Tuesday, September 28, 2010

Mediation Brings Mixed Results

Yesterday most of my work day was spent in a mediation of a construction dispute. This was my second one of these. The first, in December 2007 (or was it 08?), was for a client of ours that I had worked with. I started the project, got under construction, and turned it over to another engineer when I took our training position.

This one was not my client. Another engineer in our office handled this project. It wasn't even our design. We took over a few months after construction had begun, to help out a new client. But I was involved in helping that engineer make decisions throughout the project, was familiar with the issues, with construction in general, and with the mediation process, so he asked me to participate and the client agreed.

In the first one, the parties were $450,000 apart on a $2.3 million project. I thought no way could these two come together and a settlement be reached. It's going to court for sure, I thought. But the mediator's job it to help the two parties find some point in the middle where both feel it is worth not going to court if I can get or give that much.

A normal mediation session begins with everyone in the same room. Each side states their claims, and their response to the other's claims. Then the two parties go to separate rooms, and the mediator goes back of forth between them. His job is not to determine who is right and who is wrong. He doesn't reveal details of discussions in the other room. He does summarize the other sides arguments, and helps each side to see where the other might have a valid concern. He keeps pushing for a settlement. "What is it worth to you to avoid going to court?" he'll ask.

Last time the issues and amount involved were clear. The settlement was reached fairly easily. A lot of back and forth, but in the end our client didn't have to yield too much to avoid court. This time the issues were clear, but the dollar amount in dispute was not. It was about $300,000 on a $1.2 million project. So it was really a lot bigger than the last one as a percentage of the project. Since the parties had already had several meetings in an effort to resolve this, the mediator dispensed with the normal statements of positions and had us go immediately to separate rooms.

Since all involved in the mediation are subject to a confidentiality agreement, I can't reveal specific discussions. We took most of the morning just defining the amount of the claim. It turns out neither side had understood what the other side was really claiming. They started farther apart than we thought. Our side consisted of us two engineers, the client's chief executive, and the client's attorney. After a working lunch the mediator said the main problem on the other side's part was they were disputing a claim that some work was defective, a big chunk of the project, in fact. They admitted to one, smaller piece of defective work which they offered to fix, and wanted a certain number of dollars to change hands in their favor. It was still way far away from where we were at.

About 3:oo PM I concluded it would not be settled; we were headed to court. If that happened, both sides would sue the other. I felt that our client was in the right and would most likely win in court. But a jury is a crap shoot. They don't always side with the one in the right. We considered the likely success of lawsuits. The mediator finally asked the question: What is it worth to you to avoid going to court? Our client suggested what he was willing to do. He gave up much more than I would have had I been in his positions. The mediator shuffled back to the other room and was gone a long time. Had the other side refused the large concession?

When the mediator finally did come back, he had a typed agreement in hand. It needed one modification, but it basically ended. it. Well, not quite ended, since the clients board of directors has to approve it. But it's mostly over.

I would not describe either of these mediations as pleasant. But, they were probably better than being a witness at a trial. I've done that too, and it isn't always fun. Having been through two of these is better experience than just one. Hopefully I won't have another in the next 7 years, 3 months, and 2 days, but who knows? Construction can lead to disputes; disputes have to be resolved; meditation is cheaper than other remedies. So I guess bring it on if needed.

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