eMediation of Construction Disputes - Behind the Scenes, Warts and All
Mandatory mediation is tough enough. But how do you resolve a complex construction dispute over the erection of a 45-story office tower in the heart of New York City that involves 60 parties - including a half-dozen insurance carriers and three public agencies - when you have only a 30-day window of opportunity to accomplish it? Answer: a "robust" (1) mediation style and lots of eMail. But even more important to success: the attorneys for the main players knew their cases well and the minor ones quickly moved off center stage.
What follows are the highlights of the actual, unvarnished eMail account of how that was accomplished in "principle" (see The Mediation Session, below) under the Alternate Dispute Resolution Program of the New York County Supreme Court.
Cast of Characters (in order of appearance):
Scott - Plaintiff's attorney
Gary - Mediator
Jessica - Defendant attorney
Nicholas - Defendant attorney
David - Lead defendant attorney
Chris - COO of construction company, David's client
Judge (*) - Justice of the Supreme Court, New York Country
Murray - David's partner
Carmen - Defendant attorney
Pre-Mediation eMails
Date: February 13, 2007 7:16 PM EST
Dear Mediator and Counsel:
We represent the Plaintiff in an action pending in the Supreme Court, New York County in which you have been appointed as mediator.
Pursuant to direction received from the court on this date, I am writing to advise you and defendants of my availability for mediation on the following days.......
Scott
Date: February 14, 2007
Ladies and Gentlemen,
Just wanted to touch base with everyone before I speak with each of you individually so we are all on the same page going forward with our mediation.
The Rules require that we have the mediation within the next 30 days +/-. Before we meet we have to establish a format, all participants must be "up to speed" and prepared to negotiate and we all must be on the same wavelength.
In order to structure the format for the mediation I will need, and welcome, input from all of you. Among other things, I have to know up front how the plaintiffs and defendants will align themselves and whether offers are going to be unified or presented separately. I will need Mediation Statements.
Bottom line, we all must be Reasonable and Agreeable if we have any hope of getting this done within the time frame allowed. And when you come to the table, I hope everyone has realistically evaluated its case beyond just "what you want."
Look forward to speaking with each of you. Feel free to send me your comments.
Gary Morgerman.
Date: February 15, 2007
Dear Mr. Morgerman,
We represent the second third-party defendant R......, and the second third-party action has been discontinued with prejudice by M....... (second third-party plaintiff) against my client. This Stipualtion has been filed with the Court. As such, we will not be participating in the Mediation. If you have any questions, please do not hesitate to contact me.
Jessica
Date: February 20, 2007
Lady and Gentlemen,
We are all set to mediate on 2/28 at 10am at a location of your mutual choice, preferably in NYCity. Wherever you decide should have a conference room large enough to accommodate all the parties, their attorneys and witnesses. The location should also have a number of rooms where caucuses can be held. Needless to say, each party must have someone present with settlement authority. If anyone thinks another party must be present to order to dispose of this matter, please let me know.
I will require a Mediation Statement from each party, 10 pages or less, by e-mail, by 2/23, if possible, but no later than 2/26. I suggest you exchange them and if there is anything for the "mediator's eyes only," send it in a separate e-mail. Please include any important documents you want me to see.
I will have further requests and additional comments for each of you but wanted to get this out today so we all know we're on a tight schedule and all of you can start getting ready. Please let me have your comments, suggestions, whatever and let me know where we will be mediating.
gary
Date: February 22, 2007
The ADR rules indicate that the memorandum should only sent only to you. I have no objection to the exchange of these documents. Do you know if all parties will be exchanging?
I have not received any response from the Defendants. It appears that they are not interested in exchanging statements. I will forward my mediation stmt. to you later today when it is completed. I hope this is not a precursor of their interest in working together to achieve a fair resolution of this dispute.
