Why construction mediators and arbitrators

Courtesy of Peter G. Merrill

The Alternative Dispute Resolution (ADR) industry has long been advocating that mediators and arbitrators (ADR Specialists) only need to be trained and experienced as mediators and arbitrators; it was not necessary for the ADR Specialist to have any specific knowledge concerning the actual issues in dispute. It was certainly helpful for the ADR Specialist to have a limited knowledge of the issues but not necessary. I have often hear the saying, "A good mediator is a good mediator" and the mediator can assist the parties in coming to a satisfactory resolution to their dispute. While in many instances, that is true, the ability of an ADR Specialist to listen to the parties and use reason and understanding is without question a major necessity of an effective mediator or arbitrator. When dealing with disputes related to business decisions, divorce or marriage issues, family matters, and other general disputes, a well-trained and experienced ADR Specialist can be very effective in helping the parties come to a final resolution. Construction is another matter. If the construction dispute relates to a financial matter, breach of contract, legal issue or other issue not directly related to a construction issue, an ADR Specialist without construction knowledge may be very effective in assisting in settling the dispute. If the specific dispute directly relates to construction issues, it is imperative that the ADR Specialist have a construction background and/or construction experience.

If you were sick or injured, you would visit a doctor. If your illness was of a specific type, with the doctor having only a limited knowledge of that type of illness, the doctor would likely refer you to a specialist. You go to a doctor because they have been trained to know how your body functions and what steps and remedies would be effective in helping to cure your illness or injury. In a similar manner, if a construction project is sick and develops a defect or is injured during the construction process, that defect or dispute should be been handled by someone who has a similar training and experience as a doctor but related to construction. If the dispute is specific in nature and relates directly to a special construction expertise, that dispute should be referred to a specialist such as an HVAC expert, plumbing, electrical, structural or similar ADR Specialist who is capable of understanding the issues in the dispute due to his/her own construction knowledge and experience.

It is my opinion that if a construction dispute involves specific construction issues and is handled by an arbitrator, judge / jury who "doesn't know the difference between rebar and a Hershey bar" they should not be the decision maker handling the dispute. It becomes necessary for the parties to spend significant money hiring construction specialists and experts to testify and attempt to convince the decision maker that they are right in their position. The presentation expense becomes very costly and time consuming. At the end of the process, whether it is binding arbitration or litigation, the verdict or award is usually based on which party had the best and most convincing presentation as opposed to which party was right or wrong.

I recently had a discussion with a very prominent and experienced construction attorney. When I asked him if he recommended ADR as opposed to litigation in the construction contracts of clients he represented; he informed me that he generally did recommend ADR but in some cases he recommended the litigation process. I asked him if those that he sometime recommended to use litigation were based upon the fact that he would earn more money using the litigation process. He responded that his income was not involved in his decision but that his obligation as an attorney was to represent his client whether his client was right or wrong. If his client was right, he hoped to win the case and would be the prevailing party. If his client was wrong, he was obligated to attempt to lessen or mitigate the damages to his client.

He used the example that if his client was sued for $150,000.00 and he was able to have the verdict reduced to $50,000.00, he performed his job effectively. He went on to explain that he represented one client that in his opinion was a "less than experienced builder". When he heard that the builder was constructing a home, he knew that he had a case coming as there was no way the builder would be able to close on the house without his intervention. He went on to explain he is a very experienced construction attorney. If he could appear before a judge who basically knows nothing about construction and the opposing attorney is not as experienced, he not only could lessen or mitigate the damages, but may even win. If he appears before a construction-knowledgeable arbitrator, he has much less of a chance of winning or even mitigating the damages for his client."

My personal feeling is that when two parties go before a decision-maker with authority to render a final and binding decision, it is the obligation of the decision maker to have as much knowledge of the issues in dispute as possible. This policy does not benefit the contractor or the owner. Both parties are entitled to have a decision rendered that is fair to both parties based on which party is right or wrong and not based on who has the best and most convincing presentation. Keep in mind that binding arbitration is more final than going to court. Judges' decisions can be appealed and appealed whereas an arbitration award is generally not subject to appeal other than on certain specific procedural grounds.

I am the President and CEO of a firm that offers construction ADR Specialists located in every state in the US and in several foreign countries. We consistently turn down about two-thirds of the ADR Specialists who apply to join our National or International panels due to their lack of knowledge and expertise related to construction or construction law. Green building and remodeling is becoming so popular that we have developed a "National Green Dispute Panel" of ADR Specialists who have a special expertise related to green building, energy conservation, resource conservation and related green topics. Insurance companies have already indicated that they may exclude green-related disputes from insurance coverage as they expect judges without knowledge of green issues will likely issue verdicts in favor of the owner which will be very costly to the insurance companies. If builders specify arbitration in their construction contracts and a provider has arbitrators who are green-knowledgeable, the decision of the arbitrator will be more fair to both parties in the dispute due to the green knowledge of the arbitrator.

Construction is such a specialized field that it is virtually impossible to take a general ADR Specialist and train them to become a "Construction ADR Specialist". I have seen several contractors and individuals who have spent the majority of their career in the construction industry become very effective construction ADR Specialists.

If you are a "good" contractor, it is to your advantage to specify ADR to settle your disputes, but only if you specify a provider of ADR services specializing in construction ADR. If you are a lousy contractor, I suggest that you stick with litigation settlements. If you are an owner and anticipate any construction in the future, make certain that you specify ADR and a Construction ADR provider in your upcoming construction contract. ADR is much easier to conduct and is usually far less expensive than trying to settle construction disputes through the litigation process. Several things are not controllable during the construction process. The dispute resolution process that you will use to settle disputes is within your control. If you plan ahead and properly prepare for disputes, you will most likely see your construction project stay on time and within your budget.

Please consult an experienced construction ADR provider prior to negotiating any construction contracts. There are special ADR processes available such as "Fast Tract Agreements" or "Accelerated Arbitration Processes" that offer the most inexpensive, simple and accelerated dispute resolution processes available for construction projects.

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