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I have practiced law for 40 years with the vast majority as a “construction” lawyer. I have seen great… and bad… construction lawyering, both when representing a party and when serving over 300 times as a mediator or arbitrator in construction disputes. I have made my share of mistakes and learned from my mistakes. I was lucky enough to have great construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Becoming a great and successful construction lawyer is challenging, but the rewards are many. The following is the final No. 10 of the top 10 mistakes I have seen construction lawyers make, and yes, I have been guilty of making this same mistake.

Your and your client’s goal after a construction arbitration is to open the emailed award and be as happy as Ralphie, in the beloved movie A Christmas Story, when he opened up his Red Ryder BB gun Christmas morning. While he later almost “shot his eye out” while battling pirates in his backyard, the point is that he was a good boy all year, and it was up to Santa to review his behavior and decide if he deserved his desired BB gun. In any arbitration, your Santa is, of course, your arbitrator. While you may have presented the best case possible, there is no guaranty of your desired award/present under the tree. The mistake made by many lawyers is failing to treat the arbitrator like Santa to make it as easy as possible for that arbitrator to put you on the very nice award list. You need to – prior, during, and after the hearing – provide the best possible cookies and make it more likely for Santa to easily slide down the chimney to deliver that great award in your favor under the tree.              

Some of these suggestions below are equally applicable to trial judges, but never forget that most construction arbitrators are not full-time neutrals and are concurrently practicing as a lawyer representing clients. Yes, there are non-lawyers on many panel lists (like the AAA), but the use of any non-lawyer on a three-person arbitration panel is very rare these days. One of the most touted benefits of arbitration is that the experienced arbitrators are experts in construction and can sift through irrelevant evidence and arguments as opposed to a judge (or jury) who may have zero experience in construction.

  1. Know your arbitrator’s likes and dislikes. Santa does not want fish sticks left by the tree; he wants milk, really good cookies and fresh carrots for his reindeer. All arbitrators have their own likes and dislikes, and doing something before, during or after a hearing that is a “dislike” is a bad idea. While you vetted potential arbitrators during the selection process, once chosen, you need to do so all over again. You should be able to get some good information since most of the better-known arbitrators are those that are chosen more often. Reach out within your firm as well as to your construction colleagues. What kind of scheduling order does she prefer? What about handling discovery disputes and dispositive motions? Any preferences for how exhibits are put together? What about “hot boxing” experts (testifying back to back)? Is a time clock used for witnesses (and to reign in long-winded lawyers)? More importantly, are there are any known tendencies on specific issues (like delay damages)? Is there an oft-used arbitrator who is unbelievably hard on parties in their presentation about meeting their burden of proof on damages, even with the informality of arbitration and where the rules of evidence may not be strictly enforced?
  2. Wear the white hat in pre-hearing matters, and don’t be a jerk. Arbitrators hate discovery disputes and ego fights between lawyers just as much as judges. I have found that because as an arbitrator I am not an elected judge, and arbitration is informal, this brings out the jerk in some lawyers. Being a zealous advocate is not the same. Will being difficult help your client? You are building your credibility with the arbitrator in every pre-hearing filing and in-person or telephonic hearing.    
  3.  Don’t forget that the arbitrator is a construction expert. You helped choose the arbitrator because of his or her expertise. This is not a trial judge who, as in the middle of a bench trial years ago where I was counsel, called the lawyers up and asked, “I keep on hearing about something called a ‘pay application.’ What is that?”  In a large multi-week arbitration where I served as chair, one of the lawyers during a direct examination went on for 30 minutes getting the witness to talk about certain construction processes as if the panel were a bunch of fifth graders. As nicely as I could, I interrupted the lawyer and said that he could move on and that the panel did not need to be educated on that topic. Did that impact his credibility? Yes, it did, but the panel did not penalize his client for such a stupid waste of time. Santa knows that time is money, and he has other houses to visit.
  4.  Remember the arbitrator is drinking through a fire hose of facts and exhibits.  While you have been living with the case and know the thousands of pages of the project and the hundreds of exhibits, remember that the arbitrator is hearing testimony and reviewing exhibits for the first time when the hearing begins. Yes, there may have been dispositive motions and a pre-hearing brief, but when the hearings start, the arbitrator is listening to testimony, making notes, and juggling exhibit books. The lesson? Take your time with your examinations. Slow down. Make sure the arbitrator is caught up to where you are. Provide a brief summary before an examination of what areas you intend to go over, as well as what exhibit books you will use. Santa wants time to understand the house, the living room’s layout, and where best to put the presents. 
  5. Create a joint set of exhibit books. The previous blog post, No. 9, emphasized the many benefits of working with the opposing counsel and creating a joint set of exhibit books. Most good arbitrators require such a process, and it stops the problems (delays and confusion) of each side showing up with its own 20 thick exhibit binders when 75% of the exhibits in each set of binders are the same.
  6. Identify the exhibit books you will be using before an examination. Do not wait until you begin a witness examination (direct or cross) to specify which book you will be using. Tell the arbitrator (and counsel) before you start which books you will be using so everyone can pull out those books and better follow your examination. Again, this eliminates all sides going back and forth to find the applicable witness books.  
  7. Consider creating witness exhibit books. This may seem counterintuitive if the goals is to limit the number of books, but if you have a witness with a small number of exhibits that are scattered among multiple books, consider putting together an exhibit book for that witness that has the exhibits already numbered (as well as what books they are in).  
  8. Color code the exhibit books on the front and the spine. Most counsel use the same black exhibit books. While there may be a label on the front and sometimes the spine, especially if there are multiple books, there can be confusion and time wasted.  Using a different color code on the labels, or even different color binders, can help efficiency (“Please go to book 5, the red one”).
  9. Make sure each page in each exhibit is numbered. While many of the exhibits will have their own numbers, confusion and delay occur when, for instance, there is an exhibit that has 20-60 pages, but the individual pages are not numbered. This happens with photos, long text streams, and multiple invoices. There is nothing more frustrating for an arbitrator (and a witness), and it disrupts an examination, for the lawyer to say: “Please turn to book 18, exhibit 135, and if you go about a fourth of the way in, you will see a picture that looks like…” And no one can find it. Worse, halfway through your “Perry Mason-like” cross examination about that picture, the arbitrator says, “Counsel, sorry, I must have been looking at the wrong picture. Can you orient me?” 
  10. Make good decisions on what exhibits go into your books, and keep up with what exhibits have been used in the hearing. The arbitrator understands that since there is limited pre-hearing discovery in most arbitrations (sometimes no depositions), the tendency is to include every document or email. But be careful not to dump scores of exhibits into books that may not have even been used. This will impact your credibility. And pay close attention to what exhibits are used during the hearing. It may be (again, treat your arbitrator like Santa) that with everyone’s cooperation, there can be scores of exhibits removed from books, or even complete books can be withdrawn.