How much time have you scheduled for the mediation?
scott
Date: February 22, 2007
Scott, Exchanging or not exchanging does not relate to whether the parties want to work together. Nor have the parties, in my private discussions with each of them, expressed any disinclination to all work together to resolve this. Don't get paranoid. Be optimistic. Everybody has their own reasons.
And if you want to pass your Mediation Statement on to any party, do so. I don't think you're giving anything away.
Maybe it will intimidate them and put them in a mood to be cooperative. And maybe you'll get one in return.
We'll have a full day, non-stop, if we must.
Gary
Date: February 22, 2007
Nicholas, In your mediation statement could you please discuss, vis-a'-vis the Motion for Summary Judgment, the statement in 532 Madison/Finlander, on page 7/[6]:
"A landowner who engages in activities that may cause injury to persons on adjoining premises surely owes those persons a duty to take reasonable precautions to avoid injuring them."
Also, if you have any suggestion for an approach you would like me to take in an attempt to settle this dispute, please let me know.
Needless to say all this is confidential between us.
Gary
Date: February 22, 2007
Scott, Could you e-mail me a copy of the Loss of business/damage report by your expert.
thanks, gary
Date: February 22, 2007
Scott, Along with your mediation statement could you provide, on a street plan, a rough drawing showing locations of your client's building, the 45 story building, adjoining buildings and the extent of the scaffolding/sidewalk bridge in question. If possible, an elevation of the bridge as well.
Also a chronology of events would be helpful indicating when work started and finished on the adjoining site, the dates of erection and dismantling of scaffold/sidewalk bridge and any other significant events, like when your client went out of business, etc.
Needless to say all this is confidential between us.
Thanks, gary
Date: February 23, 2007
David, Could you e-mail me a copy of the Madison Ave "brick" case.
thanks, gary
Date: February 23, 2007
Lady and Gentlemen,
One of the parties correctly pointed out that the ADR rules state that the Mediation Statements are for the mediator's eyes only. However, when the rules were first issued in 1996, I discussed this limitation with the powers that be at the courthouse and was assured that this was a guideline only. So, as "the process belongs to the parties" if you want to exchange, please do so and I encourage that it be done. This does not mean that all must or mustn't. It's up to each of you individually to decide who you want to share your Statements with. Gary
Date: Feb 27, 2007
I have received and reviewed David's Mediation Statement. Apparently, his intent is to argue the Summary Judgment Motion which was submitted for decision to the Court over four and half months ago.
It is obvious that if the Court were inclined to grant Summary Judgment, then the Mediation Order would not have been issued. Nevertheless, I am attaching a copy of the Opposition to the Motion filed on behalf of the Plaintiff for your review. Please advise if the Mediation will be oral argument on the legal issue raised in the Motion, or a "Fact-Based Mediation." (2)
Scott
Date: February 27, 2007
Scott, It will be whatever the parties want it to be. Relax.
Gary
Date: February 27, 2007
Ladies and Gentlemen, The mediation will held at David's office stating at 10am. I would first like to meet with all the "defendants," so Scott and his people can come an hour later, at 11am.
I don't recall how much I've told each of you about my background in ADR and construction, but you can all visit my company website (www.CMInco.com) to find out about me ("Founder") and my approach(s) to mediation. If you do it will save me time during introductions and may answer some questions you may have.
Look forward to meeting all of you tomorrow,
gary
PS/ For informational purposes this e-mail was copied to all parties who were included in the original ADR papers I received from the court.
The Mediation Session and Aftermath
After the supporting cast had stepped to the sidelines (e. g., Jessica) the mediation took place as scheduled on February 28 and went all day, non-stop. (A number of attorneys for the "peripheral" parties attended as observers but did not actively participate in negotiations.) A great deal of discussion revolved around a motion for Summary Judgement that the defendants had filed jointly and was still pending. An agreement in principle was achieved but the carriers' attorneys did not want to work out precisely how the settlement number would be apportioned among them until they each spoke with their clients. The principal defendant (David's client) would bear the overwhelming cost of the settlement and the other defendants, all of whom had long-standing relationships, would not quibble over their individual contributions. Everyone shook hands, congratulated each other on a job well done and went their separate ways.
