Many construction contracts require arbitration of legal disputes, and some even require mediation as a precondition to the commencement of a formal proceeding. None, however, requires an early evaluative mediation, and this often makes early mediation simply a waste of time.
Non-evaluative early mediation – which occurs either before a case has been commenced or before any discovery has occurred – is often unsuccessful in construction disputes. In small project and residential construction cases, the property owner, whether a homeowner or a small developer, is often emotionally invested in the matter. Such claimants want their stories to be told and, more importantly, to be heard; they want to confront the other side and to receive some recognition of the harm allegedly inflicted. Standard mediation, which is non-judgmental, is not geared toward addressing those emotional needs.
In larger construction projects, the disputes are rarely so personalized. There, the difficulty with early mediation is more often traceable to the importance of quantifying the damages allegedly caused by delayed performance. Expert testimony is commonly used to establish the recoverable delay damages. Typically, however, delay damages experts are brought in after the facts have been well developed. Early mediation is therefore viewed as requiring the parties either to forego delay damages expertise or to begin costly damages expert work at an unusually early stage.
Despite these obstacles, effective early mediation can be beneficial in the fact-intensive construction dispute context. Almost every construction dispute involves a time-consuming reconstruction process to figure out what went wrong and why. For smaller parties, the process can be costly, and formal dispute resolution proceedings frequently only magnify their anguish. For larger commercial players, a major dispute is an expensive (in both time and money) distraction from the parties’ core business. Moreover, while the dispute is underway, a lien or cloud on title can tie up the property. Pending proceedings can also make it extremely difficult to replace construction financing with permanent financing.
The significant disadvantages of a lengthy formal proceeding are a good reason to try to maximize the likelihood of success of early mediation. Oddly, parties often overlook a proven path to success, namely, the use of an evaluative mediation. In this process, the mediator does not simply listen to the parties, but provides each side, in confidence, with an informed view as to the strengths and weaknesses of its position and with a sense of the likely outcome. Receiving such an analysis from a respected mediator can be a tremendous catalyst to an early settlement.
Selecting A Lawyer And A Mediator
Not every construction attorney or every mediator is experienced in early evaluative mediation. Parties considering such a process must seek out both lawyers and a mediator who are willing to do the necessary early stage work. First, when interviewing a prospective lawyer, it is essential to inquire how the attorney would persuade opposing counsel to commit to an early case assessment, and whether the lawyer will commit to undertake an early legal and factual analysis of the sort that is frequently not done until much later.
Next, the lawyers must find an appropriate mediator. There is no substitute for having the attorneys interview prospective mediators in order to find someone who is truly willing to provide a case evaluation and to push the parties to recognize the vulnerabilities of their respective positions.
The Actual Early Mediation Process
The mediator and the parties agree up front that the mediator will provide each side with a confidential, nonbinding evaluation of the critical facts and legal issues. Each side then shares in confidence with the mediator what the mediator needs to know in order to make a factual and merits assessment. The mediator cannot communicate any of that information to the other side. The mediator then separately advises each side what the mediator believes will be the likely outcome of the critical fact disputes (including credibility issues) and the key legal issues, as well as whether the parties have overlooked key issues. It is crucial that the mediator provide a simple explanation of the basis for those conclusions. This neutral evaluation of key facts and issues can be a forceful trigger to changing the parties’ own views of their likelihood of success. And that is what most often leads to a different settlement posture.
It is worth making the investment to locate lawyers and a mediator willing to proceed in this fashion. Evaluative early mediation can greatly reduce both the legal fees that would otherwise be spent on major litigation or arbitration and the time commitments and distractions of such proceedings. Equally importantly, the construction project at issue can move forward without the shadows and uncertainties of legal proceedings.
Laura Steinberg is a litigation attorney in Sullivan & Worcester’s Boston office.
