 How To
Resolve Your
Construction
Dispute
ALEXANDER LIBERMAN, OMEGA VI
The Art Museum, Princeton University NEW AAA CONSTRUCTION RULES
(Revised as of 9/1/2007)
Construction Industry Mediation Procedures
& Construction Industry Arbitration Rules
of the American Arbitration Association
Ernest C. Brown, Esq., PE
National Roster of Arbitrators and Mediators
American Arbitration Association 1 (800) 832-6946
Mr. Brown has served as legal counsel for large domestic and international projects including the Carquinez Suspension Bridge Project ($250 Million), John Wayne Airport ($340 Million), Anaheim Arena ($100 Million), Orange County Performing Arts Center ($40 Million), the Bay Area Rapid Transit System (BART), the Los Angeles MTA, and the Saudi Petrochemical Project ($3.4 Billion), as well as many other industrial, petrochemical, roadway, bridge and sewage treatment projects. He has served as lead trial counsel on significant construction cases including the Central Arizona Water Project (CAP), a $146 million Federal Court Pre-Stressed Concrete Pipe Defect Claim; the John Wayne Airport, a $73-million claim; the San Francisco Crystal Springs Pipeline Failure, a $42 million claim; and the Mohave Power Plant Explosion, a disaster including six deaths and $250 million in property damage. He also spent four years as Corporate Counsel with Fluor Corporation, engaged in contracts and dispute resolution on domestic and international projects. Mr. Brown is the author of California Public Works: Risk Management & Dispute Resolution (3rd Ed. 2003), California Infrastructure Projects (2008), and co-author of several course manuals, Architect Engineer Malpractice (Federal Publications) and Architect-Engineer Liability Under California Law (Cambridge Institute). He is a regular speaker for the American Arbitration Association, the California Bar Association, and various construction industry and public agency groups. Mr. Brown studied Civil and Environmental Engineering at the Massachusetts Institute of Technology (1975). He completed advanced degrees in Construction Management (M.S.C.E.) and Law (J.D.) from the University of California, Berkeley (1978), and studied International Law at Harvard Law School (ILS). Dispute Resolution Experience (Partial): Agencies: Bay Area Rapid Transit District California Department of Transportation California Department of Corrections Central Arizona Water District City of Sunnyvale County of Orange County of Solano US Department of Defense Los Angeles Metropolitan Transit Authority NASA North Hudson Authority Oakland-Alameda County Coliseum Authority Orange County Performing Arts Center San Diego Union School District Law Firms: Allen,Matkins, Leck, Gamble & Mallory Atkinson, Andelson, Loya, Ruud & Romo Bingham McCutchen Burke,Williams & Sorensen Gibbs, Giden, Locher & Turner Holland & Knight Lewis, Brisbois, Bisgaard & Smith Marks Golia & Finch McInerney & Dillon Miller Morton Caillat & Nevis Murtaugh, Miller,Meyer & Nelson Peckar & Abramson Pilsbury Winthrop Shaw Pittman Selman & Breitman Shook, Hardy & Bacon Thelen Reid Brown Raysman & Steiner Watt, Tieder, Hoffar & Fitzgerald White & Case Wolfe, Rifkin Shapiro & Schulman Wulfsberg, Reese Colving & Firstman Companies Douglas Barnhart Corporation Chevron USA Chicago Bridge & Iron DPIC DPR Exxon - Mobil Fluor Corporation Foster Wheeler Granite Construction Company HOK HNTB Jacobs Engineering Kennedy Jenks PCL Sierra Pacific Power Company Turner Construction Travelers Insurance Company URS US Filter HOW TO RESOLVE YOUR CONSTRUCTION DISPUTE Ernest C. Brown, Esq. PE 1 (800) 832-6946 National Roster of Arbitrators and Mediators American Arbitration Association Successful parties and their legal counsel employ mediation as an effective line of attack in resolving construction disputes. There are two basic rules regarding construction mediation: It is completely voluntary and the mediator’s discussions are absolutely confidential. It is also a huge money-saving tool. It offers great savings over the discovery and trial process. It satisfies our desire to end disputes with a handshake, not a fist fight. It turns adversaries into future friends, colleagues and allies. And, when practiced well, it is an art. There is a MAJOR flaw in many parties’ approach to mediation. They often assume that the necessary people, knowledge and documents will be readily available during the mediation proceeding. Unfortunately, during the course of many mediations, the parties and/or their legal counsel realize that an essential party, document, or other piece of key information is not available. It can leave a gaping hole in the settlement process and keep the parties from reaching an otherwise acceptable agreement. In that case, a great deal of time and effort can be wasted. If a postponement occurs, the parties may discover another missing party, document or item of information. Mediation is an art and a terrific innovation for the construction industry. But counsel and the parties must fully understand its underlying philosophy and purpose, carefully prepare their mediation case, and then wholeheartedly engage in the settlement process. THE MEDIATION PROCESS Construction mediations are generally conducted over one or two full days.