Ralphie deserved his BB gun, but not the destruction of his family’s turkey by the next- door neighbor’s coon hounds. By thinking about and implanting the many ways to make your arbitrator’s decision-making more efficient, you create credibility for yourself and your client and will increase the likelihood of an excellent Christmas morning.   

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I have practiced law for 40 years, with the vast majority spent as a “construction lawyer.” I have seen great… and bad… construction lawyering, both when on the other side of a dispute, as well as when serving well over 300 times as a mediator or arbitrator in construction disputes. To be clear, I have made my share of mistakes. I learned from my mistakes and was lucky enough to have great construction lawyer mentors to lean on and learn from, and I have tried to be a good mentor to young construction lawyers. Becoming a great construction lawyer is challenging, but the rewards are many. The following are the Top 10 mistakes I have seen lawyers make in construction disputes, and yes, I have been guilty of making all of them.

No. 1: It’s About the Facts…and the Facts…and the Facts

One of the best construction lawyers around, when asked to provide advice to young construction lawyers, said it best when asked about the four most important things to know about the successful practice of construction law. They are in this order:

  1. The Facts
  2. The Facts
  3. The Facts
  4. The Facts

This is not a typo. There is no other area of law, including commercial litigation, where there can be scores of factual issues (bids, change orders, delays, supplementation, liens, defects, default, pass-through claims, termination, etc.), each of which has its own subset of hundreds of additional “facts.” In most commercial litigation disputes, the dispute has already occurred. In construction law, many times we are asked to provide advice prior to an issue ripening into a full-blown legal dispute. Is there an ongoing issue on a project that merits a default and/or termination? What are the “tool-box” options available to a party to invoke? Gathering all of these facts, especially from an e-discovery standpoint, can be time consuming (and expensive), but is absolutely critical not only to representing and providing advice to a construction client, but also to trying to achieve a preferred result. That advice may prevent a later full-blown legal dispute or put the client in a better position to obtain a preferred result.

