Supply chain issues. Labor shortages. A lack of qualified subcontractors. Even amid a building boom, the construction industry faces a number of challenges, many of which lead to legal disputes and other claims. As courts continue to work through COVID-related backlogs, we’re seeing an increase in construction lawsuits of all kinds.
What types of issues should construction attorneys, mediators, and arbitrators should be aware of? And what kind of role can mediation and arbitration play in this area of law? We spoke with six Miles Mediation & Arbitration Construction Area Practice Group mediators and arbitrators, including Jennifer Grippa (Florida), Barry Howard (Tennessee), David Matthews (Georgia), Roy Paul (Georgia), Jim Shea (Florida), and Christopher “Smitty” Smith (Georgia), for their perspectives and advice for construction law practitioners.
The Importance of Practice Experience
Our construction law mediators and arbitrators may have come to the field in different ways, but all did construction law before doing alternative dispute resolution (ADR) work. Roy Paul handled a wide range of construction cases in both the public and private sector, including representing boards of education and contractors, before becoming a mediator. Jim Shea started out representing various trades in high-rise condominium construction defect claims 20 years ago and “enjoys the challenge of trying to figure out what happened (or likely happened) on the project.”
David Matthews has represented owners, contractors, and designs in various types of cases across the country. “Construction cases are the closest thing to a level playing field in litigation,” he adds. “It may be the only arena where counterclaims are as potent as claims.”
Jennifer Grippa had two decades of construction law experience from private practice in Florida before she started mediating and arbitrating cases. Barry Howard handled numerous construction cases including construction site accidents, construction defects, and contract issues as a lawyer, so mediating them was a natural fit. And Christopher “Smitty” Smith worked in construction law during his entire legal career and brings that knowledge and experience to his construction mediation practice.
Trends in Construction Alternate Dispute Resolution
So, what types of construction cases are trending right now? Paul is seeing a fair number of high-end residential cases as a mediator. “Many of those are disagreements about scope of work, perhaps because the scope of work wasn’t clearly defined or the issue becomes what was in the original contract, or what was an add-on or change order or extra,” says Paul.
“I am seeing more hybrid cases that include both traditional construction breach-of-contract-type claims as well as construction defect claims or counterclaims,” says Florida-based Shea. Grippa, also in Florida, agrees, noting that more delay claims and claims for extended completion time and defect claims from materials manufactured during the pandemic that suffered from quality control are being litigated. Defect claims involving building envelopes, water intrusion, and defective stucco are also common.
“Nashville and Middle Tennessee are very hot areas in residential and commercial development. Due to this we are seeing a lot of construction defects issues,” says Howard. “In residential, this is primarily lawsuits; in commercial, it’s more arbitrations. However, all these benefit from, and in some cases require, mediation as part of the contract.”
Financial issues are also playing a role, says Matthews. “Interest rates are higher, and the work has slowed down a bit. That means margins are tighter,” says Matthews. “When margins are tighter, contractors are not able to make it up on another job. This usually leads to increased litigation.”
Before You Mediate a Construction Law Case
Preparation is critical for a successful construction mediation, says Shea. “Prepare your case, prepare your client (including any business decision-makers or insurance claim personnel that need to authorize or pay a settlement), prepare opposing counsel, and prepare the mediator or arbitrator with the appropriate information,” he says. That includes confirming that insurance representatives will participate in the mediation if parties have insurance coverage.
Grippa suggests having a confidential call with the mediator at least a week in advance to apprise him or her of the relevant issues. With complex, multiparty cases, you may also want to consider exchanging written position statements two weeks before the mediation to eliminate the need for opening statements at the mediation, saving time and setting out the relevant issues well in advance.
Provide expert reports to opposing parties well in advance of the mediation, and consider creating a mediation statement, recommends Howard. “A concise mediation statement is much better than just transmitting full deposition transcripts, thousands of pages of plans, and extensive contracts,” says Howard. “A mediation statement outlining the issues with supporting documents not only helps the mediator, but also assists the parties in their litigation planning,” agrees Smith.
The Important Role of Experts
Experts can play a critical role when mediating or arbitrating a construction case. “There’s a difference between experts at mediation and experts at arbitration. If there are key issues that hinge on expert testimony, experts can be useful at mediation, but you have to give notice to the other side,” says Paul. “At arbitration, you’re going to need expert testimony of some sort to prove your case.”
Shea is a strong believer in having experts present during both mediations and arbitrations. “Experts can provide insights and answer very technical questions that help provide a roadmap of the dispute,” he says. However, the decision to include an expert should hinge on whether the person “adds value to the case,” says Matthews. “If the expert can explain something to the other side which they are not seeing, then bring the expert,” he says. “Do not bring the expert if he/she is merely a cheerleader.”
Avoiding Common Mediation Mistakes
While many construction cases do settle at mediation, lawyers often made mistakes that can prevent or delay settlement. Common mistakes include, “not being well prepared; not having total command of the facts; not having client control; and not having realistic expectations prior to mediating,” says Matthews.
Another mistake Smith sees frequently is submitting unsubstantiated claims the day of mediation. “Even if the claims have merit, it is impossible for the opposing party to make a meaningful responsive without advance planning,” Smith explains. “Surprises are never a good thing at a construction mediation.” Make sure that you’ve determined insurance coverage, confirmed expert opinions, and calculated damages well ahead of the mediation, adds Shea.
Failing to communicate effectively with opposing counsel and failing to assess costs and risks thoroughly are other common mistakes. “Don’t focus exclusively on legal issues while overlooking emotional and interpersonal dynamics,” says Grippa. “It’s essential to consider the human element and interpersonal dynamics when crafting negotiation strategies. Too often lawyers concentrate exclusively on the legal issues when addressing those non-legal issues can be crucial to reaching an agreement.”
The Advantages of ADR for Construction Cases
There are several advantages to mediating or arbitrating a construction dispute. First, it’s less time-consuming, and the average length of time consumed by construction disputes continues to rise as courts continue to work through backlogs. “Mediation and arbitration continue to be the most expedient methods to resolve complex construction cases,” says Smith. “Even if the case is not resolved at mediation, some of the issues can be addressed which can save the parties time and money.”
“I think all construction cases, whether traditional construction claims or construction defect claims, are well suited for mediation and/or arbitration because of the highly technical nature of the facts, the ability to select a mediator or arbitrator that has a background in handling construction cases, and mediation and arbitration are a generally faster and more economical way to resolve the dispute,” says Shea.
Judges and juries lack experience with the complexities of construction contract, payment, and performance process, adds Grippa. “When you overlap issues of indemnity, insurance, and surety law, the claims, crossclaims, and third-party claims become even more challenging to navigate,” she says. “A specialized mediator or arbitrator who understands the ins and out of these types of cases can help the parties find a resolution that is less risky, cheaper, and faster than resorting to the courts.”
Construction cases tend to be complex, often involve multiple parties, and millions (or tens of millions) of dollars in damages. While some cases will proceed to trial, an experienced construction law mediator or arbitrator is often the most cost-effective and efficient way of resolving these kinds of claims.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.