Contractors and subcontractors in the commercial construction industry should consider expedited, or fast track, arbitration clauses in their construction contracts. Expedited arbitrations are meant to be a cost-saving measure for smaller claims and typically involve a shorter schedule, limited or no discovery, and a single arbitrator.
While expedited arbitrations are typically used for smaller claims, these procedures are not limited to smaller projects. Smaller claims can arise on any commercial construction project, especially with subcontractors, suppliers, or other parties with limited scopes on the project.
Both the American Arbitration Association (AAA) and JAMS have developed optional expedited arbitration procedures. However, parties are also free to establish their own procedures or modify the AAA or JAMS rules in their contract. Fast track arbitration provisions can, and usually should, be used in tandem with another dispute resolution clause for larger disputes to ensure that smaller claims use the fast track procedures and that larger, more complex claims use a more robust dispute resolution plan with a discovery procedure.
Fast Track Procedures in AAA Construction Industry Arbitration Rules and Mediation Procedures
Per the new changes in place as of March 1, 2024, the AAA Construction Rules Fast Track Procedures apply to “all two-party cases where no party’s disclosed claim or counterclaim exceeds $150,000.” Parties can choose to opt into or out of these procedures, or to modify AAA’s stock terms.
The Fast Track Procedures provide for arbitration through submission of documents only for cases “where no party’s claim exceeds $25,000, exclusive of interest, attorneys’ fees and arbitration costs,” unless any party requests a hearing or the arbitrator determines that an oral hearing or conference call is necessary. A party can save a substantial amount of money on arbitrator and legal fees on these small claims simply by avoiding a hearing.
The deadlines under the AAA Fast Track Procedures are shorter than the ordinary Construction Arbitration Rules. Answers and counterclaims must be filed within seven calendar days after notice of the filing of the demand in fast track arbitrations, rather than the 14 days in typical arbitrations under the Construction Arbitration Rules. The Fast Track Procedures substantially limit time extensions without extenuating circumstances.
The Fast Track Procedures provide for limited discovery. The parties must (1) exchange copies of all exhibits, affidavits and any other information they intend to submit at the hearing, and (2) identify all witnesses they intend to call at the hearing. Otherwise, there is no discovery except as ordered by the arbitrator in exceptional cases.
Fast track arbitration hearings should not exceed one day and can only be extended for the equivalent of one day. Barring an agreement otherwise, the hearing process must be completed no later than 45 calendar days after initiating the fast track arbitration with the preliminary telephone conference. The arbitrator is required to render an award within 14 days from the date of the end of the hearing or, if oral hearings have been waived, from the due date established for the receipt of the parties’ final statements and proofs.
The ConsensusDocs 200 form actually promotes the AAA Fast Track Procedures. Under Section 12.5.1.2 of the ConsensusDocs 200 form, if a party selects arbitration on a case under the $250,000 cap and does not specify the rules, the parties are opted into the AAA Fast Track Procedures.
JAMS Engineering and Construction Arbitration Rules & Procedures For Expedited Arbitration
Unlike the AAA Fast Track Procedures, the JAMS Expedited Construction Arbitration Rules & Procedures do not establish a monetary value cap or threshold for this procedure to apply to a claim. JAMS is clear that this procedure is applicable only when the parties have agreed to expedited arbitration.
The JAMS Expedited Construction Arbitration Rules & Procedures also establish a one-arbitrator arbitration with specific and time-sensitive rules on the selection of the neutral. JAMS requires a shortened seven-day deadline for answering a notice of claim or responding to a counterclaim.
JAMS also provides for an exchange of information but, unlike the AAA rules, requires that the parties make requests for these documents during the initial telephone conference, typically held among the parties and the arbitrator soon after the arbitration is filed, to discuss the claim. Depositions are not permitted except if a party shows an exceptional need for the deposition and the arbitrator approves. JAMS requires written pre-hearing submissions from the parties providing (1) a witness list, (2) a short description of the anticipated testimony of each witness, and (3) a list of all exhibits intended to be used at the hearing.
Unlike the AAA rules, JAMS does not set a time limit for the length of the hearing or the time limit for when the hearing must be completed. JAMS does require the arbitrator to issue a final award or a partial final award within twenty (20) calendar days after the date of the close of the hearing or, if a hearing has been waived, within twenty (20) calendar days after the receipt by the arbitrator of all materials specified by the parties.
Considerations for Modifications to Fast Track Procedures
Parties are not required to use the AAA or JAMS fast track procedures, but parties can refer to or modify these established procedures when negotiating a contract. For example, parties may want to modify the AAA monetary cap for the “submission of documents only” arbitration from a claim less than $25,000 to a claim less than $50,000. Similarly, the parties may wish for the AAA Fast Track Procedures to apply to claims up to $200,000, rather than the $150,000 amount. Parties may want to use the JAMS written pre-hearing submissions procedure but otherwise apply the AAA deadlines and other applicable procedures.
Fast track arbitrations can reduce the time to obtain an arbitration award and the legal and arbitration fees associated with smaller construction claims. While AAA and JAMS have provided helpful fast track arbitration procedures, parties should consider how best to use these expedited procedures and consider modifying these provisions based on the circumstances of the project.
The author acknowledges and appreciates the significant contributions of Smith, Currie Oles legal intern Cortland Walton, in developing this article.
Smith Currie Oles provides comprehensive legal services to all parts of the construction industry across the nation. Smith Currie lawyers have decades of demonstrated success representing construction and federal government contracting clients “From the Ground Up,” including procurement matters, contract formation and negotiation, project administration, claims prosecution and, when necessary, in litigation and other forms of dispute resolution.
The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.