the paper trail

Volume 1, No. 2 • Winter 2008

ALSO IN thIS ISSue . . .

electronic Discovery Issues in ConstructionArbitrations. . . . . . page.4

ADR Case Notes. . . . page.8

Identifying the Best ADR Methods for Global Construction Disputes .. .. .. .. .. .. .. .. .. .. .. .. .. page.10

Notices & Calendarof events. . . . . . . page.15

JAMS, The Resolution Experts, is the largest private provider of ADR services in the United States, with Resolution Centers in major cities throughout the country.

The JAMS Global Engineering and Construction Group provides expert mediation, arbitration, project neutral, and other services to the global construction industry to resolve disputes in a timely and efficient manner.

the Financial Crisis,the Risk of Litigation,and the Value of ADRBy PhiliP l. BRunER, ESq. Director, JAMS Global Engineering and Construction Group

Frozenfinancialmarketsandcollapsedhousingandrealestatedevelopmentshavecreatedwhatmanynowcallan“historiccrisis.”AccordingtoaNovember3,2008articleinThe National Law Journal,thiscrisishascausedtheunravelingofbuildingprojectsacrosstheUnitedStatesandhasresultedinconstructionlitiga-tionjumpingtolevelsunseeninageneration.Butislitigationthebestanswer?Thenumberandmagnitudeofwrongdecisionsinchoosingtolitigateratherthantosettlealsoareclimbing.A40-yearempiricalstudyof“erroneous”decisionmakinginunsuccessfulsettlementnegotiations,publishedrecentlyin5 J. Empiri-cal L. Studies 551(Sept.2008),reportsthatboththerateoferroneousdecision

See “Director’s Corner” on Page 7

the Paper trail By hARVEy J. KiRSh, ESq.

Largeconstructionprojectsgeneratethousandsofpagesofdocuments.Someofthosedocumentscreatethelegalrelationshipsbetweenthepartieswhowereactively involved in theconstructionprocess.Othersvividlydemonstratehowthepartiesdealtwithissuesas theycameupduring thecourseofconstruction.Justconsiderthespectrumofprojectdocuments:

• contractdocuments(includinggeneralconditions,supplementary general conditions, specifications,drawings,soilsreports,bonds,etc.)

• drawings(includingtenderset,issued-for-construc-tionset,as-builtset,shopdrawings,erectiondrawings,

See “The Paper Trail” on Page 2

to learn more about the JAMS Global engineering and Construction Group, go to http://www.jamsadr.com/practices/construction.asp

JAMS GLOBALCONStRuCtION SOLutIONSLeading.ADR.Developments.from.The.Resolution.Experts

DIReCtOR’S CORNeR

A treasure trove of evidence, project

documents help assess liability and suggestremedial solutions.

http://www.jamsadr.com/practices/construction.asp

JAMS GLOBAL CONStRuCtION SOLutIONS • WINteR 2008 • PAGe 2

In “the Case of the Leaking Office Building,” it was not

clear whether it was adesign or a constructionor a materials problem.

whetherpropaneheaterswereusedtoheatthesiteduringwinterwork.Butonethingisveryclear–theim-portanceofthesedocumentsshouldneverbeunderrated. Thearchiveboxesfilledwithproj-ect documents, which are typicallydeliveredbyclientstotheirattorneysforuseinanarbitration,mediationorlitigationproceeding,arenotal-waysorganized.Butifoneweretoarrangetheminchronologicalorder,theywouldtellastoryinacompre-hensibleandrevealingmanner.Thatstory,whichtendstounfoldduringandafterconstruction,oftentracesthehistoryofconstructionproblemswhich may ultimately mature intooneormoreconstructionclaims.Thewaythatstoryistoldmayverywelldeterminewhethertheconstructionclaimwillbesuccessfulordefeated.

handling and Organizing the Mass of Project Documents In today’s world, we see thatinformationonaconstructionproj-

ect isgeneratedinbothpaperandelectronic formats. The early stageof project design, for example, isfacilitatedby theuseof computer-aideddesignanddrafting(CADandCADD); and Building InformationModeling (BIM) uses three-dimen-sional, real-time, dynamic build-ing modeling software to increaseproductivity in building design andconstruction. Furthermore, duringtheconstructionphase,e-mailsarebecoming an important and wide-spread method of communication,evenon smallerprojects.However,we still continue to see the moretraditional collection and transmis-sionofinformationinpaperformat.Inthelitigationcontext,therulesofcivilprocedure inmost jurisdictionsnowprovidefortheretention,pres-ervation,discovery,production,andexchangeof electronicdocuments.Parties involved in construction ar-bitrationsandotherADRprocessesofcoursebenefitfromtheguidanceprovidedbytheserules. Dependingonwhetherthedocu-ments are in paper or electronicformatwilllikelybethemostimpor-tant factorwith respect to cost. Inordertokeepcostincheck,andtofacilitate theperformanceof accu-ratesearches,thepaperdocumentsaretypicallyconvertedtoelectronicformatandmadesearchablethroughthe Optical Character Recognition(OCR)process. Byconvertingthe“hard”datatoelectronicformat,onehastheabil-ity to retrieve information throughtheuseofcomputersoftwaretoolswhichcategorizeandput thedatainto a more modular format. Key-word searches, forexample,whichareused to collect and cross-refer-ence specific itemswhich relate toeachother,couldinsomeinstances

the Paper trailContinued from Page 1

coordinationdrawings,etc.)

• bar chart and electronic sched-ules(includingoriginalconstructionscheduleandallsubsequentgenera-tionsshowingchanges/revisions)

• contemplatedchangenotices,siteinstructions, price quotations, andchangeorders

• applications for payment, andpaymentcertificates

• inspection reports, testing re-ports

• minutesofsitemeetings,andthehandwrittennotesofthosepresent

• deficiencylists

• correspondence, inter-officememos,ande-mails

• handwrittennotesof telephoneconversations

• sitesuperintendentreports(e.g.,dailyreports,diaries,logs) Foranattorney,thisisatreasuretroveofevidence thatwillassist intheprosecutionordefenseofacon-structionclaim. These documents, for betteror worse, complete or deficient,accurate or self-serving, comprisethecompletewrittenhistoryoftheproject.Theytelluswhodidwhatontheproject;theytellusaboutdesignissuesandhowtheywerehandled;theytellusaboutconstructionprob-lems,andhowtheywereaddressed(ornotaddressed);theytellusaboutdelays,andoftenstateoutright,orhintorallege,whowasresponsible;theytellusaboutdisputes,andhowtheywereresolved(ornotresolved);theytellusaboutdeliveryproblems,laborproblems,thenumberofmenon the site every day, whether itwassunnyonaparticularday,and

JAMS GLOBAL CONStRuCtION SOLutIONS • WINteR 2008 • PAGe �

But for the detailed and thorough paper trail … the dispute resolution process

might have been protracted and considerably more expensive.

revealevidenceofa“smokinggun.”Theconversionofdatatoelectronicformat reduces its size to a moremanageableandrelevantset,therebyreducingcostsandtime.

