Hon. Lisa R. Curcio, (Ret.), senior mediator and arbitrator at ADR Systems, recently published an article in the Illinois State Bar Association’s Section on Construction Law newsletter, Building Knowledge.
Non-payment, claims of defective work, delays, claims for extra work with unsigned change orders, design issues, outstanding requests for information, acceleration… A major construction project is in trouble and owners, architects, design professionals, engineers, prime contractors, subcontractors and suppliers are all pointing fingers, making claims on payment and performance bonds, and filing lawsuits. Parties want to complete the project and to be paid, but litigation frustrates those goals because it drains energy and money. The solution can be mediation.
While a judge or jury decides the outcome of litigation, the parties control the outcome of mediation. Mediation is flexible. It allows the parties to decide how to achieve their ultimate goals. Parties who want to maintain relationships have a better chance of doing so through mediation. Mediation is private and confidential, while litigation is public. The cost of mediation pales in comparison to the time, money and emotion expended in litigation.
Successful mediation requires careful planning. The first crucial step is to define “success” in the context of the claims. Is it global monetary settlement or monetary settlement of only some claims such as claims of subcontractors and material suppliers? Will mediation narrow or resolve particular issues? With everyone at the table, can the parties fashion an agreement that will complete the project? The possibilities are only limited by the creativity of the parties.
Choose the right time to mediate. If all or some of the parties are still talking and working, early mediation can be effective. When communication has failed and positions have hardened, some exchange of documents and even expert assessments might be required to successfully move forward.
Choose the right mediator. Mediating a complex construction case requires knowledge of the industry and the typical (insofar as “typical” exists) progression of a major project. The mediator should understand not just contract law, but construction law. The mediator’s personality and “style” can contribute to success or failure. Sometimes cases settle days or weeks later. Will the mediator stay engaged? Consult with others in your firm and with colleagues and opponents for recommendations. If you are scheduling the mediation through an alternative dispute resolution company, discuss the case with case coordinators and managers to get their suggestions.
Schedule enough time. Complex cases, whether because there are many parties, many issues, or both, require more time. Consider scheduling subcontractor claims on one day and general contractor/owner claims on another. Parties who are aligned on issues can streamline the process by working together to present their claims. Avoid having party representatives feel their time is wasted coming to mediation and sitting for long hours without being heard.
Prepare! Work done before the mediation will make mediation more productive. Attorneys must put on the “counsellor hat” to educate clients about the processes, the costs, and the risks of litigation and of mediation to allow the parties to make informed business decisions. Even the most experienced and sophisticated clients need an objective evaluation of the case. Honest discussion of potential problems with the claim is essential to achieving the clients’ goals.
Conduct pre-mediation conferences with the mediator either in person or by telephone. There should be at least one call or meeting involving all counsel for an overview of the status of the litigation and of the claims and the issues. It assists the mediator to understand the present relationships of the parties, the settlement status, and the issues parties see as particular barriers to settlement. Then, since there is no such thing as an ex parte communication in mediation, the mediator and parties can plan separate conferences to discuss issues particular to one party or that the attorneys want to keep confidential.
Written submissions might be the most important pre-mediation work. They should outline the parties’ claims and theories. Concisely articulate the legal and factual support for the claims to educate the mediator. Itemize potential damages. Make a clear demand. Include documents that illustrate and support claims and damages. The submissions should be shared with all parties so everyone can realistically evaluate the claims and risks and engage in effective negotiation. If there is information that is truly confidential but might be useful to the mediator during the mediation, it can be submitted separately for the mediator’s eyes only. No matter what the objective, client representatives with authority to decide and to bind must attend the mediation. Mediation without the physical presence of those representatives is almost always an effort in futility. Others with particular knowledge of the issues can also contribute to resolution. These might be non-party witnesses or experts.
Will opening comments help or hurt? Opening comments should educate, not alienate. Presentations by experts to neutrally explain differences on complex issues can assist the parties and the mediator to understand the nuances of the case. Adversarial statements by attorneys lead to anger that then must be defused before meaningful discussions can begin.
Creative thinking is important in all mediation, but especially so in multi-party, multi-issue construction cases. Some claims will require monetary settlement. Others might require reworking relationships or contracts so a project can move forward. An open mind is the best tool in the belt when it comes to mediation.
Last, but absolutely not least, when you reach agreement do not leave until there is a signed Memorandum of Understanding of the material terms. Bring your laptop with a pre-drafted agreement shell and fill in the blanks when the agreement is made. The extra few minutes spent getting a signed agreement assures that everyone knows and acknowledges the settlement terms. In the worst case scenario that someone goes back to the office and has second thoughts, your signed agreement is the best evidence for the court to enforce the settlement.
Complex construction claims can be resolved or narrowed through mediation. Once defined, success is achieved through preparation, honest analysis of the issues, and commitment to the process. The parties decide the outcome. Time, and money are saved. Get your clients out of the courtroom and back to work—mediate!
Judge Curcio brings an abundance of real-world experience – real estate, business and banking – to her mediation and arbitration practice. She spent 15 years as a Chancery Judge, presiding over mechanics liens, construction contracts and construction defect cases. Judge Curcio is regarded as an energetic and pragmatic neutral who helps parties construct suitable solutions to their disputes.