Construction Mediation: After
Poised @ the New Millennium
fast becoming, and soon will be, the prime forum for resolving construction
disputes in the new Millennium. Long categorized as an Alternative Dispute
Resolution (ADR) method simply because members of the construction industry
had been indoctrinated into thinking that if negotiations failed arbitration
or litigation was their only recourse, in reality, these two have always
been alternatives to mediation. Few executives gave mediation a thought.
Its 20 year journey, arriving
at its inevitable position in 2000 as the construction industry's soon-to-be
premier method of resolving disputes, has been an obstacle course laden
with inertia, indifference, confusion and greed.
Break the Ice in 1980
In 1980 mediation got a toehold in the industry when the roofing trade
gave it a try. Word spread, as did the toehold into a foothold, when,
in 1985 the insurance industry, through the initiative of Bernard Engels
and Elliott Gleason, executives of the Design Professionals Insurance
Company (DPIC), realized its potential and spearheaded a movement to integrate
mediation into the construction industry's dispute resolution culture.
Around the same time the
American Arbitration Association (AAA) initiated an 'invitation only'
construction mediation training program for selected members of its panel
of construction arbitrators. The author took the training in 1986 and
the same year started writing a regular column on 'ADR in the Construction
Industry' for NEW YORK CONSTRUCTION NEWS (NYCN), a column which chronicled
In 1987 a column entitled Mediation Recommended over Litigation
alerted the industry to the fact that "construction mediation was shamefully
underutilized." Another observed that: "the construction community was
generally unaware of (mediation) and its flagrant underutilization...must
be addressed by the legal community." Coincidentally, Robert Coulson,
the sorely missed past president of the AAA, in his handbook, BUSINESS
MEDIATION, said that "most lawyers would like to keep mediators out of
their (settlement) discussions," which perhaps prompted the American Bar
Association to declare that same year that it would no longer approve
a law school unless "ADR was among the skills taught to lawyers."
But mediation stayed on
the back burner as chronicled in NYCN columns between 1987 and 1991: Mediation
Popular, Except in Construction, (1987), 5 Mediation Resolutions
for the New Year, (1988), Industry Shuns Smart Mediation Efforts,
(1989), There's a Better Way to Resolve Disputes, (1990),
Lawyers Shun Arbitration and Mediation, (1991) and Construction
Mediation: The Sleeping Giant (1991).
Industry Awakens to Mediation
in 1992 heralded the progress made in the early 90's. The Associated General
Contractors of America, the nation's oldest construction trade association,
put an ADR clause in its standard contracts and the New York City School
Construction Authority (SCA) adopted mediation to resolve disputes with
its contractors and subs. That same year an attorney in the AAA's ARBITRATION
JOURNAL said: "Mediation is about to change law practice. It is the cheapest,
lowest risk, and most under-utilized form of alternate dispute resolution,
attorneys may as well make a virtue of necessity."
There was still a way to
go, however. Mediation required wider promotion within the industry. This
prompted, in late 1992, Mediation Needs Help From NCDRC and AIA.
Led by Jack Woolf of Crow Construction, the National Construction Dispute
Resolution Committee took up the gauntlet. Mediation soon began getting
its deserved recognition within the construction community.
However, it was not until the new generation of construction attorneys
began flexing their muscles and slow moving bureaucracies got their acts
together - it was not until 1997 that the American Institute of Architects
(AIA) finally put a mediation clause in its standard construction contracts
- that mediation arrived at its present, deserved place at the forefront
of construction dispute resolution.
[Mediation's growing popularity
in other dispute areas has spawned a cottage industry in private ADR,
rent-a-judge, mediation firms across the nation and it is being integrated
into the national court system. In New York State, the New York City branch
of the Supreme Court adopted mandatory mediation in 1996, followed by
the Westchester branch in 1999. Every law firm now has a mediation area,
some firms specialize only in mediation. And ADR is now part of the basic
curricular in every law school.]
So why did it take so long
to be appreciated and what ingredients make mediation so appropriate and
successful in resolving construction industry disputes?
A colleague, William Cousins, Esq., one of ADR's anointed "Special Masters,"
observed in the February, 2000 issue of Grynbaum's MEDIATION UPDATE, an
ADR newsletter for the power industry: "The term "ADR" is truly an oxymoron.
It purports to be an alternative to the trial of a lawsuit. In fact, the
lawsuit is the alternative resorted to only after the adversaries in a
conflict walk away from each other and refuse to address each other's
demands. It is, therefore, more accurate to describe the lawsuit as an
unsatisfactory alternative to negotiation (and mediation)."
Other myths have been dispelled
Attorneys lament that when
one agrees to mediation, a party takes the risk of giving its case away
to the other party. Nonsense! There are no secrets in the life of a construction
project - it is built in the sunshine for all to see (unless a tunnel),
and all the documents and drawings generated are distributed to all concerned
as the project rises out of the ground. Nor are there any legal tactics
that would surprise any member of the construction bar if the case ended
up in litigation or arbitration.
Mr. Cousins went on to say this about the kind of mediator best suited
for a particular dispute: "There is an empirical knowledge of the situation
held by the adversaries themselves which no generalist in conflict resolution
can be expected to understand. A neutral who is not well versed in this
empirical knowledge offers very little to the adversaries other than neutrality.
But neutrality in and of itself is worthless without an in-depth knowledge
of the empirical nature of the dispute."
This echoes what Bob Coulson
said in 1994 in the ARBITRATION JOURNAL. Mr. Coulson stressed: "the importance
of using mediators familiar with construction terms and conditions. The
mediator's knowledge and experience in the industry are important. Retired
judges, law professors, senior partners in corporate law firms, no matter
how competent they may be, do not always have enough practical experience
to make a major contribution to the parties' negotiations."
A prime example of how successful
mediation can be is the SCA's program wherein all the mediators are construction
experts. This ingredient, combined with voluntary participation makes
the SCA program so effective and more successful than mandatory mediation
programs where one or more of the parties may be unhappy, unwilling participants,
herded into a mediation room under a court order. And as most mediators
in these relatively new court programs are pro bono - whether for experience,
noble intentions or to make business contacts - the parties often do not
treat the process with respect. As the University of Chicago economist,
Milton Friedman, said: "What people get for nothing, they value for nothing."
Now that the industry has accepted mediation and many are heeding the
advice of Mr. Coulson and Mr. Cousins, it has arrived at the threshold
of the new Millennium in the forefront of construction dispute resolution.
Even the AAA has placed mediation first, before its namesake, arbitration,
on its web site. Mediation could not be denied during its 20 year struggle
to the top, simply because 'you can't keep a good man down.'
Construction Mediation Inc.
334 West 84 Street, #2
New York, NY 10024
212 721 1410 TEL
212 873 3029 FAX
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