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By Dylan B. Spadaccino, Esq.
Arbitration has historically been the preferred method for resolving construction disputes in the United States, as many in the industry have (1) preferred the idea of having complex construction disputes decided by someone with construction-specific experience and expertise, and (2) viewed arbitration as being quicker and more cost-effective than litigation. More recently, however, arbitration has lost some of its reputation as the best method to satisfy the construction industry’s desire for efficient and cost-effective alternative dispute resolution. See Thomas J. Stipanowich, Arbitration and Choice: Taking Charge of the “New Litigation,” 7 DePaul Bus. & Com. L.J. 383 (Spring 2009) (“Despite meaningful efforts to promote better practices and ensure quality among arbitrators and advocates, criticism of American arbitration is at a crescendo”).
In response to some of this recent criticism, on June 15, 2014, the American Arbitration Association (“AAA”) implemented new supplementary rules, in which parties involved in construction disputes will now have the ability to limit the time and cost of arbitration. In conjunction with the National Construction Dispute Resolution Committee, the AAA created Supplementary Rules for Fixed Time and Cost Construction Arbitration (the “Supplementary Rules”) that are intended “to provide an arbitration process that will be predictable in terms of total time and cost.” The Rules “envision the parties and their representatives working in a collaborative manner to move cases along within the required timeframes.” For example, for cases in the $250,000 to $500,000 range, the Supplementary Rules prescribe a maximum of 180 days from filing to award, with no more than three (3) hearing days. Arbitrator compensation for hearing days and study time (limited to 12 hours) is capped at $275 an hour. Administrative fees to the AAA are fixed at $5,000.00
“Parties involved in certain construction dispute cases can now be more certain about the time and cost associated with their arbitration,” says Rodney Toben, AAA Vice President, Construction Division. “We believe the solution responds to many concerns that arbitration costs in terms of dollars and time may have grown unpredictable. We see the new supplementary rules as innovative, reasonable, and clearly defined so that all parties benefit,” M. Toben said. To learn more about the Supplementary Rules, please visit http://go.adr.org/FixedTimeandCost.
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