Michaels' Practice

[Gary L. Cole AIA, ALA, Esq. is Chicago-based Illinois and Florida-licensed attorney and Illinois-licensed architect.  He practices design & construction law, real estate law, historic preservation law and accessibility law.  He is also a Certified Mediator and on the roster of Mediators for the Association of Licensed Architects, and is a member of the Roster of Neutrals for the American Arbitration Association’s Construction Division.  He can be contacted at garycole@lawarkbuilding.com]

[Author’s note:  Nothing in the following article should be construed as legal or business opinions or advice.  Readers should always consult their legal or business professionals for specific advice and information.]

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With civil litigation’s rising costs, mediation and arbitration are growing in popularity as potentially quicker and more cost-effective alternative dispute resolution forums.  Architects, engineers and contractors who incorporate well-considered mediation and arbitration clauses into their contracts and service agreements may have an advantage over those who don’t, and, who later find themselves embroiled in costly and protracted litigation.

Mediation and arbitration, however, differ fundamentally in their approaches and some conflicts may be better resolved in one forum over the other.

Mediation Basics

Broadly speaking, mediation is a more informal dispute resolution process than arbitration in which a neutral party – a mediator – assists two or more parties in reaching a negotiated settlement on their own.

Mediation is private, confidential and generally non-binding; unless a settlement agreement is entered into by the disputing parties.  Many contracts, especially design and construction agreements, contain requirements that parties attempt to resolve any disputes through mediation as a prerequisite to pursing arbitration and/or litigation.

Mediation can occur though a process known as facilitative mediation, in which parties propose their own solutions and a mediator serves more to facilitate productive communication toward reaching a settlement.  Or, when requested by all parties, the mediator may express an opinion regarding a possible solution in a process known as evaluative mediation.

But mediation has its limits.  Like any negotiation, successful mediation is dependent on the parties’ good faith in seeking a mutually agreeable resolution to their dispute.  But as a practical matter it’s unlikely that disputing parties will approach mediation with exactly the same conciliatory attitude, so it’s the mediator’s role to facilitate and maintain a productive dialogue with that goal in mind.

Arbitration Basics

In disputes where parties are unlikely to arrive at a mutually agreed upon solution to their dispute, arbitration may be the better forum.  Arbitration’s proceedings are more formal than mediation, but typically less so than civil litigation.

However, unlike mediation, disputes in arbitration are not resolved by the parties, but by a neutral – an arbitrator – (or sometimes a tribunal of arbitrators), who, in the case of binding arbitration, renders a binding judgment, much like a judge in traditional litigation.

Arbitration is generally conducted through a formal hearing in which the arbitrator hears the arguments of the disputing parties.  In advance of the hearing, the parties and the arbitrator conduct one or more conference calls to agree on the date of the hearing, discovery scope, deadlines and other relevant issues.  Discovery may include subpoenas for the production of documents and witnesses to appear at the hearing for examination and cross-examination.

Following the hearing, which can be accomplished in as little as a day, the arbitrator may request additional information from the parties.  Once all post-hearing issues are resolved, he will then render his judgment, known as an award. And, absent a clear showing of factors such as an invalid arbitration agreement, or corruption, fraud, partiality, or misconduct by the arbitrator, it’s unlikely that an award will be vacated if appealed.

Mediation and Arbitration in Practice

Like every business, design and construction are vulnerable to disputes, some foreseeable, many not.  It’s possible for architects, engineers and contractors to have long and productive practices and never be drawn into legal conflicts.  Unfortunately, design, engineering and construction professionals sometimes make mistakes.  But even when not at fault, absent a contractual requirement for mediation and/or arbitration, proving so may require architects, engineers and contractors to first endure lengthy and expensive legal battles.

But as the saying goes: “The best defense is a good offense,” and design, engineering and construction professionals should consider understanding how to plan properly for disputes using mediation and arbitration clauses in their contracts and service agreements.

Contracts and Service Agreements

It’s rarely a good idea to provide design or construction services without a written contract, whether it’s an industry-standard form agreement, something home-grown, or even a letter agreement.  But regardless of the form used, many architects, engineers and contractors focus more on an agreement’s business terms Read the rest of this entry »