Tag Archives: arbitration

With Construction, Compromise is Always an Option (guest post)

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Chris Hill, attorney, construction law.

Chris Hill, attorney, construction law.

Today, we have a guest post from one of our favorite  Virginia lawyers- Chris Hill. 

As always, he knocks it out of the park with another worthy post explaining why biting the bullet and settling your claim sometimes is the way to go. 

Here is Chris’s official bio:  Christopher G. Hill, LEED AP is Virginia Supreme Court certified mediator, construction lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC.  Chris authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.  His practice concentrates on mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals. 

Without further adieu, take it away Chris!

As always, thanks to Melissa for letting a Blue Devil invade her blog. I always enjoy the opportunity. Now, on with the post.

I know, you read a title like this and your first thought is “I’ll never have to compromise, if I get into trouble, I’ll be in the right!” You followed your friendly construction attorney’s advice, drafted a great contract (using a “belt and suspenders” approach) and do good work! What could possibly go wrong?

Well, among other things: 1. An owner may not pay the general contractor that you subcontracted to, 2. Weather could cause delays beyond your control, or 3. (yes, I’ll say it here) the architect may not like your work and what you did with his or her masterpiece of design. [Editor’s note: architectural plans exist for a reason, people!]. These three were just off the top of my head. Given that “Murphy was an optimist,” there are many other things totally beyond your control as a construction pro that can and likely will go wrong. The question is how to make the best of that bad situation.

Lets skip the easy points and head straight for the title of the post. You’ve already done all you can to “fix” the situation: increased manpower, shuffled your workforce, and gotten the work done as soon as possible. The party that should be paying you has decided not to do so. You decide that you need to do something besides beg for your money.

At this point you have a couple of options (not mutually exclusive): Mediation or Litigation/Arbitration. The second option is the “nuclear” option and to be used as a last resort. Remember, this is a zero sum game with no winners once the lawyers start filing papers. You will spend money that you didn’t plan to spend and take focus away from your business.

The first option is where you compromise. While you may not get the result that you may get by going to the mat in litigation, namely a judgment for everything that you would have gotten had you been paid in full, mediation has its advantages.

What are they? 1. The big one is control. With litigation or arbitration, you are turning your fate (and possibly the fate of your business) over to a third party. In mediation, you get some control and get to creatively determine the best way to solve the problem. 2. After anywhere from a few hours to a day, the dispute is resolved. Compare this to the several months to several years of litigation and you see where this would help. 3. It cuts off the attorney fee spigot much sooner than the alternative. While I as a construction attorney don’t mind being paid, you can’t run a business profitably with a monthly legal bill.

While a compromise is never the ideal, it is in most cases far better than the alternative.

Thanks, Chris!  It is a tough message to hear when you are in the thick of battle, proving that you are right, but the economic realities should always be considered before starting down the long path toward a court trial. 

Now it is your turn.  Have you settled or mediated a claim purely to put the economic pain of litigation to rest?  Do you regret that decision, or feel it was for the best?  Share in the comment section below.

PS:  Final reminder to VOTE for this blog in the “Best Legal Blog” competition. TODAY IS THE LAST DAY!  It takes, literally, about 1 second, and does not require your name, email, or anything else.  (It tracks IP numbers only).  THANK YOU for your vote!!!!!

 

Can’t we all just get along? Mediation and settlement of the construction lawsuit (Law & Order: Hard Hat files Part 7)

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meeting around tableToday, part 7 of our series on the Construction Lawsuit, Law & Order: Hard Hat files.

At some point during the lawsuit (usually, but not always, after expert reports are produced), your lawyer may tell you the case is going to mediation.  In fact, in North Carolina, all Superior Court cases are ordered into mediation, though the timing is usually left to the lawyers.

What is mediation?

Quite simply, mediation is a process in which the parties, their insurance representatives, and their lawyers get together to discuss trying to settle the case.  The process is usually fairly informal, fast, and, often effective.

How is mediation different from arbitration?

In arbitration, you present your case to a one or three person “panel” of arbitrators.  Witnesses are sworn in, evidence is presented, and, ultimately, the arbitrator(s) decide who wins, who loses, and what amount of damages should be paid.

In mediation, however, there is no “decision maker,” and the only way your case will be resolved is if you agree to having it resolved.  In other words, you have much more control over the outcome.

Technically, how does a mediation work?

Mediations are all unique, but in general, most start out with a “general session” in a large conference room in which all parties (lawyer, parties to the lawsuit, and insurance reps) are present.  The mediator, usually another lawyer who is not involved in the case, will present opening remarks, explaining that he/she is not there to decide anything, the ground rules for the day, and how he handles confidential information.

