Originally posted 2015-02-02 10:16:10.
Over the past three weeks, I’ve discussed three “stages” of a construction dispute from the claim, to how to increase the pressure for payment, to the litigation. While these three steps are all too often necessary tools in your construction collection arsenal, they are expensive and time consuming. No well run construction business can or should budget for litigation. The better practice would be to engage a construction attorney early in the process and avoid the dispute altogether if possible. Unfortunately, even the best of planning can lead to the need to hire a construction lawyer for the less pleasant task of assisting you in getting paid.
This post is about an alternative to the scorched earth of stage 3 of the process that can and should be at least considered either before or after the complaint or demand for arbitration has been filed. I am of course speaking about voluntary mediation. Why did I emphasize “voluntary?” Because to me mandatory mediation (as required in many construction contracts) is a bit like forced volunteerism, it is something that the parties will go through to “check a box” but will not have their hearts in it. Remember, by the time the mandatory mediation clause kicks in, the parties are likely at an impasse in their construction dispute and are ready to fight. Being forced to mediate, especially from the party seeking payment, can (and in my experience often does) make the parties just go through the motions at best and be hostile to the process at worst. Neither of these attitudes are conducive to resolving a dispute.
All of that said, and as anyone that has followed Construction Law Musings for any period of time knows, I am a HUGE fan of voluntary mediation. I am such a fan that I went through the additional time and effort to become a certified mediator here in Virginia. As opposed to mandatory mediation, when the parties decide that, as business people, they will sit down with a third party and try to come to a resolution that is at least one that they can live with, the process usually leads to the end of the dispute. Even in those instances where the process does not lead to an immediate resolution, mediation has its benefits.
I have personally gone into a mediation thinking that either my client (when I’m wearing my construction attorney hat) or the parties (when acting as a mediator) have no chance of settling their differences short of walking out and continuing to court and, with the help of a qualified mediator, have left with a resolution that seemed impossible. The parties managed to get past the anger and the “my way or the highway” battle cries of the arbitration and litigation worlds and find a way to walk out of the mediation at least equally displeased with the outcome. The two sides also walked out having removed the risk of a poor result in litigation and the certainty of a much higher attorney fee bill.
In short, before charging to the end of what I call “Stage 3- The Last Straw,” I always recommend that mediation be considered as an alternative to the long, expensive and risky litigation or arbitration process.
I recommend that you look to my ADR page here at Musings for more of my (and others’) thoughts on mediation and its benefits.
As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.
Here in NC, all state cases that are filed get assigned to (involuntary) mediation. The parties do have choice as to when the mediation will occur- before, during, or after discovery. Even with it being mandatory, it has a tremendous success rate. Something about having a third party play devil’s advocate, and hearing from someone other than your own lawyer, is enough to change minds. That, and the wearing down that occurs by the time the end of the day rolls around. Sometimes I think mediation is a war of attrition. If the parties stay there long enough, they WILL settle.
Thanks for the input Melissa. I can see how that would work if the parties are already in litigation and have already “footed the bill” for some legal time, etc. and can see the looming expense and time. It also will depend on the mediator. Some (metaphorically) lock the parties in their rooms until a settlement occurs, while others are “punching a clock.”
The “involuntary” mediation that I was referring to primarily is the contractually required “mediation” that is a prerequisite to suit. In these cases, I often see a “check the box” mentality.