Many construction clients are not sophisticated in the organization and retention of project records. Employees come and go. Part of a construction lawyer’s job is to ask… and ask… and ask… and, yes, bug the client to make sure that all documents are not only preserved, but provided, reviewed, and analyzed. One of my own notable examples was a dispute in which I represented a contractor. Right before the start of a week-long arbitration, I was preparing the site superintendent to testify. And, yes, I had hounded the client to produce all project documents. While doing a mock cross-examination, he smiled at a question and said, “Well, I have that fact documented in my personal, daily project journal I keep on every project.”  My response was “WHAT the (expletive deleted)!” That journal had not been provided to me, much less to the other side, and certainly was not a hearing exhibit. I disclosed the journal, produced it immediately, and was able to use it (over objection, but that is one of the advantages of arbitration). It did not play a huge role in the final result (which was a win for my client), but I learned a valuable lesson from this “mistake” and never made it again. Remember, when on the warpath, search for ALL client project documents.

To be clear, the “law” is always a vital part of any construction dispute, both statutory and basic case law. Any good construction lawyer has to know the law and how best to present that law in conjunction with the facts to the decision maker. The oft-heard criticism of arbitration is that arbitrators do not care about the “law” as much as trial court judges. I disagree, but since most construction arbitrators are normally great, experienced construction lawyers, I have found that their adherence to the “facts” is manifest. Ignore facts that hurt your side or be surprised by “facts” that show up in document production at your and your client’s peril.

 Finally, at any hearing, the construction lawyer that has done his or her homework and knows the facts in and out is normally the most successful and persuasive. In a recent arbitration, one older lawyer was searching unfruitfully for an exhibit, when a young (well-trained) lawyer on the other side helpfully piped up saying, “Look at Volume 3, Exhibit 75.” That young lawyer knew the other side’s exhibits as well as his own. It was impressive. Was that enough to sway my final award? Of course not, but it did show me which side was more prepared and persuasive.

So, the moral of this mistake is to always, always remember: It’s. All. About. The. Facts.

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Here’s the Scenario:

After months of working with a new developer client (and providing hours of unreimbursed value engineering) and hard negotiations over the cost plus GMP contract (fighting over indemnity/escalation/savings/liquidated damage clauses), you have a deal. You pop a cork with all involved since the developer has said this is one of many future projects. Your very patient subcontractors have held their prices. You have assurances of financing (after all, it’s not the “developer’s” name that’s on the prime contract, it’s the specially created “limited liability” company that’s the “owner”). The Notice to Proceed is forthcoming. But then you receive an email from your developer saying that the construction loan for the project is going to close in two days, and please sign and return the enclosed lender required “Consent Certification and Agreement.” While there’s been zero discussion of such an agreement, certainly none in the prime contract, the pressure is on. You want to be cooperative because if there is no loan, there is no money… and no project.

A Warning

Don’t blindly sign this “tri-party” agreement (owner, lender, and contractor). It is a binding contract between you and the lender and is applicable if the LLC owner defaults under the loan. While the content of these agreements differs from lender to lender, here’s what they normally contain:

  1. A contractor consent to a potential assignment of the prime contract to the lender in the event the owner defaults;
  2. The circumstances under which the contractor will or will not get paid for past and future work;
  3. A waiver of lien rights for work in place; and
  4. Obligation on the contractor to seek prior written permission directly from the lender, during the project, and prior to any possible default by the owner, for any change in the plans, the schedule, and even any change orders.

Will this requirement for lender permission be followed during the project? Almost never. But what’s the risk if it does not happen? Suppose there is an owner default. The lender provides formal notice that it’s your “newest best friend” and is stepping into the shoes of the owner. Now, you have “breached” the contractual obligations to provide notice to the lender.

Yes, you have little leverage on the front end. Many times, the lender’s lawyers say to the owner (and then pass it onto the contractor), “No negotiations; get it signed or no deal.” While you may have faith in your hugely successful developer client, again (see above), your contract is with a single use LLC whose only asset is the land that is about to be heavily mortgaged to the lender. If there is an owner default/foreclosure and this agreement is invoked, you may have a fight over payment, completion, and retainage. And if there have been multiple change orders, delays, suspensions, or major changes in scope of work without obtaining lender permission, you better believe the lender will pull out this agreement and argue “material” breach.

What Can You Do?

First, try to negotiate the terms. You cannot get around a basic assignment but try to provide some better language about getting paid for work in place and future work. Do not waive lien rights in advance (which in many states would not be enforceable). Put the burden on the owner to obtain written permission from the lender for any amendments, change in plans, schedule, or change orders. Another option is to try to improve the definitions of the terms. Add “material” to changes in the scope of work. For change orders, propose a monetary amount ($100,000) for the requirement to obtain written permission from the lender. And be prepared for the developer (and their lawyers) to come down on you like a house of bricks for not being a “team player” and potentially screwing up the “deal” that “has to close on Friday.” And don’t worry — “We will never default, so why haven’t you signed the agreement?”  