A few days after the mediation session the parties learned that the defendants' Motion for Summary Judgement had been denied. During the next few weeks the mediator touched base with the Court to make sure the settlement deal was executed. But the mediator soon learned from the plaintiff that the deal had fallen through:
Date: Apr 3, 2007
Gary - On several occasions I started to write and thank you for your efforts to mediate our case, but each time my frustration with the lack of good faith by certain parties interfered. So, I will keep it brief.
Thank you for your hard work in mediating the case. You graciously gave of yourself. I, and my client, appreciate your time and effort. It is truly unfortunate that the same cannot be said of all the other parties, as it is clear that some parties were not engaged in a good faith effort to mediate the case. In fact, as you probably know, even though the Plaintiff acceded to the demands of the other parties, they, as a group, have refused to consummate the settlement.
So, litigation will continue. I doubt this case will ever be settled, so a jury will decide. Perhaps this is for the best. You did your best and my client and I are thankful for your efforts.
Thank you again.
Scott
Reconvening the Parties
The New York County ADR rules state that: "The initial ADR session is mandatory. Furthermore, if the Neutral believes that an additional ADR session will be productive, he or she may schedule one and attendance is again required." Accordingly, after speaking with a number of the parties and receiving their support to continue, the mediator notified the Court that a second mediation session would be held. The Court so advised the parties:
Date: May 7, 2007
Mr. Morgerman (and Parties) - By Order dated May 3, 2007, Judge (*) has directed all parties to return to ADR Mediation and contact you by May 9, 2007 to arrange for a further mediation date. Thank you for your attention to this matter.
Presently we are scheduled for the following depositions: May 17 2nd 3rd Party Defendants; May 24 2nd 3rd Party Plaintiff to be deposed by Transit; May 31 Depositions of Transit, Con Ed.
As the consensus at the conclusion of today's deposition was to reschedule the forgoing to permit Mr. Morgerman to further mediate prior to expending further sums, and if unsuccessful, to complete these depositions prior to the next Court date on June 21, 2007 @ 11:00, I suggest that we re-schedule as follows..........
Please review and advise. Thank you.
Scott
Judge's Chambers and Aftermath
The parties met in the Judge's chambers on the morning of May 9 and while there contacted the mediator to schedule a second day of mediation. In David's absence, his partner, Murray, assured everyone, including the mediator, that later that day, or the next day "at the latest," he or David would advise the mediator as to David's availability for another mediation session.
But not hearing from David or his partner by May 15, the mediator called David's client, Chris. They discussed the case briefly after which Chris agreed to contact David and get back to the mediator.
Another week went by without word from Chris or David. However, an eMail to Chris smoked David out. David overreacted to the mediator's "robust" intervention by formally complaining to the Judge:
Date: May 23, 2007 9:29 AM EDT
So Chris, awaiting your call, this is how I see things:
After reading all the material submitted and hearing what everyone had to say at the mediation on 2/28, i concluded that plaintiff definitely had a cause of action and the motion for Summary Judgment would be denied. In fact, during my discussions (arguments!) with David and the other defendants' attorneys at the mediation we discussed the same "special damage" passages from the Finlander case that Judge (*) would later quote in denying the motion, allowing the case to go forward.
Of course the plaintiff has the burden at trial to prove that your company, et al, went beyond the bounds of reasonable standards of the industry in conducting its constructions operations at the site vis-a'-vis plaintiff, that there was a causal relationship to the damages plaintiff allegedly suffered, and plaintiff must prove its damages. This will be a costly endeavor in time and money for all the parties. And depending on the proofs and the fickleness of juries there's no telling at this point how the chips will fall at trial.
So when plaintiff made a final offer of $,,,,,,,, at the mediation and the defendants started hedging about that number I told them they would be collectively guilty of malpractice if they walked away from that settlement. They all agreed (including your attorney who told me at the end of the day that he was really impressed that we were able to forge a settlement) and a deal was struck, in principle, with plaintiff for that amount.
