Why Compromise is Sometimes Better Than A Construction Dispute

On April 7, 2010

Over the past two weeks, my construction law blogging buddies over in Virginia published two blog posts that largely draw the same conclusion:   a compromise is sometimes better than a fight.    As an attorney, I know that disputes are oftentimes unavoidable, but attorneys and litigants should think long and hard about compromises whenever they present themselves.

Tim Hughes’ really got me thinking about this topic when he posted “Do You Really Want A Construction Dispute?”   His post, referencing Dovetail Construction’s “Sometimes Things Go Wrong” post, points out the obvious:  sometimes, things go wrong.   In construction, it’s just a casualty of the business.

Tim’s blog post discusses a lot of the things builders can do to avoid or resolve conflict before the dispute escalates into a litigation experience.

Chris Hill of Construction Law Musing‘s  published something that addresses a possible next step:  Construction Mediation is Exhausting, but Worth It!

Even after a dispute escalations into litigation, there’s still the chance to reach a compromise.    The mediation process is confidential, it’s not binding, and if its a complete flop in getting the case settled it at least gets the parties together and helps them prepare their claims for trial.

Here’s my take on why in mediation, the juice is worth the squeeze.

In Litigation, Even Winners Are Losers

I said it.   In most cases, even winners in litigation turn out to be losers.   Why?   Because litigation is really, really expensive.

The high cost of litigation is precisely why a majority of cases settle out of court, and if you’re going to settle out of court, you might as well settle at the very beginning of the case and its expenses, rather than the middle or the very end.

The problem with getting “young” cases to settle is that the parties are still emotional about their positions, and they haven’t spent enough in attorneys fees and litigation expenses to consider cutting bait.    The mediation process is a gift to this type of circumstance.  If the parties are willing to participate in a mediation, the process is designed to keep the party’s emotions out of their decisions and to reach a compromise if possible.

They’re very successful, and they do a good job of relying to both sides that if they go forward and spend tons of money litigating the claim, even winning will be losing.

Your Attorney’s Fees Is Usually Spent Money

So what if you’re spending a lot of money on attorney’s fees, if you can just collect them after winning, right?

Wrong.

There are two reasons why this is largely an incorrect sentiment.

First, remember that a majority of cases settle before trial, and you can be sure that the case doesn’t settle for a “best day in court figure.”   In other words, the party “winning” in the settlement isn’t going to get a pie in the sky deal.  It is called, after all, a “compromise.”   One of the first things to get stripped from the deal?   Attorneys Fees.

Second, attorneys fees aren’t available to most litigants.    This is called the American Rule, and even wikipedia has a page about it stating:

The American rule provides that each party is responsible for paying its own attorneys fees, unless specific authority granted by statute or contract allows the assessment of those fees against the other party.  Under the American rule every party – even the party prevailing – must pay its own attorney’s fees.

In the case of construction disputes, this means that litigants are usually not entitled to attorney’s fees.   As such, every dollar you spend in the litigation, is a dollar less that you’ll ever have.

Mediation gets the parties to the table and does a great job of communicating the American rule to both parties, so they can analyze their risks and make a level-headed decision about whether to proceed.

Litigation Isn’t Always Bad

Litigation isn’t always a bad thing.   Sometimes, the gap between the parties is too great to bridge.   Sometimes, you do have the right to recover attorneys fees, or penalties, or some other type of damages.   Sometimes, the other party’s non-cooperation gives you no other choice.

I guess we can say this in a nutshell:  Litigation isn’t bad when litigation is necessary.

It’s all those times that litigation isn’t necessary that cause problems.  Jumping into an expensive litigation shouldn’t be a reaction.   There are ways to reach a settlement and avoid the legal complications, and if there are ways, you should explore them.   You really don’t want a construction dispute.