March 21, 2024 Article

Important Updates to American Arbitration Association Construction Industry Rules and Mediation Procedures

The American Arbitration Association (AAA) updated its Construction Industry Rules and Mediation procedures (AAA Rules), effective March 1, 2024, marking the first update since 2015. The updates are important because the AAA Rules are commonly used in construction contracts, including standard AIA contracts.

The updated rules reflect certain technological advances. In particular, preliminary hearings may now be held by videoconference, telephone or in person. Other updates include the following related to Regular, Fast Track and Complex proceedings:

Regular Track Procedures

These apply to most construction disputes.

  • Appointment of Arbitrators:
    • Arbitrators must be on the AAA’s National Roster of Arbitrators unless otherwise agreed or if the AAA determines the requested expertise is lacking among roster members.
    • The AAA now has the authority to limit party strikes to arbitrators.
    • Emergency arbitrator requests must be fulfilled within three days of the request.
  • Motions: Arbitrators must consider the cost of preparing and opposing a dispositive motion when deciding whether to allow a party to file such a motion.
  • Consolidation and Joinder: Requests for consolidation and joinder must be submitted before the Merits Arbitrator is appointed, unless good cause is shown, and prejudice will result if not granted. Failure to object to a joinder request is a waiver of any objection.
  • Clarification of Awards: Arbitrators can clarify awards to correct clerical, technical, or computational errors.
  • Sanctions: Arbitrators may impose sanctions after providing the sanctioned party an opportunity to respond before issuing the sanctions order.
  • Confidentiality: Arbitrators are required by Rule to keep all materials confidential and can issue confidentiality orders.

Fast Track Procedures

The Fast Track provides streamlined proceedings for cases involving fewer parties and lower damages.

  • New Limit for Claims and Counterclaims: Claims cannot exceed $150,000 (previously $100,000).
  • Discovery Limitations: Discovery is restricted to extraordinary circumstances and allowing it may lead to removal from the Fast Track Procedures.
  • Limitations on Motions: Motions are permitted unless a party can show “good cause.”
  • Awards are standard (i.e. generally conclusory) unless parties request otherwise, potentially affecting eligibility for Fast Track Status.

Complex Proceedings

The Threshold for a three-arbitrator panel has been raised to $3,000,000 (previously $1,000,000).

Construction professionals should consider these updates when drafting and negotiating dispute resolution clauses in construction projects. These changes are likely to influence decisions on whether arbitration is suitable and how parties pursue or defend claims in arbitration.

Access the amended AAA Rules here.