Mediation of disputes an option to litigation

The mediation of construction disputes is a growth industry, and the reason is obvious: mediation works and it is far better than the alternatives.
August 11, 2010

Construction can be a contentious business. Change order disputes, delay claims, deficient work issues, warranty questions, and payment disagreements are common areas of conflict. Unfortunately, litigation or arbitration often results. Parties quickly learn, however, that trials and hearings are time consuming and expensive. Outcomes are unpredictable, and the risks are sometimes unacceptable.

Increasingly, the construction industry is demanding change. Nowhere is this new reality more evident than in the growing insistence that disputes be mediated.

Simply stated, the mediation of construction disputes is a growth industry, and the reason is obvious: mediation works and it is far better than the alternatives. Construction contracts, including those of the American Institute of Architects, are mandating its use. The American Arbitration Association is actively promoting mediation and maintains a panel of trained mediators. A host of private mediators are emerging and are concentrating on the construction industry.

Here are four things Building Team members should be aware of regarding mediation:

  • If contractors, subcontractors, owners, and architects are going to effectively utilize mediation, they need a clear understanding of the process.

  • They need to know how to select a qualified mediator.

  • They need to appreciate the role of the mediator and the limitations inherent in mediation.

  • Most importantly, they need to recognize what they can do to enhance the possibility of a successful mediation.

Selecting a mediator

Essentially, mediation involves the use of a neutral third party (the mediator) to act as a facilitator of settlement discussions. Unlike an arbitrator, the mediator does not decide the dispute. An experienced mediator will, however, raise questions about the parties' positions and may express opinions about some aspects of the controversy. Good mediators help the parties focus on both the advantages of a compromise resolution as well as the risks and costs associated with failing to reach an agreement.

In selecting a mediator, experience in the construction industry and experience as a mediator should both be weighed. The mediator should have professional training, including the requisite instruction concerning ethical responsibilities of mediators. He or she needs to have good "people skills" with the ability to help "separate the people from the problem." He or she needs to have an understanding of the risks and costs associated with litigation and arbitration in order to help the parties evaluate their alternatives.

Significantly, the mediator needs to know how to ask tough questions and present unpleasant realities while maintaining the confidence of the parties and their attorneys. To a great extent the success of the mediation will hinge upon the skill and ability of the mediator. For that reason alone, the selection process should never be taken lightly.

Once the mediator has been selected, the mediation conference should be scheduled. Typically, the mediation begins with an "opening statement" by each side. Without interruption the parties are allowed to present their view of the dispute. While the attorneys typically make the presentations, the principals are also encouraged to speak if they so desire. Each side may offer "evidence" for review or even present opinions from experts. These presentations help the opposite party understand the position of its adversary, and they help educate the mediator. Often the mediator may ask questions during this phase of the process in order to clarify certain important issues.

After opening statements, the mediator will usually separate the parties and then begin a series of meetings designed to focus on possible solutions to the conflict. Invariably, offers and counteroffers come forward. Discussions with the mediator help the parties and their attorneys analyze the facts relating to the dispute and any controlling legal questions. Risks of possible unfavorable results at trial are explored. The cost and expense of litigation or arbitration are discussed. Slowly, during the course of the process, posturing gives way to a hard appraisal of the case and a sense of realism begins to appear.

Throughout the mediation process the Building Team parties involved can enhance the probability of success by doing the following:

  • Listen carefully to the other side and understand its position. These are critical parts of the process and their value cannot be underestimated.

  • Concentrate on your interests and needs rather than your rights and entitlements.

  • Maintain an open mind and avoid a premature bottom line.

  • Carefully consider not only the direct costs of litigation or arbitration but also the indirect costs, including the management time and energy that will be devoted to the matter if it is not resolved, as well as the "lost opportunity costs" of continuing to devote resources to the dispute.

  • Be patient. Patience is a critical part of the process. Opening offers often bear no relationship to final positions.

  • Don't become discouraged. Mediation requires that the parties (and the mediator) not give up easily. An even, slow process usually works best.

These considerations, and others, can serve as powerful catalysts for compromise and settlement. An experienced mediator will assist the parties in bringing objectivity to the dispute, and will aggressively pursue with them the many advantages of compromise. The mediator also can help remove or control the personal animosity of the parties, which is often a natural by-product of the conflict.

With hard work, determination, and a large dose of patience, the parties and the mediator, more often than not, will find a commonsense solution which works, which leaves both sides somewhat dissatisfied, and which is far better than proceeding to battle.


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