Happy Birthday to You! Happy Birthday to You! Happy Birthday Dear AAA Supplementary Rules! Happy Birthday to you!

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One year ago, the American Arbitration Association implemented new rules to provide an arbitration process that would be more predictable in terms of time and cost. The Supplementary Rules for Fixed Time and Cost Construction Arbitration (“Supplementary Rules”) were established to control:

  1. the maximum time to complete the arbitration;
  2. the number of hearing days the arbitration will run;
  3. the arbitrator costs; and
  4. the AAA administration fees.

How the Rules Work? Of course, being created by the AAA, the Supplementary Rules are intended to be administered by AAA arbitrators. According to the rules, the time to complete the arbitration, the number of hearing days, and AAA fees and arbitrator compensation, are calculated according to the applicable Time/Cost Schedules and are based on the larger of the claim or counterclaim. If you attempt to change the number of hearing days or time frame, the AAA may in its discretion apply the Regular Track or Large, Complex Case Track of the Construction Industry Arbitration Rules.

So What? After you review the Supplementary Rules, you can tell that they are most useful for those cases where there is a distinct issue in dispute and there is not going to be the need for significant discovery.  Here are some of the key components:

  • If the parties’ contract calls for application of the Supplementary Rules, then AAA will administer the case under those rules.
  • If parties agree to an existing dispute want to use the Supplementary Rules, they may commence an arbitration by filing a submission agreement to arbitrate under the Supplementary Rules.
  • A party files a demand for arbitration in accordance with their construction contract, but is limited to 5 pages.
  • The respondent has up to 14 days to answer, which also may not exceed 5 pages.
  • A party has up to 30 days from the filing of a counterclaim to amend its claim or counterclaim.
  • An administrative conference shall take place within three days of filing for arbitration, and within 14 days after the conference, the parties shall meet (either in person or by phone or video conference) and confer.
  • Only one arbitrator shall administer the proceedings. The parties must select the arbitrator, when the hearing will occur, maximum number of days for the hearing, and the extent of discovery.
  • The arbitrator is authorized to amend and approve the discovery plan for the parties. If the parties fail to agree on terms, the Supplementary Rules provide guidance.

Ultimately, the arbitrator must make an award to the parties not more than 20 days from the close of the hearings. The rules provide the form for the award, amount of arbitrator’s compensation, and administrative fees. Fees range from $10,500 to $52,000. The rules also provide for remedies for nonpayment and defaults.

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Questions: Have you used the Supplementary Rules in your construction contracts? Have you arbitrated a case using them?  I’d love to hear some feedback.