The Bottom Line

In 98% of your projects, there should never be a need to “go back” and read the fine print of the prime contract. But it’s the 2% of the projects that can go sideways that suck every drop of profit out of the rest of the projects. Will such a lender assignment and owner default ever happen? The odds are overwhelmingly no, but just in case, be aware and pay attention to these kinds of agreements. Do not simply sign without reading through the fine points and details. Call your “friendly neighborhood” construction lawyer, and get some sage advice about pushing back on some of the terms. If the answer is “no,” then you have a business decision to make. If that decision is to sign, be sure that the entire project team knows about these requirements for advance written permission. And then when the owner (or architect) complains about delays in executing change orders, remind them about the agreement.

Construction law is NOT boring, at least that’s what I tell my daughters. In these series of posts, I will explore some of the VERY interesting historical facts about construction law that can be used at your next motion hearing, family gathering, social event or fellow lawyer meeting.  While these anecdotes may not keep your kids or significant others from rolling their eyes, hopefully they can provide a small respite from your (yes, I admit) sometimes boring life in construction law.

Fact: if there is anything state court judges hate more than discovery disputes, it’s dealing with mechanic’s liens. You see their judicial eyes roll up. How many times has an owner uttered sheer astonishment when their lawyer says that they may have to pay twice for materials or labor on a project?  How is that even possible in the good old U.S. of A? No matter what side you are on, to spice up a brief or oral argument when lien statutes are at issue, make a note to “get patriotic” by mentioning one of our founding fathers: our third president, Thomas Jefferson. Why? Because TJ, as he is affectionally called, actually is the founding father of United States lien law.

To encourage construction in the new capital city of Washington, the federal government, as well as the new state of Maryland, were trying to convince mechanics (back then that meant “laborers”) to do work and provide “credit” to get the new capital built. The history books show that TJ worked with the Maryland General Assembly to establish the United States’s (and the world’s) first set of unique construction lien laws. 

However, don’t go too far out on a lien limb because TJ, despite his many attributes, did not conceive the basic idea of a lien. There were already lien-like privileges in some civil law countries such as France (which TJ loved) and Spain, and some historians trace their roots to the mighty Roman Empire (please do not buy a lien history book for your favorite construction lawyer…if they even exist). Also, remember that despite the Louisiana purchase, since Louisiana had been controlled by both Spain and France, the French Napoleonic Code had been adopted.  With knowledge about some of these civil law concepts, what then occurred was the encouragement and colonial arm twisting of landowners (“thou must be joking…”) to pass legislation to provide to builders and suppliers rights against the land itself, along with their basic breach of contract rights against the entity that hired them to do the work. Pretty much all states eventually followed Maryland’s lead, and in Texas and California, mechanic’s liens are a constitutional right.

The result was the “builders” that built our great capital and our country know they have statutory legal rights even if the entity that hires them “takes the money and runs.” While these days debtors prisons are out, when payments for work do not properly “flow down,” like ants at a picnic, there are many claims and little opportunity to recover spent money and materials.  These rights have become even more important in these modern days when many commercial (and residential) prime contractors do not self-perform and subcontract out 100% of the actual work. As the great philosopher Tom Cruise famously said, “Show me the money!” 

Of course, since liens are against common law, most case law and judges agree that lien laws have to be strictly interpreted: 100% compliance is generally the rule versus the exception. While many states have attempted to update and modernize lien laws, the next time you pull out your state’s lien statutes, take a look at the legislative history of a few specific statutes and you will see references to the 1800s and case law from the early 1900s. It also goes without saying that lien laws differ in every state, so be very, very careful if you represent a client in a lien law issue in an unfamiliar state. Local counsel who knows the nuances and ins and outs of sometimes ambiguous lien laws is many times a must.      

So, what’s the bottom line and why refer to Thomas Jefferson in your next brief, at the dinner table or in front of a state court judge who may just want to move on and handle a discovery versus lien law dispute? You can, first of all, liven things up. When have you been able to — no matter what side of the lien table you are on — stand up and talk about the founding of our country and the laws that began in the early 1800s by one of the most revered presidents in United States history? If you represent a lien claimant, how dare the owner try to get out of paying a laborer/supplier? How unpatriotic and ashamed TJ would be. If you represent the owner, you can cite the common law and state that even TJ, also a renowned lawyer and landowner, made sure that the “t’s” and “i’s” of this purely unique statutory scheme must be enforced and followed. Either way, sometimes even judges need some entertainment in the middle of a long, tedious, and sometimes boring motion docket, and fathers need to know that sometimes their kids do not think that they are the most boring lawyers in the world.

