Construction Mediation: After 20 Years, Poised at the New Millennium


by Gary Morgerman

January 2001

Mediation is fast becoming, and soon will be, the prime forum for resolving construction disputes in the new Millennium. Long categorized as an Alternative Dispute Resolution (ADR) method simply because members of the construction industry had been indoctrinated into thinking that if negotiations failed arbitration or litigation was their only recourse, in reality, these two have always been alternatives to mediation. Few executives gave mediation a thought.

Its 20 year journey, arriving at its inevitable position in 2000 as the construction industry's soon-to-be premier method of resolving disputes, has been an obstacle course laden with inertia, indifference, confusion and greed.

Roofers Break the Ice in 1980
In 1980 mediation got a toehold in the industry when the roofing trade gave it a try. Word spread, as did the toehold into a foothold, when, in 1985 the insurance industry, through the initiative of Bernard Engels and Elliott Gleason, executives of the Design Professionals Insurance Company (DPIC), realized its potential and spearheaded a movement to integrate mediation into the construction industry's dispute resolution culture.

Around the same time the American Arbitration Association (AAA) initiated an 'invitation only' construction mediation training program for selected members of its panel of construction arbitrators. The author took the training in 1986 and the same year started writing a regular column on 'ADR in the Construction Industry' for NEW YORK CONSTRUCTION NEWS (NYCN), a column which chronicled mediation's progress.

1987-1992
A 1987 column entitled Mediation Recommended over Litigation alerted the industry to the fact that "construction mediation was shamefully underutilized." Another observed that: "the construction community was generally unaware of (mediation) and its flagrant underutilization...must be addressed by the legal community." Coincidentally, Robert Coulson, the sorely missed past president of the AAA, in his handbook, BUSINESS MEDIATION, said that "most lawyers would like to keep mediators out of their (settlement) discussions," which perhaps prompted the American Bar Association to declare that same year that it would no longer approve a law school unless "ADR was among the skills taught to lawyers."

But mediation stayed on the back burner as chronicled in NYCN columns between 1987 and 1991: Mediation Popular, Except in Construction, (1987), 5 Mediation Resolutions for the New Year, (1988), Industry Shuns Smart Mediation Efforts, (1989), There's a Better Way to Resolve Disputes, (1990), Lawyers Shun Arbitration and Mediation, (1991) and Construction Mediation: The Sleeping Giant (1991).

Industry Awakens to Mediation in 1992 heralded the progress made in the early 90's. The Associated General Contractors of America, the nation's oldest construction trade association, put an ADR clause in its standard contracts and the New York City School Construction Authority (SCA) adopted mediation to resolve disputes with its contractors and subs. That same year an attorney in the AAA's ARBITRATION JOURNAL said: "Mediation is about to change law practice. It is the cheapest, lowest risk, and most under-utilized form of alternate dispute resolution, attorneys may as well make a virtue of necessity."

There was still a way to go, however. Mediation required wider promotion within the industry. This prompted, in late 1992, Mediation Needs Help From NCDRC and AIA. Led by Jack Woolf of Crow Construction, the National Construction Dispute Resolution Committee took up the gauntlet. Mediation soon began getting its deserved recognition within the construction community.

1993-1999
However, it was not until the new generation of construction attorneys began flexing their muscles and slow moving bureaucracies got their acts together - it was not until 1997 that the American Institute of Architects (AIA) finally put a mediation clause in its standard construction contracts - that mediation arrived at its present, deserved place at the forefront of construction dispute resolution.

[Mediation's growing popularity in other dispute areas has spawned a cottage industry in private ADR, rent-a-judge, mediation firms across the nation and it is being integrated into the national court system. In New York State, the New York City branch of the Supreme Court adopted mandatory mediation in 1996, followed by the Westchester branch in 1999. Every law firm now has a mediation area, some firms specialize only in mediation. And ADR is now part of the basic curricular in every law school.]

So why did it take so long to be appreciated and what ingredients make mediation so appropriate and successful in resolving construction industry disputes?

Misnomers and Myths
A colleague, William Cousins, Esq., one of ADR's anointed "Special Masters," observed in the February, 2000 issue of Grynbaum's MEDIATION UPDATE, an ADR newsletter for the power industry: "The term "ADR" is truly an oxymoron. It purports to be an alternative to the trial of a lawsuit. In fact, the lawsuit is the alternative resorted to only after the adversaries in a conflict walk away from each other and refuse to address each other's demands. It is, therefore, more accurate to describe the lawsuit as an unsatisfactory alternative to negotiation (and mediation)."

Other myths have been dispelled as well.

Attorneys lament that when one agrees to mediation, a party takes the risk of giving its case away to the other party. Nonsense! There are no secrets in the life of a construction project - it is built in the sunshine for all to see (unless a tunnel), and all the documents and drawings generated are distributed to all concerned as the project rises out of the ground. Nor are there any legal tactics that would surprise any member of the construction bar if the case ended up in litigation or arbitration.

The Proper Ingredients
Mr. Cousins went on to say this about the kind of mediator best suited for a particular dispute: "There is an empirical knowledge of the situation held by the adversaries themselves which no generalist in conflict resolution can be expected to understand. A neutral who is not well versed in this empirical knowledge offers very little to the adversaries other than neutrality. But neutrality in and of itself is worthless without an in-depth knowledge of the empirical nature of the dispute."

This echoes what Bob Coulson said in 1994 in the ARBITRATION JOURNAL. Mr. Coulson stressed: "the importance of using mediators familiar with construction terms and conditions. The mediator's knowledge and experience in the industry are important. Retired judges, law professors, senior partners in corporate law firms, no matter how competent they may be, do not always have enough practical experience to make a major contribution to the parties' negotiations."

A prime example of how successful mediation can be is the SCA's program wherein all the mediators are construction experts. This ingredient, combined with voluntary participation makes the SCA program so effective and more successful than mandatory mediation programs where one or more of the parties may be unhappy, unwilling participants, herded into a mediation room under a court order. And as most mediators in these relatively new court programs are pro bono - whether for experience, noble intentions or to make business contacts - the parties often do not treat the process with respect. As the University of Chicago economist, Milton Friedman, said: "What people get for nothing, they value for nothing."

The New Millennium
Now that the industry has accepted mediation and many are heeding the advice of Mr. Coulson and Mr. Cousins, it has arrived at the threshold of the new Millennium in the forefront of construction dispute resolution. Even the AAA has placed mediation first, before its namesake, arbitration, on its web site. Mediation could not be denied during its 20 year struggle to the top, simply because 'you can't keep a good man down.'

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Biography




Gary Morgerman, founder and president of Construction Mediation Inc. (CMInc), was born, bred, and educated in New York City. A graduate of the Cooper Union for the Advancement of Science and Art, with a degree in structural engineering, he later attended New York University School of Law. Twenty years ago he entered the field of construction claims and Alternate Dispute Resolution. Mr. Morgerman arbitrates and mediates construction cases for a number of organizations, agencies, and court systems. These include the Supreme Courts of New York and Westchester Counties, the New York City School Construction Authority, The Mayor's Office of Construction, the FDIC, the United States Department of the Interior, and the American Arbitration Association, among others. He also provides construction claims services for construction entities and law firms. Having written and spoken all around the country on these subjects, the Associated General Contractors cited him for his "pioneering and revolutionary efforts" in the field of construction mediation.

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Website: www.CMInco.com

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