ADR way to settle disputes outside courtroom

Although all industries and individuals have benefitted greatly from the availability of Alternative Dispute Resolution (ADR), perhaps no industry has benefited more than the construction industry. The reasons to use ADR are compelling.
For example, many issues are too technical for juries, trying cases is more costly and time consuming, the outcomes are more predictable, etc. This article addresses the processes and options that must be understood to fully realize the potential benefits of ADR.
First, what is ADR? In its simplest terms, ADR is the process of resolving disputes without going to court. Essentially, ADR is comprised of mediation, case evaluation and arbitration.
Mediation is the process whereby a mediator facilitates resolution of a dispute through settlement. A mediator typically will not tell the parties what the outcome should be. Rather, the mediator helps each party evaluate the strengths and weakness of the respective claims so the parties can reach a mutually agreeable resolution.
Two keys to successful mediation are selecting the right mediator and timing.
In terms of the selection process, it is imperative to select a mediator that not only has extensive subject-matter knowledge, but also has a personality that generates respect. Those skills create trust in the mediator, which is one of the greatest factors in reaching a settlement. For example, if the mediator cannot grasp key subject-matter concepts like the distinction between base contract and extra work, then the mediator’s trust is lost. On the other hand, a great subject-matter mediator who is caustic to the parties is equally unlikely to develop trust and, hence, an environment conducive to settlement.
As part of the mediator selection process, the parties should conduct their due diligence. This includes contacting attorneys who frequently mediate cases and asking the mediator for references. The mediator selection process is crucial and the parties need to approach it correctly to maximize their chances of successfully resolving their dispute. Timing is also critical. If the parties have a sincere desire to quickly resolve their dispute, then an immediate mediation is usually the right choice. Under these circumstances, if the parties wait too long, their positions might become entrenched thus resulting in a lost opportunity.
On the other hand, if the parties are already entrenched, then some form of “discovery” (e.g., questions under oath and document productions) is usually needed to increase the likelihood of success. Under these circumstances, the parties often agree to mediate but nonetheless file a lawsuit so the court can oversee the orderly progression of discovery. When the parties have exchanged enough information to evaluate each other’s claims, then they “stay” the lawsuit and proceed to mediation. Efforts to mediate either too early or too late are seldom successful.
Case evaluation is the process whereby a third party hears each party’s perspective and then renders a nonbinding decision. Case evaluations are most effective when settlement negotiations failed because the parties were too emotionally vested in their positions to objectively evaluate the strengths and weaknesses of the respective claims. Under these circumstances, case evaluations are incredibly effective at providing the parties AND their counsel with a “reality check.” It is far better to learn one is wrong from reading a nonbinding decision than reading a binding jury or judge verdict. Ironically, in the more-complicated cases, it is not uncommon to return to mediation after a case evaluation so the nonbinding decision and any remaining loose ends can be framed into a mutually acceptable settlement agreement. Arbitrations are very similar to trials in that a third party renders a binding decision after all parties present their evidence and witnesses. Arbitrations have become, to some extent, the vehicle of choice for resolving complex construction disputes. The fact finder is ideally a subject-matter expert with extensive, real-world experience. The benefits of arbitration are obvious (educated fact finder, less-expensive process, quicker decisions, etc.), but drawbacks exist as well. For example, appeals of arbitration decisions are rarely successful.
Because appeals are rarely successful, the arbitrator selection process is critical. In addition to subject-matter expertise, one issue the parties must investigate is potential bias. Arbitration companies are private businesses whose marketing activities may impact their impartiality. Although Conflict Statements are routinely provided by arbitrators, it is imperative that the parties carefully review the same and then question the arbitrator about any potential issues.
In short, ADR has transformed the way businesses and individuals resolve disputes. To maximize the potential benefits of ADR, however, the parties must understand how to the different processes work and which is most likely to achieve success. •


Drew W. Colby and James E. Purcell are attorneys with Partridge Snow & Hahn LLP. Colby co-chairs the firm’s construction group. Purcell is a member of the firm’s litigation group.

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