-Partners in Practice -

The very best way to resolve a dispute in construction is to take steps to head it off in advance. None of the formal alternatives--not litigation, arbitration, nor even mediation/arbitration can produce anywhere near as satisfactory an outcome as a project without conflict. Indeed, the principal aim of a good contract, well conceived and care fully negotiated, is to preclude as many of the opportunities for conflict as can reasonably be anticipated.

Nevertheless, in an undertaking as complex as a building project, with its pick-up team of participants with widely differing values and goals, disputes inevitably emerge. Some escalate out of control. Third parties have to be brought in to hear the evidence, sort out the facts, and make a decision which puts the conflict to rest. Knowing this to be true, it may make sense to give a certain amount of thought, in advance, to the methods by which disputes will be handled on your projects.

If you deal with dispute resolution as an integral part of your negotiations with your client, you can exercise an important measure of control--over the forum to be used, the identity of the third parties who will be brought in, and the rules by which those third parties will work toward some form of resolution. If you do not, you will be thrown into the arena of last resort. There, two attorneys and a judge (or a judge and jury) will make their way through a costly ritual, struggling to arrive at a decision on complex issues in a building process they may only dimly understand.

It may be better, by far, to provide for an alternative. You may even want to provide for a number of alternatives, each related to differences in the nature of the disputes that actually arise. You can do so if you work with your attorney to define your own rules and, then, use those rules in the agreements you sign and the construction contract documents you write.

In order to understand the alternatives and weigh their merits and shortcomings, it might first be useful to take a closer look at the traditional forum for resolving conflict, the courts.

For all of the social benefits our judicial system has produced over the years, few are satisfied with the costs it imposes on those who become entangled in it. A judge in the United States Court of Appeals put it this way: The average litigant is over-discovered, over-interrogated, and over-imposed. As a result, he is overcharged, over exposed, and overwrought. Not only is this judge painfully correct in his view, but the events he describes all take place before a case even gets to trial. There, trauma can turn to tragedy.

How does all this come about? Attorney James C. Moore of Rochester, New York has identified four characteristics that help to explain why litigation has become the bane of the construction industry.*

• The first is that a lawsuit can be initiated against anyone even remotely connected with a building project. If a general contractor, facing a loss on a project, feels he or she has been injured by someone else (and, from the contractor's point of view, why else would there be a loss?), a suit can be filed naming everyone in sight: the prime design professional, all of the consultants on the job, the owner, subcontractors, material suppliers, and on and on.

  It is not that the plaintiff expects to prevail against each of the parties; the object of the game is to cast the net far enough and wide enough to snare whomever it is that may be responsible. Failing that, if enough parties are drawn in, all threatened with costly and time-consuming litigation, it may be possible to force each of them to contribute to a settlement.

• Second, the plaintiff can seek damages of any amount he or she chooses. The amount is likely to be excessive, either as a strategy to gain a bargaining advantage and underscore the need for some form of restitution, or because the plaintiff knows it will be reduced through the process of litigation in any event. Legal fees, court costs, and fees for expert witnesses will all erode the ultimate recovery.
• Third, there are no-holds-barred in terms of the cross-complaints that can be filed once litigation is underway. It is not uncommon for a defense attorney, in making certain all bases have been covered, to file cross complaints against everyone who might conceivably be involved. The defense theory is this: "My client is not responsible, but it may be that his or her clients, colleagues, or consultants are." Here the situation can get very nasty.
• The fourth characteristic is that, without hiring an attorney, it is almost impossible to go through this ordeal with any hope of emerging from it even relatively intact. By the time it is over, there may be an army of attorneys involved. It is costly, wasteful of time and energy, and trying for everyone concerned except those who make their living from the inability of others to resolve their own conflicts.

Litigation is part of a judicial system designed over 200 years ago--a system which does not always deal effectively or efficiently with the complex, multi-faceted issues presented to it in modern times. It is replete with elaborate protections for everyone involved, and it is subject to abuse in no small part because of those protections. Worse, it is a system that does not normally allow a person wronged by abuse of the system to recover any of the expenses of that wrong.

For all of these reasons, arbitration has come to be viewed with increasing favor in recent years, not only within the construction industry, but by the public and the courts, as well. As originally conceived, it was thought that arbitration would provide the industry with a faster, less costly, and more equitable dispute resolution process.

Has arbitration lived up to its early promise? In some cases, it has, but the accolades have been anything but unanimous. We will explain why when we examine the advantages and disadvantages of the arbitration alternative in "Dispute Resolution, Part II: The Institutionalization of Arbitration."
__________

*Moore, James C., "Providing for Conflict: Appropriate Forums for Dispute Resolution," a presentation to the members of the Design Professionals Management Association, Chicago, Illinois, May 14, 1980.

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
© 2000 Hilb Rogal & Hobbs Professional Practice Insurance Brokers, Inc. All Rights Reserved. California License #0641361.