Then, the mediator asks each lawyer to state his case.  The party who brought the lawsuit always goes first, and they state how the project started, why they sued, and why they believe they are entitled to damages.  This can range from a 5 minute speech from their lawyer to a full-blown 2 hour multi-media (read: powerpoint) presentation, including remarks from retained experts.  I’ve seen both, and everything in between.

Following the plaintiff’s presentation, the other parties will be asked to state their case (i.e., their defense, and any counterclaims), and why they believe they will prevail at trial.

After all of the lawyers have had their say, the mediator will generally allow any parties to speak if they wish to.  Discuss this with your lawyer ahead of time, but the default is to simply bite your tongue, keep your mouth shut, and wait until “private session” to have your say.  No architect or engineer ever made things better by arguing during the opening general session.

What are these “private sessions” of mediation all about?

After the opening session, the mediator will divide the parties into different conference rooms.  Sometimes, parties whose interests are closely aligned may be in the same room, at least for part of the day.  For example, if an architect and his engineer are united in their defense, they may want to spend part of the private sessions together.

The mediator will then practice “shuttle diplomacy”.  That is, the mediator will talk with each party privately, playing devil’s advocate, discussing case outcomes, and, ultimately, passing offers to settle back and forth among the parties.

How do the offers of settlement work?

The settlement offers are highly case-dependent, and can vary throughout the day depending on how the mediator likes to work and how much leeway the attorneys give him.  Usually, he starts with the plaintiffs to find out what amount of money, short of the full amount claimed, they would accept to walk away from the lawsuit.

Then, the mediator talks with the defendants (and third party defendants) about how much money they would be willing to pay to be done with the risks and unknowns of a jury trial.   Conditional, confidential, and other offers are sometimes employed.  If they are, the mediator will discuss the process with you at that time.

Why should I pay money?  My design was good and I haven’t done anything wrong!

At some point during the day, you will end up saying this.  It will seem extremely unfair that you are being asked to pay (or have your insurer pay on your behalf) for someone else’s problem or mix-up.  However, ultimately you will have to make a business decision about how much time and effort your Firm wants to spend on taking the case to a jury.  If the case settles, you free up the time you would otherwise spend in depositions, meeting with your lawyer, talking to experts, and reviewing documents.  Depending on the scope of the project and the lawsuit, this could be hundreds of man-hours.  Further, at the end of the day, you end up risking bad publicity and an adverse judgment that will affect either your bottom line or your insurance premium.

Are you saying I have to settle?

No, absolutely not.  Sometimes, the plaintiff has such a crazy demand, that you are better off taking the case to a jury.  Other times, the evidence is so much in your favor that it doesn’t make sense to settle.  Usually, however, the case is more nuanced, and so you need to discuss the evidence, and your chance of a successful verdict, with your lawyer on a case by case basis.

My case was “impassed” at mediation.  What does this mean?

If the mediator concludes that the parties are too far apart to settle, at some point he will declare an impasse.  If this happens, everyone shakes hands and goes home.

What happens next is that the lawyers may continue to talk over the next month or so to see if there is any chance at all for settlement, and at the same time begin or continue their preparations for a trial.  Just because a case impasses at mediation, doesn’t mean it can’t or won’t settle.

Cases can settle right up and through trial, until the jury comes back with a verdict.  Obviously, the sooner a case settles the better, as you will have spent less time and money on trial preparation.  However, do not give up all hope of settlement simply because of a mediation impasse.  (After all, Lennie Briscoe never gave up, did he?!).

Your turn.  Have you been part of a mediation?  Tell me about your experiences, good and bad.  And, if you haven’t already, be sure to sign up for email updates of blog posts directly to your inbox.  The sign-up box is on the top right hand side of the homepage.

Photo (c) cobrasoft. 

Research Produces New Standards for Construction (guest post)(& more)

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Welcome Back!  The “regular season” of Construction Law in NC blog posts has now officially started.

Recently, I had the privilege of writing on the subject of Private, Single Panel Arbitration on Chris Hill’s blog.  Please read the article if haven’t already. 

The first issue of my brand-spanking new newsletter, The Construction Professional, went out yesterday to those on the email list.  If you want to be one of the cool kids, be sure to sign up now by visiting the right hand side of the blog.  (Or, you can simply shoot me an email at mbrumback at rl-law dot com).

Finally, today’s post is a guest post by Susan Wells.  Susan is a freelance blogger who enjoys writing about automotive and health news, technology, lifestyle and personal finance. She often researches and writes about automobile, property and health insurance, helping consumers find free insurance quotes, and the best protection available. Susan and I welcome your thoughts and comments on this article.

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The Insurance Institute for Business and Home Safety (IBHS) sits on a 90-acre parcel of land in South Carolina. The research facility is dedicated to advancing building science by evaluating various residential and commercial construction materials and systems.

