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.