When I learned later that your company backed out I was dumbfounded as were some of the other defendants I later spoke with.
As we discussed, neither the construction industry, nor your company, has anything to fear from the Judge's rulings in this case to date. If your company, and any other construction company, acted in a reasonable manner during construction it will prevail. But win or lose at trial, it ain't worth the effort and the decision will have no effect on the industry, one way or the other. This is a "special" case.
That's it in a nutshell. Would be happy to discuss further with you and/or David. Everyone is waiting to hear from me on how we are going forward with the mediation.
Best, gary
Date: Wednesday, May 23, 2007 9:43 AM
To: Gary (Construction Mediation Inc.)
Cc: David
Gary - it was good to talk with you the other day. Thanks for your analysis (attached) and for your efforts to facilitate a settlement. This appears to me to be a compelling argument for settlement, but I do not have the benefit of all the facts and arguments that might mitigate against settlement. Our lawyer, David, has not called me back yet, which must mean he is still on trial. I will copy this to our CFO, who is also involved with CCIP settlement decisions. Organized opportunities to settle cases with many parties don't occur with regularity.
Chris
12 Minutes Later, David Suddenly Re-appears:
Date: May 23, 2007 9:55 AM
Gary, Again, thanks for you efforts. I have spoken with David and he briefed me on the case. David is fully aware of all aspects, and, having now worked with him for several years, I am confident in his judgment. I am going to rely on his advice. David would prefer that you work through him.
Chris
Date: May 23, 2007 2:44 PM
Chris, I, too, would have preferred to work through David but he forced me to take another route.
To set the record straight, I got a conference call from the parties from the judge's chambers on 5/9. During that call I spoke with David's partner, Murray, who personally assured me that he or David would get back to me later that day or by the next day, at the latest, to discuss another mediation session, per the judges order and the desire of all the other parties to settle this dispute. Not hearing from either, I waited until 5/15 before I contacted your company, and you in particular because of your ADR background noted in your resume on your company's website.
Look forward to hearing from David.
Gary
June 7, 2007
Hon. (*)
Supreme Court of the State of New York, County of New York
80 Centre Street
New York, New York 10013
Dear Judge:
This office represents defendant .......in the above matter which is scheduled for a conference on June 21, 2007.
We have recently been contacted by the Office of Court Mediation regarding the scheduling of mediation pursuant to the Court's last discovery order. While we have no objection to attending any mediation, we do have an objection to the mediator.
On or about May 23, 2007, the mediator improperly contacted my client directly, without my knowledge and without my authorization, to discuss this case.
In view of the foregoing, I respectfully request that this issue be addressed at the forthcoming conference.
Very truly yours,
David ......
Date: June 7, 2007 7:20 PM
Folks, Regarding David's letter to the Judge, he forgets that I am appointed by the Court to serve the parties. If there are attorneys representing the parties, they are third in the pecking order vis-a'-vis my responsibilities. The mediator in such a situation is not legally, morally or ethically restricted from speaking directly with a party, with or without the attorney's permission or notification. It's the mediator's call. When an attorney, by action or inaction, prevents the expeditious resolution of a dispute before the court, to the detriment of all others involved, the mediator's obligation is to remove the impediment or go around it. That's mediation 101.
Despite David's temper tantrum, I am ready and willing to continue as your mediator. I bear no ill will towards David and look forward to seeing him and all of you again.
Gary
Date: June 8, 2007 6:53 AM EDT
Folks, The parties should have a telephone conference to decide if they want to continue with me as the mediator. I'm waiting for feedback.
gary
Date: June 8, 2007 11:32 AM EDT
Gary, And this because you were doing your job...?!
Carmen
Date: June 20, 2007
From: SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY
The Court orders that the parties appear for a further mediation date on Thursday, June 28, 2007 at 10 o'clock a.m., at a location to be chosen by the mediator.
