Recent changes in American Arbitration Association Rules

New Flexible Fee Schedule. The AAA is adopting a new alternate “Flexible” fee schedule, to make it easier to initiate arbitration than under the normal Standard fee schedule. There are three unique aspects to this new alternate schedule. First, the initial Flexible filing fee is considerably lower than the Standard initial filing fee, but after a period of 90 days, an additional “Proceed” fee will be due, and before the hearing a “Final” fee is due. If the Flexible option is chosen, however, the total of these three fees will be somewhat higher than the Standard initial fee and final case service fee. Second, either party can elect to use the Flexible fee schedule; thus, one party can use the Flexible schedule, and the other party can use the Standard schedule if it wishes. Three, if the parties mutually select and appoint the arbitrator(s), the Proceed fee is cut in half, thus resulting in a total fee considerably less than the total of the Standard fees. The Flexible fee schedule will be in effect until at least May 20, 2010.

Pending Construction Arbitration Rules Changes. The AAA and NCDRC are considering some changes to the Construction Arbitration Rule, including the following possible changes:

1. Raising the threshold for Large Complex cases to $1,000,000.

2. Expressly permitting the parties to elect to use any track of the rules.

3. Modification of the R-7 consolidation rules.

4. Describing items that arbitrators might cover in preliminary telephone hearings.

5. Discouraging exceptions to the no-discovery rule.

6. Allowing the arbitrator to overrule party agreements on extension of time.

7. Adding remedies for non-payment.

8. Requiring that at least one member of a three-member panel be a construction lawyer and another be an industry professional, unless the parties agree otherwise.

The revised rules are expected to be finalized and published on the AAA website before July 1. The AAA expects to annotate the new Rules with links to explanatory and “how to” material that will be of help to users of the Rules.

Continuing Concerns. The AAA continues to be concerned about the impact of discovery on arbitrations and about increasing the use of industry professionals (non-lawyers) on panels. They also plan to review the qualifications of each of the 1900 members of their Construction Arbitration Panel.

Generally, while the AAA experienced a financial loss last year, it was the result of investment losses (join the club) and not operations. Arbitration filings have generally remained steady, and mediation filings have increased.

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