Mediate, Don’t Litigate, Your Construction Contract Complaints


“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often the real loser—in fees, and expenses, and waste of time.”


Abraham Lincoln, 1850


Many lawyers are familiar with Abraham Lincoln’s “Notes on the Practice of Law” written in 1850 (1). As a mediator and strong proponent of collaborative methods of resolving disputes, this is my favorite section of his observations on practicing law.


Mediation is a collaborative process where the parties select a neutral mediator to assist them in resolving their dispute, not to decide it. As an alternative to litigation, mediation is an effective forum in which to “persuade your neighbors to compromise”. Few areas of disputes are more litigious than the area of construction and yet, few areas of disputes have better reasons to use mediation.


Construction Disputes.


Most civil litigation lawyers have probably had at least one, if not more, construction related cases in their career. In fact, there are many law firms, or practice groups of firms, that specialize in litigating these cases. The reason for this is demonstrated by the following examples of disputes which frequently occur in construction projects:


  • The owner who wanted to change things as the project was being built, but then doesn’t want to pay the price charged after the changes are done;
  • The contractor who met all the standards of the industry, but the owner is demanding perfection and produces a never ending list of imperfections;
  • The subcontractor who is delayed by others on a project increasing his costs, but ends up with back charges of one sort or another that cancel out its payments due;
  • The designer who designs a project which gets changed by others during construction, but is still blamed for the problems when the project doesn’t perform as planned.


The very nature of these disputes, especially on larger commercial and industrial projects, makes them very expensive and time consuming to litigate. The disputes are often factually complicated, document intense, loaded with technical issues (such as design errors, delay analysis, environmental harm), and emotionally charged.


When the parties to a contract litigate these disputes, they are likely to spend as much or more money during the complicated discovery process then they do in the actual hearings. Even when binding arbitration is utilized, similar problems occur. All the delays and expense of the discovery process are even more troubling when you consider there is greater than a 90% chance that the case will settle before trial.


Mediation is of course not new to the construction industry, and is slowly becoming more widely used. Many of the standard industry form agreements, now require that the parties agree to start with mediation, before they undertake the next step whether that step be binding arbitration or litigation. It is also helpful in New Jersey, as in other states, that there is a court mandated Complementary Dispute Resolution (CDR) program which requires mediation for many cases within a short time after civil pleadings are filed.


Benefits of Mediation. If you have been through a mediation, you are aware of some of the benefits. Here are a few of the major benefits:


The Parties’ control the outcome. One benefit of mediation is that the parties remain in control of the resolution. Unlike litigation or arbitration, in mediation parties don’t relinquish control of the decision to a third party, who must be extensively educated. Rather, they seek assistance from a skilled neutral.


Pressure relief. A good mediator can help in dispelling negative emotions which are often the propellant for litigation. This is often done by allowing “venting” by the parties in a controlled environment at the outset of the mediation process thus releasing some steam and giving the parties the opportunity to be heard.


No expensive learning curve. A mediator experienced in construction and the law can provide assistance, without all the anguish involved in completing the discovery process. A knowledgeable mediator can facilitate a settlement without the need of an extensive education. He can also provide confidential insights, as to the nature of each party’s individual case strengths and weaknesses.


Savings in time and money. Instead of taking years to complete a law suit, the entire mediation process can be over in weeks. The mediation itself is often no more than a day or two. The cost of the mediation process is also a fraction of the cost of litigation. This is true even taking into account that most litigation ultimately settles before trial.


Preserving relationships. The mediation process also allows for creativity in coming up with differing solutions to effectuate a settlement. Interest based principles of negotiation can help expand the pie for all the participants. In this way, mediation allows the parties an opportunity to preserve their relationships, as opposed to the damage caused from litigation.


Confidentiality. The mediation process can remain completely confidential as any settlement agreement might be and is also subject to certain additional protections by laws that govern the mediation process.


For those lawyers and mediators committed to collaborative methods of dispute resolution, Lincoln had some further encouraging advice from the same writings (1):


“As a peace-maker the lawyer has a superior opportunity of being a good person. There will still be business enough.”


Abraham Lincoln, 1850


The American Arbitration Association reported a 12% increase in construction cases filed for mediation last year over the prior year, which shows an encouraging growth in the mediation business. Hopefully, this trend will make room for many more peacemakers in the world of construction disputes.


End Notes


1. Abraham Lincoln, Speeches and Writings 1832-1858, 1989, The Library of America, pages 245-246.

                        author

Chris Kane

Chris Kane P.E. J.D. is a professional engineer, lawyer and mediator and based in Princeton, New Jersey.  He has over 30 years of experience in the construction and environmental industry and nearly 20 years of experience as a mediator participating in all methods of dispute resolution. Chris is currently Vice… MORE >

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