Dispute Resolution Methodologies

Stephen M. Rymal, P.E., Esq.
MDC Systems^®
Consulting Engineer

In the construction industry, there are several alternative dispute resolution (ADR) methodologies designed to provide a means to resolve disputes without resorting to formal litigation in court.  Some projects set up dispute resolution boards (DRBs) to address disputes in real time before the parties harden their positions and carve them into stone.  The advantage of DRBs is that they meet regularly with the parties to recognize and address disputes at their earliest stage when the inherent risks can be truly estimated, appreciated, and shared.

Another ADR method is arbitration which is a less formal procedure than litigation in court but still allows each party to testify under oath, to present evidence, and to offer oral persuasive argument which ultimately results in a decision being rendered by the arbitrator in favor of one party against the other.  The advantage of arbitration is the speed with which the arbitration hearing can be scheduled and a decision rendered ultimately reducing the cost to the parties in legal expenses when compared to a full litigation in court.

Mediation[1] is even less formal than arbitration in the sense that neither party testifies under oath or offers evidence.  The parties have an opportunity to present their position, either in private or in a joint session, and then the mediator engages in private, confidential conversations with the principals on each side in an effort to find a mechanism upon which to build agreement.  Usually, the mediator initially highlights the estimated cost to litigate the dispute in arbitration and/or court as a means to get the parties thinking about the dollars at stake beyond just the face value of the claimed damages.  The mediator also offers insight into the relative probabilities of obtaining a favorable outcome in either arbitration or litigation based upon his/her experience and the circumstances of the dispute.

Unfortunately, there is a general perception within the construction industry[2] that mediations are ineffective, that mediations don’t resolve the dispute, that mediation brings an inherent “split the baby in half” mentality, and basically that mediation is a waste of time.  This opinion is widely held even by attorneys despite the fact that many construction contract documents and courts require mediation. Nevertheless, mediations can be an effective tool to resolve construction disagreements, particularly those where the issues are complex, highly technical, and multi-faceted.

I have had the pleasure of participating in mediations which were successful in that the parties were able to mutually agree upon a fair and reasonable settlement amount and avoid lengthy and costly litigation.  I was also impressed with the professionalism and insight the mediators brought to the table even though they were not technically trained or experienced.  As a result, my recommendation to parties who are involved in a dispute is that they should seriously invest time in researching the qualifications and experience of the mediator or arbitrator they select.  This one decision can make all the difference in the ultimate result.

Finally, I have participated in jury trials as an attorney, an expert and even as a juror.[3]  Jurors come from all walks of life and bring with them a wealth of life’s experiences and knowledge upon which to render decisions.  I respect and appreciate the service that a jury offers in our justice system. However, my experience with construction claims that are typically multi-faceted, schedule dependent, highly technical, full of contractual clauses that are interdependent and factually complex tends to overburden and overwhelm the capacity of a jury to fully comprehend facts, figures and details that can easily be lost or forgotten long before the jury deliberates and renders its verdict. Additionally, a jury trial is replete with formal legal filings, motions and civil practice maneuvering that at times bears little upon the fundamental nature of the dispute itself and the result desired.

Therefore, most parties to a construction dispute will be less comfortable with the expense and uncertainty of a jury trial and verdict, and more comfortable with the controllable, predictable and timely environment of arbitration and mediation.

[1]  Black’s Law Dictionary, Seventh Edition, defines “mediation ” as “a method of nonbinding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution – also termed a conciliation.” Law.com defines “mediation” as “the attempt to settle a legal dispute through active participation of a third party (mediator) who works to find points of agreement and make those in conflict agree on a fair result. Mediation differs from arbitration, in which the third party (arbitrator) acts much like a judge in an out-of-court, less formal setting but does not actively participate in the discussion.”

[2] In this context, the author is referring generally to the project managers, construction managers, architects, engineers, and contractors, i.e. those who are actively engaged in on-site construction activities.  Many attorneys also view court ordered mediations as a necessary evil in order satisfy the court before proceeding with litigation.

[3] I have reported for jury duty three times and actually served as a juror on a capital murder trial.