Thursday, July 31, 2008

AAA vs. Home Improvement Contractor Arbitration Program

At one point in time, I would guess that if a contract contained an arbitration clause, it most likely would have included an agreement to use the American Arbitration Association (AAA) for the arbitration itself. Nowadays, AAA has many competitors, but it is still a very popular option for construction contracts. There are pros and cons to choosing arbitration to resolve disputes, but the purpose of this post is to compare two arbitration organizations: AAA and the Massachusetts Home Improvement Contractor Arbitration Program (HIC).

Price: AAA is more expensive. The fees for arbitration are based on the amount in controversy, and the arbitrator is paid by the hour. There is no limit on the amount of time to be spent in arbitration. The HIC program has a fixed price ranging from $450-850.00 depending on the amount in dispute. This fee provides for a half-day arbitration that also includes a site visit if the homeowner so chooses.

Arbitrator: AAA sends out a list of arbitrators to choose from that can be rejected by the parties. The HIC program assigns the arbitrator. As long as the arbitrator has no conflicts, there is no choice (that I know of).

Appealability: AAA arbitrations are binding and final. Generally the only bases for overturning arbitrations are bias of the arbitrator and fraud of the arbitrator. Other states will also consider an appeal for "manifest disregard of the law." HIC arbitrations are appealable to the district or superior court with a new trial. The findings of the arbitrator become evidence in the trial.

Participation: A AAA arbitration can take place without the participation of the other side. The HIC program makes every effort to bring the parties in to arbitrate. Contractors impliedly consent to participate in the HIC arbitration when they register with the state.

Experience of arbitrator: Both organizations offer experienced arbitrators to arbitrate disputes. AAA has a construction panel and the HIC group consists of experienced construction attorneys, engineers, contractors, etc. I am on both panels, and I believe a number of the other arbitrators are as well.

I particularly like the Construction Industry Rules of the AAA. That said, M.G.L. c. 142A (the Home Improvement Contractor Statute) also offers guidelines for the HIC program.

At the end of the day, I would say that AAA is more "high end." The HIC program is intended to help homeowners and contractors to resolve disputes without the participation of attorneys (although many parties to hire attorneys for the process).

What you choose for your contract is up to you. Just make sure you know what you are agreeing to and how that might impact your claim if you end up involved in a dispute.


At 2:13 PM, Blogger Family Fotos said...

Hi Andrea,

Your blog is very informative and helpful. I have just hired a Mold Remediation Contractor to work on my basement. He gave me an estimate of $ 9,250 wherein he estimated 190 Man Hours + Actual Material Costs. This estimate was given in writing in a letter from him where he justified a fixed price of $9,250 he had quoted for the job. However, the actual man hours put in were just 110 hrs. Eventhough the contract says the total fee is $ 9,250, the separate letter he gave me where he justified the price giving the costing analysis with labor hours has significantly higher labor hrs.

Can I dispute with the contractor since his costing estimate is significantly different than the actual hrs he put on the job? The letter and the actual contract signed are two different documents. The actual contract gives the scope and the fee amount as $ 9,250. The separate letter he sent during negotiations had a costing analysis but is not incorporated or referred into the actual contract.

Thank you very much for your advice.

At 9:06 PM, Anonymous Anonymous said...

If you did not sign Know Your Consumer Rights" pamphlet/ Failure to advise a consumer of the presence of the binding arbitration clause or the jury trial waiver clause or to secure the necessary acceptance, rejection or consumer signature as provided in this Section shall render null and void each clause that has not been accepted or rejected and signed by the consumer. If you did not sign the Consumer Rights agreement then You may have a chance in court but why would an Arbitrator judge against his client. He may and can add nominal damages against you. If you must pay AAA fees and contractors fees to start arbortration. You will lose. AAA can make an award using fraud, corruption, and violate rules, laws knowing it will cost you to fight back and even if you have overwhelming evidence of fraud and many violations they will laugh at the money you spent to fight back and say we have immunity even if corruption is proven. Ask AAA if one lies under oath has AAA ever in 80 years charged perjury. If arbitrator fraud can you even get an explanation. If yes who make the decision? The Arbitrator Yes the arbitrator. Just ask

At 8:46 PM, Anonymous Anonymous said...

Home Improvement Contractor arbitration in Massachusetts can award and pay damages through the Guaranty Fund administered through the Office of Consumer Affairs - AAA is not going to pay you any money if the contractor can't.

At 4:26 PM, Anonymous Anonymous said...


We recently received an award in an AAA case filed against a registered contractor. The contractor does not like the award and refuses to pay. We filed for confirmation in court. Their response to our summons was to again complain about the award. What next?

At 10:34 AM, Blogger Marjorie said...

There is no recourse if your arbitrator, or the other side commits fraud. The courts will not overturn an arbitration from state court. The federal courts in the 9th Circuit will if the arbitrator failed to disclose a prior relationship. We need to boycott all arbitration until fraud can be addressed. Go to court, or just move on.

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At 11:51 PM, Anonymous Anonymous said...

We were part of a very large construction project and are still owed $600k. Arbitration was suspended because the customer who is the claimant stopped paying the arbitrator's. What next?

At 1:21 PM, Anonymous Anonymous said...

I currently was ripped off by a contractor working on my house in the amount of $10,300. He ripped my house apart and then when the building dept came down they said he had "grossly" overcharged me! Now I have to hire someone else to put my house back together. He will not even return my calls anymore. He was also working under his fathers license and not even his own (they have the same name). The building dept advised me to file a complaint through the HIC...which I am doing now. Is there any chance of getting my money back? What will happen to this guy? Should I hire an attorney at this point? Help!

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