The Case of theleaking Office Building The case of the leaking officebuilding is a good example of thevalue of following the paper trail.Duringconstruction,itwasnotap-parent that there was a problem.It was not until after the buildingbecame occupied that one of thetenantsnotedanumberofpuddlesonthefloorofhisofficeafteraheavyrainfall.Moretenantsinotherofficeshadthesameexperience,andwithinashortperiodoftime,theproblembecamewidespreadandserious.Thepoint of entry of the water couldnot be discerned. It was not clearwhetherthewaterwaspenetratingthemasonry,orcomingthroughthewindowgaskets,or from the roof,orfromsomeotherpointofentry;anditwasnotclearwhetheritwasadesignoraconstructionoramateri-alsproblem. So the owner asserted a claimagainstanumberofpartiesinvolvedin the project (the “shotgun” ap-proach),andhopedthatthedisputeresolutionprocesswouldsortthingsout. The targetedpartieswere thegeneral contractor, the generalcontractor’sbondingcompany (un-der the performance bond), themasonrysubcontractor,thewindowsupplier, the roofingsubcontractor,thestructuralsteelsubcontractor,thearchitect,thestructuralengineer,andothers. As you might expect, eachofthesepartiessaidtheydidnoth-ingwrong, andblamedothers.Allparties hired attorneys; some wererepresentedbytheir insurers;some

hadretainedexpertwitnesses(withvaryingdegreesofexpertise);andtheshowgotunderway. Inthedisputeresolutionprocess,eachofthesepartieshadanobliga-tiontoproducealldocumentsinhis/herpossessionwhichwererelevanttotheissuesindispute.Inturn,eachparty had the right to review thedocumentsproducedbytheoppos-ingparties. Indoingso,eachpartywaslookingfora“smokinggun”intheopposingparties’documents.A“smoking gun” consists of one ormore documents which may serveto implicate another party, or toshifttheblameorfocusawayfromthemselves. Inthecaseoftheleakybuilding,the owner’s attorney, during thedispositions, was able to uncovernumerousletters–whichhadneverbeen seen before – between thecontractorandthemasonrysubcon-tractor,inwhichthecontractorhadwarned about the masonry work.Inparticular,therewereallegationsofpoorgrouting,whichmighthaveallowedwaterpenetrationthrough

thebuildingenvelope. Additionally, the comprehensivedailysite reports indicatedthat themasonry subcontractor employedcrewsofmostlyapprenticemasons.Furthermore, there were letters,notes,andotherdocumentswhichindicated that there were disputesbetweenthearchitectandthestruc-turalengineer,inwhichthearchitectwarned that certainallegeddesigndeficienciescould lead toa“twist-ing” of the structure, a separationofthemasonry,andtheconsequentwater penetration. The detailedminutesofsitemeetingsalsomadereferencetoproblemswiththesteelerectionwhich, in retrospect,wereseentohavebeencausedbyadefi-ciencyinthestructuraldesign. Uncovering these documentshelped the parties to identify thecausesoftheleakageproblem,andsuggested certain remedial strate-gies.Thedocumentsalsohelpedtoestablishwhichpartieswererespon-siblefor,ormayhavecontributedto,theproblem. The owner’s claim was resolvedshortlythereafter.Butforthedetailedand thorough paper trail leadingto the masonry subcontractor andthestructuralengineer,andleadingawayfromtheroofingsubcontractorand the steel supplier, the disputeresolutionprocessmighthavebeenprotracted and considerably moreexpensive. Inbaseball,therule isthatatiegoes to the runner. In a construc-tionclaimscenario,atiegoestothepersonwiththebestpapertrail.

Mr. Kirsh is a JAMS mediator, arbitrator, and project neutral based in Toronto, Canada. Email him at [email protected] or view his Engineering & Construction bio at http://www.jamsadr.com/neutrals/ExpResumes.asp?id=2428.

http://www.jamsadr.com/neutrals/ExpResumes.asp?id=2428



electronic Discovery Issuesin Construction Arbitrations

By JOhn W. hinChEy, ESq.

Scope This article identifies the issuesassociatedwithelectronicallystoredinformation(ESI)aspotentialdocu-mentaryevidenceindomesticandin-ternationalconstructionarbitrations.Next, itbrieflysurveyshowarbitralorganizationseitherhaveorhavenotrecognizedandtreatedESIissuesintheirrules,guidelines,andprotocols.Finally,thearticleconcludesbysug-gestinghowESI canbest beman-agedandcontrolled in thecontextofconstructionarbitrations.

Electronically Stored Evidence AnyonenotresidinginaHimala-yancaveoverthepast10yearswillknowthatthevastbulkofcommu-nications, information, documents,anddatausedinbusinessandcom-mercialtransactionsarenowtrans-mittedandstoredinelectronicform.Somehavesuggestedthatover90%of commercial communications,documents,andinformationarenoweitherexclusivelycreatedandmain-tained in electronic form or resideconcurrentlywith“hardcopies”ofthe same information. Particularlyis this true in the construction in-dustry. The now antiquated useofcomputer assisted design (CAD) isbeingovertakenbytheuseofbuild-ing information modeling (BIM) inwhich traditional two dimensional

design information becomes threedimensional and constitutes only asmall part of the total universe ofconstruction-related data creationandcollectionforamodernproject.With integrated project delivery(IPD), “interoperability” and “leancontracting”enteringonthesceneto enhance construction projectdeliverymethods,virtuallyallofthekeyprojectparticipantswillnowbelinkedelectronicallyaswellascon-tractually.Thus,ESIisnolongerjustapartof,itistheplayingfield! ToparaphraseHumphreyBogartasthecharacterRickBlaineinCasa-blanca,electronicdocumentsarejustlikeotherdocuments,onlymoreso.Put more prosaically, the creation,communication,andcollectionofESIadddifferentdimensionstothecre-ation,communication,andcollectionoftraditional“hardcopy”material,suchthatdifferenttreatmentiscalledfor.Yet,somehavesuggestedother-wiseinthecontextofarbitration,i.e.,thatissuesconcerningthedisclosure,discovery, and exchange of ESI arefundamentallynodifferentthanwithpaperdocuments.Theseconservativeviewpoints notwithstanding, evena brief overview of the differencesshouldclosetheargumentinfavorofatleastsomedifferenttreatmentofESIinthecontextofarbitration. So,whatarethedistinctionsthatjustify differences in treatment be-tweenESIandhardcopymaterial?ThesheervolumeofESIisofseveral

magnitudesgreaterthanwithhardcopymaterials.Why?Becauseelec-tronicinformationissomucheasierto create, duplicate, and disbursethanwith the traditional copyma-chines. As one cogent example ofhowvolumealoneaddscomplexityandrisktoe-disclosure,thinkofthegreatereffortrequiredtoreviewgi-gabytes,ifnotterabytes,ofdataforprivilegedorconfidentialmaterial. The “locations” of ESI will notbe in the traditional file drawer,“fileroom,”orstoragewarehouse.Instead,duplicateormodifiedcop-iesofESImayresideinhundredsofelectronic files, including individualdesktops,laptops,andpersonaldatainstrumentssuchasBlackberriesandevencellphones–not tomentionthenetworkservers,backuptapes,orhardstoragedrivesthatmaybelo-catedanywhereintheworld.Hence,therearemultiplemore“places”andpersonstoidentifywhenitbecomesnecessarytodeterminewhoreceivedorwillbechargedwithnoticeofhav-ingreceivedelectronicmaterial. It should be obvious to anyonedealingwithelectronicdata that itisephemeral,meaningthatitcanbeeasilylost,whetherbytheintentionalclickofadeletebuttonortheinten-tionalorunintentionaloverwritingofprevioustext.MostbusinessestodaypreserveESIforonlylimitedperiodsoftime.Then,thereistheephemeralmetadata or “hidden” informationthatcanrevealpotentiallyimportant


itemssuchasthedatethedocumentwascreated,modified,ortransmit-ted–noneofwhichisapparentonthe “face” of the document, butwhichcanbedisclosedorretrievedwiththerightsoftware. Similarly, datawhichwas inten-tionally and appropriately deletedbecauseofprivilegeorconfidentialityreasonsmayberecoveredandviewedbyexpertswiththerightequipmentandsoftware.And,ofcourse,thereare different varieties of softwareand hardware, some of which can“communicate”withothertypesofhardware and software, and somevarietieswhichcannotcommunicateorinteract,thusmakingitmoredif-ficulttoretrieve,transmitandsearchforparticularinformationinESI. Therelevanceofalloftheseandother intrinsic characteristics, mak-ingESIdimensionallyandmateriallydifferentfromhardcopymaterial,issimply that the retrieval, transmis-sion,disclosure,anduseofESIisde-monstrablymoredifficultandcostly.Moreover,thephysicalcharacteristicsofESIraiseproceduralissueswhichshouldalertthosewhoareengagedintheprocessofresolvingdisputesbyarbitrationtofindefficient,economi-cal,andfairwaystomanageESIinthecontextofarbitration.