Lawyer’s Advocacy in Arbitrations: No. 10 of the Top 10 Horrible, Terrible, No Good Mistakes Lawyers Make: Not Looking for Ways to Make Your Arbitrator Happy at the End of a HearingDavid K. Taylor, Bradley Arant Boult Cummings, Nashville, TN
dtaylor@bradley.com
615-252-2396

There’s a great argument that lawyer advocacy in an arbitration is more essential than at a trial in court. This is the last post of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make in arbitrations, both when I served as counsel and as an arbitrator. Agreeing to arbitrate a dispute, whether in a contract or by agreement, is a serious decision for any business. There are pros and cons to binding arbitration versus trial in a court that go beyond a series of blog posts, but the fact is that when a dispute is arbitrated, finality is the rule. It is very difficult to appeal an arbitration award. In many instances, representing a party in an arbitration requires more due diligence and work than a trial. Great “arbitration” lawyering is therefore essential but… sometimes does not happen.

No. 10: Not Looking for Ways to Make Your Arbitrator Happy at the End of a Hearing

Prior to the time that the proof in an arbitration is formally “closed” and you pack up your bankers boxes and thank the arbitrator (and are gracious to your adversary), think through how you can help the arbitrator make a well-informed award. Especially with an arbitration where there are scores of claims (such as change orders, each of which may be factually complicated) and defenses, remember that while you may have lived with the dispute for years, the arbitrator only has her notes and the (many times) voluminous exhibit books. Depending on your working relationship with opposing counsel, they have the same general goal when the hearing ends: Make sure the arbitrator understands each sides’ claims and defenses.

Therefore, be creative. Would post-hearing “summaries” that link up specific issues or claims to witnesses and exhibits be helpful, even if you work with opposing counsel to do so?  If there are claims for the recovery of legal fees (such as who is the “prevailing party”) and allocation of arbitration costs (which can be significant and include the arbitrator’s compensation), while you should have determined prior to the hearing how the arbitrator wants to handle such claims, ask for direction. Are your damages clear and unambiguous and have they remained unchanged from when the hearing began? Many times, during the hearing, claims and defenses are modified/revised/withdrawn. What about proposing the submittal of a Word document or Excel spreadsheet that lists the claims and amounts sought with a blank space for what will be awarded on that claim? Most arbitrators want to and will address every “claim” in the written award and want to be 100% clear on the relief sought.

While most arbitrators do not want formal post-hearing briefs that address every single issue, it may help to offer to submit a short and to-the-point summary of your damages. Sometimes there are pure legal (such as contract clause interpretation) issues that were raised for the first time in the hearing. If you are unclear or unsure that the arbitrator understands your position on such issues, offer to submit a short memorandum or even an email.  Do remember that whatever is submitted (under most arbitration rules) the time frame for the issuance of an award (typically 30 days from the close of the hearing) does not formally begin until all “post-hearing” filings have been submitted.

The bottom line is this: If you were the arbitrator, what would you want from counsel to make your final decisions and the award easier to write? Especially in a dispute where there may be scores of issues and claims, any post-hearing efforts or offers to the arbitrator to make her job easier will win you brownie points; hopefully increase your and your client’s credibility; and will pay off in the final result.

Finally, since this is the last of the top 10 posts, thank you for all of the great feedback I have received from readers all over the country, including a number of suggestions and recommendations from full-time arbitrators. One suggestion I recently implemented in an arbitration where I served as counsel was well received by the arbitration panel. For the 10 jointly created exhibit books, instead of putting them all in typical black binders, we used different color binders for each book. It saved time for all involved by being able to ask a witness or the panel arbitrator to turn to the “green” binder.

Read numbers 1, 2, 3, 4, 5, 6, 7, 8, and 9 on the list.

No. 1 of the Top 10 Horrible, Terrible, No Good Mistakes Lawyers Make in MediationsLet’s assume the mediator sticks his head into your room with a grin at 8pm after an exhaustive day when your client is still upset he made the 8th counteroffer and the Mediator says: “Great news! Counter-offer accepted! We have a deal!”  Wonderful, right? Even though your client was pushed way past what he came ready to do that day, you have a deal.  So what mistakes are made when it comes to confirming the long sought, hard fought deal?

