Unstructured Construction Mediation – Going With the Flow


Every mediator has their own style within the standard format. Sometimes, however, events dictate a change in the format as well. And sometimes, when the right ingredients are present, the mediator can ‘cut to the chase’ and get the job done and thereby reveal how efficient and cost-effective mediation can be when some of its ritualistic, excess baggage is tossed overboard.


The Emergency Call to Duty


The call came early Sunday morning. “I’m stuck in Denver. Everyone’s in New York and they all want you to give it a try.”


Every doctor has experienced the midnight call to duty. Other professionals who have “hands-on” relationships with their clients are always “on call” and must respond to their needs on short notice. And in another profession anchored in trust and reliability, a mediator must respond as well to an emergency call from a fellow mediator.


The Dispute


The long scheduled mediation was set for the next day in NYCity. The mediation statements, pleadings, contract between the parties and a number of important documents were immediately forwarded by e-mail and, after speaking with the attorneys later that day, I agreed to mediate the construction dispute. It arose out of the erection of a hi-end, hi-rise condominium in the Chelsea district in downtown Manhattan and was between a general contractor/developer partnership and a terminated concrete subcontractor.


Every mediator worth their salt has worked out, in advance of the mediation, a tentative structure for the proceeding. The process belongs to the parties so input from all involved is always sought to help the mediator identify negotiable issues and set the agenda. But usually they leave the format up to the mediator.


The vast majority of mediations fit the traditional mold: initial public session with all players present followed by caucuses with groups or individuals designated by the mediator, usually interspersed between additional public sessions as the issues are clarified, eliminated and resolved.


The Next Morning


But on such short notice, with little time to submerge myself in the dispute, research the issues and brainstorm an approach to its resolution, standard format was the default setting as I made my way bright and early the next morning to meet with the parties and their attorneys at the offices of the GC. (On my way through the side streets of Manhattan, I passed a vest-pocket, Sephardic cemetery snuggled between two buildings – a bad omen, I thought.)


It was so early, in fact, that the contractor’s offices were desolate except for the contractor himself, a self-made gentleman who exuded charm and confidence as he greeted me in the tastefully appointed, hi-tech, spacious reception area. Built-in HDTV screens proudly streamed a wide variety of his company’s projects.


He invited me into his office for a cup of coffee from a pot, he told me, was his second of the morning. In the normal course of events, mediators tend to avoid one-on-one sit-downs with a principal in a mediation. Attorneys frown on such solo meeting with their clients. But I had a lot of catching up to do so I decided to ‘go with the flow’ to see where events took me awaiting the rest of the participants to arrive.


The General Contractor

As soon as we sat down he declared he would not budge a penny from his last offer to the sub and went on at length to explain why. This “final” offer had been conveyed to the subcontractor at a last-ditch, weekend meeting between the attorneys two days previously, a meeting that neither the former mediator, I found out later, nor the present one, had been made aware of. He was being more than generous, he went on, and wanted an opportunity to go over each and every of the 20 plus change orders – the guts of the dispute – at the mediation session later that morning to demonstrate his munificence. (With such little preparation and sketchy feedback from the attorneys the day before, I had been thinking about a “global” settlement, not an “issue-by-issue” recitation of differences.) He also revealed that despite the sub’s termination, he thought its work first-rate and said that had it not been for the intervention of a “facade expert” insisted upon by a financial institution, the dispute would not have mushroomed as it had.


After twenty minutes we were interrupted by an aide who announced the arrival of the GC’s opposing attorney. Having done my best to bond with the contractor in the little time we had – we shared our common experiences in the construction business – and having heard an earful, I excused myself to greet and meet the new arrival.


The Attorneys


Female construction attorneys are few and far between. And one who actually had “hands-on” experience in the construction business is a real rarity. Again, common backgrounds allowed us to quickly break the ice as we were ushered into the empty conference room set aside for the mediation. I got right to the just-revealed weekend negotiation for an update on the latest status of the dispute.


That meeting ended with the two sides at loggerheads but the attorneys still had a good relationship, she said, and both hopeful that the mediator could find a way to bridge the gap in the numbers put on the table.


She spotted the opposing attorney through the glass walls of the conference room as he entered the reception area and waved. The two of us went outside to greet him.


The new arrival was a construction attorney who represented a party in a complex construction mediation I had done years back. This surfaced during my conversations with the attorneys the day before. His good words and his good relationship with his opponent gave me credibility and the three of us optimism that we could work in concert to help the parties make a deal.


The Subcontractor


The three of us were going into the conference room when a project manager and a super from the subcontractor arrived. During introductions the PM announced that his boss had not made it back in time from a quick trip to Ireland and would not be attending. When I inquired, he revealed that his settlement authority was limited.