ESi Procedural issues ThelikelyproceduralissuesraisedbythedistinctivecharacteristicsofESIincludethefollowing:• Willthepartieshaveanobligationtopreservepotentiallyrelevantandmaterial ESI either before or afterthearbitrationcommences?Ifso,inwhatformatandforhowlong?• Whatistobethescopeofdisclo-sureordiscoveryofESI,particularlywhen one or more parties do notwanttovoluntarilyproducethema-

terial?• InwhatformorformatwillESIbeproducedorexchanged?Willmeta-databerequired?• What tools and techniques areavailabletoreducetheburdenandcostofe-disclosure,e.g.,limiteddateranges, agreed search terms, datasampling,andspecialsoftware?• How will privileged and confi-dential information be protected,especiallywhenwith ESI there is agreater likelihood of inadvertentproduction?• What considerations are to betakenintoaccountbythetribunalintheefforttobalanceburdens,cost,andneed?• WillindependentexpertassistanceinESIbehelpfulorrequired?• Howwill thecostofpreserving,collecting,producing,andexchang-ingESIbeallocated?

ESi -Related Rules,Guidelines and Protocols While the U.S. Federal Rules ofCivil Procedure were expanded inDecember 2006 to deal with thediscovery,production,andexchangeofESI infederalcourtproceedings,mostAmericanarbitral institutions,including the American ArbitrationAssociation,havenotyetdevelopedspecificrulesorguidelinesconcern-ingESIindomesticarbitrations. Ontheinternationalscene,how-ever,thereisanongoing,sometimesheated,debate,firstastowhetherthere should be specific rules orguidelines regardingESI in interna-tional arbitration; and, if so, whatthoserulesorguidelinesshouldbe.The primary argument put againsthavingESIrulesorguidelinesisthatbecause discovery or disclosure ofdocumentary information is quitelimitedinthecontextofinternational

arbitration,tofocusattentiononESImightencouragetheuseof“Ameri-can-stylediscovery”ininternationalarbitration – a most unwelcomeprospect.Moreover,itisargued,theexisting international arbitral rulesconcerningdisclosureandexchangeof documentary evidence are per-fectlyadequatetodealwithESI,sowhycreateasolutionforaproblemthatdoesn’texist? On the other side are thosewhobelievethat,indeed,therearefundamental differences betweentraditional documentary materialandESI,and,ifthesedifferencesareignored,partiesandarbitratorswillbelefttoflounderwithoutcommonexpectations as to how the issuesshould be treated. It appears thatthisdebate is resolvingonthesideofthe“positivists”whoadvocateforthedevelopmentofspecificrulesandguidelines, asevidencedby the re-centpublicationsonESIbytheICDRandtheCharteredInstituteofArbi-trators.Also,inJune2008,theICCformedaworkinggrouptoexamineelectronicdisclosureissues,andtheIBAhasalsolaunchedareviewofits1999RulesontheTakingofEvidenceinInternationalCommercialArbitra-tion (IBA Rules) with much of thediscussion focused on the use andabuseofESIande-disclosure. Article1ofthe1999IBARules,rather presciently, did define aDocumentas“awritingofanykind,whetherrecordedonpaper,electron-icmeans,audioorvisualrecordingsoranyothermechanicalorelectronicmeansofstoringorrecordinginfor-mation.”However,thereisnothingbeyond thisdefinitionof a“Docu-ment” to require or suggest thatESIbetreateddifferentlythanotherformsofdocumentaryevidence.As

See “Electronic Discovery” on Page 6


electronic Discovery Issues in Construction Arbitration continued.from.Page.5

mentioned, some have suggestedthattheIBARulesareperfectlyad-equatetodealwithESIissuesinthecontextof internationalarbitration.TheAAA’sinternationalaffiliate,theICDR, took the treatment of ESI asteportwofurtherwhenitrecentlypromulgated their “Guidelines forArbitrators Concerning Exchangesof Information” (ICDR Guidelines)(effectiveMay31,2008).However,ithasonlythistosayspecificallyabouttheexchangeofESI: “When documents to be ex-changedaremaintainedinelectronicform,thepartyinpossessionofsuchdocumentsmaymakethemavailableintheform(whichmaybepapercop-ies)mostconvenientandeconomicalforit,unlessthetribunaldetermines,onapplicationandforgoodcause,that there is a compelling needfor access to the documents in adifferent form. Requests for docu-mentsmaintainedinelectronicformshould be narrowly focused andstructured to make searching forthemaseconomicalaspossible.Thetribunalmaydirecttestingorothermeansoffocusingandlimitinganysearch.”(ICDRGuidelines,¶4) WhiletheICDRGuidelinesareahelpful starting point, they do notdeal with many other issues thatcanarisewithESI incommercialorconstructionarbitrations. On October 2, 2008, the Char-teredInstituteofArbitrators(CIArb)published a “Protocol for E-Disclo-sureinArbitration”(CIArbProtocol).As stated in its introduction, theCIArbProtocol“is foruse in thosecases (not all) in which potentiallydisclosable documents are in elec-tronic form and in which the time

and cost for giving disclosure maybe an issue.” The CIArb Protocol,therefore, is intended to focus theparties and tribunal on “issues forconsideration”andonallowingthepartiestoadopttheprotocolaspartofanagreementtoarbitrateapo-tentialorexistingdispute.Todate,the CIArb Protocol is probably thebestandmostcomprehensiveguidetobothidentificationandtreatmentof the issuesassociatedwithe-dis-closure in commercial arbitrations,whether domestic or international.TheCIArbProtocolbeginswithlistingthoseissuesthatshouldbeconsid-eredbythepartiesandpanelatthe“earliestopportunity,” typically thepreliminaryconference:• Thetypesofelectronicdocumentswithineachparty’spowerorcontrol,andwhatthecomputersystems,de-vices,andmediaareonwhichtheyareheld;• Whatstepsormeasuresmaybeappropriatefortheretentionorpres-ervationofESI;• WhatrulesandpracticemayapplytothescopeofdisclosureofESI;• Whetherthepartiescanandwanttoagreetolimitthescopeofdisclo-sure;• What tools, software, methods,or techniques may be available toreducetheburdenandcostofe-dis-closure,suchasusingmorelimiteddate ranges, agreed search terms,anddatasampling;• How inadvertent disclosure ofprivilegedmaterialmaybeprotect-ed;• Whether the parties and tribu-nal may benefit from professionalexpertise in ESI management anddisclosure.(CIArbProtocol,Art.3).

ArequestfordisclosureofESIorelectronicallystoreddocuments,sim-ilartotheIBARules,mustbespecificastothedocumentor“categoryofdocuments”andmustfurtherspecifyhow the documents requested are“relevant and material to the out-comeofthecase”(CIArbProtocol,Art.4).Inmakinganyorderorgivinganydirectionfore-disclosureorfortheretentionorpreservationofESI,the tribunal must have regard for“theappropriatescopeandextentofdisclosure”undertheexistingagree-mentorapplicablearbitrationrulesorlaw,andinadditionmusttakeintoaccount:• reasonablenessandproportional-ity;• fairnessandequalityoftreatmentoftheparties;and• insuring that each party has areasonableopportunitytopresentitscasebyreferencetotherelativecostsandburdensofcomplyingwiththeorderordirection.Thisexercise“shallincludebalancingconsiderationsoftheamountandnatureofthedisputeand the likely relevance andmate-riality of the documents requestedagainstthecostandburdenofgivinge-disclosure.” (CIArb Protocol, Art.6). The CIArb Protocol goes on todeal with the form and format ofproducingtheESItotheotherparty,suchas“nativeformat”orotherwise;whethermetadatashallbedisclosed,allthewhilerequiringashowingoftherelevanceandmaterialityoftherequestedmaterialsandabalancingof the relative costs and burdensinvolved.(CIArbProtocol,Arts.8-9).Finally,thetribunalisauthorizedto“consider the appropriate alloca-


makingandthecostofsucherrorsaregrowing.Since1999,dependingonthetypeofcase,plaintiffserroneouslyproceededtolitigationupto63%ofthetime,whiletheaddedcosttodefendantswhoerroneouslyrejectedsettlementexceeded200%.Tortlitigationhasthehighesterrorandaddedcostrates. Amidthewreckageof2008’s“perfectstorm,”partiesandtheircounselmustconsidercarefullyimprovedoptionsforresolvingdisputesinnova-tivelyandefficientlyshortof litigation.AsEngland’sLordChiefJustice,LordPhillips,remarkedaafewmonthsago:“Itismadnesstoincurtheconsiderableexpenseoflitigation…withoutmakingadeterminedattempttoreachanamicablesettlement[throughmediation].”Twenty-threeyearsago,WarrenE.Burger,thenChiefJusticeoftheUnitedStatesSupremeCourt,stronglyrecommendedarbitrationratherthanlitigation:

