Archive for the ‘Arbitration & ADR’ Category

Mediation! New Service Available at Wolfe Law

On December 8, 2012 Author By Seth Smiley

Seth J. Smiley, partner at Wolfe Law Group, LLC and author of ConstructionLawMonitor.com is now a formally trained mediator. New Orleans just hosted the AAAU’s (American Arbitration Association University), Essential Skills for the New Mediator workshop in downtown, hosted by Neil Carmichael.

Why would parties want to mediate a dispute instead of going to court? That answer is easy, yet has many factors. The most important are that mediation is less expensive and much more efficient compared to litigation. But the most important factor is that the parties control their own outcome, rather than a group of strangers (jury).

So if you are in a dispute and are looking for an economical, logical and swift conclusion that is mutually agreeable between you and your adversary, then mediation may be just what you are looking for. Contact the Wolfe Law Group, LLC for more details.

Posted in:     About Our Services, Arbitration & ADR, Business Matters, California, Collections, Construction News, Disputes, Green Building, Insurance, Litigation, Louisiana, Oregon, Washington  /  Tags: , , , , , , , , , , , ,   /   Leave a comment

Louisiana Arbitration Law

On May 30, 2012 Author By Seth Smiley

Over the past few months here at Wolfe Law Group, I’ve been involved in a number of disputes where where arbitration clauses were invoked and the matters traveled the path of arbitration rather than ordinary judicial proceeding. Mediation and Arbitration have been touted as the faster, cheaper and more efficient way to handle legal disputes. While this may be true due to the enormous built in delays and catastrophic costs of “going to trial” there are a number of ways that contractors can be disadvantaged by dealing with lawyers who are not experienced with this process.

First and foremost, there is no standard for the rules. This means that, unlike the slow judicial process, the rules by which each arbitration play by can be changed and altered based on the contracts between the parties and document that they incorporate. For example, the American Arbitration Association (AAA) is one of the leaders in construction arbitration. They publish a set of rules called “Construction Industry Arbitration Rules and Mediation Procedures.” These rules are the rules that govern the entire proceeding. What this means is that there is a completely different set of operations for an arbitration than there would be for a judicial proceeding. As all lawyers know and most laymen do not, procedural tactics and expertise can make or break a case, even before it gets to be heard on the merits.

The key to getting this set of rules to apply is by having a good unambiguous arbitration clause in your construction contract. The AAA even gives example clauses that a construction company can use in its construction contract:

“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.” See AAA’s Guide to Drafting Dispute Resolution Clauses for Construction Contracts 

On of the more important aspects of the quote above it that it incorporates the AAA Construction Industry Arbitration Rules. The same can be said for just about any arbitration company, but the AAA tends to be the leader in the commercial and construction industry. Further, you can even go as far as having a local company such as ADR, Inc., host the arbitration and then the AAA rules will apply to that proceeding.

Another reason why this is important this that the law in Louisiana governing arbitration proceedings is relatively short and references other parts of the Civil Code and the Code of Civil Procedure. Louisiana Civil Code in its Revised Statutes §9:4201 – §9:4217 encompass Louisiana Arbitration Law. These statutory provisions are helpful in filling in the gaps where other rules fall short and that point to other areas of Louisiana law that govern arbitration proceedings.

Typically the process works like this: 1) first you look to the contract to see how the parties have agreed to have the matter arbitrated, such as a clause saying that arbitration is proper and which rules apply. 2) Then you see which rules apply (if any) and then that will be the governing set of rules for the proceeding. 3) In matters where the rules are silent, then parties are forced to look to the Louisiana Arbitration Law section of the Revised Statutes as gap filler. 4) Finally, if all areas are silent, then you seek a decision form the arbitrator for what to do or how to proceed based on public policy.

Knowing the rules is critical to the success of an arbitration or any type of legal proceeding. The term “the devil in the details” cannot be more applicable. Arbitration proceedings can save a company thousands of dollars and lots of time. The one negative is that the are final and cannot be appealed, save extreme circumstances.  Always consult with an attorney before deciding to insert an arbitration clause into your construction contract and if you decide to invoke it.

