Top 5 Construction Mediation Tips and Techniques: Tip #3 – If There are Reasons Why your Case may not Settle at a Construction Mediation, Understand them in Advance.

Please allow this Blog post to serve as the third installment in a five part series entitled “Top 5 Construction Mediation Tips and Techniques.” The previous installments can be found below:

Tip #1 – Ensure you and your client fully understand what mediation is and what its benefits and purpose are.
Tip #2 – Know your case well. Know their case better.

            The Blog posts from this series are intended to be cumulative and should be reviewed as a whole in order to fully receive the message of the author. This post will focus on the importance of understanding barriers to settlement and overcoming those barriers.

          After assessing my case independently and with my client, I will generally have a good feeling as to whether this is a case that will settle at mediation or continue beyond trial. This is largely based on the outlook of my client, the posture of the opposing parties and my instincts based on similar experiences. Without prejudicing an ability to negotiate with a clean slate, I generally try to predict the reasons why the case will not settle and then address them with my client and the opposing party in advance of or at the mediation. Finding those sticking points and confronting them head on is a way to ensure that you are giving your best effort at a construction mediation.

          As a general rule, construction mediations will not work when there is reason to delay resolution of the action (typically caused by monetary issues or emotional influences), or one of the parties is ill-advised on the merits of their position. The former is very tough to address and overcome, but the latter is easier. Through a powerful case workup in advance, a persuasive written and oral mediation statement and a consistent and logical negotiation approach, you may be able to educate an irrational party on the flaws of their ill-advised position and the risks of going forward in that posture. If you are not able to, that is fine, for if their position is so ill-advised that it will affect the outcome, you should be happy with the gift you have been given. Some people have to learn lessons the hard way.

            To the extent you are able to, I would feel out the other party in advance of a mediation to see what type of settlement range you are dealing with and whether legitimate offers will be made at the mediation. In doing your diligence, as well as privately gaining an understanding of the parties wherewithal to pay and its perceived risk tolerance for litigation, you will be able to prepare for whatever “poor mouth” excuses you may get at construction mediation. This is obviously less of an issue for insurers, large developers, contractors or suppliers, but it is often the primary issue dealing with lower tier trade subcontractors. Knowing their financial position can enable you to deal with the issue directly when it comes up. I am consistently overjoyed at the looks on people’s face when I cite back to them what their assets, current projects and known sources of income are. In doing so, I am able to eliminate the bluff and force the issue to what it really is- what are you choosing to offer to pay? If the decision is reduced to a choice that is influenced by a variable you can control, you are that much closer to rising to a higher level of victory in your negotiations.

            As touched on above as part of your construction mediation preparation work, it is critically important to quantify your damages and ensure they are reasonably related to the provable liability. Supportability and credibility in offers is crucial to the shared process of dispute resolution that construction mediation represents. What does it say to any party’s credibility when the offer bears little relationship to the actual damages sustained or the set-offs available? Offers buttressed by empirical data and coherent support demonstrates strength of bargaining position and confidence in ultimate recovery. It is much easier to attack a blanket offer not tied to reasoning than it is to an offer that is associated with incontrovertible facts and law. Wildly unsupportable demands often suggest that the party is trying to overcome deficiencies in its case by making the perceived risk of loss on the adversary greater. In reality, these offers are more likely to be summarily rejected, countered with less logic than the initial offer, or simply drive the opposition to the conclusion that negotiation is simply a waste of time and resources. Thus, the message communicated with each offer should as powerful as the monetary value associated with it. Clients should be prepared to understand this concept as failure to adhere to a well-grounded negotiation strategy can negate all of the well-intentioned preparation in advance.

          Strong consideration should be given to including an initial offer in a pre-mediation communication, conference or written statement. Critically evaluating the dispute and performing a risk analysis in advance of a construction mediation will serve all party’s interests and it may set the stage for a truly collaborative negotiation process. In addition to fostering continued negotiations by being able to credibly respond to the opposition assertions, you may be able to educate the opposition and require a re-evaluation of their position. Certainly, communicating a pre-mediation offer comes with risks, as it will undoubtedly set the base line for negotiations as well as run the risk of destroying opportunities for an open-minded dialogue on the day of the mediation. For that reason, any offer that is made pre-mediation should be reasonable and supportable. An untenable offer may result in termination of the mediation before it begins; but, untenable offers should not be presented in the first place unless the intended result is to assure a trial on the merits. By communicating a reasoned offer in advance of mediation, the boundaries of the dispute can be set prior to arriving at the joint session. Rather than spending time and effort simply defining the dispute, the mediator can then collaboratively work with the parties towards a resolution of that dispute.

            Let’s face it, the construction world is filled with a lot of hard heads that fill up those hard hats. If your client is prone to letting its pride get in the way of reason, or self-destructive emotional outbursts that ruin goodwill, it is best to take steps to mitigate that weakness. Perhaps ensuring that the corporate representative is one of the more even keeled executives with authority, or restricting litigant direct interaction is a way to ensure that the focus of conversations stay on the substance of the litigation and issues at bar and not a personal vendetta. You will see circumstances like this in the construction setting when one party is challenging the craftsmanship of another party’s life’s work and work product. Like artists, construction project managers are reluctant to admit that their canvass is less than perfect- that they messed up. The reality is, however, more projects are laced with construction defects than are not. Don’t let hubris get in the way of sound business dealings. Pride and principle are the most expensive words for a client to use in a lawsuit, and as lawyers sometimes we are discharging our duties in representation more diligently to be effective counselors in furtherance of advocacy. Understanding and repressing the emotional barriers to settlement will help deal with one of the larger barriers to productive discussions that hinder settlement.

           To fully prepare for resolution, whether through trial or mediation, effective trial attorneys anticipate the other side’s argument, appreciate the positions taken and understand from the other side’s perspective both sides of the case. Notably, appreciation and understanding do not necessarily equate to agreement. Rather, they represent an ability to critically evaluate the strengths and weaknesses of a position so that the interests of the client are better served. To that end, it is worth understanding that opposing counsel and their client will have valid points to make, too. Listen to their presentations with an open mind, knowing that the next time you hear it, there will be an objective fact finder judging it for its value. You can learn so much about a party’s case by listening to the construction mediation presentation for its positives rather than just picking out distinguishable rebuttal points. Mediation will teach you more about their case than it will about yours if you work the process the way it should be worked.

        Please revisit the site tomorrow as we post Part 4 of our 5 part Construction Mediation Tips and Techniques series entitled: “Tip #4-Take your construction mediator selection, pre-mediation conference, mediation statement and mediation presentation seriously.”

Sources:

Robert J. McPherson, Building Resolutions, News from the AAA Construction Division, Issue #1, March 2010

Gregory S. Martin, Mediating the Construction Dispute- Are You Ready to Mediate, RPPTL Action Line, Volume XXXII, No. 2, Fall 2010

Larry R. Leiby, Florida Construction Law Manual, Volume 8, 2011-12 edition