In an effort to meet customers’ needs during tough economic times, the American Arbitration Association (AAA) announced that a new Flexible Fee Schedule, allowing clients to initiate arbitration proceedings at a reduced rate, would be available through May 30, 2010. This pilot program applies to all claims involving the Commercial, International, Employment, and Construction Rules and offers lower initial filing fees and increased flexibility for parties. Both parties can agree to choose the same fee schedule, or each party can individually choose the schedule that is best for them, either the Flexible Fee Schedule for the Standard Fee Schedule.

The Flexible Fee Schedule and the Standard Fee Schedule are very similar. The main difference is that the pilot program has three phases instead of two, consisting of an Initial Filing Fee, a Proceed Fee and a Final Fee. The potential savings of the Flexible Fee Schedule over the Standard Fee Schedule comes at the new Proceed Fee stage. The program’s cost saving benefits kick in with the Proceed Fee only if the parties can mutually agree on an arbitrator without the assistance of the AAA. If the parties are able to work together and select the arbitrator, they will receive a 50% discount on the Proceed Fee. This can result in significant cost savings.

For example, if a client had a $900,000 claim, they could save $2,800 by proceeding under the Flexible Fee Schedule if the parties can agree to pre-select an arbitrator. The non-refundable Initial Filing Fee would be $1,000, and the non-refundable Proceed Fee would be $5,600. However, by selecting the arbitrator together within 90 days of filing the demand, the parties can reduce the Proceed Fee to $2,800, a 50% savings. In comparison, the Standard Fee Schedule would have an initial Filing Fee of $6,200. The Final Fee (Flexible) and Case Service Fee (Standard) are both $2,500, which is due when the hearing is scheduled and is refundable with 24-hours notice. That would bring the total cost under the Flexible Fee Schedule to $6,300, as opposed to $8,700 under the Standard Fee Schedule.

As noted above, while the new option provides greater flexibility and potential cost savings, it only works if the parties can mutually agree on the arbitrator. If not, the AAA will appoint one, and the Flexible Fee Schedule will actually cost more in the end. Thus, if the likelihood of the parties agreeing on an arbitrator is low, and the prospect of early settlement is slim, the Standard Fee Schedule remains preferable.

Visit the AAA’s website, www.adr.org, for complete details and a schedule of the programs’ fees.

To take advantage of the potential savings under the Flexible Fee Schedule, contact one of our Construction attorneys or the Leonard, Street and Deinard attorney with whom you regularly work.  

Go here to view a complete list of our Construction attorneys.