• Mediation, Arbitration or Litigation: How to Pick Your Poison
  • April 30, 2014 | Author: David P. Ray
  • Law Firm: Bernstein Shur - Portland Office
  • Probably the last thing on your mind at the beginning of a job is considering how and where you will prosecute or defend claims arising from the project. But it is highly likely that, buried somewhere in the agreement you are about to sign, there is a provision that makes a selection of a method and forum for resolving disputes. If you don’t understand or pay attention to it, you may find yourself in a dispute resolution forum that is not of your choosing. Before signing a contract, consider these three common methods of dispute resolution:

    1. Mediation

    Mediation is a preliminary and non-binding procedure that is often used in conjunction with both arbitration and litigation. Mediation is a settlement conference facilitated by an independent professional selected by the parties. The mediator will bring the parties together, listen to all sides of the dispute, assess each parties’ relative strengths and weaknesses and use his or her mediation skills to try to cajole, convince and persuade the parties’ to settle the issues. Mediations typically are completed in one day. If successful, there will be no need to arbitrate or litigate; the claim will have been resolved by agreement of the parties.

    2. Arbitration

    If unsuccessful, the parties will have to proceed with some form of binding dispute resolution. Arbitration and litigation are binding processes and are mutually exclusive. Arbitration is a non-judicial process where the disputes between or among the parties is submitted to one or more arbitrators - usually persons experienced in construction - for final, binding resolution. The arbitrators hold hearings where witnesses testify and evidence is submitted and then issue an award. The arbitration award is enforceable in court and, except in extremely limited circumstances, cannot be appealed, challenged or overturned. AIA forms generally include mandatory arbitration clauses.

    3. Litigation

    Litigation means that a court - with or without a jury - will be the forum for resolving disputes arising from the project. Because the typical construction or design case is complex and involves multiple issues, trial by jury is rarely a wise choice. If you have chosen litigation, you will be at the mercy of the court’s schedule which, in Maine, typically means that you will have a hearing on your claims less quickly than an arbitration hearing.

    So, which poison do you pick? Generally, arbitration is less expensive and faster than litigation and, when the issues are complicated construction or design claims, it is usually possible to find arbitrators with sufficient experience and knowledge to facilitate the presentation and resolution of claims. On the other hand, some observers believe that arbitrators tend to compromise claims more readily than judges.

    Over my career as a construction lawyer, I have had the opportunity to litigate extensively, act as both a mediator and arbitrator many times, and have taken part in many, many mediations and arbitrations. As I have explained, each choice has different benefits and burdens. Whatever your preference, you should make sure that the contract you are signing is consistent with your expectations.