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Mediation is an effective, well-tested form of alternative dispute resolution in the construction industry. Yet, many stakeholders in the construction industry have never engaged in real-life mediation proceedings. By not having a thorough understanding of the construction mediation process, one may quickly fall prey to missed opportunities or even worse – a failed mediation. Understanding the construction mediation process is therefore key to increasing your chances for a successful mediation.
You’ll find further resources on construction mediation, below. After that, I go into further detail on what you can expect at your first construction mediation…
Category: Construction MediationConstruction Mediation: An Efficient Alternative to Construction DisputesConstruction projects can be quite large in scope, requiring the careful coordination of multiple parties to complete project deliverables on-time and on-budget....
How Construction Mediation
Non-binding mediation is typically mandated by the construction contract or subcontract as a “condition precedent” to filing suit or an arbitration demand. This means you cannot pass go and proceed to court or arbitration until an effort was made to resolve the dispute through mediation.
Even when not contractually required, nearly all state and federal courts have a mediation program, and there is usually a mandatory requirement to mediate prior to trial. Often, the lawyers agree to early mediation prior to discovery or depositions, so in effect, the very first court proceeding is actually a non-binding mediation event. The American Arbitration Association, as well, has a parallel mediation platform which is both extraordinary cost-efficient and very effective.
Lastly, the lawyers, or even the parties themselves, may agree to have a neutral mediator whom they both trust and respect hear both sides of the dispute and try to facilitate a negotiated resolution.
Ultimately,, mediation is the alternative dispute resolution of choice for many stakeholders within the construction industry. It avoids the long legal process, which can take 1, 2 or even 3 years to play out. It can save tens or even hundreds of thousands in legal fees. But perhaps most important, it puts you back at work making new money, or pursuing new endeavors, rather than keeping you stuck in the past.
Indeed, according to the Dispute Resolution Journal “more than 85% of those who mediate their disputes settle successfully.”
There are generally two types of construction mediators, the full-time mediator, and the part-time mediator. The ‘part-time’ mediator is typically a construction lawyer with a side gig mediating other cases, ie, where he or she does not represent either party and has no conflicts of interests with the parties or their lawyers. Therefore, while you will see this individual wearing their mediator hat at the mediation, the day before and the day after they were and are advocates, just like your own lawyer, arguing and championing the rights of their client in any given matter.
Generally, the lawyers who mediate on the side are the most respected of their peers, and view their mediation practice more as giving back to the profession than profiting from it.
The full-time mediator is usually a retired judge, or a retired or semi-retired construction lawyer who now mediates and arbitrates full-time. While effective, the time removed from active representation of clients could make it challenging for the full-time mediator to fully appreciate the dispute. On the other hand, a former judge’s experience ‘on-the-bench’ can lend a unique perspective to how a trial judge, arbitrator or jury might view particular claims or defenses.
The right mediator is perhaps the single most determining factor as to whether a negotiated settlement will be achieved. Of course, patience, trustworthiness and being a good listener are vitally important. In construction cases, the mediator should have more or less equal experience representing both sides of the dispute, ie, contractors and owners, or gc’s and subs. This will both build the credibility of the mediator, and lend a unique perspective to see areas of compromise that neither party may have otherwise appreciated.
Also, it is important to carefully choose the mediator that’s right for the particular case. And as each case is different, there will be no cookie cutter mold for the mediator to fit. For example, if sitework is the core area of dispute, a mediator with specialized experience in earthwork cases can be a tremendous advantage. Or if delay is really what the dispute is about, a mediator with deep experience prosecuting and defending delay claims is a terrific choice.
Once appointed, the mediator will then begin assisting both parties to find a mutually agreeable date and location. The mediator will also need to ensure that both parties exchange the proper information required for the mediation. Sometimes this is a limited document exchange, a draft lawsuit, or just a letter setting out the factual background to that point in time.
I have found that you can generally expect to get out of mediation what you put in. I make sure to always have at least a half-day prep session with my client about a week before the mediation. I do this in person, with the case file and project documents at hand, and ensure we discuss our best and worst day in court, the other sides best and worst outcomes, and that the space in the middle is what the mediation seeks to fill. Often, I’ll indicate what the estimated legal costs will be through trial and appeal, and ask that my client take that amount into the ultimate settlement position (meaning, even though my client might establish x as the lowest offer they can accept at mediation, I will ask that the $30,000 it might cost to get through trial and appeal be factored in to possibly lower that drop-dead settlement figure).
Lastly, while the parties are ultimately responsible for their own rules of the mediation, a skilled mediator will help both parties settle on fair ground rules for the proceeding and the method of any presentations..
Once the rules and procedures of the mediation have been agreed upon, it’s time to engage in the actual proceedings on the scheduled date. The session will usually open with the mediator restating the agreed upon rules and guidelines from previous discussions to make sure everyone is still on the same page. Introductions may then be made for further clarifications.
Next, the mediation proceeds – typically by allowing the claimant (usually the contractor) to present a brief opening statement or overview of their claims, , followed by a response from the defendant. At that point, the mediator will typically break the parties up into “caucuses”, with one party and their lawyer staying in the original room and the other party and their counsel heading to a different, nearby room.
The rest of the day is typically spent with the mediator going back and forth between the two rooms, conveying each side’s position to the other, while at the same time analyzing, discussing and conversing with the people in each room, working to bridge the gap and bring the best offer possible back to the other.
A word about confidentiality is important. Some mediators will operate under the assumption that everything told to it by a party is confidential unless specifically indicated as non-confidential and permitted to be shared with the other side. Others will work on the opposite basis, ie, the assumption is that everything may be shared unless it was specifically identified as confidential. Of course, it is important to hear from the mediator how they intend to operate, and to conduct oneself accordingly.
However, in some mediations the opening statement is skipped, and occasionally, he parties do not even get together at all, but are kep in separate rooms from the start.
Experts or other consultants may be brought into the discussion to provide credibility to issues like schedule delays or the dollar amounts of the claim in question. Remember that the rules of mediation are incredibly flexible, and each mediator may recommend different proceedings. For example, in a highly complex case, it’s entirely possible that the mediator may ask both parties to present their opinions on an issue-by-issue basis in order to gauge each claim on their individual merits.
Mediation is not a binding proceeding; meaning that neither party is required to come to an agreement. But, with the right mediator and the right frame of mind, a resolution is achieved in the vast majority of cases. In those instances, a quick, one page and often hand-written settlement agreement will be drawn up with only the most basic terms, usually who pays who money, how much and by when, and all parties sign to indicate their agreement, and copies passed out to all parties and counsel. In the coming days, the lawyers negotiate and draft a formal settlement agreement with additional boiler-plate terms, but if for some reason that process breaks down, the one pager signed at the mediation can and should be used to enforce the agreement in court.
Often, a mediated settlement outcome is one neither party will likely be ‘happy’ with, but it is one both sides can live with. As lawyers, this is our barometer that the settlement was fair and balanced. After all, mediation is often the last stop to have input in the resolution of your dispute – once the first witness is sworn in and/or the jury is empaneled, the fate of your future is resting in someone else’s hand(s). I encourage all my clients to grab the opportunity mediation presents to play a part in their own destiny, and regard mediation with an open mind and a conciliatory attitude.
Importantly, even if a full and final settlement is not achieved, some portions may be resolved, or the gap may be substantially narrowed, streamlining the eventual litigation or arbitration to only the most hotly contested topics.
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