New AAA Commercial Rules

AAA doesn’t revise its rules very often.  The last revision of its Commercial Rules was in October of 2013.  So, the new rules, effective September 1, 2022, are worth noticing.  To get the rules and AAA comments on changes, go to adr.org.

The rules will, by and large, still look familiar to those who have been working with them over the years.  And a discussion of rule changes is bound to be a little tedious.  But these changes are important, so let’s give them a quick one-over. 

Expedited Procedures and Large, Complex Cases

To increase efficiency, AAA categorizes cases by size, providing different procedures for smaller and larger cases.  The upper limit for expedited cases has been increased from $75,000 to $100,000. Those cases have shorter schedules and rules that limit motions and discovery. Rule 1(b).  In fact, Rule E-5 now prohibits discovery or motions in expedited cases unless the arbitrator determines good cause has been shown to allow them.

Large Complex Cases allow additional procedures appropriate to larger disputes.  The threshold for these cases has been increased from $500,000 to $1 million. Rule 1(c). And now the value at which a panel of three arbitrators is appointed has been increased from $1 million to $3 million.  Rule L-2(a). Of course, the parties may still agree to more or fewer arbitrators.  Rule 17.

An administrative review counsel has been formed to address issues arising in large, complex cases.  These include (1) challenges to appointment or continuing service of arbitrators, (2) locale of proceedings, and (3) whether filing requirements for initiating proceedings have been met.  Rule 2(d).

You may want to have a look at further discussion of the benefit naming an administration organization such as AAA in your arbitration agreement in my book, Arbitrating Patent Disputes: A Practical Guide (ABA).  The discussion in the book applies to all commercial arbitrations, as do many of the areas discussed.

Consolidation and joinder

Over the years, there have been many requests for consolidation of arbitrations and joinder of parties.  Often it will be more efficient to have cases considered together or to gather all parties involved in a dispute in one arbitration. 

The new rules provide that a party may request to consolidate existing arbitrations or to join parties to an ongoing arbitration.  The AAA can have the arbitrator in the first filed case determine whether consolidate cases, or it can appoint a “consolidation arbitrator,” who has authority to consider and rule on a consolidation request.  In determining whether to grant consolidation, the deciding arbitrator is to take into account: a) the terms and compatibility of the agreements to arbitrate, b) applicable law, c) the timeliness of the request to consolidate and the progress already made in the arbitrations, d) whether the arbitrations raise common issues of law and/or fact, and e) whether consolidation of the arbitrations would serve the interests of justice and efficiency.  Rule 8(a).

As to joinder of parties, if the existing parties and parties to be joined do not agree to joining an arbitration, the arbitrator already serving can determine whether to allow joinder.  If an arbitrator has not yet been appointed, AAA may appoint an arbitrator for the sole purpose of determining whether or not the joinder should be ordered.  Rule 8(b).

Separate arbitrators appointed to address joinder and consolidation may also be called on to make decisions about previously appointed arbitrators and related matters. 

Zooming into the 21st Century

We all learned a lot about the use of technology to save time and money during the Covid crisis.  Many of us relied heavily on technology to keep cases moving and to save time and money. And many of us were at first surprised at just how well Zoom and similar platforms worked for arbitration hearings. 

AAA earlier interpreted its rules to allow use of such technology.  But, based on favorable experiences most of us had, the new rules explicitly allow use of such technology to hold hearings.   See Rules 22, 25, 33 and E-7.

Discouraging unproductive motions

At one time, there was a question whether dispositive motions were allowed in arbitration. But AAA’s revision of the Commercial Rules in 2013 specifically allowed them. But they could be brought only with permission and only after an arbitrator decided they were likely to succeed and dispose of or narrow the issues in the case. 

While motions can save time and money by eliminating meritless claims, motions in general tend to increase the expense of arbitration.  The new rules now require the arbitrator to consider the time and cost in briefing dispositive motions when deciding whether to allow parties to bring them.  The arbitrator may assess fees and costs as part of a decision on a dispositive motion.   Rule 34.