“MyoverviewoftheworkofthecourtsfromadozenyearsonthecourtofAppealandnowsixteeninmypresentposition,addedtotwentyyearsofprivatepractice,hasgivenmesomenewperspectivesontheproblemsofarbitration.Onethinganappellatejudgelearnsveryquicklyisthatalarge part of all litigation in the courts is an exercise in futility and frustration.Alargeproportionofcivildisputesinthecourtscouldbedisposedofmoresatisfactorilyinsomeotherway….Myownexperiencepersuadesmethatintermsofcost,time,andhumanwearandtear,arbitrationisvastlybetterthanconventionallitigationformanykindsofcases. Inmentioningthesefactors, I intendnodisparagementoftheskillsandbroadexperienceofjudges.Iemphasizethisbecauseto find precisely the judge whose talents and experience fit a particular case of great complexity is a fortuitous circumstance.Thiscanbemademorelikelyiftwointelligentlitigantsagreetopicktheirownprivatetriersofthe issues.”TheHonorableWarrenE.Burger,Using Arbitration to Achieve Justice,40Arb.J.3,6(1985)(emphasisadded).

Thecomplexityofengineeringandconstructiondisputeshascausedtheindustrytopursuesettlementofdisputesbyprivatemethodsformorethanacentury–modern,innovativemethodsincludestructurednegotia-tions,evaluativemediation,disputereviewboards,projectneutrals,andexpedited arbitration.Critical to theprocess are thepeopleunder thedisputeresolutionprocessofchoiceasprivatemediatorsortriersofissues.Thismandatesselectionofthemostskilled,knowledgeable,andethicalneutrals,mediators,andarbitratorsintheworld. JAMS’GlobalEngineeringandConstructionGroupcomprisesmanyoftheworld’sfinestneutrals,withexceptionalindustryandlegalknowledgeandwiththehighestethicalstandards.Theyarecommittedtoprovidingunsurpasseddisputeresolutionservices–whetherconsultingonthedesignofeffectivedispute resolutionprocedures, servingasevaluativeprojectneutralsormediatorsaidingpartiesefficientlytosettletheirdisputes,orsittingasarbitrators.

Respectfully yours, Phil Bruner

Mr. Bruner is a JAMS mediator, arbitrator, and project neutral based in Minnesota. Email him at [email protected] or view his Engineering & Construction bio at http://www.jamsadr.com/neutrals/ExpResumes.asp?id=2370.

DIReCtOR’S CORNeR continued.from.Page.1tionofcostsinmakinganorderordirection for e-disclosure” and, ifnecessary,drawing“suchinferencesasmaybeappropriatewhendeter-miningthesubstanceofthedisputeoranyawardofcostsorotherrelief.”(CIArbProtocol,Arts.10-14).

Conclusions ItisfairtosaythatESIis,inseveralrespects,“different”fromtraditionalhardcopymaterial,whichdifferencescan result in significant additionalburdens and costs to the partieswhendisclosureofESIisappropriateorrequiredinacommercialarbitra-tion,andespeciallyinaconstructionarbitrationwheregreaterquantitiesofESImaybeexpected.Becauseofthepotentialforadditionalburdensand costs associated with e-disclo-sure, it is appropriate for variousarbitralinstitutionstodeveloprules,guidelines,andprotocolstoassistthepartiesandtribunals–first,toiden-tifytheissuesinvolvedandsecond,toappropriatelymanageandcontrole-disclosure. Thebestandmostcomprehensiveprotocolcreatedtodateisthe“Pro-tocolforE-DisclosureinArbitration”developed and published by theCharteredInstituteofArbitratorsinOctober, 2008. However, whetherornotrules,guidelinesorprotocolsexist,ifESIisgoingtobethesubjectofexchangeordisclosureanduseinacommercialorconstructionarbitra-tion,thebesttimetodealwiththosemattersistheearliesttimepossible,which will normally be during thepreliminaryconference.

Mr. Hinchey is a JAMS mediator, arbitrator, and project neutral based in Atlanta, GA. Email him at [email protected] or view his Engineering & Construction bio at http://www.jamsadr.com/neutrals/ExpResumes.asp?id=2374.






• “intertwined Contracts” and Arbitration Rights: 3M Co. v Amtex Sec. Inc., 542 F. 3d 1193 (8th Cir., September 16, 2008), Sourcing Unlim-ited, Inc. v. Asimco Inter-national, Inc., 526 F. 3d 38 (1st Cir., May 22, 2008), and Aliron International, Inc. v. Cherokee Nation Industries, 531 F. 3d 863( D. C. Cir., July 8, 2008) and International Underwriters AG v. Triple I Inter-national, 533 F. 3d 1342 (11th Cir., July 14, 2008).

Complexbusinessarrangementsfrequentlyareexpressedinmultiple“intertwined” contractual docu-mentsthatsometimescontaincon-flictingdisputeresolutionprovisions–suchascallingforarbitrationunderone contract and litigation underothers.Courtsthenmaybeobligedtoresolvetheconflictbyconstruingthereachofthearbitrationclauseinonecontractacrosstheother“inter-twined”contracts. “Intertwined” contracts, in thecontextofarbitrabilitydisputes,arethosesocloselyrelatedinfactorlawastocreatecommondisputeresolu-tionobligations.Suchobligationsareexpressedundermanyguises:estop-peltodenyadutytoarbitrate,impliedcontractduty,agency,subrogation,alterego,“vouchingin,”third-partybeneficiary,andotherlegaltheories.Thegeneralruleapplicabletobothsingleand“intertwined”contractsisenunciatedinthe3McasebytheU.S.CourtofAppealsforthe8thCircuitasfollows: “Although a party may not be compelled to arbitrate a dispute unless it has agreed to do so, the ‘liberal federal policy favoring arbi-tration agreements’ requires that a district court send a claim to arbitra-

tion when presented with a broad arbitration clause…as long as the underlying factual allegations simply ‘touch matters covered by’ the arbi-tration provision.” Just how this rule is applied inpractice is apparent in four “inter-twined” contract cases decided in2008 by Federal courts of appeal–threecompellingandonedenyingarbitration:

1. 3M Company v. Amtex Se-curity: In creating an “integratedservice provider” relationship, thepartiesenteredintoa“masteragree-ment”coveringgeneraltermsanda “subagreement” covering spe-cifictermsforservicesataparticularplant. The “subagreement” con-tained an arbitration clause requir-ing arbitration inMinnesota,whilethe“masteragreement”includedageneral clause granting each partytherighttopursue“anylegalrem-edy” for any claim “arising out oforattributabletotheinterpretationoftheagreement.”Whenadisputearoseoverpayment,theservicepro-viderbroughtsuitinTexas,theplantownerthendemandedarbitrationinMinnesota,and theprovidercoun-teredbyamending itsTexassuittoallege fraud, tortuous interferenceand other non-contract claims. Inupholdingalowercourtordercom-pellingarbitrationofallclaims,the

U.S. Court of Appeals for the8thCircuitruled: “Our task is to look past the labels the parties attach to their claims to the underlying factual allegations and deter-mine whether they fall within the scope of the arbitration clause…. Given the broad scope of the arbitration clause and our insistence upon clarity before concluding that the parties did

not want to arbitrate a related mat-ter, we conclude that it cannot be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers [the provider’s] claims…. When the par-ties have agreed on an arbitration clause that appears to cover their dispute, it should be upheld.”

