Why construction mediators and arbitrators need to be construction experts
By Peter G. Merrill
The Alternative Dispute Resolution (ADR) industry has long been advocating that mediators and arbitrators (ADR Specialists) need only to be trained and experienced as mediators and arbitrators and that it was not necessary for the ADR Specialist to have any specific knowledge concerning the issues in dispute. It was helpful for the ADR Specialist to have a limited knowledge of the issues but not necessary. I have heard many times that “A good mediator is a good mediator” and can assist the parties in coming to a satisfactory resolution to their dispute. In many cases, that is true. The ability of an ADR Specialist to listen to the parties and use reason and understanding is without question a major necessity of an effective mediator or arbitrator. When dealing with disputes related to general business decisions, divorce or matrimonial issues, family matters and other general disputes, well-trained and experienced ADR Specialists can be very effective in helping the parties come to a final resolution to their dispute. Construction is another matter.
If the construction dispute relates to financial matters, breach of contract, legal issues or other issues not directly related to construction issues, an ADR Specialist without construction knowledge can be very effective in assisting in settling the dispute. If the dispute directly relates to construction issues, it is imperative that the ADR Specialist have a construction background and/or construction experience.
If you were sick or injured, you would go to a doctor. If your illness or injury was of a specific type, with the doctor having only a limited knowledge of that type of illness, the doctor would most likely refer you to a specialist. You go to a doctor because they have been trained to know how your body is constructed and what steps and remedies would be effective in helping to cure your illness or injury. In a similar manner, if a construction project is sick and develops a defect or is injured during the construction process, that defect or dispute needs to been handled by someone who has a similar training and experience to a doctor but related to construction. If the dispute is specific in nature and relates directly to a special construction expertise, that dispute should be referred to a specialist such as an HVAC, plumbing, electrical, structural or similar ADR Specialist who is capable of understanding the issues in the dispute due to his/her own construction knowledge and experience.
It is my opinion that if a construction dispute involves specific construction issues and is handled by an arbitrator, judge or jury who “doesn’t know the difference between rebar and a Hershey bar” they should not be the decision maker handling the dispute. It becomes necessary for the parties to spend a great deal of money hiring construction specialists and experts to testify and attempt to convince the decision maker that they are right in their position. The expense of the presentation becomes very costly and time consuming. At the end of the process, whether it is binding arbitration or litigation, the verdict or award is usually based on which party had the best and most convincing presentation as opposed to which party was right or wrong.
Some months ago, I had a discussion with a very prominent and experienced construction attorney. When I asked him if he recommended ADR as opposed to litigation in the contracts of the construction clients that he represented, he informed me that he generally did recommend ADR but in some cases he recommended the litigation process. I asked him if those that he sometime recommended to use litigation was based on the fact that he would earn more money using the litigation process. He responded that his income was not involved at all in his decision but that his obligation as an attorney was to represent his client whether his client was right or wrong. If his client was right, he hoped he would win the case and would be the prevailing party. If his client was wrong, it was his obligation to attempt to lessen or mitigate the damages to his client.
He used the example that if his client was sued for $150,000.00 and he was able to get the verdict reduced to $50,000.00, he would have done his job effectively. He went on to explain that he had one client that in his opinion was a “less than experienced builder”. When he heard that the builder was building a house, he knew that he had a case coming as there was no way the builder would be able to close on the house without his intervention and assistance. He went on to explain that he is a very experienced construction attorney. If he could get before a judge who basically knows nothing about construction and the opposing attorney is not as experienced as he is, he not only could lessen or mitigate the damages; he might even win and be the prevailing party. If he goes before a construction-knowledgeable arbitrator, he has much less of a chance of winning or even mitigating the damages for his client.”
My personal feeling is that when two parties go before a decision maker who has the authority to render a final and binding decision, it is the obligation of the decision maker to have as much knowledge of the issues in dispute as possible. This policy does not in any way benefit the contractor or the owner. Both parties are entitled to have a decision rendered that is fair and equitable to both parties based on which party is right or wrong and not based on who has the best and most convincing presentation. Keep in mind that binding arbitration is more final and binding than going to court. Judges decisions can be appealed and appealed whereas an arbitration award is generally not subject to appeal other than on certain specific procedural grounds.
I am the President and CEO of a firm that has construction ADR Specialists who are located in every state in the US and in several foreign countries. We consistently turn down about 2/3 of the ADR Specialists who apply to join our National or International panels due to their lack of knowledge and expertise related to construction or construction law. Green building and remodeling is becoming so popular and is such a specialized field that we have developed a “National Green Dispute Panel” of ADR Specialists who have a special expertise related to green building or remodeling, energy conservation, resource conservation and related green topics. Insurance companies have already indicated that they may exclude green-related disputes from insurance coverage as they expect judges who will not have any knowledge of green issues will most likely issue verdicts in favor of the owner which will be very costly to the insurance companies. If builders specify arbitration in their construction contracts and a provider who has arbitrators who are green-knowledgeable, the decision of the arbitrator will be more fair and equitable to both parties in the dispute due to the green knowledge of the arbitrator.
Construction is such a specialized field that it is virtually impossible to take a general ADR Specialist and teach them to become a “Construction ADR Specialist”. I have seen several contractors and individuals who have spent the majority of their career in the construction industry become very effective and experienced construction ADR Specialists.
If you are a “good” contractor, it is to your advantage to specify ADR to settle your disputes but only if you specify a provider of ADR services who specializes in construction ADR. If you are a lousy contractor, I suggest that you stick with litigation. If you are an owner and are anticipating any construction in the future, make certain that you specify ADR and a Construction ADR provider in your upcoming construction contract. ADR is much faster, simpler to conduct and is usually far less expensive than trying to settle construction disputes through the litigation process. Many things are not controllable during the construction process. The dispute resolution process that you will use to settle disputes is under your control. If you plan ahead and properly prepare for disputes, you will most likely see your construction project stay on time and within budget.
Please consult with an experienced construction ADR provider prior to negotiating any construction contracts. There are special ADR processes available such as “Fast Tract Agreements” or “Accelerated Arbitration Processes” that offer the most inexpensive, simple and expeditious dispute resolution processes available for construction projects.