AAA Trap: What Rules Apply?

It’s not uncommon for companies to use an arbitration provision in their contracts to resolve disputes as an attempt to control costs. Many cite to the pending rules of the American Arbitration Association or AAA. Depending on whether your case is a “Large, Complex” case (i.e., your claims are at least $500,000), you might not have as much structure as you may desire to govern the handling of your dispute, thereby causing uncertainty and potentially driving up the cost. In the case of Large, Complex matters, the arbiter is granted more deference in establishing the discovery to be exchanged and depositions to be conducted.  In smaller matters, however, there is an argument that the arbiter does not have as much discretion.  More importantly, nowhere does it mention what procedural rules and limitations apply. For example, how many interrogatories or depositions will be permitted? What is reasonable notice for a deposition to occur? Normally, applicable state or federal rules of civil procedure  would provide a framework to answer these questions.  However, they don’t necessarily apply in arbitration unless specifically called out in the arbitration provision. This uncertainty can cause disputes between the parties, thereby driving up the cost.  Depending on which side of the dispute your company is on, you may or may not want to have extensive discovery to assist you with your case.  So, if you want more certainty, make sure to spell out what rules of civil procedure should apply in the event of arbitration.

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