2 breakout session #107 carl p. meglan, p.e., p.s., founder & limited partner meglan, meglan...

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Breakout Session #107 Carl P. Meglan, P.E., P.S., Founder & Limited PartnerMeglan, Meglan & Company, Limited

April 15, 20084:30 pm to 5:30 pm

How ADR Resolves Construction Disputes

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Carl Meglan has more than 40 years of experience as a professional engineer and

surveyor. His many areas of expertise include construction engineering, construction forensics, claims management, alternate dispute resolution,

and organizational leadership and training. He has served as a consultant, advisor, expert

witness, and as a mediator and arbitrator for the American Arbitration Association for 25 years. In the latter role, he has been the arbitrator on 130

separate construction arbitration cases.

CARL P. MEGLAN, P.E., P.S.CARL P. MEGLAN, P.E., P.S.

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Alternate dispute resolution (ADR)Dispute resolution boardsMediation vs. arbitration (or other)Mediation processHearings, settlements & awardsArbitration process

Mediation & Arbitration

SEMINAR OVERVIEWMediation & Arbitration

SEMINAR OVERVIEW

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TYPES OF ADRMediation & Arbitration

TYPES OF ADR

Partnering & risk-sharing (incompatible?)Dispute resolution panels/boardsNegotiation (by parties or representatives)Mediation (structured, assisted negotiation

using a facilitator or mediator)Continued

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TYPES OF ADR

Arbitration (decisions & awards made by neutrals)

Party arbitration (3 arbitrators – two selected by parties & one selected by the two neutrals)

Neutral arbitration (arbitrator selected by agreement of parties)

American Arbitration Association Construction Arbitration Panel (1 or 3 arbitrators) Continued

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TYPES OF ADR

Summary trials (decisions & awards by panel of professional neutrals)

Litigation Trial by jury (decisions & awards by panel of

amateur neutrals & judge) Trial by judge (decisions & awards by judge)

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Dispute Resolution Boards

TYPES OF ADRDispute Resolution Boards

TYPES OF ADR

What are they?How do they work?

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Summary Trials

TYPES OF ADRSummary Trials

TYPES OF ADR

What are they?How do they work?

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Mediation vs. Arbitration

THE DIFFERENCE?Mediation vs. Arbitration

THE DIFFERENCE?

The major distinction lies within the more simplified mediation process

Selecting a mediator Identifying all vital parties to the mediationStatements & hearingsSettlements

Let’s examine the mediation process . . .

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Construction Mediation

MEDIATOR SELECTIONConstruction Mediation

MEDIATOR SELECTION

Candidate must be a neutral, disinterested individual with known mediation skills and

experience who can manage the mediation process and bring it to a successful

conclusion (settlement) for all involved parties and stakeholders.

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PRIOR TO HEARINGSConstruction Mediation

PRIOR TO HEARINGS

Identify mediation parties & stakeholders Written pre-mediation summary statements

by the parties to the mediator (facts & law) Adjust the parties’ pre-mediation attitude

(reconciliation & compromise) Exclude representatives with preferences for

arbitration or litigation

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HEARING PROCESSConstruction Mediation

HEARING PROCESS

Parties present at the mediation offer opening statements, summarizing their position

Parties are then placed in separate rooms with exhibits & witnesses to explain their positions & proofs to the mediator (facts & law) Continued

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HEARING PROCESSConstruction Mediation

HEARING PROCESS

Mediator communicates facts & legal positions (authorized by each party) from one party to the other (information exchange)

Acting as communicator & go-between, mediator presents each party’s best settlement offer (or none, at first)

Exchange of information & offers continues until a mutually agreeable settlement is reached & signed by all parties

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A GOOD SETTLEMENTConstruction Mediation

A GOOD SETTLEMENT

Generally defined as an obvious displeasure with the mutually agreed settlement, offset by an overriding relief of having the process completed & now in the past

Terms of a settlement can also assume forms other than just $$$

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WHY AAA IS USED?Construction Mediation

WHY AAA IS USED?

Contracts authored by the American Institute of Architects make mediation a

prerequisite to arbitration or litigation (known as a condition precedent), so it is prudent to have AAA select a mediator to

apply AAA rules and to manage the mediation process.

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Arbitration vs. Mediation

THE DIFFERENCES?Arbitration vs. Mediation

THE DIFFERENCES?

Construction arbitrators decide who will pay whom how much (or do what for whom)

Parties are usually represented by legal counsel, although it’s not mandatory

Arbitrators’ award is final & legally binding Continued

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Arbitration vs. Mediation

THE DIFFERENCES?Arbitration vs. Mediation

THE DIFFERENCES?

Construction arbitration awards are decided & written by the arbitrators only

Construction mediation settlements are reached & written by the parties only with the help of a mediator/facilitator

Construction mediators and arbitrators must be familiar

with the construction process and parties involved

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Construction Arbitration

WHAT IS IT?Construction Arbitration

WHAT IS IT?