Number 1: Not Nailing Down the Deal at the Mediation

I have had parties pack up and walk out with this comment: “We will take a shot at a draft settlement agreement and send it to the other side this week.” NO!  Most mediators will not allow the parties to get away without in some way reducing the deal to writing and having the representatives sign off.  Especially in emotionally charged mediations where both sides are very unhappy, clients can change their minds. Second guessing is even more likely after reporting back to their bosses (“You agreed to what?”).  If nothing was written down to commemorate the deal, then there is no deal.  The failure to write down even the basic terms can also increase the likelihood of later disputes (whether in good faith or not) about key clauses (e.g., indemnification, scope of the release, who is released, confidentiality, non-disparagement).

So, should you take the time and start working on a fully executed settlement agreement while everyone is still at the mediation?  If that is not possible should you at least draft a limited “Term Sheet” that lays out the basic parameters of the deal and is conditioned on counsel working together in good faith to get to a more formal settlement agreement?  Most of the time, the best answer is “yes.” If it is very simple deal (money is paid and full and complete releases) there is no reason (with laptops/printers) that a full settlement agreement cannot be drafted and signed at the mediation. To make it even easier, always come to the mediation with a draft settlement agreement with blank terms. If that is simply not possible, Term Sheets can work, especially with complicated multi-party deals, but there is still the issue of later disagreements about clauses.  If there are key clauses that are important to the deal, the hope is that counsel have informed the mediator and that there is general agreement on those specific clauses.  No matter how tired everyone is, it is normally worth every dollar to keep everyone in the rooms working to…get…it…done.

Read numbers 2, 3, 4, 5, 6, 7, 8, 9, and 10 on the list.

The Top 10 Horrible, Terrible No Good Mistakes Lawyers Make in Construction MediationsEffective representation of clients in construction mediations takes more than throwing together a mediation statement at the last second and showing up at the mediation. Doing it right requires the same kind of due diligence and work that goes into preparing for a key deposition or even trial. Great “mediation” lawyering is essential and is the best way to get to an acceptable deal. Over the years, I have compiled a list of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make before, during, and after mediations in which I was the mediator. Below please find No. 10, and look for #’s 1-9 in future blog posts!

No. 10: Mediating Too Early or Too Late

Every dispute is different.  There are no firm rules as to when mediation should be considered. If the parties have a history, are in an ongoing relationship, will deal with each other in the future; and the legal fees/expenses will be substantial, it may make sense to try to set up an “early” mediation, even prior to the filing of a lawsuit. Sometimes the contract’s ADR clause requires mediation prior to litigation/arbitration. While those clauses can be waived, the issue is always whether the parties/counsel have enough information about the dispute to make good business decisions about settlement. Many times I have heard counsel say “I will be able to get an expert to support our claim,” which is not very persuasive to the other side when it is an expert-driven dispute. Sometimes there is a real concern that “final” offers made in an early mediation become sticking points for future settlement discussions. Early mediations can sometimes cause more problems, and make the parties madder at each other, especially with ego-driven clients (and yes, lawyers!). I have found that an early mediation is more likely to work is if there is a good working relationship between the lawyers who, working with an experienced mediator, can help manage the entire process (and their clients) to try to get an acceptable settlement early in the dispute.

What about “late” mediations just prior to trial? Will the parties agree to postpone a trial and stop the preparation process for a late mediation (of course, the Judge has to approve as well)? There are practical issues involved, such as finding a capable mediator at the last second and setting aside a full day (or longer) for mediation with trial counsel who have been furiously prepping for trial and who probably believe that the request is a stall tactic. My general experience is that since both sides know every inch of the other side’s case immediately prior to trial, if there is to be a last minute settlement, including during a trial, that can best accomplished between the parties/counsel without a mediator’s involvement.

So, the preferred timing for mediation is most likely sometime between early and late: a time when the parties know enough about the dispute to make well reasoned settlement decisions but not so late that the entire investment necessary for trial has already been made.

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I have practiced law for 40 years with the vast majority as a “construction” lawyer. I have seen great… and bad… construction lawyering, both when representing a party and when serving over 300 times as a mediator or arbitrator in construction disputes. I have made my share of mistakes and learned from my mistakes. I was lucky enough to have great construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Becoming a great and successful construction lawyer is challenging, but the rewards are many. The following is No. 9 of the top 10 mistakes I have seen construction lawyers make, and yes, I have been guilty of making this same mistake.

