At a recent scheduling conference for a complex construction case involving multiple parties and multiple millions of dollars, the judge laughed when asked when the case might go to trial. We were told that we would be lucky to go in 2023. All the parties were understandably discouraged. Necessity truly is the mother of invention and the catalyst for creative solutions. Outlined below are three options to timely resolve construction disputes and avoid the long wait for a fact finder in the traditional litigation setting. Inventive ideas include dusting off the old concepts of Special Masters, combining contemporary case evaluation methods with mediation, and finally, modifying the traditional arbitration process to enhance efficiency.
Utilization of Special Masters
Parties who cannot or will not agree to arbitrate, or who otherwise prefer to continue with traditional litigation, should consider using a Special Master to expedite the proceeding. Special Masters have been around for a long time and are generally under-utilized in construction litigation. The use of Special Masters has one benefit for all those parties who refuse arbitration: it preserves all appellate rights.
The process is simple: the parties first agree to submit the matter to a Special Master. Then, as in arbitration, since the appointment of a Special Master in most states is purely by consent, the parties select the individual who will fill that role. This can be an attorney with extensive construction litigation experience. Next, the parties prepare a detailed consent order outlining the duties, roles, and responsibilities of the Special Master. The order identifies the commencement and conclusion of the appointment, the duties and role of the Special Master, and the powers (and limitations on the power) of the Special Master. These powers could include resolution of discovery disputes, issuance of subpoenas, making proposed interim rulings on summary motions for adoption or rejection by the court, compelling the attendance of party witnesses, setting the time and place for the hearing, ruling on continuances, making preliminary rulings on evidentiary matters, and most importantly, after hearing the evidence, preparing detailed proposed findings of fact and conclusions of law for the court to adopt or reject. If the court decides to adopt all the findings, a final judgment may be entered. If the court decides not to adopt any portion of the Special Master’s findings, a separate limited hearing by the court would be scheduled.
The beauty of the Special Master approach is that not only do the parties select the decision maker, they also decide when and where the proceeding will take place. Perhaps most critically, this process has the benefits of arbitration while preserving appellate rights, which parties generally forfeit in an arbitration proceeding. Accordingly, parties who cannot or will not agree to arbitrate, or who otherwise prefer to continue with traditional litigation, should consider using a Special Master to expedite the proceeding.
Modified Case Evaluation
In most states, nearly all litigated cases are required to submit to some form of case evaluation process, with the procedures varying from state to state. The parties should consider using the existing process in more meaningful ways. For instance, the parties can agree to select a “Blue-ribbon Panel” of case evaluators, consisting of experienced construction law attorneys which will put them in the best possible position to provide a competent case evaluation award. Further, the parties can stipulate to modify the case evaluation presentation process to afford enough time for each party to present an in-depth explanation of their positions. Parties may be more receptive to considering and accepting a case evaluation award issued by a panel they have selected using a process that more fully considers the merits of the parties’ positions.
A commonly overlooked opportunity in this space is the combination of case evaluation with mediation. For example, parties can agree that the case evaluation award be entered and sealed in an envelope and delivered to the ADR clerk. After that envelope is delivered, but before it is opened and distributed to the parties, the same case evaluators could participate, either all or in part, as mediators to try to facilitate a resolution before the case evaluation award is published to the parties.
It is also time to take a fresh look at arbitration. Even if the parties’ contract does not contain an arbitration clause, the parties can always agree to use arbitration as their dispute resolution mechanism. As arbitration is purely a creature of contract and consent, the parties have complete control over the arbitration parameters and process. This allows for substantial flexibility in structuring a resolution process that meets the parties’ needs. For example:
- The parties can determine their own rules. Often, parties simply adopt the Rules of the American Arbitration Association or modify those rules to suit their purposes. Parties can make arbitration simulate a full-blown trial or streamline the approach and the rules when it makes sense to do so.
- The parties can determine the process by which they will select a mutually agreeable arbitrator who has the requisite knowledge, skill, and background in construction law.
- The parties can decide who administers the arbitration proceeding. The parties can select the American Arbitration Association, or any other group that administers arbitrations, or even manage it privately.
- The parties can control the scheduling and location of the hearing, manage how soon the case can be heard, where the case is heard, how quickly the results will be issued, and whether there would be any court involvement relating to equitable claims.
- The parties can decide whether dispositive motions will be permitted and if so, which standards apply. Typically, under the rules of the American Arbitration Association, dispositive motions are permitted but the standards are not clear. Parties can make that clear in an arbitration agreement.
- The parties can control the level and extent of discovery which is one of the most expensive parts of any litigation process. Parties can decide whether discovery will be permitted and limit the number of interrogatories, the extent of document production, electronic document protocols, whether all documents will be produced in native format, the number and length of permitted depositions, and numerous other parameters to avoid costly disputes once the proceedings begin.
- The parties can decide the specifics of how the hearing will be conducted. One technique to rein in unnecessarily lengthy witness examination is the use of a “chess clock” whereby parties are allotted a specific amount of time for their direct and cross examination. This technique forces the parties to focus on the key issues of a case and moves the proceeding along. Parties can also establish the order and method of proof, such as whether affidavits will be permitted in lieu of live testimony.
- The parties can decide which evidentiary rules, if any, apply. In a typical arbitration, there are no rules of evidence, or the rules of evidence are very loosely applied. To avoid evidentiary objections concerning hearsay and document foundation, the parties can stipulate that state or federal rules of evidence apply in whole or in part.
- The parties can also include a mediation requirement in an arbitration agreement. The American Arbitration Association has such a process built into its standard rules.
Justice delayed is justice denied. Clever use of efficient dispute resolution techniques can counter the pitfalls of prolonged litigation. These are but three options which can move your construction litigation forward despite the current court congestion associated with the pandemic. Lawyers and litigants should consider the Special Master process to expedite proceedings and preserve appellate rights. Parties should get more inventive with the traditional case evaluation process. Finally, arbitration, however structured, should certainly be given a fresh look. These are just some of the options, and the universe of options is only limited by the creativity of the parties.