In recent years, the construction industry has sought alternative forms of dispute resolution to avoid the high cost and wasted effort inherent in hotly contested litigation. One of these alternatives is mediation. At bottom, mediation is a settlement negotiation conducted through a neutral third party mediator. Mediation can be voluntary or required by the contract, or in some instances may be required by the Court in which the dispute is pending. The American Arbitration Association offers voluntary mediation in conjunction with a pending arbitration. Whether voluntary or required, mediation is always non-binding and any party can end the process at any stage of the mediation by refusing to budge. Statements made during the course of the mediation cannot be used in court or arbitration proceedings.
The hope for mediation is that reasonableness will prevail over intransigence: that both parties will recognize they are better off compromising at an early stage rather than battling for years over documents, testimony and expert opinion, all of which involves uncertain result but certain high costs. Since most litigation is settled without a full trial, but after extensive and costly proceedings, mediation affords the parties the opportunity to reach the same settlement at an earlier, less traumatic and less costly stage.
How does mediation work? First, the parties must select a mediator. The American Arbitration Association maintains a panel of mediators familiar with construction disputes. There are also a number of private dispute resolution services that maintain panels of mediators. The key to the selection of a mediator is to find a person who is experienced in construction, has the skills to analyze disputes, frame issues and evaluate claims and who has the training and personality to keep the parties focused on a course of discussion that will lead to settlement. Usually the mediator is a retired judge, a lawyer or an industry professional. The parties to the dispute are responsible for the mediator's compensation which can be substantial depending on the experience of the mediator and the time required. But when measured against the overall expense of litigating a construction dispute, the mediator's compensation is a bargain at any price, particularly if the mediation is successful.
Second, the mediation process must be established and scheduled. There are no rules governing procedure. The parties and the mediator must agree where and how the mediation will be conducted. Usually a mediation will progress in four stages as follows:
Stage 1: The pre-mediation memorandum. Each party submits its version of the facts, issues and amounts in controversy so that the mediator can familiarize himself with the dispute prior to meeting with the parties.
Stage 2: The initial meeting. The mediation begins with the mediator and all parties and their counsel together in one group. The mediator will usually explain his role and the method he wishes to use to identify the major disputes and to assist the parties in reaching a settlement of the conflicting claims. Each party is given the opportunity to present its view of the facts, the dispute, the amount it is seeking and why its position is correct. In turn, every other party presents its views. The mediator may question the parties to clarify and highlight facts and issues, and to establish each party's precise position so that both the parties and the mediator are focused on the same issues.
Stage 3: The caucuses. The mediator meets separately with each party during which he further explores the claims of that party. His objective is to highlight the risks and liabilities of the litigation to that party, and to attempt to determine where compromise and tradeoffs may exist. The mediator may discuss his views of the facts and the law, and give a frank evaluation of the party's claim in an attempt to make that party realistically appraise the potential strengths and weaknesses of its position. He also will attempt to identify issues on which there is potential agreement, and to segregate those issues which appear to be the sticking points preventing settlement. The mediator may go back and forth between the parties during this stage to determine if a modified viewpoint of one party will result in modification by the other party. If at some point the issue turns into a gap between the amount of money that one party is willing to accept and the amount that the other party is willing to offer, the mediator will attempt to determine whether there is room for compromise between the two figures.
Stage 4: The final joint conference. If caucusing has not produced a settlement, the mediator will generally bring the parties back together in a single group to explain how he views the dispute and its potential for resolution, and he will further explore whether the gap between the parties is such that there is room for additional compromise. If this final joint meeting does not result in a settlement the mediator may end the mediation or he may attempt to reconvene the mediation after the parties review their positions.
Can mediation work? Absolutely! It has been the means of resolving many difficult construction disputes. But it can only work when the parties are ready to realistically look at the strengths and weaknesses of their positions and their prospect for recovery in light of the cost, time involvement and risks of litigation, and are willing to compromise to avoid further litigation. It does not work where the dispute is one manufactured by a party who is simply unable or unwilling to pay what should be an undisputed balance. In that circumstance the party without a defense may turn mediation into just another pretrial tactic forcing the other side to resist unwarranted settlement pressure and imposing further delay and expense on a party who needs a process to force payment, not one that requires fruitless negotiation.
Where there is a good faith dispute, a willingness by all parties to address that dispute in a spirit of compromise, and a mediator who is knowledgeable in construction disputes and has the ability to combine aggressiveness, persistence and patience, the mediation process can assist parties in reaching a compromise which everyone can live with. The relatively low cost of mediation compared with the higher cost and other pitfalls of litigation can make mediation well worth the effort.
This
newsletter is intended to provide general information of interest to the
construction industry. It is not intended to provide specific legal advice or
to address fact specific issues. For that you should consult your legal
counsel. Corwin & Corwin LLP assumes no liability in connection with the
use of this newsletter. The Supreme Judicial Court may consider this material
advertising.
©1992-2000 Corwin & Corwin LLP. All rights reserved.