While the legal profession has come a long way as far as being “paperless,” with few exceptions, construction legal disputes still maintain a high level of tree killing. To be clear, clients have moved on and are at the forefront, using AI as well as project specific software (like Procore) to manage the enormous amount of documentation necessary to timely and properly design and build large projects. While I have served on a few arbitration panels where all sides cooperate and have presented exhibits exclusively via thumb drives/laptops and links, these are the exceptions and not the rule. Last year, I was on a panel for a three-week arbitration involving six parties (owner, architect, prime contractor, surety, two subcontractors). Despite pre-hearing admonitions by the panel for counsel to work cooperatively on joint exhibits, clearly labeled and numbered, the parties presented each panel member with a total of 60 black exhibit books, each more than six inches thick… and 75% of the exhibits in each side’s set were exactly the same. Precious time was wasted during the hearing dealing with redundant and poorly organized exhibits and caused a lot of confusion. A typical exchange went something like this: “Panel, please go to our Exhibit Book 23, exhibit 235, and sorry, this exhibit has 45 pages that are not numbered, so go somewhere in the middle.” Counsel and the arbitrators would then stand up, reach back to their exhibit book stack, sort through and find the right numbered book, haul it back to the table, move (or step over) the five books they just used, pull open the book with the three-hole binder (which typically gets broken), and try to find the referenced exhibit.   

There’s a better way, and before the construction lawyers out there grind their teeth and shake their heads, please remember that your goal as an advocate is to persuade the arbitrator of the merits of your client’s position. Anything you can do to make the arbitrator’s decision easier (yes, treat your arbitrator like Santa) should be done. Here are just a few of the ways – some easy, some hard – that have been implemented to address this issue, especially in large, multi-week arbitrations, with hundreds of exhibits and scores of witnesses:

  1. Go fully or even partially paperless.
    • This takes full cooperation and coordination with not only counsel, but the arbitrator (who may still want hard copies).  Technology is great until it is not. Is the hearing room appropriate and has the necessary technology? Of course, no need to worry about a room if it is a 100% virtual arbitration (which happened many times during COVID). But, what’s plan B if something goes wrong? Chaos happens, and that’s no good especially if it happens to you (and thus your client).     
  2. Create a joint set of exhibits.
    • Most good arbitrators mandate in the initial scheduling order that counsel exchange a list of all possible exhibits 30 days prior to the hearings and then work together in good faith (yes, I know that can be hard) to create a joint set of exhibit books. As mentioned above, if each side prepares and brings its own set of exhibit books, it is certain that many, if not most, of the exhibits in each sides’ books will be identical. Avoiding duplication is really easier than you think. The books can be organized in sections with a joint index. By way of example: pre-hearing briefs; contracts; pay applications, pictures/videos, damages backup, summaries, specifications, expert reports; and a year-by-year chronology (notice letters and emails). Remember that generally the technical rules of evidence do not strictly apply in arbitrations, so there is no need to fight about relevancy or admissibility. Absent something unusual, all the submitted exhibits from all sides will be admitted by the arbitrator. While this process can take time and effort, setting aside the fact that it will make the arbitrator’s life easier (especially during the post-hearing award process), it has enormous benefits, including making the preparation of witnesses and examinations so much easier and more efficient. If you try it, you will like it. If the arbitrator does not suggest this process during the initial call, you should do so.  
  3. Identify the exhibit books you will be using before an examination.
    • Do not wait until you begin a witness examination (direct or cross) to specify which book you will be using. Tell the arbitrator (and counsel) before you start which books you will be using so everyone can pull out those books and better follow your examination. Again, this eliminates all sides going back and forth to find the applicable witness books.  
  4. Consider creating witness exhibit books.
    • This may seem counterintuitive if the goals is to limit the number of books, but if you have a witness with a small number of exhibits that are scattered among multiple books, consider putting together an exhibit book for that witness that has the exhibits already numbered (as well as what books they are in).  
  5. Color code the exhibit books on the front and the spine. 
    • Most counsel use the same black exhibit books. While there may be a label on the front and sometimes the spine, especially if there are multiple books, there can be confusion and time wasted.  Using a different color code on the labels, or even different color binders, can help efficiency (“Please go to book 5, the red one.”).
  6. Make sure each page in each exhibit is numbered.
    • While many of the exhibits will have their own numbers, confusion and delay occur when, for instance, there is an exhibit that has 20-60 pages, but the individual pages are not numbered. This happens with photos, long text streams and multiple invoices. There is nothing more frustrating for an arbitrator (and a witness), and it disrupts an examination, for the lawyer to say: “Please turn to book 18, exhibit 135, and if you go about ¼ of the way in, you will see a picture that looks like…” And no one can find it. Worse, halfway through your “Perry Mason-like” cross examination about that picture, the arbitrator says “Counsel, sorry, I must have been looking at the wrong picture. Can you orient me?” 
  7. Make good decisions on what exhibits go into your books, and keep up with what exhibits have been used in the hearing.
    • The arbitrator understands that since there is limited pre-hearing discovery in most arbitrations (sometimes no depositions), the tendency is to include every possible document or email. But be careful not to dump scores of exhibits into books that may not even be used. This will impact your credibility. And pay close attention to what exhibits are actually used during the hearing. It may be (again, treat your arbitrator like Santa) that with everyone’s cooperation, there can be scores of exhibits removed from books, or even complete books can be withdrawn.

