By Cody W. Wilson
If you are involved in the building trades; if you’re a contractor, subcontractor or a supplier to the industry; chances are you find yourself in a dispute at some point.
If you’re involved in a legal dispute, you may be able to settle it without going to court. One way to do this is to work out a solution with the help of a mediator — a neutral third person.
The use of mediation to resolve disputes between members of the construction community is common in the industry because companies understand its effectiveness, efficiency and cost benefits when compared to litigation or arbitration. This article addresses some of the many basics to mediation found in Utah Code Annotated §78B-9-101 et seq., and the individuals involved in the process.
What is Mediation?
Mediation is an alternative to the traditional litigation process. Mediation is an informal process in which a trained neutral third party — the mediator — assists the parties in reaching a negotiated resolution to a dispute. Mediation is forward-looking. The goal is for the parties to work out a solution they can live with. Mediation focuses on solving problems, not uncovering the truth or imposing legal rules.
Parties to construction disputes are commonly using mediation to resolve claims on their construction projects. Frequently they are required to mediate as part of a dispute resolution provision in a contract. Some are pressured to participate in the mediation of their disputes by judges who won’t hear their cases until they first go to mediation. Others volunteer to mediate as a way to avoid going to trial altogether.
Is the Mediator Like a Judge?
No. The mediator does not decide who is right or wrong, make findings of fact or rule on issues of law and has no authority to impose a settlement on the parties. Instead, the mediator helps the parties to jointly explore and reconcile their differences. If mediation does not generate an agreement, the parties do not lose their right to trial and either side is free to sue or propose binding arbitration. A major plus to using a mediator is found in the parties’ ability to choose a mediator with construction experience rather than rely on a judge or jury who likely have no construction experience.
How Long Does the Mediation Process Take?
Mediation is a very efficient process that saves time and money. While the length of meditation will vary in each case, the majority of mediations are completed in eight hours or less. More complex cases, however, will often require more than one day to mediate. Also, since the mediation process is voluntary, either party may leave at any time if they wish and the mediator can terminate the mediation if it does not appear to be working, although this is very rare.
How Should Parties Dress for Mediation?
Dress comfortable, but respectable. Mediation is informal and the parties should feel comfortable.
Who Should Attend the Mediation?
The parties and lawyers attend. For mediation to work, all parties should involve persons empowered to make a decision to settle the matter. It is unacceptable in a mediation to have final authority reside in an individual at the home office who is not present at the mediation.
Where Does Mediation Occur?
Mediators will arrange a mutually convenient time and place for the mediation after consulting with both parties.
Who Pays the Mediator?
Typically, the parties split the cost of the mediator.
It is important to have a plan going into a mediation. You need to have an approach to the mediation — what you hope to accomplish in the mediation, how you propose getting there, who will take the lead role and how will that change as the mediation progresses. Spend time before the mediation highlighting the strengths and weaknesses of your position and the strengths and weaknesses of the other side’s position. Try to anticipate, to the greatest extent possible, the arguments that the other side is likely to make. Make sure that the 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.
What Happens in Mediation?
Every mediation is different and unique. Experienced mediators will use a format that is best suited for the particular dispute. Generally, however, the process of mediation falls into six stages:
First, the Mediator’s Opening Statement. After the parties are seated, the mediator will introduce the parties, explain the goals and rules of the mediation and likely encourage each party to work jointly toward a settlement.
Second, the Parties’ Opening Statements. Both parties are allowed time to explain, in his or her own words, what the dispute is about and how they have been affected by it and to present a few ideas for resolving it. It is important to remember that while one party is speaking, the other party is not allowed to interrupt.
Third, the Joint Deliberation. The mediator may attempt to get the parties talking directly regarding what was said in the opening statements. This allows the mediator and parties time to determine what issues need to be addressed.
Fourth, the Private Caucuses. This is the guts of every mediation. The private caucus is a chance for both parties to meet privately with the mediator and discuss the strengths and weaknesses of his or her position and brainstorm ideas for settlement. The mediator may “caucus” with each party once or several times if needed.
Fifth, the Joint Negotiation. After private caucuses with each party, the mediator may bring the parties together again for direct negotiation.
Sixth, Wrapping It Up. This is the end of the mediation. If the parties have reached an agreement, the mediator will likely put the main provisions in writing while the parties listen. If the parties wish, they may write up and sign a legally binding contract. If no agreement is reached, the mediator will review the progress made by the parties in the mediation and advise each party of their options, such as meeting again later for further mediation, going to arbitration or going to court.
Mediation can be a tedious process, including lengthy periods when the mediator spends time in private caucus with the other side, only to deliver some “nothing sandwich” of a response after what seems like an eternity. Stay positive, let the process work. 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 posturing). Work with the mediator to formulate strategies that can produce useful progress.
Is the Mediation Process Confidential?
Yes. All mediation proceedings are confidential. Documents created for the mediation are also confidential and may not be introduced during a subsequent trial if the dispute is not settled. Likewise, the mediator should not testify or be compelled to testify at a subsequent trial. If the dispute subsequently goes to trial, the judge who is assigned to the case is not told the identity of the mediator or given any information about what took place during the mediation process.
What are the Advantages of Mediation?
It keeps the decision-making process in the hands of the parties. It is confidential. It is flexible. Parties are usually more comfortable. Disputes are commonly resolved in a fraction of the time. Agreements reached through mediation leave open the possibility for future relationships. Lastly, it almost always costs less than traditional litigation.
What Happens if a Party Fails to Comply with the Agreement Reached at Mediation?
No party shall be bound by anything said or done at the mediation unless a written settlement is reached and signed by all necessary parties. If a settlement is reached, the agreement must be in writing, and, when signed and approved by the appropriate authorities for all parties, it will be binding upon all parties. An agreement reached during mediation is enforceable in court just like any other settlement agreement.
What Should Contractors Remember?
Mediation is never easy, so be prepared. The mediator may propose a settlement that may not be justifiable in terms of the law, principle and contract terms or industry practice. But it may make good business sense, despite the cost. At least examine the proposed settlement from that perspective. Remember you don’t have to make a deal. Just be open.
Mediation is just one technique to settle construction claims. Mediation is not appropriate for every dispute, but it has the advantage of allowing the parties to choose the outcome rather than have it determined for them by a judge, jury or arbitrator. Remember that you have a great deal of control over the outcome of mediation and the final decision to settle is yours. To be successful in mediating your construction claim, you must understand the mediation process, the merits of your case and strategies to help you get a good result.
Good luck out there!
Cody W. Wilson is a shareholder in the law firm of Babcock Scott & Babcock PC in Salt Lake City, whose practice is focused on construction law and disputes.