2. Aliron International v. Cher-okee Nation Industries. TheU.S.Armyawardedacontractora“primecontract”torenderservicesinGer-many.Thecontractorthenawardeda“subcontract,”whichprovidedforarbitration,toalaborservicesfirmtofurnishstaffingtoperform49%oftheprimecontract.Whenthe“sub-contract”was foundtoviolate theStatusofForcesAgreementbetweentheU.S.andGermany,thecontrac-tor and subcontractor entered intoan “Agreement for AdministrativeSupport,”whichdidnotcontainanarbitrationclause,andwhichtrans-ferredthesubcontractor’semployeesto the contractor in exchange for49%oftheprimecontractrevenue.Whenthecontractorstoppedmak-ing payments, the subcontractorcommencedsuitunderthe“Agree-ment,” and the contractor movedtocompelarbitrationunderthesub-contract.Thetrialcourtgrantedthemotion to compel. On appeal, the

ADR Case Notes


U.S.CourtofAppealsfortheDistrictofColumbiaCircuitaffirmedthetrialcourtbasedupontheprinciplethat“wheretwocontracts,notexecutedatthesametime,refertothesamesubject matter and show on theirfacethatonewasexecutedtocarryouttheintentoftheother,itispropertoconstruethemtogetherasiftheywereonecontract.”

3. Sourcing Unlimited, Inc v. Asimco Int’l. A corporation withoperations in the U.S. and Chinaentered into a written partnershipagreement with another multi-nationalfirmtopromoteitsbusinessinChina.Thepartnershipagreementrequiredinternationalarbitrationofcommercialdisputes.Whenpaymentdisputesarose,thecorporationfileda U.S. suit against the signatoryfirm,andalso joinedaspartiesthefirm’s non-signatory subsidiary andits chief executive officer who hadsignedtheagreementonbehalfofthefirmandhadallegedlybreachedanoralagreement.Thedefendantsmoved to compel arbitration withthesignatorycorporation inChina,andsoughtdismissalofthenon-sig-natoryparties. Inreversingthetrialcourt’sdenialofarbitration,theU.S.CourtofAppealsforthe2dCircuitcompelled all parties to arbitratetheir disputes under theNewYorkConvention and Chapter 2 of theFederalArbitrationActbecause: “Federalcourtshavebeenwillingto estop a signatory from avoid-ingarbitrationwithanonsignatorywhentheissuesthenonsignatoryisseekingtoresolveinarbitrationareintertwinedwiththeagreementthattheestoppedpartyhassigned.”

4. International Underwriters AG v. Triple I: International Invest-

ments, Inc. AnownerofaNigeriancementplantprojectthatfellapartafter a Japanese lender refused tofundtheprojectloansuedasuretyforfraudinfailingtoreturna$5.2millionpremiumpaidfordeliveryofafinancialguaranteebondrequiredbytheloanescrowagreement.Theescrow agreement contained anarbitration clause, but the surety’s“principalagreement”underwhichitpromisedtoissuethebonddidnot.The trial court denied the surety’smotion to compel arbitration andthe U.S. Court of Appeals for the11thCircuit affirmed thedenial asfollows: “The principal agreement be-tween[theowner]and[thesurety]was for the issuanceof a financialguarantee bond in exchange for afee.Theagreementdidnotincludean arbitration clause…. The termsandlogicalimportof[thearbitrationclauseintheescrowagreement]didnot extend to disputes arising notfromanyfailuretoperformthees-crowagreementbutonly fromthefailuretoperform–andfraudulententicementinto–theagreementforissuanceofthebond.”

• Arbitrator Disclosures, Which Are not Required by law, Create no Basis to Remove Arbitrator or Vacate Award: Luce, Forward, Hamilton and Scripps v. Paul Koch, 162 Cal. App. 4th 720 (Cal. App. Dist. 4, April 30, 2008)

Anarbitrator,whowasaformerjudge, disclosed that one of thelawyersinapendingarbitrationhadappearedbeforehimwhilehewasonthebenchandhad“wonsomeand lost some,”andalsodisclosedthatapotentialwitnessatonetimehadservedwithhimontheboardofatriallawyers’association.Thecourt

upheld the Arbitral Administrator’srefusal to disqualify the arbitrator,rulingthatthedisclosureswerenotlegallyrequiredbecausethedisclosedrelationshipsdidnotinvolveabusi-nessrelationship,apersonalrelation-ship,oraclosefriendshipwitheitherthelawyerorpotentialwitness.TheCourt’s opinion concluded: “JudgeHaden’scandorwascommendable,andarbitratorsshould,ofcoursebeencouraged to err on the side ofdisclosure. We conclude, however,that substantial evidence supportsthe trial court’s finding that JudgeHaden was not legally required tomake any disclosures pertaining to[thelawyerorwitness].”

• European union Mediation Directive Promotes Mediation of Cross-Border Disputes

The European Union MediationDirective(IP/08/628,April23,2008)requiresmemberstates,by2011,togiveformalrecognitiontomediationasakeypartoftheirjusticesystems.The Directive is sure to encouragemediatedsettlementofdisputes,andfollowstheEuropeanUnion’sprom-ulgationinJuly2004oftheEuropeanCodeofConductforMediators. Thebroadacceptanceofmedia-tionthroughoutthejudiciariesofEu-ropealsowasapparentintheMarch29,2008,remarksofEngland’sLordChiefJustice,LordPhillips: “Itismadnesstoincurtheconsid-erableexpenseoflitigation…withoutmaking a determined attempt toreach an amicable settlement. Theideathatthereisonlyonejustresultof every dispute, which only thecourtcandeliveris, Ibelieve,oftenillusory…. Parties should be givenstrong encouragement to attemptmediationbeforeresortingtolitiga-tion.”


By ROy S. MiTChEll, ESq.

The current economic downturn is an ideal impetus to expand your arsenal by getting up to speed on how some ADR procedures can work on your behalf.

International litigation has longbeenknown tobeexpensive, timeconsuming,complex,andsubjecttolegalvariablesthatmakeitunwiseforuseinglobalconstructiondisputes.In response, international arbitra-tionwasdevelopedasanalternativedispute resolution process shortlyafter World War I. Unfortunately,over time, international arbitrationhassuccumbedtomanyofthesamemaladies that typically accompanylitigation. As a result, the globalconstructionindustrysoughtnewer,better,faster,cheaper,andmoreef-ficientdisputeresolutionprocedures,andwenowhaveapanoplyofADRapproaches from which those en-gagedinglobalconstructiondisputeresolutioncanselect. Amidthecurrenteconomiccrisisandallitsrelatedrepercussions,nowistheperfecttimetoreviewwhetheryouareusingtheADRtoolsthatarebestsuited–andmostcosteffective–foryourneeds.Selectingtherightmethodfortherightsituationsavesboth sides in a dispute time andmoney, two commodities that arealwaysworthconserving.

Alternative Dispute Resolution – A Brief Primer Asseasonedconstructionlawat-torneysappreciate,thebestfeaturesof Alternative Dispute Resolution(ADR)techniquesaretheirabilitytoreducethetimeandcostofsettlingclaims. Beyond arbitration, media-tion,mini-trials,andfactfindingareADRtoolsthatcanalsobetailoredin anyway theparties agree tofitthe special circumstances of theirindividualdisputes. Whether they constitute minorvariationsofmoreformalarbitrationproceduresorpre-agreedsettlementdiscussion techniques, ADR proce-durestendtobeequallyappealingtoallparties–beitemployer,engineer,contractor,orconstructionmanager.Becauseofthefactualnatureofmostconstructionclaims,disputestypicallyconcerntheallocationofmoneybe-tweenthepartiesratherthan legalor moral principals. Questions ofhowmuchmoneyisallocabletotheactions of either party, rather thanassigningfaultorestablishing legalprecedent,allowuseofADRproce-duresthatencouragepartiestofindamiddleground.Thesetechniquesrepresentanattractivealternativetothe costly and cumbersome proce-duresoftraditionalinternationalliti-gationorarbitration,andasaresulthavegainedsubstantialsupportfrombothprivateandpublicemployersinreconcilingconstructiondisputes.

