News from Tesser & Cohen

Latest AAA Rules for the Construction Industry Arbitration & Mediation Proceedings
By: Lee M. Tesser, Esq.

On October 1, 2009, the American Arbitration Association (AAA) enacted revised rules for its Construction Industry Arbitration and Mediation proceedings. There are several that are noteworthy as follows:

R-7 - The AAA has created a special panel of arbitrators familiar with consolidation and joinder disputes to hear disputes governing requests for consolidation of separate arbitrations. Basically, if a party believes that separate arbitration proceedings should be consolidated into one, the AAA will appoint an R-7 arbitrator to hear the dispute and make a decision with regard to that request. The R-7 arbitrator cannot serve as an arbitrator in the consolidated arbitration proceeding. In the construction arena, this is an important change as it is often the case that several arbitrations may be proceeding simultaneously involving Owner/GC; GC/Sub; and/or Owner/Architect.
R-10 - An arbitrator may serve as a mediator during an arbitration proceeding so long as it is requested by all the parties and the arbitrator consents to do so. Also, unless the parties agree otherwise or by decision of the arbitrator, an arbitration proceeding is not stayed during the pendency of the mediation.
R-36 - Interim measures: While not a significant change, it is important to note that an arbitrator under AAA Rules has the authority to "take whatever interim measures he or she deems necessary, including injunctive relief and measures for the protection and conservation of property and disposition of perishable goods. Such interim measures may be taken in the form of an Interim Award and the arbitrator may require security for the cost of such measures". Paragraph D was added to allow the arbitrator to apportion costs in either the Interim Award or Final Award associated with the application for any interim relief.
R-56 - Remedies for Non-Payment: The failure of one party to properly pay the arbitrator's compensation has long been a problem. The AAA in an effort to ensure that each party fulfills its payment obligations has amended the rule to add Paragraph D, which states that "the arbitrator may suspend the arbitration if full payments have not been received." Further, if the fees remain unpaid after a determination to suspend an arbitration due to non-payment, the arbitrator has the authority to terminate the proceedings. Such an order shall be in writing and signed by the arbitrator.

The AAA continues to make efforts to improve its administration of arbitrations to the benefit of the parties. One excellent example is the AAA's enactment of its "Fast Track Procedures". Under these rules, claims under $75,000.00 will receive an arbitrator, hearing, and a binding decision within sixty (60) days of the initial conference call. Compared to the Court system, that is a pretty good deal.