Posts Tagged ‘Mediation’

I’ve Received Contractor Lawsuit. What Happens Next?

Builder Ripping Up A Contract Lawsuit

The project is either over or it is winding down, money and tensions are getting tight. Contractors know this scenario very well. The problem arises when a lawsuit is delivered because of the dispute. Many contractors do not know what to do once they receive a lawsuit. This post will outline the possibilities of what happens after the lawsuit is received.

Why Did I Receive A Lawsuit?

On a typical construction project, whether public or private, commercial or residential, there are typical players. These players include: the owner, general or prime contractor, subcontractors, laborers, suppliers and equipment lessors. All of these parties have the ability to file a lawsuit and/or receive a lawsuit, depending on the facts of the situation.

In actuality, you have received this lawsuit because of your involvement in the project and someone in this group has alleged that you are liable for some type of damage. This undoubtedly will be money damages. Other types of damages exist but courts like to compensate with money.

What Happens Once I Am Served With The Lawsuit

The clock starts running! No matter the jurisdiction, whether it be state or federal court or in Louisiana or another state, the time to respond to the lawsuit begins to run once service is made. Depending on the jurisdictions for which I am familiar you have anywhere from ten to sixty days to respond. The usual here in Louisiana is fifteen days from service in a state court, see La. C.C.P. 1001.

Many times if you contact an attorney they can get an extension of time for which to file and answer or other responsive pleadings. This is customary in our business.

Options With The Lawsuit

There are a few options that I see people do when they receive a lawsuit, some are advisable and others are inadvisable.

Hire An Attorney: The first, most logical and most advisable option is to contact your attorney and retain his services to defend you in the lawsuit. An attorney will know the landscape of the Court procedures and assure that you will be protected within the confines of the law. Attorneys are not miracle workers, but they have a number of strategic and tactical maneuvers which can be deployed to protect you or your company’s interests.

The flaw here is that lawyers are not cheap. A good lawyer will tell you whether the amount and nature of your dispute are worth fighting over. Many times its a better business choice to work out a deal and move on with making money.

Self-representation: I see this more and more these days. A person can always represent themselves in a court of law. The Fourteenth and Sixteenth Amendments have been interpreted through the years to allow individuals to represent themselves pro se in court. The key here is individuals representing themselves. A corporation or limited liability company is not an individual. They are juridical entities, which cannot be represented in court unless by an attorney.

Due to the fact that most smart business owners are some type of business entity, courts will not allow for self-representation. Self-representation can be advisable in some situations, but most of the time it is not.

Do nothing: This option is popular, but it is disfavored and inadvisable. When a party who is sued does nothing, the suing party can get a judgment by default. Once a judgment is rendered against the party who is sued, then bank accounts, garnishments and property are all options for a quick collection.

Instead of doing nothing, if you file and answer or other responsive pleading, the judicial process will take much longer and you have many other legal moves at your disposal.

Other options: – Informal negotiations or ADR clause are other options. Once you have been sued and within the time frame to answer, you and/or your company could engage in informal negotiations with the adversary. I always encourage my clients to work out a deal and move on. This can be with informal meetings or telephone calls. Its always smart to bring in an attorney to help here, even if not for the full lawsuit.

Finally, many construction contracts have some type of alternative dispute resolution (ADR) clause. Even with these clauses present an adversary may still file suit contrary to the contract. This can be done for a number of legitimate reasons. All you or your attorney have to do is enforce the ADR clause. This can be done informally or via formal court Motion.

Conclusion

Once a lawsuit is received by a party to a construction project, there are a number of options, as discussed above, which can be implemented. The key here is to do something and avoid a default judgment. Contacting an attorney for advice is a smart play, even if it is to decide which of the above methods is best for you.

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Tips for Mediation Success

Measure SuccessHere at Wolfe Law Group, LLC, I mediate disputes many types. The disputes I usually handle are construction, collections, insurance claims, contracts and leases . Often times I am asked, what it takes for a mediation to be successful and if there is a trick to getting a successful mediation. Normally, it all depends on the parties frame of mind.