Factors to Weigh inChoosing An ADR Method Apartyevaluatingtheoptionofutilizing ADR should consider therelated strategic and tactical im-plications. For example, one partymayconsideritscasesoclear-cutitisunwillingtoengage inaprocessdesigned to promote compromise.Thisperspectiveshouldbecarefullyconsidered,however,asmostclear-cutcasestendtobecomelessclearasarbitrationproceeds.Theavailabilityoflegaldefensesmayalsoinfluencethedecision.StatutesoflimitationorotherlegaldefensesmaynotbeasstronginADRasinanarbitralforum.Similarly,onepartymaywishtohavean Arbitral Panel hear the disputewheretheissuesareparticularlyap-pealingtothatforum.Thesefactorsmaymakeitdifficultforthepartiesto agree to use ADR techniques,but nonetheless the advantagesofemployinganADRprocedureafteradisputearisesshouldremainastrongconsideration. Because the parties themselvesdefinethemethodofdisputeresolu-tion,itispossibletotailortheADRprocedure to fit the particular dis-pute.Nevertheless,thereisaimpres-sivevarietyofferedbythebasicADRmodels, including mediation, mini-trial,fact-finding,oruseofaProjectNeutral.OneofthekeyadvantageswithADRisthatthecontractdoesn’tneedtocontainaclausespecifying

Identifying the Best ADR Methodsfor Global Construction Disputes


itsuse.Becauseitiswhollyvoluntaryand consensual on both sides, thepartiesmayinitiateanADRprocesswhenevertheyjointlydecideto.

international ArbitralBodies, Contracts Termsand national legislation The International Chamber ofCommerce(ICC)haslonghadase-ries of alternative approaches suchasConciliation(similartoMediation);Technical Expertise (similar to Fact-Finding by an expert); Pre-ArbitralReferee,abitlikeaDisputeReviewBoardinthatitprovidesforrapidin-terventioninurgentmattersinwhichlegalinterpretationbeyondthescopeoftechnicalexpertiseisrequired;andAmiable Compositeur, where fair-ness and equity are viewed as theguidelines rather than the precisecontracttermsorthelaw.ThelatterisalsoallowedunderUnitedNationsCommissionInternationalTradeLawrules,butpartiesrarelyuseitundereitherbecauseatleastoneofthepar-tiesalwayswishestohavetheotherabideby the termsof thecontractandthelaw. Similarly, the most well knownstandardformconstructioncontractsused in the Middle East and Asiawere adapted by the World BankandanumberofRegionalBanksfortheirinternationalprojects.Overtheyears,theFederationInternationaledes Ingenieurs Conseils (FIDIC) hasutilizedContractAdjustmentBoardsandothermethodsfordisputereso-lution. In 1996 the United Kingdom(UK) passed the “Housing Grants,ConstructionandRegenerationAct1996” (HGCRA) which, in Section108,establishedaprocedurecalled“Adjudication”wherebyaparty to

a construction contract can refer adisputetoadjudicationandtheAd-judicatorisrequiredtorenderade-cisionwithin28daysofthereferral.Thedecision is temporarilybindingsubjecttoultimatedisputeresolutionbyarbitrationorbyagreementoftheparties. TheHGCRAanditsrelatedregu-lations under the “Scheme forConstruction Contracts (EnglandandWales)Regulations1998”revo-lutionizeddispute resolution in theUKbecausemostcontractsarenowcovered by this provision and thetimelimitationissoshort.Claimants–oftenintheformofasubcontractorinadisputewithaprimecontractor–cantakehoweverlongtheydesiretopreparetheircasebeforereferringthedisputetoadjudication,andtheAdjudicatormustholdahearingandrenderhisdecisionwithintheafore-mentioned28days.Theendresultofthisprocessisoftenextremelyfavor-able to Claimants and unfavorableto Respondents who have virtuallyno time to prepare their defenseor present their case. Some mayconsiderthisanADRprocess,butitclearly lacks the essential elementsof being a voluntary, non-binding,informal, and confidential action,whichgenerallycharacterizeADRas

itispresentlyunderstood.HarveyJ.Kirsh,Esq.wroteanexcellentarticleonthistopicinthepreviouseditionofthispublication.

Dispute Review Boards TheuseofaDisputeReviewBoard(DRB),althoughnottraditionallycon-sideredADR, isprobably thesinglemosteffectiveapproachtoresolvingdisputeson construction contracts,withasuccessratioofapproximately98%.SometimesreferredtoasDis-pute Resolution Boards or DisputeAdjudication Boards, they are par-ticularlypopularwithemployersandpublicagencies. Proceduresvarywidely,buttypi-callyacontractwillcontainaclauseestablishingaDRBconsistingofthreepeople,onechosenbyeachsideandthethirdbytheothertwomembers.Eachsideordinarilypaysitsownse-lecteeandthepartiessharethecostsofthethirdperson.Inconstructioncontractsthereisastrongtendencyforeachpartytoselectanengineerbecause of the technical nature ofthework,andforthetwoengineersto select an attorney as the thirdmember,sinceattorneysbringadif-ferentdisciplineforissueswhichmayinvolve contract interpretation and

See “Identifying” on Page 12

the use of a Dispute Review Board (DRB), although not

traditionally considered ADR, is probably the single most

effective approach to resolving disputes on construction

contracts, with a success ratio of approximately �8%.


legal issues, andaremore likely tobeknowledgeableinmanaginganynecessaryhearings.Anothernotableaspectoftheselectionprocessisthateachpartymustapprovetheselec-tionoftheotherpartyaswellastheneutral.Asaresult,theDRBhasthefullconfidenceofbothparties. DRB members are usually re-quiredtobeselectedwithinthefirst30-90daysof the contract,beforeconstruction actually begins. First,members are provided with copiesof the project plans and specifica-tions.Next,theyvisitthejobsiteandmeetwithemployer,engineer,andcontractor representatives regularlythroughouttheconstructionprocessso potential problems can be dis-cussedandactualproblemsresolvedby the Board during the course ofthe construction. When problemsarise,theDRBreceivesrelevantoralandwritteninformation,meetsandissuesapromptandreasoneddeci-sion,whichisusuallyrequiredwithin30days,andwhichmaybeadvisoryorbinding.IftheBoard’sdecisionisbinding,itistypicallybindingonlyonaninterimbasisspanningtheperiodof construction, and then subject

tochallengeviathenormaldisputeclauseprocedures. Thisprocessofferstheadvantageofaddressingdisputesinrealtimebyexpertsapprovedbythepartieswhohavebecomefamiliarwiththecon-structionasitwasperformed.IthasalsobeendiscoveredthatthemereestablishmentofaDRBtendstodis-couragethesubmissionoffrivolousclaimsandtoencouragethepartiestoworkout theirdisputeswithoutthenecessityoftakingthemtotheDRB.

Project neutrals A variation on the DRB processis theuseof a ProjectNeutral.Mycolleague,KennethC.Gibbs, Esq.,hasnotedtheadvantagestousingaProjectNeutral:• choosinganeffectiveADRprocesswhile the parties are still on goodtermsisasmartidea;• a Project Neutral takes any per-ceivedbiasoutofthedisputeevalu-ation process and moves disputeresolution to the front end of theproject;• aProjectNeutralhelpstoprevent

small problems from festering intobigonesandcanworkwiththepar-tiestoproactivelypreventdisputes.

