by Andrew Flake
Apple held its annual product launch this week, announcing a new iPhone and other updated products with the company’s usual marketing panache. Less heralded, though perhaps more relevant to those of us in the dispute resolution world, was another launch: After a two-year process of internal review, and with copious input from stakeholders, the AAA has released its amended Arbitration Rules and Mediation procedures. revised its commercial arbitration rules.
I briefly considered how I might dramatize these changes, à la the late Steve Jobs, but the revisions are largely enhancements, as opposed to major changes or innovations. I decided a concise summary would be preferable.
So what are the changes? While I would commend you to review the full set of rules as amended, particularly before you file a new case, I redlined the revisions, and here are some items that caught my eye:
Clarified Procedures for Consolidation and Joinder: In a welcome addition, the Rules spell out the timing and process for party joinder and the consolidation of related cases. How to add parties, and how to treat and consolidate related arbitrations, were previously decisions made ad hoc by the arbitrator in the case. Now, the timing is spelled out, and after a request to consolidate or is filed, the AAA can assign decision to the arbitrator in the first-filed case, or use a “consolidation arbitrator,” selected solely to rule on the request. The same single-purpose appointment can also be used for joinder.
The arbitrator ruling on the joinder or consolidation request can also decide whether any previously-appointed arbitrator will remain, and as necessary, determine the process for filling any vacancies. Relevant to both the consolidation decision, and to this later decision, will be what the respective arbitration agreements provide. If consolidation is approved, it can be for all purposes in the case, or only for limited purposes, for example, only pre-hearing status and discovery matters.
Considering Efficiency in connection with Dispositive Motions: Usefully, as part of the decision whether to allow a dispositive motion, Rule 34(b) now requires the arbitrator to consider “the time and cost associated with the briefing” of the motion. Previously the only explicit criteria were the likelihood of a proposed motion’s success and its impact on issues in the case.
Consideration at preliminary hearing of third-party funding: Although the topics to be discussed at preliminary hearing remain the subject of case-specific determination by the parties and the arbitrator, AAA suggests that certain topics be discussed in its checklists. The pre-hearing checklist now includes the existence and identity of any third-party funding.
Tracking a judicial trend in required disclosure of third-party funding, this addition strikes me as salutary from an arbitrator disclosure perspective. Litigation and arbitration funding is increasingly a feature in the dispute resolution domain, so there may be cases when it is appropriate to consider whether a non-party “has undertaken to pay or to contribute to the cost of a party’s participation in the arbitration,” or “has an economic interest in the outcome of the arbitration.”
Other more routine, but nonetheless important, changes include:
- Enumerating the means by which an arbitration demand or other case-initiating documents may be served to include methods authorized by the law of the state where the party to be served resides, or by email — but only if the party to be served agrees to e-mail service. My sense here is that, in too many instances, parties were contesting the accuracy or appropriateness of an email used for service.
- Not surprisingly, making explicit the arbitrator’s ability to decide on the use of video, audio, or other electronic means, in hearings and, under R. 33, in the parties’ presentation of evidence. Remote witness testimony, already a common feature of our hearings, would be included here, provided always that an opportunity for cross-examination is available.
- Including a general requirement that the AAA and the arbitrator maintain all matters related to the arbitration or the award as confidential. This memorializes what I have observed is already the practice of most of us who regularly arbitrate for parties.
- Making clear, under R. 39 concerning requests for emergency, interim relief, that the arbitrator “may” consider, in deciding on costs allocation, “whether the request for emergency relief was made in good faith.”
- Allowing AAA, in its discretion, to limit the number of strikes parties may exercise as to proposed neutrals, presumably to avoid elimination of all eligible proposed arbitrators
- Including what is basically a rule of construction, providing that references in the arbitration agreement to “the arbitrator” in the singular, or “The arbitrators” in the plural, without a more, will not be deemed a specification of number of panel members. Thus, as a drafting matter, parties preferring a tribunal size different than the Rules’ defaults should specify that preference (e.g., “a single arbitrator” or “three arbitrators”)
- For expedited matters, limiting hearing days to at most two, with one the default absent a showing of good cause.
- Increasing the amount in controversy ceiling, for use of the Expedited Procedures, from $75,000 to $100,000; and raising the floor for use of the Large Complex Case Procedures from $500,000 to $1,000,000 ($3,000,000 in the case of a counterclaim).
So there you have it. These changes and all others in the amended Rules will apply to cases initiated on or after September 1, 2022. Give them a read, and as you do, know that they reflect a great deal of deliberation, work, and input by AAA, by those of us who serve as arbitrators, and by the lawyers and parties who use the commercial ADR system.
And there is, I should mention, one more thing… The new Rule 52 permits a party to request that the arbitrator “interpret” the award! This one is pretty important. Although every good arbitrator wants to deliver a final award that is not just correct and complete, but clear, there are cases, especially in complex disputes, where a party receiving the award may have a question about some aspect of the award, i.e., what something means.
This kind of request is different than a request to issue new or different relief — under the doctrine of functus officio, the arbitrator’s powers terminate after she issues her award –and the new rules makes this distinction. While a party can request, through the AAA, that the arbitrator “interpret the award,” she “is not empowered to re-determine the merits of any claim already decided.”
You can view the full set of revised Rules here.