Tuesday, September 10, 2013

AAA amends the Commercial Arbitration Rules and Mediation Procedures, effective October 1, 2013

Many distribution agreements require mandatory arbitration of disputes and a substantial number falls under the supervision of the American Arbitration Association. AAA arbitration matters arising from Puerto Rico are managed by AAA’s International Center for Dispute Resolution in New York. The procedures for Large, Complex Commercial Disputes incorporated in the AAA’s Commercial Rules apply to claims that meet or exceed $500,000. It goes without saying that the AAA Rules are important to practitioners when drafting arbitration agreements or when litigating disputes governed by the AAA Rules.

The Commercial Arbitration Rules, including procedures for large complex cases have been substantially revised with the changes becoming effective October 1, 2013. The new rules and amendments “shall apply in the form in effect at the time the administrative filing requirements are met for a demand for arbitration or submission agreement received by the AAA.” Apparently, the amendments would not apply retroactively to a pending arbitration, unless the parties consent. Rule 38 (governing emergency measures of protection) applies to arbitration agreements entered after October 1, 2013.

A significant amendment is that, for claims over $75,000, the Rules require mediation under the AAA’s Commercial Mediation Procedures. Any party may unilaterally opt out of the mediation. Unless otherwise provided, the mediation runs concurrently with the arbitration. Unless all parties and the mediator agree, the mediator shall not serve as an arbitrator in the dispute. R-9.

There are new rules governing the preliminary hearings with a checklist of topics to be addressed by the parties and the arbitrator(s). P-1-2.

New rules include the duty of the parties to disclose conflicts with the arbitrator(s) and failure to disclose may constitute a waiver to later object.

Other significant changes include:

Dispositive Motions – guidance is provided on the standards to be applied by arbitrators when considering dispositive motions. R-33. That is, the arbitrator(s) may allow the filing of dispositive motions only upon a determination that the moving party has shown it is likely to succeed and dispose of or narrow the issues. (Author’s Note: allowing the filing of dispositive motions as of right can be inconsistent with a streamlined and cost-effective arbitration process and that may be why the rule does not allow filings as of right. The new standard, however, appears to be similar to the standard for preliminary injunctions but in the context of summary judgment. As it stands, the new rule may invite collateral litigation on the propriety of summary adjudication and may require the filing of dispositive motions for the arbitrator to determine likelihood of success. It remains to be seen how the arbitrator can avoid prejudging the merits of the dispute to decide whether to allow any dispositive motions without the benefit of the motion itself and the opposition).

Emergency relief- formerly existed as optional procedures, but are now included in the Rules themselves. R-37-38.

Greater Arbitrator Control
o over the exchange of information, power to order reasonable document exchange
o with the ability to put boundaries on discovery and e-discovery
o with the power to allocate costs
o with sanction power for abusive or objectionable behavior
o and guidelines for dealing with non-paying parties