Fact Finding Factfindingisyetanothervaria-tion on the DRB/Project Neutraltheme in which fact finders areidentifiedeither in thecontract,orlaterafteradisputehasarisen.Typi-cally,theyareexpertsinthetypeofconstructioninvolvedandtheirsoleauthority is to determine the factssurroundingadispute.Theyhavenodecisionmakingauthorityandsimplyreporttheresultsoftheirfindingstotheparties.Thepartiesmayormaynot accept their findings and mayormaynotsettletheirdisputeasaresultoftheexercise.Aspreviouslynoted,theICChasprovidedasimilarserviceundertheheadingofTechni-calExpertiseforsometime.Althoughthisprocesshasbeenrarelyusedtodate,itappearstobegainingfavorinsomeglobalconstructioncontracts.

Mediation Mediation is a voluntary, non-binding, informal, and confidentialprocedure designed to assist theparties in negotiating a settlementbetweenthemselvesviaathirdpartyneutral.Byemployinganeutralparty,thetwosidescanbeencouragedtoassume a conciliatory posture thatwillresultinafaircompromise.Themediator typically has no authoritytomakeanydecisionortobindtheparties to any settlement. The roleofthemediatorisnottodecidethecase,buttoencouragethepartiestoreachtheirownagreement.Thispro-cessworkswellnotjustbetweentwo

Identifying the Best ADR Methods continued.from.Page.11

A Project Neutral takes any perceived bias out of thedispute evaluation process and moves dispute

resolution to the front end of the project.

JAMS GLOBAL CONStRuCtION SOLutIONS • WINteR 2008 • PAGe 1�

parties but where multiple partiesareinvolvedasprimaryparticipants,suchasemployers,engineers,primecontractors,subcontractors,sureties,orinsurancecarriers. Asnoted,mediationnormally isavoluntaryprocedurewherebytheparties agree to engage a neutralindividualtoserveasafacilitatorinmeetings seeking to resolve theirdisputes.Typically,thepartiesbrieflypresenttheircasestothemediatorwithoutaformalhearingorpresen-tationofwitnesses.Thisinitialpartofthemediationisusuallyface-to-face,but thereafter it resembles shuttlediplomacywitheachpartybeingina separate roomand themediatoractingasadiplomaticgo-between. Mediationisoneofthemostcom-monformsofADRemployedintheglobal construction industry today,largely because it offers confiden-tiality, informality,and lowcosts. Itis a process based on the integrityof the mediator, and as such, thepartiesareoftenwillingtodiscloseconfidential information to themediator that might otherwise bewithheldinamoreformalproceed-ing. This makes mediation a quickandcosteffectivedisputeresolutionprocedurethattendstomaintainagood future working relationshipbetweentheparties.Studiesindicateasuccessrateofapproximately85%insettlingacasewhenmediationisemployed. Mediationisoftenacontractualpre-obligationtootherformsofdis-pute resolution. The mediator actsasa facilitator,andfrequently, inaconstruction setting, as an evalu-ator. It’s notable that all presenta-tions, conversations, documentsprepared for the mediation, offersand counter-offers are confidentialandmaynotbedisclosedorusedin

subsequentdisputeproceedings.Themediatorproceedsbyaskingprobingquestionsandexpressingskepticismof positions. He or she assists thepartiesinevaluatingtherisksofthecase,transmitsoffers,andseekstohelp the parties voluntarily resolvethedispute. Duringmediation,itisimportantthatfullyauthorizeddecisionmakersbepresentonbothsides,andthatcareful preparation be undertakenbytheparties.ShortStatementsofPosition–about15-20pages long–areusuallysubmittedtothemedia-torandswappedbetweenopposingparties10daysbeforethescheduledmediation,andsomemediatorsen-couragethepartiestomeetwithhimorherindividuallyduringthatperiod.Openingsessionswherethepartiesmake their initial presentations toeachotherandtothemediatorareusuallylimitedtoonehoureach.Noargument,crossexamination,ques-tioning, or transcripts are allowedduringthisperiod. Amajordisputetypicallyrequirestwotothreedaystoresolvebutmanymediationsareaccomplishedinonly

oneday.Anypartyorthemediatormaydeclareanimpasseanddiscon-tinue the proceedings, but this israrelydone.Evenifthepartiesfailtoreacharesolutionduringtheinitialsession,themediatoroftenstaysintouchwiththemandmayconveneasecondmeetingtoresolvethedis-pute.Alternatively, thepartiesmayrequest that the mediator proposeaconfidentialsettlementnumbertobothsidesinadoubleblindsettingwhichbothsidesarefreetoacceptor reject. Obviously, the mediationprocess requires good faith and awillingnesstoreachasettlementbybothsides.Ifsuccessful,mostmedia-torsrequirethatthepartiesexecuteaHeadsofAgreementtomemorializetheir agreement before concludingthe proceedings in order to avoidlaterdisputes. In some cases, the parties mayagree to a so-called Med-Arb pro-ceeding.EssentiallytheMed-Arbap-proachstartsoutasmediation,butifnosettlementisreached,themedia-torswitcheshatsandmakesafinaland binding award. This approachisfraughtwithlegal,technical,andethicaldifficultiesforallofthepar-tiesinvolved,includingthemediator.However, inonecase inwhich theauthorserved,thepartieswereableto reachamediatedsettlementonthemajordelaysandchanges thatwereindispute,buttherewerestillaseriesofopenChangeRequests(CR),whichhadnotbeenthesubjectofthemediation.Attherequestofbothparties,hewasthenaskedtoholdaseparatehearingattendedsolelybytheparties,withouttheirattorneys,torenderfinalandbindingwrittendecisions on the open CRs. Theprocessworkedwith theparticularpartiesandattorneysinvolved,butit

See “Identifying” on Page 14

Mediation is one ofthe most common formsof ADR employed in the

global constructionindustry today, largely

because it offersconfidentiality, informality

and low costs.


washighlyunusualandisnotgener-allyrecommended.

Mini-Trial The mini-trial form of disputeresolutionutilizesamorestructuredmechanism for resolving a disputebutwithoutresortingtoanarbitralforum.Inamini-trial,representativesofeachpartypresenttheircasetoaPanelselectedfrompreviouslyunin-volvedseniormanagementofeachparty who have authority to settlethecase,plusaneutralparty. Originally popular in the settle-ment of construction contract dis-putesintheUnitedStates,mini-trialsarenowusedfarlessthanmediation.Because theprocedure focuses thedispute on the primary issues ofthe case without resorting to timeconsumingandexpensivearbitrationprocedures, mini-trials can be wellsuited to complex factual disputescommoninglobalconstructioncon-tracts. By countering the tendencythatcloselyinvolvedindividualshaveto focus on peripheral issues, andbyavoidingthemoreformal issuesthat may complicate a case in anarbitral forum,thedecisionmakersofeachpartyareabletoengageinaconstructivedialoguethatpromotesthelikelihoodofanamicableresolu-tion. Procedures governing mini-trialsarenormally set forth inanagree-ment entered into by the parties.Thatagreementusuallyprovidesforashorttimeframe,eliminatesdiscov-ery,andsetstimelimitationsoneachstageoftheprocess.Mostmini-trialscanbeconcludedwithinonetothreemonths from when the process is

agreedupon,andthehearingitselfistypicallylimitedtotwotofivedays.A post-hearing discussion follows,wherethetwoseniormanagementrepresentativesandtheneutralmeettoresolvetheissues.Whileparticipat-ingatthisphase,theneutralpartyissolelyafacilitator,hasnoauthorityto provide more than an advisoryopinion, and does not act to bindthepartiestothedispute. Mini-trialsmaybebindingornon-binding.Theyaremoreformalthanmediation, but the procedures arestillflexibleanddeterminedby theparties.Typicallyopeningstatementsand fact and expert witnesses areused,butthelengthofthepresenta-tions is limited.After thepresenta-tions, most attendees depart andleavethePaneltodeliberate.Ifthetwoseniorexecutiveson thePanelareunabletoreachagreement,thethird party neutral often providesanindependentopiniontohelpthepartiesavoidastalemate. To the extent the mini-trial ap-proachisstillinuse,itisnowoftencombinedwithmediationtoformahybridtypeofADRinwhichthePanelhears thepresentationsof thepar-tiesandthemediatorthenmediatesbetweenthetwoexecutives.Whileseldomused,thisisanotherexampleofamajoradvantagetovirtuallyalltypesofADR:thepartiesthemselvesdeterminetheprocedurestobeusedandwhetherornottheywillbebind-ing. WhilethereisnoonemagicADRmethod that can be successfullyusedinallcircumstances,thismuchisclear: 1. ADRisaverydesirablealterna-tivetothecosts,delays,anddisrup-