What Is A Successful Mediation?

The number one measuring stick and overall way the legal industry measures mediation success is whether the case settles, due to the mediation. This typically is a clean way for all parties to know whether the mediation was a success.

There are other types of successful mediation, whereby the parties agree to resolve some of the disputed issues but not all of them. In my mind, these partial settlements are a success.

Finally, I believe that just about every mediation that is completed and the parties work through the entire process is a success. Mediation is a unique tool that lets the parties prepare and evaluate the case strengths and weaknesses, before getting into a trial setting. There is no judge or decision maker, therefore parties as well as their attorneys can see what a neutral third party thinks of the merits. This can be very helpful and a real eye-opener for clients.

Another success story that comes out of working through the mediation process is knowing what the opposition is willing to do to resolve the dispute. You can determine whether you have someone who will work to get a resolution or an adversary who is irrational.

There Are A Number Of Factors That Go Into A Successful Mediation

There are many factors which can lead to a successful mediation. Each case is different therefore the importance of success factors will vary from dispute to dispute.

Ripeness is a big issue when it comes to whether a mediation will be successful. Some times its impossible to know if your matter is ripe until you engage in the mediation process, due to unexpected factors which may arise. Further, many attorneys will jump into mediation in order to get a quick deal. This practice is not beneficial to the client or the outcome of the dispute.

Attitude of the parties is another huge factor when it comes to the success of a mediation. There are disputes where all sides are irrational and cannot make a deal. There are other disputes when its just one party who is creating an impasse. A good mediator will work on parties to encourage positive attitudes with regard to making a deal. The mere fact that the parties agreed to come together, is a sign that reason is being applied and there’s a possibility for a deal.

Having all parties actually listen and work through all of the issues presented by each other party. Many times a party will only want to discuss its issues and not listen to what other are saying. This breakdown in the communication process can be very problematic for the mediation process.

Other Sources For Mediation Information

Mediation is quickly becoming one of the go-to methods for alternative dispute resolution. Its been around for a long time and will continue to be here because of its cost-effective alternative to standard litigation. There are a number of good sources which talk about successful mediation. NOLO.com has a good article with Ten Rules for Success. Marc Engel has a similar article with good information entitled 8 Steps to Make Mediation Successful.

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The Best Time to Mediate A Dispute is Yesterday

Eviction ImageHere on ConstuctionLawMonitor.com I like to blog about non-traditional ways to settle disputes between contractors and other feuding parties. Mediation is my favorite because I am a mediator. Its also my favorite because, generally, its the best and most efficient way to resolve disputes. There are circumstances whereby mediation will not work but that usually happens when irrational parties come to the table.

In this post I will explore the element of “when” is a matter ripe for mediation.

Timing Issues For Mediation

As discussed in other posts, there can be clauses within construction contracts wish mandate mediation. This type of clause is called a mediation or alternative dispute clause. In this instance, the contract will lay out exactly how the mediation and/or arbitration process should be handled when an dispute occurs between the parties.

So the timing element of a contractually mandated mediation is spelled out in the construction contract. Many times mediation is a precursor to any litigation or arbitration hearings. This basically works as to when there is a dispute, parties look to the contract to see how the mediation should be initiated.

Outside of contractually mandated mediation there is also voluntary mediation. By definition, all mediation is voluntary. The premise of all mediation proceedings is that the parties are there voluntarily. Otherwise the mediation will not work.

Once the parties are both there in good faith and voluntarily, then the process can work properly. Most mediation proceedings can be completed in one day. Sometimes more complex issues with numerous parties may take a bit longer and may span over a number of days. Either way is fine and the process is designed to facilitate both simple and complex.

Its Okay To Mediate A Dispute More Than Once

Often times parties think they only get one bite at the apple when it comes to mediation. Mediation is different than trial or an arbitration where there does not have to be a final decision made by the neutral party. A mediator is merely a facilitator to settlement. When parties mediate, they have to be the ones who make the final decision to settle.

