Construction Mediation: Ten Tips for Success

Construction projects often produce disputes.  Mediation can help resolve such disputes, quickly, confidentially, and efficiently.  This Article offers ten tips for success in mediation. 

1.     Get What You Need:

Forms of mediation vary greatly, from facilitative (with the mediator encouraging parties to consider the benefits of settlement, and creative alternatives for dispute resolution), to evaluative (with the mediator providing a non-binding assessment of the strengths and weaknesses of positions, to help parties rationally evaluate the benefits of settlement), and a variety of other forms.  Mediators, moreover, vary, from subject matter experts (including non-lawyer professionals) to experts in dispute resolution (including ex-judges and highly experienced counsel).  Get a process, and a mediator, that is right for your dispute.  Even if the process is not specified in a contract, or if mediation is directed by a court, you still have the ability to shape the process (on agreement with the adversary).  Since you share an interest in ensuring that the process succeeds, early discussion with adversaries about the needs of the dispute should be a high priority. 

2.     Prepare For The Mediation:

Successful mediation requires preparation.  Make sure that the appropriate decision-makers are in the room; that essential information (necessary to evaluate the dispute) has been exchanged; and that the mediator is well-informed about the nature of the dispute, the history of prior attempts to resolve it, and any roadblocks or opportunities that may affect the conduct of the mediation.

3.     Foster Cooperation:

Nobody “wins” a mediation by steam-rolling an adverse party.  They win by encouraging the adversary to see the wisdom of a fair resolution of the dispute.  This is a special form of advocacy; it starts with cooperation.  Discussions of the process, the schedule, the venue and the pre-conditions (information exchange, briefing of the mediator)—all can offer opportunities for parties to demonstrate that cooperation and rational discussion about common interests can produce beneficial results.  All-or-nothing (“my way or the highway”) positioning may work in some situations, but not in mediation.

4.     Prepare To Persuade The Adversary:

Mediation offers a unique opportunity to speak directly to an adversary and its decision-makers.  In the exchange of pre-mediation memoranda, and especially in the opening statements that commonly begin the mediation session, focus on what the adversary needs to know (and consider) to reach the conclusion that a fair settlement is appropriate in this dispute.  The critical audience is the adversary, not the mediator.  Focus on the strengths of your position, and problems in the adversary’s position.  Remind the adversary of the risks and costs of discovery and trial.  Avoid bluster and name-calling.  Joe Friday had it right: “Just the facts, ma’am.”

5.     Seek Agreement On The Framework For Discussions:

 Construction disputes often present an array of sub-issues, which may roll up into a “big picture” question (i.e., which side writes the other side a check).  On occasion, parties may wish to focus the mediation on that overall question.  But, more commonly, some discussion of individual issues occurs first.  Talk to the adversary (and mediator) about the framework for the discussions.  Will they proceed one-by-one through a list of issues?  If so, which issues come first?  Is the priority based on dollar value, or from easiest to hardest, or something else?  Are there some issues that cannot be resolved, now, due to incomplete information (e.g., a critical exchange of expert reports has not yet occurred, or a critical motion is pending before the court)?  Think of the mediation as a project.  Is there a logical sequence for discussions that most likely will lead to efficient resolution of the dispute?  This is another opportunity to demonstrate cooperation with an adversary.

6.     Formulate A Settlement Range:

Just as with valuation of any asset, the value of claims in a dispute is not a matter of precise science.  And, just as in any business deal, a party has both its wish list of “wants,” but  also a more modest list of “needs.”  Using those criteria, it should be possible to formulate a range of settlement values, from “best case” to “worst case,” and some sense of a “likely case.”  The ultimate settlement (if it occurs) generally involves an overlap between each party’s individual settlement range.  Working through your own settlement range, and “guesstimating” what the other party may think is the range is a very useful exercise in preparation for mediation.  During the mediation, moreover, when settlement demands and offers are exchanged, efforts to explain the justification for your position on the range of settlement values (often, an assessment of the probability of success, multiplied by the amount of damage recoveries at stake, minus the costs of litigation) can help you to advocate (often, through the mediator) for the reasonableness of your position.  And, where an adversary offers a number “out of the blue,” a useful response is often to inquire as to the basis for the calculation of their number.

7.     Stay Positive:

Mediation can be a tedious process, including lengthy periods when the mediator spends time in private caucus with the adversary, only to deliver some “nothing burger” of a response from the other side.  Stay positive.  Everybody postures.  Everybody wants to maintain a broad latitude for negotiation.  An experienced mediator will remind you that the process works, even in some very tough cases.  Resist the temptation to walk out, on the conclusion that the other side is “not serious” about settlement (given their early positioning).  Work with the mediator to formulate strategies that can produce useful progress.

8.     Use Your Creativity:

Most disputes, at bottom, are about money.  But there often are valuable items that may cost little to offer, to “sweeten” a deal.  A contractor claiming losses on a project might accept “structured” payments (over time), or additional work, in lieu of the full amount of money that could be claimed.  An owner could accept correction of defective work, or an extended warranty, in lieu of direct monetary compensation.  Both sides might benefit from agreement on a public statement regarding successful completion of the project.  Further, even if the entirety of the dispute cannot be resolved, the parties may agree to resolve a portion of the conflict, and direct the remainder of the dispute to resolution by some efficient mechanism (such as the engagement of a neutral third-party engineer).  Part of the magic of mediation is that, with the right mediator, and cooperation between the parties, creative solutions may emerge even where the parties are dead-set in their positions on the merits.

9.     Complete The Settlement:

Shaking hands on a deal at the mediation table is fine, but certainty as to the deal is better.  Before leaving the mediation, the parties should have (at least) a binding term sheet, outlining the essential terms of agreement.  To ease the burden of drafting a term sheet (often late in the evening, after parties have bargained hard all day), bring a draft form to the mediation.  Better yet, prepare a form of term sheet (with blanks) and share it with your adversary, in advance of mediation, so that preparation of the form, for signature at the end of the process, is relatively easy.

10.  Learn From The Process:

No two mediations are exactly the same.  But parties can learn a great deal about the process, and about the needs and capabilities of their own organization, from conducting a mediation.  Do some form of de-briefing, after the mediation, as to what went well, and what can be improved.  Consider capturing that knowledge in a memorandum, or a lunch-and-learn program, to spread the benefits of the experience within your organization.

                       

Steven Bennett

Steven C. Bennett's practice focuses on complex domestic and international commercial litigation and arbitration, including bankruptcy, construction, corporate governance, data security, energy, privacy, real estate and other matters. Mr. Bennett gained extensive trial experience during six years at the Office of the United States Attorney for the Southern District of… MORE >