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Posted on Friday, August 21, 2015

Construction Arbitrators Get New Powers

On July 1, 2015, the American Arbitration Association (AAA) rolled out new rules for the construction industry. Construction arbitrators can now sanction parties and grant emergency relief, among other power expansions.

Sanctions

A construction arbitrator can order sanctions where a party fails to comply with AAA rules or an arbitrator’s order. The arbitrator can also order non-monetary sanctions, such as making an adverse determination against a party or limiting a party’s participation in the arbitration. A party must have an opportunity to respond before a sanction determination, through the submission of evidence and legal argument before a sanction award is made. The sanction award must be explained in writing, and default awards cannot be used under this sanction power.

Emergency Relief

A party can apply for emergency relief before an AAA panel is formed. One day after submitting an emergency relief application an emergency arbitrator is appointed. Not later than two days after this appointment, the arbitrator sets a schedule for consideration of the emergency relief application. If the emergency arbitrator finds that the applicant shows that “immediate and irreparable loss or damage” will occur absent emergency relief, the arbitrator can enter an order granting emergency relief.

Dispositive Motions

Arbitrators can consider written motions disposing of all or part of a claim, or narrowing case issues. This new explicit allowance of dispositive motions is akin to motions to dismiss or motions for summary judgment in traditional litigation.

Mediation

The revised rules provide for a mediation step for cases with claims over $100,000. In these cases, the dispute is automatically tracked for mediation. However, any party can opt-out of the mediation, unless the parties’ contract has a mandatory mediation provision. The mediation takes place concurrently with the arbitration and cannot be used to delay the underlying arbitration proceedings.

Conclusion

Other rule changes include the addition of time frames and filing requirements to the consolidation and joinder process, new preliminary hearing rules, and greater oversight and regulation over pre-hearing document exchange and production. These new expansive powers are welcome additions, because they will allow construction companies involved in arbitration swifter resolutions and more opportunities for interim monetary relief.

Katie Lipp is a Senior Associate Attorney and head of the construction practice at Berenzweig Leonard LLP. She can be reached at klipp@berenzweiglaw.com.  

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