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Consider mediation for your next construction dispute

January 10, 2012

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It’s going to happen. A construction dispute, that is. You can hope that every job from here on out goes smoothly. But, if you stay in business long enough, it’s highly likely you’ll encounter a situation with an owner or developer that can’t be resolved with a simple chat.

In such situations, lengthy and expensive litigation may seem inevitable — and if not that, a binding arbitration hearing. But there’s another alternative to consider: mediation.

A selected voice
In mediation, a neutral mediator facilitates a settlement that’s acceptable to both parties. The mediator meets with the parties in informal joint sessions — and possibly separately — to help them explore relevant facts, issues, positions, needs and options. A mediator might identify obstacles, point out overlooked issues and develop resolution strategies. The mediator, however, doesn’t give legal advice or resolve the dispute. Instead, the parties must attempt to reach a settlement.

The parties to the dispute select the mediator — typically a practicing attorney, retired judge or other professional. Working with a mediator who has experience and expertise in real estate and construction can expedite the process and foster the introduction of options not previously considered.

Several stages
Typically, the mediator begins with an opening statement, which includes introducing the attendees and reviewing the procedures, ground rules and goals. The parties then make their opening statements, usually describing their understanding of the dispute, presenting their cases and proffering ideas for resolution.

Next comes the joint discussion in which the mediator speaks with the parties about the information in their opening statements and determines which issues to address. Each party then meets separately to assess the strengths and weaknesses of their respective positions.

At the joint negotiation stage, the mediator reconvenes the parties to negotiate face-to-face. If an agreement can be reached, the parties put it in writing and either sign the document or have their attorneys review it. Such agreements, once entered into, are enforceable as contracts. If no agreement results, the mediator reviews the process and discusses available options, including another mediation session, arbitration or litigation.

Less adversarial
The mediator takes a neutral stance, so energy is spent collaborating with the other party rather than trying to persuade the mediator. In this way, mediation is less adversarial than either arbitration or litigation.

What’s more, lawsuits can take months, if not years, while mediation rarely lasts longer than several days. And parties can speak for themselves, which can lead to creative solutions not possible in an adversarial setting. A mediator’s evaluation of the strengths and weaknesses of a case can change perspectives about the odds of winning in court, paving the way for settlement.

Further, mediations are conducted confidentially. Statements and evidence used in mediation generally can’t be admitted as evidence in subsequent litigation, and mediators can’t be compelled to testify. Avoiding a courtroom also means parties aren’t subject to legal precedents or the rigid structure of litigation. In addition, mediation doesn’t involve formal rules of evidence or the question-and-answer format of a trial.

Finally, mediation is often used with the understanding that the parties will move to arbitration if both don’t come away from mediation satisfied.

Arbitration Avenue
Arbitration tends to be less formal than litigation, but it can include discovery and the use of legal standards. Before the arbitration, the parties make stipulations regarding locale, confidentiality, rules of evidence and issues to be considered. Each party then presents evidence, including testimony and arguments, and can cross-examine witnesses.

Unlike in mediation, where the parties themselves reach a consensus, the arbitrator renders a final and typically binding decision. Further, the rules in arbitration can limit damages, restrict the time limits for filing a claim and impede information sharing. Arbitration has one key limitation: Virtually no appeal is possible.

All of your options
In an industry as wrought with conflicts as construction, it’s important to remember all of your options for resolving disputes. Mediation may save you time in the short term and money in the long run.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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