As noted, in expedited cases, no motion of any sort can be brought without showing good cause and the arbitrator’s permission.  Rule E-5.

Emergency relief

The Commercial Rules continue to provide for emergency relief, called “emergency measures of protection.”  This is similar to a TRO or Preliminary injunction in court.  On an expedited basis, a party can apply for appointment of an emergency arbitrator to provide emergency relief. 

But the new rules exclude cases administrated under expedited procedures from this program.  Rule 39(a).

The emergency arbitrator may also consider whether a request for emergency relief was brought in good faith when allocating costs. 

This rule appears to be directed to keeping expenses down in smaller cases and in discouraging parties from bringing requests for emergency relief merely to obtain a strategic advantage.

Keeping it confidential

Arbitrators have long been required to keep arbitration matters confidential unless applicable law, the parties agreement, or a court order says otherwise.  New rule 45 makes this explicit.  It also authorizes the arbitrator to issue any confidentiality order necessary for the case, including protecting trade secrets and confidential information.

Electronic signatures.  

An arbitrator can now electronically sign an award unless applicable law won’t allow that.  Rule 48(a).

Modification of award

Arbitrators have always been able to modify awards to correct, clerical, typographical, or computational errors.  This is true under both the Federal Arbitration Act and AAA’s Commercial Rules.  I devoted a chapter of my Arbitrating Patent Disputes book to the topic or modifying awards., if you want further information on that topic.

The AAA recognizes that more reasoned awards are being requested in arbitration these days.  A reasoned award states not just the results, but the reasons why, similar to a trial court decision.  Because of this, arbitrators are now allowed under revised Rule 52(a) to “interpret an award” at the request of a party.  But “interpret” does mean “change.”  Arbitrators are still not allowed to “re-determine the merits of any claim already decided.”  Still, in some cases it may be important to a party to better understand what an arbitrator meant if it is unclear to them.  

Keeping it secure in cyberspace

Arbitration cases are typically administered over the internet, like everything else these days. That, of course, raises security concerns.  AAA already had issued cybersecurity checklists and a best practices guide on cybersecurity. And now the AAA P-2 checklist includes this as a topic for discussion at all preliminary hearings.  Welcome to the 21st century!

Third party funders

Third-party funding of litigation and arbitration has been on the rise in the last few years.  The P-2 checklist now includes whether there is third-party funding and the source.  This could be important to an arbitrator when making disclosures of connections that could raise concerns about impartiality. 

Other rule changes

There have been other changes to the rules including:

·       Incorporating AAA-ICDR’s standards of conduct for parties. Rule 2(c).

·       Clarifying filing requirements and AAA determination whether they have been met.  Rule 4.

·       Fixing the locale of the arbitration.  Rule 12.

·       Limiting the number of strikes a party can use on a list of arbitrators, preventing a party from keeping an arbitrator being appointed by striking them all.  Rule 13.

·       Allowing a party to request a form of record other than a court reporter’s transcript, recognizing advances in technology.  Rule 29.

·       Arbitrators are allowed 7 days after receiving post-hearing submissions to determine whether additional submissions are needed before closing the hearing.  Rule 40.

·       Allowing additional measures an arbitrator may take for nonpayment of administrative fees or deposits for arbitrator’s fees. Rule 59.

What about pending cases

When do these changes apply? That’s the first thing the new rules point out: “These rules and any amendment of them 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®.”  That’s the same thing the 2013 rules said.  So, you will still be under the 2013 rules unless your arbitration was filed on or after September 1, 2022.  You can get the 2013 rules by going to adr.org then finding the Archived Rules.   As noted, some important things have changed, so you will need to be a little ambidextrous for a while if you have cases that were filed before and after the change. 

In summary

As time goes on and issues evolve, the rules change.  AAA has brought the rules up to date with an eye to increasing efficiency and fairness.  Change is always hard, but in this case the changes are well thought-out and should improve the quality of arbitrations going forward.