1. Prior to the Mediation, counsel for the parties will submit a very brief (5-8 pages) on the main points of the dispute. It is extremely helpful if these materials include the critical documents, such as copies of letters, documents, checks, meeting notes or other helpful materials that will help the Mediator understand the issues. 2. The briefs should be submitted at least five days before the Mediation. If the parties have confidential information to present, they may do so informally during the Mediation. It is not necessary to copy other counsel, but many mediators find it helpful to the mediation process if the parties agree to do so. 3. The Mediator will generally circulate a confidentiality sheet with various terms and conditions for the Mediation that also serves as a sign in sheet. 4. The principal parties and any person whose approval is needed for resolution must attend unless other arrangements are made in advance with the Mediator. Failure to have the ultimate decision makers personally present will quite probably result in failure of the mediation. 5. The Mediator must disclose any prior relationships with the parties as well as the law firms, especially if the Mediator has conducted a mediation for either firm or party in the past. 6. The Mediation generally proceeds as follows: First, there will be a joint session, in which the attorneys for the parties will introduce everyone and the Mediator will explain the process to the participants. Second, the attorneys or their principals, will present a 15-20 minute presentation on their side of the case, with all parties present. At the conclusion of that session, the Mediator will summarize his understanding of the positions of the parties. The parties may also ask the other side key questions, as might the Mediator. Third, the parties will meet separately with the
Mediator for sessions of 30-45 minutes each. These
are confidential sessions. It is however, important that
any particularly sensitive information be discussed in
the context that the material should not be revealed to Fourth, the Mediator will eventually advise the parties
whether the matter is ripe for settlement, and if the
matter can be settled, upon what terms. THE CHECKLIST Parties: ◘ Are all parties present? (Owner, General,
Subcontractors, A/E) Initial Presentation: ◘ Can each side present its case in 30 minutes? Disputes: ◘ Have all claimants exchanged written claims and
demands? Pleadings: ◘ Are the basic pleadings in place? ◘ Have all parties answered? ◘ Are there absent parties? ◘ Are all parties served? ◘ Are there any jurisdictional issues? ◘ Is there a bankruptcy stay on any party? Claim Analysis: ◘ Are full copies of the contracts available? ◘ Who had primary responsibility? ◘ What subcontracts assigned that responsibility? ◘ What are the contract defenses? ◘ Who is indemnified for the loss? ◘ Who is entitled to attorney’s fees and costs? ◘ What is the venue for the dispute? ◘ Have inspections and testing been completed? Insurance Coverage: ◘ Have all parties tendered to past and current carriers? ◘ Are the carriers accepting defense and coverage? ◘ If not, have all carriers provided reservations of rights letters and detailed coverage opinions? ◘ Are full copies of insurance contracts available? ◘ Do the principals have coverage counsel? ◘ Are the policy limits and deductibles known? ◘ Is there a chart of the additional insureds? ◘ What is the total amount of insurance? ◘ Are sureties on notice and fully informed of their risks? Legal and Expert Costs: ◘ Do the insurers and principals have an estimate of
defense costs? Damages: ◘ Is there an itemized and complete written claim? Strategy and Planning: ◘ Are the parties and their carriers informed? Settlement Mechanics: ◘ Can the case settle piecemeal or only globally? Settlement Obstacles: ◘ Does one party wish to punish another party? Pleadings: ◘ Are the basic pleadings in place? Claim Analysis: ◘ Are full copies of the contracts available?
Insurance Coverage: ◘ Have all parties tendered to past and current carriers? The Mediation Facility: ◘ Are the mediation facilities adequate? CAVEAT The foregoing describes a generalized mediation process and a generic checklist for construction disputes. Careful thought by the parties and their counsel will result in supplementing or shaping these lists for individual cases. Experienced legal counsel may find this paper useful in assisting their clients in understanding the mediation process and assuring they are fully ready for an effective mediation experience and a satisfying case resolution.
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Ernest C. Brown, Esq. PE