Posted in:     About Our Services, Arbitration & ADR, Construction Contracts, Construction News, Litigation, Louisiana  /  Tags: , , , , , , , , , , , ,   /   1 Comment

Litigation Topics for Prime / Subcontractor Contracts

On November 2, 2011 Author By Seth Smiley

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   2 Comments

Arbitration Review May Be Limited…But It Can’t Be Waived in Washington

On January 25, 2011 Author By Scott Wolfe Jr

The Washington Supreme Court wrote an opinion interpreting the Washington Arbitration Act last week in Optimer Int’l, Inc. v. RP Bellevue, LLC.

In this case, a landlord and tenant submitted themselves to an arbitration proceeding pursuant to their contract, and the loser at arbitration wasn’t satisfied with the award. They sought judicial review of the holding in superior court, and were denied this review at the trial and appellate level because of a clause within the contract’s arbitration provisions that “waived” the right to appeal any arbitration award.

The appellant and Supreme Court ruled that the “waiver” did not – and can not  – waive the right to seek judicial review of an arbitration award as statutorily allowed by the Washington Arbitration Act.

To the extent this ruling contradicts a previous appellant case, Harvey v. University of Washington, 118 Wn. App. 315, 76 P.3d, the Washington Supreme Court said that this case is overruled.

The limitations of the ruling in Optimer Int’l is important.

  1. The case construes the Washington Arbitration Act, because that is the law in place when the arbitration took place. However, this has been replaced with the Revised Uniform Arbitration Act (RUAA), which the Supreme Court indicated they need not consider.
  2. The review allowed by the Washington Arbitration Act is very limited, allowing review for only specific errors with the award (fraud, bias, etc.).

While this case does not address the RUAA, I would think we’d get a similar result under the new statutory scheme.

Posted in:     Arbitration & ADR, Washington  /  Tags: , , , , ,   /   Leave a comment

Litigation Sucks!! Get Out Of It

On November 8, 2010 Author By Scott Wolfe Jr

As a lawyer (and a client), the legal system has caused me significant frustration.   Why?   Because judges can make terrible decisions, opposing parties and attorneys can abuse the process, the costs can be enormous, and at the end of the day the case comes down to a decision-maker who can decide against you.

One thing I frequently tell clients is this:   The litigation process is designed to keep people out of it.  I wrote about this issue in the past here:  Why Compromise Is Sometimes Better Than A Construction Dispute.

Our friend Alan Haley recently published two blog posts related to this topic on this Louisiana Construction Law Blog.  I discuss them both here:

The 20% Rule
What is the 20% Rule?   It is the principal that you can have bulletproof evidence, the best argument and facts, and a “perfect case,” but still face at least a 20% risk of losing.   How?   Check out the quote from John Watkins who explains the rule in his article about the same:

Why is the twenty percent rule true? Because unforeseeable things happen in litigation. Star witnesses blow up in depositions or on the witness stand, even if they are well prepared. There may be a document or email out there that you (and your lawyer) did not know about when the case was filed.

But, most importantly, cases are resolved by judges and juries. Judges and juries are human beings, and, given that fact, may not see things your way. Judges and juries may seize upon facts and issues that you know are irrelevant to the dispute, but which become highly relevant, because they get to decide the case, not you.

Judges and juries may simply like the other side better than you. Maybe your confidence will be perceived as arrogance. Maybe the other side has an explanation that resonates.

Mediation As Dispute Resolution Mechanism in Construction Industry
If litigation is so unpredictable, what do you do with your disputes?   Just walk away from them?   The answer to that, of course, is usually no.   A separate post from Alan discusses the possibility of mediation taking a larger role in construction disputes.

When mediation works, it’s great.   After all, it takes away absolutely all of the risk and leaves the result of the dispute in the parties’ complete control.    It’s why Alan predicts that mediation will become more and more popular as time goes on:

Probably because of the problems currently plaguing arbitration (see what folks have to say about that here, here, here, here, and here).  Finally, mediation is a more pure alternative dispute resolution mechanism because the participants share in deciding the outcome as opposed to dealing with a decision or award.  Further, mediation is usually cheaper and faster than arbitration.

Check out both of Alan’s posts, as they’re great for folks who might be neck-deep in litigation and thinking….this sucks.

Also, after writing this blog post, I stumbled on another post out there from Melissa Brumback.   Posted on her Construction Law in North Carolina Blog, Melissa updated her “Should I Stay or Should I Go Now? (Court v. Arbitration)” post.   Another good read on the topic.

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Posted in:     Arbitration & ADR, Litigation  /  Tags: , ,   /   3 Comments
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