BMJ Stone
EZG Manufacturing
Federated Insurance
Fraco USA, Inc.
Hohmann and Barnard, Inc.
Hydro Mobile, Inc.
iQ Power Tools
Kennison Forest Products, Inc.
Mortar Net Solutions
Non-Stop Scaffolding
Pullman Ermator
Tradesmen's Software, Inc.
November 19, 2002 7:32 AM CST

Dispute Resolution Methods


An article appearing in the October 2002 issue of Masonry examined various claims that may arise in construction disputes. This month I'd like to provide a sequel and discuss the principal methods of resolving such disputes: litigation, arbitration, mediation and negotiation.

Each method enjoys benefits over the others, yet none is ideal for every situation. The best method to resolve any dispute is usually a function of cost, time, complexity of claim, and the willingness of the disputing parties to reach a negotiated settlement.

By far, litigation is the most expensive and time-consuming resolution method, involving the retention of a lawyer, the filing of a lawsuit, and the preparation for and conduct of trial and possible appeal. Litigation can benefit the disputing parties by enabling them to obtain considerable information from the opposite side through a broad array of "discovery tools": depositions, document requests, interrogatories and inspection of property among others. Litigants may also subpoena non-parties and ask the court to order persons and firms to disclose information. Further, following the trial a prevailing claimant can use several judicially enforceable measures to collect a judgment through seizure of the losing party's property or wages.

All of these litigation benefits, however, come at a high price. Lawyers, discovery procedures and trials are expensive; delays are frequent; and litigation places significant financial and time burdens on all parties. Many litigants who believe initially that they have a "slam dunk" case are later dismayed to find that they have spent virtually as much or more to litigate their winning case as the amount of damages they recover at trial.

In short, litigation is best for obtaining information to prosecute a complex case and is perhaps the best resolution method for enforcing a court's final judgment, but it is also the most expensive and burdensome method.

An increasing number of claimants are turning to arbitration as a less expensive means of resolving their disputes. Many contracts now include mandatory arbitration provisions, requiring the contracting parties to resort to arbitration should a future dispute arise.

Arbitration typically involves a claimant filing a claim with an arbitration service (e.g. American Arbitration Association), followed by a limited exchange of information by the disputing parties who appear before a neutral decision-making arbitrator, one who may or may not be a lawyer.

Ideally, the arbitrator may be someone knowledgeable about the area of the dispute. During the arbitration the parties present evidence and argument in favor of their respective positions. Thereafter, the arbitrator issues a final, binding, and generally enforceable decision.

Arbitration procedures are typically far more flexible and less onerous than those governing court proceedings, and the extent of discovery, information exchange and trial length is usually far less than in litigation. As a result, the parties are able to receive an arbitrator's decision sooner and less expensively than had they sued in court.

It is now common that a lawsuit in state or federal court may take well over a year to reach trial, and longer again if an appeal is pursued. By contrast, much arbitration can be completed within 90-to-180 days of the commencement of the claim, generally with no appeal permitted. Significantly, most courts will assist the disputing parties enforce an arbitrator's final decision. Thus, arbitration awards, like court decisions, are enforceable.

There are drawbacks, however. While the cost of arbitrating is less than litigating, the costs can still be considerable. What is saved through fewer pre-hearing procedures is offset by the cost of the arbitrator's fee. Whereas litigants do not pay the court for a trial, parties in arbitration generally must pay an hourly or fixed fee for the arbitrator's time to review case materials, preside at an arbitration hearing, and issue a decision.

Further, critics complain that some arbitrators simply "split the baby," a situation in which a compromise decision is rendered despite the merits of the case strongly favoring one side. Many others believe, however, that conscientious arbitrators make timely, efficient decisions based on the facts and applicable law of a case.

With the significant costs and delays associated with litigation, many claimants are also turning, at least initially, to mediation. Mediation involves the selection of a neutral mediator who briefly reviews the parties' positions and evidence, and then attempts to formulate a compromise solution that the disputing parties can agree to accept. Unlike litigation and arbitration, which tend to pick a "winner or loser," mediation picks an intermediate position between the parties' conflicting positions.

One technique mediators employ is to provide the parties with a candid assessment of the relative strengths and weaknesses of all parties' positions, propose a compromise position reflecting those strengths and weaknesses, and emphasize that recourse to litigation will likely be costly for all, with a delayed outcome that no one can predict or control.

Despite its benefits, mediation also has some drawbacks. The participating parties must be willing to compromise, or at least recognize that their failure to reach a negotiated outcome can well lead to litigation. Indeed, a mediator's proposal is simply that, and is not binding on the parties.

They must all accept and abide by the decision. If they do not, the aggrieved party may be forced to pursue litigation. At a minimum, mediation offers a preliminary, cost-effective means of seeking to resolve a dispute short of more costly litigation or arbitration.

The least expensive resolution method is negotiation, whereby the parties, or their representatives, communicate their positions attempting to persuade the other side of the merits of their case. This approach eliminates use of a neutral third-party, and involves direct dealings between the disputing parties.

The success of negotiation, however, depends greatly upon the skill of the negotiators and again, the willingness of the parties to reasonably assess the strengths and weaknesses of all parties' positions.

Each dispute resolution method should be evaluated for its respective cost, not only in terms of dollars but time commitment for the affected parties. Also, one should consider whether or not the success of their claim depends upon acquiring information from the other side or some third-party (in which case litigation may become preferable). If quick, inexpensive resolution is preferred, then mediation and negotiation should first be considered and explored.

About the Author

Warren Lutz, Esq., is a Director with the Washington, D.C., law firm of Jackson & Campbell, P.C. He specializes in product liability, toxic torts and construction litigation.


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