American Arbitration Association revises construction rules

By: The VNN Team  //  Arbitration, Consumer News

by Carol Thompson

The American Arbitration Association has revised the rules governing the construction industry, effective July 1, expanding the powers of the arbitrator and may alter traditional assumptions underlying the selection of arbitration as a dispute resolution process for construction projects.

The rules now provide a procedure for emergency relief that may result in more mid-project disputes being taken to arbitration or court, as the new Rule R-39 provides a party can seek emergency relief from either the AAA or a court, without violating the agreement to arbitrate, according to JD Supra Business Advisor. Also, the arbitrator is now expressly provided with the authority to sanction parties for violating his/her orders, and with specific authority to manage the discovery process and enforce compliance.

A new rules states, “Enforcement Powers of the Arbitrator, has been introduced to explicitly provide the arbitrator with the “authority to issue any orders necessary to enforce the provisions of Rules R-23 and R-24 and to otherwise achieve a fair, efficient and economical resolution of the case.” Examples provided include issuance of confidentiality orders to protect confidential information, imposition of electronic search parameters, and allocation of costs of document production. Most importantly, however, Rule R-25 provides that the arbitrator may draw adverse inferences, exclude evidence, and award costs in the event of a party’s ‘willful non-compliance’ with an order of the arbitrator.”

JD Supra Business Advisor also noted another new rule that “allows the arbitrator to entertain motions disposing of ‘all or part of a claim, or narrow[ing] the issues in a case.’”

 

Another new rule is sanctions, whereby the arbitrator now has the authority to “order appropriate sanctions” when a party does not comply with the arbitrator’s orders or the party’s obligations under the rules. Although the rule expressly prohibits entering a default award as a sanction, it allows for sanctions “limit[ing a] party’s participation in the arbitration” and adversely determining issues, provided the order is explained in writing and evidence and argument were submitted.

Arbitration has been under scrutiny since spring when the Consumer Financial Protection Bureau (CFPB) released a lengthy report sharply criticizing the arbitration process.

Since that time, there has been more consumer awareness. The CFPB reported that few were even aware of the arbitration clauses hidden in their consumer contracts, nor did they realize they were giving up their right to take disputes to court.

Image: Flickr/Brian Turner