A binding & final decision rendered by one arbitrator (knowledgeable in construction) or an experienced arbitration panel selected and agreed upon by the parties

An arbitrator serves as both the judge & juror, deciding facts & law (which to believe & adhere to)

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Construction ArbitrationNONBINDING ARBITRATIONConstruction ArbitrationNONBINDING ARBITRATION

It is not arbitration . . . It is mediation (and a waste of time & money, usually)

By definition, arbitration is legally binding on all parties & enforceable by law in the appropriate court (judgments issued by the court are identical to an arbitrator’s award)

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AAA PROCESSConstruction Arbitration

AAA PROCESS

Under AAA’s construction arbitration rules Claimant files an arbitration demand & pays

an administrative fee AAA forwards copy of demand to other party

(respondent), with a set time to respond Respondent files a response or counter claim

& pays an administrative feeor Continued

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AAA PROCESS

Respondent ignores demand (but after a set time period has expired, the process goes forward as if the respondent had answered the demand)

Respondent may seek injunctive relief in court, which halts the arbitration process pending a court ruling or further appeal

Continued

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AAA PROCESS

Once the claim is filed & served, AAA assigns the case to an administrator

Administrator selects a minimum of 12 arbitrators from the AAA Construction Arbitrators Panel, often located in proximity to the disputed project site, depending upon the contract language Continued

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AAA PROCESS

Administrator sends list of arbitrators to parties for their review

Parties strike names from the list with whom they have a prior relationship (business, social, family, etc.) or know the other party to have had one

Continued

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AAA PROCESS

Parties rank remaining arbitrators in numerical order of preference to each party

Case manager selects arbitrators with the lowest numerical score & notifies the parties & arbitrators

Arbitrators are asked to disclose any known conflicts with any party to the arbitration

Continued

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AAA PROCESS

To facilitate the conflict elimination process, AAA requires each party to list all of their principals, individuals, and companies involved in the project and the dispute and to list every potential witness they may call at the arbitration hearing. Those lists are forwarded to the appointed arbitrators who use them to determine possible conflicts of interest. Continued

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AAA PROCESS

Once any conflicts are identified, waived and/or eliminated, the arbitrators sign a neutrality oath & are appointed to arbitrate the case from that point forward

Large construction arbitration cases have three arbitrators, one of which is selected as chairman of the arbitration panel to handle administration Continued

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AAA PROCESS

After the arbitrators are sworn in, apre-arbitration hearing is usually held via teleconference, where the following are agreed to by the parties:

Date, location & estimated duration of the hearings

Whether there will be discovery, and if so, how much Continued

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AAA PROCESS

Dates are set for exchange of exhibits and witness lists between the parties

Requests to depose witnesses are made and & agreed to by the parties (or the arbitrators if they cannot agree)

A stipulation of facts (and list of common exhibits) is formally agreed to by the parties, usually in accordance with a scheduled date of completion Continued

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AAA PROCESS

Arbitrators who conduct the hearings may grant a party a continuance from the set hearing date, but often refuse such requests

Pre-arbitration briefs may be prepared & delivered by the parties to the arbitrators, depending upon the preferences of the arbitrators & parties Continued

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AAA PROCESS

Arbitration hearing begins with opening statements by claimant & respondent (or their advocates), setting the tone of the hearing & explaining each party’s position

Claimant calls witnesses to testify on behalf of its position, facts & exhibits

Witnesses may be cross-examined by respondent Continued

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AAA PROCESS

Direct examination & cross-examination of witnesses proceeds until there are no more questions of the witnesses

Claimant ends its case after presenting its final witness & cross-examination is finished

Respondent then calls witnesses to testify on behalf of its position, facts & exhibits Cont

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AAA PROCESS

Witnesses may be cross-examined by claimant

Direct examination & cross-examination of witnesses proceeds until there are no more questions of the witnesses

Respondent ends its case after presenting its final witness & cross-examination is finished Continued

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AAA PROCESS

Arbitrators may ask questions of any witnesses at any point in the examination process, but that usually occurs at the end of the examinations, if at all

Upon concluding the testimony of all witnesses of all parties, the hearing is declared closed Continued

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AAA PROCESS

Parties & arbitrators may agree to the preparation of post-hearing briefs, a suggested form of award from each party, & a receipt date by the arbitrators

Arbitrators have 10 to 30 days to make their awards after the close of the hearing or the date of receipt of the post-arbitration briefs, whichever is later Continued

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AAA PROCESS

Awards are written by the arbitrators and forwarded to the AAA case administrator for distribution to the parties, at which point the arbitrators are dismissed

Awards may be brief or very complex findings of fact & conclusions of law, depending on the wishes of the parties, with most arbitrators preferring awards in terms of dollars

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The Arbitrator

SELECTIONThe Arbitrator

SELECTION

AAA construction arbitrators are usually selected from among written applicants by a panel of local arbitrators who have served the association for many years. AAA arbitrators are engineers, contractors, architects, construction law attorneys, and other industry experts with considerable construction project experience. Attorneys constitute less then one-third of all AAA Construction Arbitrator Panelists.

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The Arbitrator

TRAININGThe Arbitrator

TRAINING

AAA construction arbitrators are required to complete formal training courses, developed and administered by the association. Failure to take them will result in the removal of an arbitrator from the AAA Construction Arbitrator Panel until the courses are completed. Usually one course per year is required. AAA has the only continuously trained and reviewed panel of construction arbitrators in the U.S.

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The Arbitrator

COMPENSATIONThe Arbitrator

COMPENSATION

Arbitrators are compensated by the day and/or hour for their services. For example, an arbitrator might set his/her compensation rate at $800 per day and/or $100 per hour (for partial days) with

the first day free, except for small single-day arbitrations, which are set by AAA at $950.

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AAA Resources

GENERAL INFORMATIONAAA Resources

GENERAL INFORMATION

For all other information, including the complete rules and fee schedules for

mediation and arbitration, go tothe Web site, www.adr.org.

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ANY QUESTIONS?

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Carl Meglan, P.E., P.S.E-mail: [email protected]

Web: www.meglan.com

Phone: (888) 997-6821Ext. 222 (toll-free)

FOR MORE INFORMATION, CONTACT:FOR MORE INFORMATION, CONTACT:

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The preceding presentation is copyrighted by the National Society of Professional Engineers® Professional Engineers in Construction. All rights are reserved. Any transmission, retransmission, or republishing of the audio or written portions of this program without permission is prohibited.

2 breakout session #107 carl p. meglan, p.e., p.s., founder & limited partner meglan, meglan...

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