I gave his attorney an apprehensive look and after a quick, private discussion with her, I ushered the sub’s people into a small conference room off the reception area. As they settled in I asked the PM to contact his boss for settlement authority within the broad range discussed over the weekend. His brogue had revealed our common ancestry and the storied feistiness surfaced when I told him, as I exited, that without that authority the mediation could not go forward.


The Developer


Just then the developer-partner of the GC arrived. Her attorney introduced me and showed her into the contractor’s office to wait with him while the two attorneys and I reconvened in the main conference room to finish our discussion.


The Attorneys


Back with the attorneys awaiting word from the sub’s people whether they had gotten settlement authority, I soon discovered that the lawyers were in agreement that any number within the range last discussed was okay with them, if not with their clients. I suggested splitting the difference – mediation 101 – and that suit each fine.


As they brought me up to date on the weekend negotiations, a question arose between them as to the value of one of the critical items they thought they had agreed on. While they reviewed their notes I took the opportunity to get acquainted with the developer, who was still huddling with the contractor in his office.


The GC and the Developer


It was clear from the moment I joined them that there was a “father-daughter” relationship between the two. It was also apparent that the dynamic young developer was chomping at the bit to put this dispute behind her, in the crow’s-nest looking for new projects and the time to concentrate on ones already in various stages of development. She seemed indifferent to the amount of money in dispute, but in deference to her older, wiser partner, voiced support for his refusal to budge.


The mediator’s dilemma in such a situation is obvious: how to get the GC to move off the dime without undermining his tough, construction-guy persona with his young partner. So it was back to mediation 101: a discussion of the long and costly road ahead if they did not settle here and now, instead of on the courthouse steps, where and when, in 97% of all disputes, one side decides to stop playing “chicken.” A graphic description of the time and money that would be spent by each of them personally was calculated to impact more on the restless developer than on the dispute hardened, patient and stubborn GC. But it was a realistic account that both had to hear from an objective source and was my last settlement salvo before exiting to see how the PM and super were doing.


The Project Manager and the Super


They were still trying to contact their boss. I asked about their stateside concrete projects and told them about my past life designing reinforced concrete structures and my experiences in the field as a young inspector constantly battling with the cement finishers over their silent, constant, thumb-in-the-mouth gestures to the truck drivers from the concrete plant for “more water.” I also told them (with the GC’s prior approval) that future work with their present adversary was not out of the question despite the present difficulties. Nor did they, or their boss, have any lingering personal gripes with the GC. And we all agreed that despite stormy weather in past relationships, repeat business was the heart and soul of the construction business. [“Better the devil you know, than the devil you don’t,” I thought, but left it unsaid]


The Attorneys


When I rejoined the attorneys they had resolved their different recollections of the weekend meeting. I reported on my caucuses with their clients, how I sized each up and, as I escorted them back to the rooms occupied by their clients, suggested they follow up and reinforce the arguments I had laid out. I also told the GC’s lawyer that if the GC got his wish to go over each and every change order at the public mediation session, the mediation could hit some rough water. The sub’s people would defend their boss’s honor (and their own) and the mediation could start floundering. With those parting words, I took a seat in the reception area awaiting feedback from each as to whether the tides were running our way.


Shortly thereafter the subcontractor’s attorney joined me. Her guy had been contacted and was willing to meet the other side halfway.


And not long after that the other attorney came out of the GC’s office and asked if I would join him with his clients. His told me they wanted to discuss a “guarantee” and said no more.


The “Guarantee”


The GC and developer were seated at a conference table. He seemed resigned. We joined them and the attorney proceeded to fill me in. The number was “doable” but the developer wanted assurances that her condo owners would be fully protected. She had a reputation to protect and wanted the sub to “guarantee” that he would be accountable for all the work in his contract, including overlapping work completed by the sub who replaced him.


I knew the attorney knew (and probably the GC as well) that his adversary’s lawyer could not, and would not, allow the sub to agree to such an open-ended guarantee. I also knew my role at that point was to explain the reasons why to his clients. This is often the mediator’s task – to support an attorney when there’s bad news a client may not be happy to hear, or has already heard, from the attorney. I finished my explanation as to why such a guarantee was a “nonstarter” and after I answered questions from the developer, the attorney summed up my remarks with: “That’s basically what I told them.”


The GC and developer looked at each other, nodded, and said they too would to split the difference, sighing that they would forego their demand for a “guarantee.” We had a settlement.


The Public Meeting


At the end of the morning we finally had a “public meeting,” an impromptu one in the reception area as we were all putting on our coats, saying our goodbyes and congratulating each other on a job well done. No one seemed happier than the developer.


Postscript


Within one week the money was paid, releases exchanged and the court notified to discontinue the case.



© Copyright 2007 Construction Mediation Inc.

                        author

Gary Morgerman

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… MORE >

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