Gene J. Esshaki, Professional Resolution Experts of Michigan
The American Arbitration Association (“AAA”) recently published new rules governing commercial arbitrations and mediations. The rules are available on-line at: www.adr.org/commercial. The rules apply to all cases filed after October 1, 2013, and make significant changes in the manner in which AAA cases are arbitrated or mediated.
Every attorney involved in the process of AAA arbitration, whether as drafter of commercial documents containing arbitration clauses, litigator, arbitrator or mediator, needs to closely study the new rules since they contain significant changes from the last rules edition in 2009. This space is insufficient to address all the changes, so only a few will be highlighted. Those changes include the following:
• Mandatory Mediation. Under the 2009 rules, in the absence of a provision requiring mediation in the contract giving rise to the dispute, mediation could only occur at the request of one party made to the AAA to invite another party to participate in mediation by voluntary submission. M-2. Under the 2013 rules, in all cases where a claim or counterclaim exceeds $75,000, the parties are required to mediate their dispute at any time during the arbitration, provided, however, that any party to the arbitration may unilaterally opt out upon notification to the AAA and the other parties. R-9.
• Expedited Case Jurisdiction. Under both sets of rules, the jurisdictional limitation for expedited cases is set at $75,000. Under the 2009 rules, where a claim was less than $10,000, exclusive of interest and costs, the dispute was resolved by submission on documents only, absent a motion and determination by the arbitrator that an oral hearing was necessary. E-6. The 2013 rules provide that jurisdiction for submission on documents only is raised to $25,000. E-6.
• Dispositive Motions. The 2013 rules specifically authorize an arbitrator to make rulings upon dispositive motions where the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case. R-33.
• Sanctions. The 2013 rules add a new provision authorizing arbitrators to order appropriate sanctions where a party fails to comply with its obligations under the rules or with an order of the arbitrator. If sanctions are issued, the arbitrator is required to explain the reasons for the sanctions, in writing, and shall require the submission of evidence and legal argument prior to making the award. Default is prohibited as a sanction. R-58.
• Complex Case Discovery. The new rules maintain the jurisdictional limitations for complex cases at claims or counterclaims that exceed $500,000. (Introduction to 2013 rules regarding large, complex cases.) Under the old complex case rules, parties could conduct such discovery as may be agreed upon; provided, that the arbitrator could set limitations on such discovery. Further, at the discretion of the arbitrator and upon good cause shown, the arbitrator could order depositions and interrogatories to persons who may possess information determined by the arbitrator as necessary to a determination of the matter. L-4(c) and (d). Under the 2013 rules, the reference to the parties conducting such discovery as they may agree upon is deleted. Further, the ability of the arbitrator to order depositions can only be used “in exceptional cases.” Finally, there is no reference in the 2013 rules for the issuance of interrogatories to parties or witnesses. L-3. The addition of the language “in exceptional cases” is clearly intended to limit the taking of depositions in AAA arbitrations. Additionally, removing the authorization of the parties to agree upon discovery in advance and deleting any reference to interrogatories are further limitations on discovery that now can occur in matters filed with the AAA.
While the new rules are designed to expedite arbitrations, they may instead result in parties electing not to file before the AAA because litigators no longer have access to critical discovery techniques required to prepare their case for hearings.
As mentioned, a thorough reading of the new rules is advisable for practitioners who draft arbitration clauses, litigators who try arbitration cases and lawyers that act as arbitrators or mediators before the AAA.
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Gene J. Esshaki is a member of Professional Resolution Experts of Michigan. He is a graduate of Wayne State University Law School. Since graduation, he has continuously practiced law in the Detroit metropolitan area, specializing in complex commercial litigation and alternative dispute resolution. He is a neutral arbitrator on the complex case panels of the American Arbitration Association and the International Center for Dispute Resolution. He has an active practice in mediation and is appointed frequently by state and federal judges to mediate some of their most complex commercial cases. He is a member of the American Board of Trial Advocates and a frequent Lecturer for ICLE on ADR topics. He is a founding shareholder in Abbott, Nicholson, Quilter, Esshaki, & Youngblood PC located in Detroit.