In layman’s terms, IBHS builds things and then attempts to destroy them by recreating conditions of natural disasters. In a studio-like production, the laboratory builds houses and then submits them to fire, wind, ice and water damage.

The IBHS research center even has a few videos on YouTube that demonstrate the effects of wind damage and fire.

two houses compared in wind damage situation

This destruction is an integral part of the construction industry as insurers work to identify risks and mitigate them through improved materials and structures. IBHS President Julie Rochman explains that the research center allows them to produce controlled experiments that are not being conducted anywhere else in the world. No longer forced to rely on case studies or opinions, the IBHS can record its findings and actively search for (and test) stronger systems.

Engineer Scott Sundberg explains the value of the research center in a single sentence, saying, “One test is worth a thousand expert opinions.”

To those at the IBHC, the information produced by these experiments is essential to advancing a sustainable community. Using hard data and conclusive evidence, such large-scale and detail oriented research allows the insurance and construction markets to focus on effective mitigation techniques. The average consumer will also have more access to product knowledge and has the potential to become more informed about products and strategies that can make their homes and buildings safer.

“Predictability and reliability of building materials and information is extremely important to the sustainability of the community, “says Mississippi Housing Director Gerald Bessey.

“Collectively as we apply these to public policy decisions and as the market place makes market choices. I think the market will react to good information that’s reliable and stable.”

In insurance underwriting laboratories like IBHS, disaster resistant and energy efficient technologies are merging to produce a new definition of sustainability.

Admittedly, there are few market standards for “green” products, and the FTC is actively working to mitigate the damage caused by “greenwashed” products that touted false claims of durability and environmental benefit. For uninformed consumers and construction managers, the wrong green system could put building structure at risk.

Some elements, such as vegetative roofs, can actually serve as fuel for fires or pose a threat under high winds. The IBHS proposes that energy efficiency and structural durability can work in tandem to create a truly sustainable product: one that will be environmentally friendly yet resilient in the face of environmental disasters.

One such recommendation is retrofitting older homes. Owners can replace windows and doors with energy efficient and wind resistant materials and seal energy leaks. Simple weatherization steps can actually help the average homeowner reach a new level of sustainability without rebuilding their home using entirely new green technology.

Interestingly, there are green insurance policies that allow policy holders to rebuild after a disaster using green upgrades. This would allow for recycling of debris, LEED certification as well as coverage for new appliances.

Most insurance policies do not currently consider products like wind-resistant glass to be a green upgrade, but as research begins to define standards of sustainability, it’s only a matter of time before green technologies and resistant materials merge to produce the highest standards of construction.

Thoughts? Comments? Questions?  Drop me an email or leave your musings below.

 

5 Reasons Why You Need Arbitration for a Construction Dispute (Guest Post)

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Today we welcome another guest author to the blog– Jonathan Newby.  Jonathan is in the brokerage business, and runs a website relating to brokerage fees.  Thanks Jonathan for your sharing your thoughts today.

5 signArbitration may be a better alternative to some construction disputes, assuming that you use a qualified and skilled arbitrator or arbitration panel.  Here are five benefits for using arbitration over litigation:

  1. Arbitration means that the decision maker is an experienced industry professional instead of a lay jury.
  2. Arbitration can provide better protection for your assets by minimizing your risk of large losses sometimes seen with jury verdicts.
  3. Arbitration can provide flexibility in scheduling, versus court where you are told when and where to show up without much room to negotiate.
  4. Arbitration can put an end to your case faster.  The time taken by an arbitrator is usually less than that to get a case to court to resolve a construction dispute.
  5. Arbitration costs can be much less when compared to the one charged during any other legal process like litigation.

These are five reasons why arbitration may be better for your construction dispute, so consider using an arbitration provision in your next construction contract.

Editor’s Note:  As I’ve previously noted, there are pros and cons to arbitration in lieu of trial.  The better venue is in part based on the type and size of contract, as well as numerous other subjective considerations.  Discuss whether arbitration is appropriate for you with your construction law attorney.

Thoughts, comments, or questions?  Drop Jonathan or me a note in the comments section, below. 

Photo (c) freefoto.com.

 

 

Arbitrators are not King Solomon?

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whoa signAfter my recent post on the pros and cons of court vs. arbitration, I was contacted by the American Arbitration Association (AAA).    They told me that, contrary to what is a widely held belief about panels “splitting the baby,” their internal studies actually show that is not, in fact, the case.   The summary of their findings is worth reading.

Now, I don’t know the particulars of their study protocol, and AAA is certainly not a disinterested party, but the numbers are impressive.  Perhaps AAA arbitration panels, at least, are not King Solomon.

Do you have a AAA arbitration experience?  Share it in the comments below.

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Photo “whoa” by stgermh via Flickr/Creative Commons license.