The court notes that it received a letter dated June 7, 2007 from David ........, counsel for defendant ......., with respect to the Court ordered mediation. Should counsel object to the Court volunteer mediator's services, such counsel should arrange for the scheduling and payment of a private mediation service (i.e. JAMS), to be scheduled and conducted within 20 days of the date of this order. If private mediation is in fact chosen, on or about June 26, 2007, counsel shall notify this Court by letter, as well as the Court assigned mediator, and the Court Clerk Specialist for the Commercial Division/Alternate Dispute Resolution Program.
Upon receipt of this order, plaintiff's counsel shall serve a copy upon all parties by fax & regular mail.
Date: June 27, 2007 9:39 AM EDT
Everybody,
Considering the court order dated 6/20/07 (attached for your convenience) providing for mediation on 6/28/07 at 10:00 a.m., although I have not been advised by the mediator as to location (the order states that the mediator will choose the location), I am offering the use of our offices. Unless advised to the contrary, the mediation will be in our offices tomorrow starting at 10:00. Since the order does not state the duration of the mediation, I have scheduled my office's availability for 2 hours.
David
Date: June 27, 2007 12:26 PM EDT
Ladies and Gentlemen,
It is clear that David was to advise by 6/26/07 whether he would seek a private mediator or participate in the court-ordered mediation on the 28th. If he chose the latter he was to contact the mediator as to a location. Not having heard anything from David by the 26th, I am sure we all are confused and may have made other commitments. (Before leaving town on the 22nd I spoke to David twice but he said he had not yet spoken to his client regarding this matter.)
However, I will keep my commitment to the 28th at David's office and hope all other parties will as well. Please advise by tonight whether all relevant parties will attend. As per the court's order: "counsel will appear with the authority to settle, and with their clients available by telephone call."
Gary
Later That Day, Many Phone Calls Later, "All's Well That Ends Well:"
Date: June 27, 2007 4:10 PM EDT
To: All,
I am pleased to advise that the plaintiff has agreed to accept an offer made by the defendants and, consequently the case is settled. It will not be necessary to go forward with the mediation tomorrow. Plaintiff has agreed to notify the court.
David
Date: 6/28/2007 9:42 AM
From: SUPREME COURT OF THE STATE OF NEW YORK COMMERCIAL DIVISION
ALTERNATIVE DISPUTE RESOLUTION PROGRAM REPORT FORM
Index No.....................
This case was refferred to me for alternative dispute resolution by order of Justice (*), dated 02/01/2007. In an effort to resolve or narrow the dispute, a session was held. The results were as follows (Please check one):
__x____ The matter has been settled. 6/27/07s
______ The matter remains unresolved and is ready to proceed in court.
______ The matter has been resolved in part and is ready to proceed in court.
______ The matter remains unresolved and is ready to proceed in court for failure to comply with ADR rules and/or neutral's instructions by one or all parties.
Conclusion
Had not the lead defendant's attorney gotten paranoid over the implications of the Summary Judgement ruling on his client's case, and the construction industry in general (see 5/23/07 9:29 AM eMail), a settlement would have been signed, sealed and delivered within the 30 day guideline specified in the Court's ADR Program guidelines. Nevertheless, upon conferring with his client after the mediator's ("robust") intervention, the deal was re-struck. So, despite the parties' unnecessary expenditure of time and money after the original deal fell through, in the end everyone (except the pro bono mediator) got off cheap using ADR's often maligned orphan, Mandatory Mediation, still the best vehicle for mediators to hone their skills on tough cases, often with reluctant participants.
Notes:
(1) see "Mediation Law and Practice," Spencer & Brogan, Cambridge University Press, 2006, pgs. 143-147.
(2) "Fact-Based Construction Mediation" is discussed on the mediator's website: www.CMInco.com
Gary Morgerman
August 2007
New York City
Construction Mediation Inc.
www.CMInco.com
CMInc@pipeline.com
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