tionsofinternationallitigation. 2. The ADR process allows theparties to jointly select, or create,whatever process they believe willbest suit their ownunique circum-stances. 3. Ithelpspreservetheworkingrelationshipsbetweentheparties. 4. Itallowsthepartiestomanagetheir disputes just as they manageotherproblems. 5. Ittypicallyallowstheselectionof industry knowledgeable peopletoassistthepartiesinresolvingthedispute. 6. It can be utilized with anynumberofparties. 7. It typically results in savingsof90-95%ofarbitration timeandcosts. By becoming familiar with thewide variety of ADR proceduresavailable, parties to a constructiondisputecanincreasetheiroptionsinresolvingtheirissue.IncreasedADRtools,inturn,resultinbetteroddsforanoutcomewithwhicheachpartyissatisfied,andenablesthemtoreturntheirprimaryattentiontotheprojectitselfandtotherelationshipsathand,leaving behind the distractions ofwhatmightotherwisebecomeabit-ter,divisiveandexpensiveproceed-ing.Thecurrenteconomicdownturnisan ideal impetus toexpandyourarsenal by getting up to speed onhowtheseADRprocedurescanworkonyourbehalf.

Roy S. Mitchell, Esq. has been involved in domestic and international dispute resolution for decades and is currently resolving disputes related to underground construction post-9/11 in New York. He joins JAMS in January and will be based in Washington, DC.

Identifying the Best ADR Methods continued.from.Page.13


DEC. 10-12, 2008: “ADR in Cross Border Disputes” at 23rd Construction SuperConference ThePalaceHotel•SanFrancisco•http://www.constructionsuperconference.com/ME2/Default.asp

The Construction SuperConference, now in its 23rd year, is recognized as a preeminent legal construction conference. This year the conference has been organized into four tracks: (1) Legal and Institutional, (2) Business-Related Issues, (3) Contracts and Management, and (4) Industry Specific. JAMS is sponsoring the Contract and Management Track’s Session E11 on ADR in Cross Border Disputes.

Thursday, December 11 • 2:15 - 3:30 PM: Contract and Management Track, Session E11

From the Other Side of the Bench: Views of Cross Border Construction Mediatorsand Arbitrators about “Do’s and Don’ts” of Case Presentation and Cost ControlTheConstructionIndustry’ssearchforADR’s“holygrail”ofeffective,inexpensive,expedited,andfairdisputeresolutionprocesseshasledittoconsideratleast10processesshortoflitigation–withvaryingresultsinvariouscontexts.Arbitration,theoldestoftheprocesses,isviewedbymanyaslittlebetterthanlitigation.ThePanelwilldiscusswhatworksanddoesn’tworkinADRandincasepresentation.Theywillalsoimparttheirthoughtsonhowarbitrationcanbe“fixed”andansweranyquestionsaboutthenewJAMSarbitrationrules.DiscussionwillincludetheviewsofconstructionindustrygeneralcounselwhopartookinarecentJAMSsurveyregarding“controllingtherisingcostsofarbitration.”Thepresentationwillbeinteractivesothatyoucanshareyourviewsaswell.

Participating JAMS GlOBAl EnGinEERinG AnD COnSTRuCTiOn GROuP (GEC) nEuTRAlS include:

Notices & Calendar of events

FEB. 19-21, 2009: The American College of Construction Lawyers JAMSGECNeutralThomas J. Stipanowich, Esq. moderatesapanelon“Construction Conflict Resolution in China”AmeliaIsland,Florida•http://www.accl.org

APRil 24, 2009: Construction Management Association of America,Southern California Chapter JAMSGECNeutralKenneth Gibbs, Esq. presentsalegalseminaron“Alternative Dispute Resolution: What CM’s need to Know”8:00AMto10:30PM•TheGrandConferenceCenter•LongBeach,CA•http://www.cmaasc.org/

Philip l.Bruner, Esq.

Moderator;JAMSGECDirector

Jesse B. (Barry)Grove iii, Esq.

JAMSGECAdvisoryBoard

Katherine hopeGurun, Esq.


John W.hinchey, Esq.


Thomas J.Stipanowich, Esq.


See “Notices” on Page 16

http://www.constructionsuperconference.com/ME2/Default.asp

http://www.accl.org/news.html

http://www.cmaasc.org/


Board of Editors

PhiLiP L. BRunER, ESq.*Director, JAMS Global Engineering and Construction Group

hARvEy J. KiRSh, ESq.*JAMS Global Engineering and Construction Group

JOhn J. WElSh, ESq.JAMS Executive Vice President and General Counsel

JAMS Global Construction Solutionsseekstoprovideinformationandcommentaryon current developments relating to dispute resolution in the construction industry.Theauthorsarenotengagedinrenderinglegaladviceorotherprofessionalservicesbypublicationofthisnewsletter,andinformationcontainedhereinshouldnotbeusedasasubstituteforindependentlegalresearchappropriatetoaparticularcaseorlegalissue.JAMS Global Construction SolutionsispublishedbyJAMS,Inc.Copyright2008JAMS.Photocopyingorreproducing inanyforminwholeor inpart isaviolationoffederalcopyrightlawandisstrictlyprohibitedwithoutthepublisher’sconsent.

AdditionalmembersoftheJAMS Global Engineering & Construction Group

Viggo Boserup, Esq.Hon. William J. Cahill (Ret.)

Richard Chernick, Esq.*Zela “Zee” G. Claiborne, Esq.

Hon. John W. CooleyRobert B. Davidson, Esq.*

Linda DeBene, Esq.Bruce A. Edwards, Esq.David Geronemus, Esq.Kenneth C. Gibbs, Esq.*

Jesse B. (Barry ) Grove iii, Esq.*Katherine hope Gurun, Esq.*

William E. Hartgering, Esq. John W. hinchey, Esq.*Gerald A. Kurland, Esq.

hh humphrey lloyd qC*Hon. Clifford L. Meacham (Ret.)

Joseph T. McLaughlin, Esq. Roy S. Mitchell, Esq.

Donald R. Person, Esq.Alexander S. Polsky, Esq.Vivien B. Shelanski, Esq.

Thomas J. Stipanowich, Esq.*Michael J. Timpane, Esq.

Eric E. Van Loon, Esq.Hon. Curtis E. von Kann (Ret.)

Catherine A. Yanni. Esq.Michael D. Young, Esq.

*GEC Advisory Board Member

JAMS GLOBAL CONStRuCtION SOLutIONS

EDiToRiAL GuiDELinES

JAMS Global Construction SolutionsinvitesthesubmissionofarticlesontopicsrelatedtoADRandconstruction.Tofindhowtosubmit

anarticle,pleasegoto:http://www.jamsadr.com/

images/PDF/JAMS-Construction-Solutions-Guidelines.htm oremail constructionsolutions@

jamsadr.com.

RECEivE ThE nEwSLETTER

ELECTRoniCALLyTosignupforyour

complimentaryelectroniccopyofJAMS Global Construction

Solutions,pleasegotohttp://www.jamsadr.com/practices/construction.asp

oremailconstructionsolutions

@jamsadr.com.

Notices continued.from.Page.15

DECEMBER 2008

JAMS GEC Advisory Board Member hARvEy J. KiRSh’S article on “The Dispute Resolution Provisions (Part 8) of the New Canadian Standard Construction Contract (CCDC 2-2008)” will appear in the December 2008 issue of Construction Law International, the magazine of the International Bar Association’s International Construction Projects Committee.

http://www.jamsadr.com/images/PDF/JAMS-Construction-Solutions-Guidelines.htm



