an arbitrator for such purposes within one business day for contracts entered into after the effective date of the Rules.  It remains to be seen how parties to construction contracts will utilize this provision, but there is at least the potential for mid-project side-trips to arbitration.

Other changes, such as those to Rules R-23 and R-24, merely provide more detailed guidance to the arbitrator on management of the proceedings in general and discovery in specific (which begins to look a lot more like civil litigation discovery, at least as far as document discovery goes).

Since some of these changes are significant, if you are contemplating entering a contract specifying these Rules for arbitration (or if you are currently party to a contract that specifies use of the Rules in effect at the time of the dispute), please see Pillsbury’s Client Alert reviewing the latest changes.