Patrick McKnight | Forum on Construction Law
The American Arbitration Association (“AAA”) recently released an important new document, “Discovery Best Practices for Construction Arbitration: Recommendations for AAA Construction Advocates and Arbitrators.” These best practices are intended to “educate advocates and arbitrators to better manage pre-hearing exchanges of information in construction disputes.”
Generally, the seven-page document seeks to promote the speed and efficiency of resolving construction disputes through arbitration. While observing that construction disputes are often very document-intensive, the best practices note that the format of arbitration does not allow for unlimited discovery:
Therefore, arbitrators should, consistent with their authority, manage arbitration proceedings to achieve the goal of providing a simpler, less expensive and more expeditious process, and discovery decisions should be proportional to the size and complexity of the matter being heard. The arbitrator should stress how, due to the number of documents, discovery in a construction dispute is different than in a typical commercial dispute.
These best practices were developed in conjunction with the AAA’s National Construction Dispute Resolution Committee (“NCDRC”), advocates, arbitrators and construction industry professionals. The guidance and suggestions in the best practices are recommended for use in all construction cases administered by the AAA under the Construction Industry Arbitration Rules or Commercial Arbitration Rules. It is important to note that these best practices are in no way intended to replace the Rules.
The best practices suggest filing a detailed statement of claims and defenses as early as possible. This can help narrow the focus of discovery, identify critical documents, and avoid disputes. Whenever possible, “the scope of documents should be narrowly tailored and proportionate to the disputes at hand.” Further, a scheduling order can be an effective tool to establish deadlines and avoid delays.
The best practices also address the growing importance of e-discovery. Today’s construction disputes commonly involve a high-volume of emails, drawings, submittals, and other electronically stored information (“ESI”). The new guidance suggests addressing e-discovery during the pre-hearing conference. The size and complexity of the dispute should be the driver of the ESI protocol. In situations where the cost to produce electronic documents appears excessive, arbitrators are encouraged to consider requiring the party demanding that production to pay for the costs.
Site inspections can play an important role in resolving construction disputes. They can also be expensive and time-consuming. The best practices suggest arbitrators carefully weigh the benefits of agreeing to a site inspection and establish a protocol in advance. Likewise, arbitrators are encouraged to consult photographs of the site prior to a visit to help become familiar with the project. Any tour of the project site should be conducted without attorney commentary.
Disputes and Sanctions
Discovery disputes happen. Parties should make a good-faith effort to meet and confer to resolve these disagreements. If these consultations are unsuccessful, arbitrators are encouraged to schedule a telephonic conference. Hopefully many of these disputes can be precluded from arising in the first place through appropriate planning and communication.
It is important to remember that arbitrators have the authority to order sanctions. Courts may uphold these sanctions when sufficient cause exists. Arbitrators can choose to order sanctions either immediately at the time of the action, or they can choose to wait to do so in the final award. However, precluding proof should only be considered in the most extreme circumstances.
The new AAA guidance suggest that depositions be used only when there are clear and compelling grounds to demonstrate they will contribute to the speed and efficiency of the arbitration process.
Third-party discovery can be a complicated and thorny issue in an AAA arbitration. Courts have reached different conclusions as to whether Article 7 of the Federal Arbitration Act allows for an arbitrator to subpoena a third-party to produce documents prior to a hearing. In any event, third-party discovery should be limited to the largest, most complex cases.
These best practices seek to balance the almost inherently complex nature of construction disputes with the efficiency offered by AAA arbitration. This new document is a valuable resource for arbitrators, attorneys, and construction professionals. The summary contained in this article discussed only a few of the highlights and is not meant as a comprehensive survey.
Parties interested in more information on AAA construction arbitration rules and procedures are encouraged to visit adr.org/construction.