Many contractors and subcontractors fear the unpredictable costs of litigating their claims. This is especially the case if the claim is small. In some instances, the uncertainty of legal fees and consultant costs can cause them to forego asserting their claims altogether. They may not realize, however, that if their contract incorporates the AAA Construction Industry Arbitration Rules (“AAA Rules”), they may have an arbitration provision that promotes prompt and cost-efficient claims resolution.
Depending on the characteristics of a claim, the AAA Construction Industry Arbitration Rules establish four procedural tracks. For smaller claims, the Fast Track Procedure is an extremely efficient manner of resolving claims. The Fact Track Procedure is available where no claim or counterclaim exceeds $75,000 (excluding interest, attorney fees, and costs).
To maintain efficiency, the Fast Track Procedure establishes limits on the schedule, hearings, and discovery. The schedule is limited in a number of ways. The defendant’s answer is generally due within seven (7) calendar days after notice of the filing of the demand is sent by AAA. While the parties can increase or decrease their claim or counterclaim (if any), they must do so before seven (7) days prior to the first scheduled hearing. After the arbitrator is appointed, a new or different claims or counterclaims may not be submitted without the arbitrator’s consent. Even the selection of the arbitrator is conducted in a summarized procedure.
Within ten (10) days after confirming the arbitrator, the parties will hold a preliminary telephone management hearing. The arbitrator will set the time limits and procedures so that the arbitration and hearing will be completed within the summarized timeline.
No or Limited Discovery
Generally, no discovery is permitted under the Fast Track Procedure. The arbitrator has the authority, however, to permit discovery upon the request of a party in exceptional circumstances. In any event, the parties must exchange all exhibits, affidavits, and other information they intend to submit at the hearing, and identify all witnesses to be called, no later than five (5) business days prior to the arbitration hearing.
Expedited Hearing and Award
The arbitration hearing must be held no later than 45 calendar days after the preliminary telephone conference, unless the parties and the arbitrator agree otherwise.
The hearing itself is also simplified. It is limited to one day, but for good cause shown, the arbitrator may schedule one additional day. If extended time is granted, it may be conducted by telephone conference or other means. Moreover, where the matter involves a claim of $10,000 or less, the arbitration will be decided solely on the basis of submitted documents, and no hearing will be permitted.
An award will be issued no more than 14 calendar days after completion of the hearing.
There are a few exceptions that will render the Fast Track Procedure inapplicable. If a claim or counterclaim is amended to exceed $75,000, the case will be conducted under other procedures, unless all parties agree otherwise. The arbitrator may reassign the matter to another procedure (e.g., Regular Track Procedure or Large Complex Case Procedures) if the case is to be decided by more than one arbitrator, or if the parties agree to vary the procedures to be inconsistent with the Fast Track Procedure (e.g., agreement to more than a 1-day hearing).
Contractors and subcontractors (at any tier) should check their contracts to see if they incorporate the AAA Rules. If so, the Fast Track Procedure may apply to smaller claims. In that case, contractors and subcontractors should consider taking advantage of the expedited and efficient procedures for pursuing claims under the AAA’s Fast Track Procedure.