In my experience, I have seen parties try to mediate disputes early on in the dispute and it did not work out. There was simply an impasse which could not be worked out that particular day. Then the parties dig back in and litigate or negotiate independently. Months and even years later, the parties will come to the table again to mediate and try to work out a deal. As long as the parties are engaged and willing to compromise there is always hope that mediation will work.

Other More Expensive Alternatives To Mediation

There are two main alternatives to mediation. Litigation and Arbitration are what I will discuss.

Litigation

As you may or may not know, litigation is the standard practice here in the United States, but it is old and antiquated. Litigation is also extremely expensive and slow. If a party files suit on a hundred thousand dollar construction dispute it will likely take years to completed. The process is slow and the parties know how to exploit the process so that it will move even slower. The only parties who make money off litigation are attorneys.

One of my favorite quotes regarding how bad litigation is from the French scholar Voltaire,

“I was never ruined but twice; once when I lost a lawsuit and once when I won one.”

Even as far back as the seventeenth century people were opposed to litigation. Needless to say, the process has become worse, not better.

Arbitration

Next is the somewhat better and more favored, arbitration. Arbitration is good because it is more efficient and cost effective than litigation. Parties get to select an arbitrator and then proceed ahead with more relaxed rules than traditional litigation. The problem here is that the arbitrators ruling in binding. Binding is scary because its all left to the discretion of one person.

I’ve experienced a number of arbitration rulings that have left me scratching my head wondering what the arbitrator was listening to. There is the possibility of appeal, but the standard is overwhelming and the ruling is rarely overturned.

Mediation is a voluntary negotiation process where a neutral third party helps to facilitate the parties making an agreement. In my mind this choice is clear to mediate.

 

 

 

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Construction Contracts: Mediation Is A Great Alternative To Litigation

Mediation bigstock-Attorney-at-Law-sitting-at-des-49285283 copyMediation and Construction Law are two of my favorite topics to discuss. These are my favorite aspects of the practice of law. Every construction law dispute I encounter starts with the premise of getting contractors paid. No matter the dispute, the underlying factor is withholding of money along the hierarchical chain of characters.

Owners need to get cash from the lenders. General Contractors need to get progress payments from the Owner. Subs are always waiting on the GC to pay out. Suppliers provide goods on credit with the hopes of getting paid once the other parties take their share. There are small margins for error and high possibility of dispute.

With such small percentage of money actually going to profits its no wonder owners, general contractors, subcontractors and suppliers cannot afford expensive litigation. There are efficient and cost effective means to settle disputes without having to tee it up in the courts, Mediation and Arbitration. For the purposes of this blog, I will be speaking to the more flexible of the two forms of alternative dispute resolution methods, Mediation.

Do Construction Contracts Contain Mediation Clauses?

It depends on the contract. Many American Institute of Architects (AIA) form contracts will allow for an option to include both a mediation and arbitration clause for alternative dispute resolution. If you are unsure if your contract has  mediation clause you should look to see if there is some type of language like the following provided by the American Arbitration Association (AAA), who is the leader in the arbitration and mediation space.

If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Construction Industry Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.” AAA Construction Industry Arbitration Rules and Mediation Procedures (pg 14).

There are many variations on this type of clause. Courts are very keen on upholding mediation clause language because courts favor resolving disputes through other means.

Construction Disputes Settle With Mediation

Some disputes will never settle. The parties are so entrenched to a position that they become irrational and will not compromise. The construction industry is different. Contractors tend to want to continue doing business and therefore do not want to burn bridges.

I have personally been witness to numerous construction disputes setting through mediation. The parties agree to meet with a neutral third party, the mediator, and go through the process until a compromise is reached. Conventional wisdom states that the best settlements are those where both sides leave unhappy.

Construction disputes are no different. Each party negotiates some give and take until a compromise is reached. I see it all the time. Have your attorney put mediation clauses in your company’s contracts. Do not sign contracts unless they have a mediation clause. Finally, even if there is not a specific clause mandating mediation, you can still mediate! All that is required are two parties who want to solve a dispute.

 

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Mediation! New Service Available at Wolfe Law

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.

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