| The construction industry arbitration rules
and mediation procedures of the American Arbitration Association
were last amended effective September 15, 2005. Because these
rules and procedures are often used as a result of an arbitration
provision in a commercial agreement, including agreements
between owners and design professionals, between design professionals
and their subconsultants, between owners and contractors,
and between other parties who have entered into a commercial
transaction, a brief review of the current AAA procedures
may be helpful.
The construction industry rules provide for mediation, as
well as arbitration. However, contract provisions providing
for mediation or arbitration must be in writing in order to
be enforced by a court. Parties may mutually agree to mediation
or arbitration even if they have no written agreement.
Because of the advantages associated with mediation, which
is a nonbinding process, prior to the commencement of arbitration,
which is a binding process, mediation procedures have become
quite popular. The mediator is an impartial facilitator of
negotiations between the parties who are having a dispute.
The mediator will honor requests for confidentiality while
mediating a dispute and will permit the parties to mediate
pursuant to an agreement that provides for confidentiality
of facts and circumstances revealed during mediation. Accordingly,
there is no reason for parties to be reluctant to mediate
out of a concern that information that may harm them might
be disclosed. Courts will honor the confidentiality associated
with the mediation process.
The AAA itself does not act as a mediator or as an arbitrator,
but rather provides the means of choosing mediators and arbitrators.
Many other organizations exist that provide such mediation
and arbitration services, and it is not uncommon to find retired
judges actively engaged in the rendering of mediation and
arbitration services. Many of them advertise their availability.
However, the American Arbitration Association has endeavored
to provide mediation and arbitration services pursuant to
established and published rules in return for the payment
of a filing fee and a case service fee. Copies of the rules
can be obtained on-line from AAA at its website, www.adr.org.
AAA rules are divided into mediation procedures, arbitration
rules for regular track procedures, arbitration rules for
fast track procedures, and arbitration rules for large complex
construction disputes procedures . The National Society of
Professional Engineers and approximately 19 other organizations
participate in the National Construction Dispute Resolutions
Committee, which sponsors arbitration and mediation procedures
specially designed for members.
Mediation procedures cover the subjects of the initiation
of the mediation, the appointment of a mediator, the qualifications
of the mediator, the identification of matters in dispute,
the date, time and place of mediation and the authority of
the mediator. The mediator does not have the authority to
impose a settlement on the parties. Mediators often meet jointly
with the parties and separately with the parties in an effort
to bring about a resolution of the disputes through negotiation.
The mediation may continue until it is successful or until
it is apparent that no success is likely.
AAA arbitration rules cover regular track procedures, fast
track procedures and complex construction procedures. Disputes
involving $75,000 or less are administered under the fast
track procedures, which are designed to provide an economical
and fairly quick conclusion to the dispute. No discovery of
evidence is permitted. Claims or counterclaims exceeding $75,000
are administered under regular track procedures where discovery
is permitted. However, a recent Wisconsin Supreme Court decision
has held that only the discovery provided for in Wisconsin
Statutes dealing with arbitration may be used by an arbitrator.
Since AAA appointed arbitrators have often authorized more
extensive discovery procedures by the parties, there currently
is some uncertainty as to how much discovery authority an
arbitrator has, including an arbitrator appointed from a panel
under the auspices of the American Arbitration Association.
That decision may prompt an expansion of the discovery rules
contained in the AAA procedures for regular and complex construction
cases.
While it is common in court initiated proceedings for multiple
parties to participate in one case, the power to order such
joinder of disputes may be limited by the parties' agreement.
Where there is no agreement, AAA may appoint an arbitrator
for the limited purpose of deciding whether separate arbitration
should be consolidated or joined to permit a fair and complete
outcome.
The parties may mutually agree to the place of the arbitration,
but where no agreement is possible, the AAA will determine
the locale. The AAA appoints arbitrators from its national
roster of arbitrators and the parties have an opportunity
to agree to the identity of the arbitrator or arbitrators.
Normally, one arbitrator is selected by the parties, or a
panel of three arbitrators may be appointed. If the parties
cannot agree on the selection of an arbitrator, AAA will appoint
the arbitrator. Sometimes the agreement itself provides for
the appointment of an identified arbitrator in which case
the agreement will be honored.
An arbitrator must be impartial and independent, and willing
to perform his or her duties with diligence and in good faith.
Arbitrators found acceptable by the parties or appointed by
AAA must sign sworn statements that they have no conflict
with the parties or their witnesses or their attorneys, the
names of whom are disclosed during the arbitration selection
process.
Once appointed, the arbitrator or arbitrators hold a preliminary
hearing to schedule the pre-hearing procedures, including
where permitted, discovery and exchange of documents. A date,
time, and place of hearing is determined. On the date of the
hearing, witnesses give sworn testimony under oath, and the
proceeding may be stenographically reported if the parties
choose to pay the cost.
The proceedings are conducted similarly to a court proceeding,
but the arbitrator has the discretion to vary from the strict
legal procedures applicable to a court proceeding. The arbitrator
determines the admissibility, relevance and materiality of
any evidence offered. The arbitrator is authorized to subpoena
witnesses or documents for the hearing. When the hearing is
concluded, the arbitrator declares it closed and the time
limit in which the arbitrator is required to make the award
commences to run. The award must be made by the arbitrator
no later than 30 days from the date of closing the hearing.
The form of the award may be agreed to by the parties, but
if no agreement is reached, the arbitrator is expected to
provide a concise, written breakdown of the award. Where requested
by the parties, the arbitrator will provide a written explanation
of the award.
In the award, the arbitrator may not only award or deny damages
to a party, but may also assess fees, expenses, and compensation
associated with the arbitration.
The arbitrator is compensated at the rate filed with AAA.
The parties have an opportunity to consider the appropriateness
of the rate at the time the arbitration selection process
is undertaken.
Large, complex construction disputes are defined as claims
or counterclaims involving at least $1,000,000. Such disputes
are heard by three arbitrators. Once again, the arbitrators
must be agreeable to the parties, but if they are unable to
agree, AAA appoints the arbitrators from a large, complex
construction case panel. Proceedings thereafter are similar
to the regular track proceedings.
Under Wisconsin law, an arbitration subject to Wisconsin
law is subject to only limited review by a court. Certain
defects in the process will result in an award being vacated
by the court. Those circumstances include where the award
is procured by corruption, fraud, or undue means, where there
is evidence of partiality or corruption on the part of the
arbitrators, where the arbitrators are guilty of misconduct
in refusing to postpone the hearing upon sufficient cause
shown or refusing to hear evidence pertinent or material to
the controversy, or for any other behavior which prejudices
the right of the parties, or where the arbitrators exceed
their powers or execute them in a substantially imperfect
way so that a final and definite award has not been made.
Where an award is vacated by the court, the court may in
its discretion direct a rehearing in arbitration.
Considering the high cost associated with court proceedings,
arbitration is a reasonable alternative disputes resolution
process. Sometimes, particularly in a large, complex case,
arbitration procedures may be as costly as court procedures.
However, everyone associated with arbitration hopes that arbitration
can accomplish the resolution of disputes more economically
and more timely than court proceedings.
TOP |
