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USGNN Original StoryMediation vs. Arbitration: Webinar Series Concludes with Discussion of Alternate Dispute Resolution
March 24, 2009

When it comes to profitability, a lot can be said for the way a company manages information. That's been the overall theme of the Construction Specification Institute's three-part webinar series, "Maintaining Profitability in Your Construction Business," which concluded this afternoon. Bill Dexter, a risk-management consultant and trainer, Mary Jones, a California attorney specializing in alternate dispute resolution and Marge Mellody, a mediator specializing in real estate-related disputes, continued that focus when they discussed dispute resolutions during today's session.

"There is always the possibility that someone will file a claim against you for almost anything," said Dexter. "And we've already established that [construction] is a high risk/low margin business and it's full of disputes. Lawsuits are expensive and time-consuming and we also know that a satisfied customer is easier to deal with than one who is unsatisfied."

When facing risks and disputes, Dexter said there are a lot of alternate dispute resolutions (ADR) that can help. "These are alternatives to litigation," he said, "and can be effective ways to preserve the relationship of parties involved."

While there are several types of ADR, the session focused primarily on two: mediation and arbitration.

"With mediation, no one can force a decision upon you; a mediator is only the facilitator of the process and not a judge," said Mellody, explaining that with arbitration the parties actually meet with a "private judge."

"Arbitration is a voluntary submission of dispute for final and binding judgment. The judge has ultimate control over the outcome," Mellody added.

The session next gave a detailed look at the characteristics of both mediation and arbitration.

Mellody explained that mediation is a very informal process and in many cases it simply allows both parties the opportunity to tell their sides of the case.

"The mediator helps get them over the past and to move forward," Mellody explained. "But they have to have a cooperative mindset; attitude is very important."

She added that while the goal is to reach an agreement, it's not binding until both parties sign it.

"If you're going through a mediation, do not leave until you have that agreement signed," said Dexter, who explained that if the parties leave before the agreement is signed they could come back and change their minds.

There are also obstacles to settlement that must be considered, such as anger or ego-impairing judgment.

"There has to be a reduction in ego and getting down to the business of resolving the dispute," said Mellody. "You cannot think clearly if you are angry."

It's also necessary to understand what's important to the other side and also knowing your own bottom line and what you are willing to accept.

While mediation is rather informal, arbitration is a more formal process. When it comes to arbitration, one of the most important features is that it is very rare that the decision could be appealed. As Dexter explained, the courts are reluctant to hear an appeal because they know that the parties had agreed to resolve their dispute through arbitration and are therefore accepting of whatever that decision may be.

When it comes to arbitration, the panel pointed out that everything comes down to the cost of the job itself. In other words, the amount of the dispute will determine how much time actually needs to be involved. For example, if the dispute is under $10,000 the individual involved may prefer to represent him or herself rather than investing in the cost of an attorney.

Whether going with mediation or arbitration, that decision must be written into every contract-between the architect and the owner; the owner and the general contractor; the general contractor and subcontractors.

"Everyone is agreeing to this," said Dexter, who added, "It's never to late to add this to a contract, however, once a dispute arises it's not going to be easy to get the other side to agree to it." Some advice he offered to ensure a successful resolution included keeping complete records, documenting everything and sticking to the agreement.

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