When there will be multiple exhibit books, these simple guidelines will help you, your client, and witnesses better prepare and present your case. You can enhance your credibility by using these tactics regarding exhibits prior to your next arbitration hearing.   

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I have practiced law for 40 years with the vast majority as a “construction” lawyer. I have seen great… and bad… construction lawyering, both when representing a party and when serving over 300 times as a mediator or arbitrator in construction disputes. I have made my share of mistakes and learned from my mistakes. I was lucky enough to have great construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Becoming a great and successful construction lawyer is challenging, but the rewards are many. The following is No. 8 of the top 10 mistakes I have seen construction lawyers make, and yes, I have been guilty of making this same mistake.

Most (but not all) commercial construction contracts contain binding arbitration clauses.  Whether the contract is between an owner and architect/designer, an owner and prime contractor, or a subcontractor and prime contractor, the decision to arbitrate or litigate a dispute is always negotiable. You can refer back to one of my previous blog posts in this series discussing the pros and cons of binding arbitration vs. litigating in court. But when parties have decided to arbitrate a dispute, the next question is what rules will apply and how will the arbitration be administered?

Most arbitration clauses (especially those in the standard AIA form set of construction project documents) specify that the American Arbitration Association (AAA) will “administer” the arbitration and that the construction rules of the AAA will apply (the “AAA Rules”). Per the AAA Rules, a party filing an arbitration pays a filing fee to the AAA, the amount of which is based on the amount of the claim. For example, the total non-refundable fee (with few exceptions) for a claim (or counterclaim) from $500,000 to $1 million is $12,675. A claim from $1 million to $10 million is $17,450. There are other AAA fees to pay as the process continues. The other primary costs are the compensation (normally hourly) of the selected arbitrator (or panel).  

There are many experienced construction lawyers who are unhappy with the administrative services provided by the AAA (I am not one of them) when taking into consideration the amounts charged by the AAA to the clients. Their arguments are as follows: “I know who the good and bad arbitrators in my area are. My clients do not need to pay the huge AAA filing fees to just get a list of potential arbitrators. And once chosen, a good arbitrator takes over the administration of the arbitration and all the AAA case manager does is set up calls (when the arbitrator does not do so), collects the estimated arbitrator fees from the parties, sends out notices and pays the arbitrator.” 

Because of the arguments above, and other concerns, there is a growing trend for parties and their construction lawyers, even with an arbitration clause that calls for AAA administration, to completely “bypass” the AAA and have the arbitration administered “privately.” Over the past five years, I would estimate that 33% of the arbitrations for which I have served as an arbitrator (including on a panel of 3 arbitrator) over the past 3 years have been privately administered. What this means is that the parties agree to amend the arbitration clause; enter into a private arbitration agreement (which may call for portions of the AAA Rules to apply); and agree on an arbitrator(s). There can also be an agreement to a private arbitration without a pre-existing arbitration clause. While the arbitrator’s rates will normally be the same as the rates charged by the AAA, the obvious savings to the clients is that the AAA’s initial filing fees and other charges are avoided.

On first blush, especially for large claims and counterclaims, this may look like a win-win for the clients. However, before you go off and recommend this to your clients, you better be fully aware of the risks and issues that can arise.

  • Avoid issues by having an agreed private arbitration agreement.

If the arbitration clause calls for AAA Rules, and the parties agree to private arbitration, there should always be a carefully well-drafted private arbitration agreement signed by the clients. It should, among other items, set forth what rules will be applicable; what pre-hearing discovery will be allowed; identify the agreed arbitrator (and at what hourly rate); outline the requirement to split the arbitrator compensation; and determine a process if, for whatever reason, the existing arbitrator must withdraw prior to the hearings. I do not agree to serve as a private arbitrator without such an agreement in place (which is where I obtain my authority to issue a binding award).  Also, do not forget that such an agreement is a “contract,” and there can be clauses included that were not in the original contract, such as a prevailing party attorneys’ fees/arbitration expenses clause or even an agreement for the most convenient hearing location (not the location of the project). Last year I served as a private arbitrator on a project located in Alabama with counsel in Atlanta, Tennessee and Colorado, and the hearings were in my firm’s offices in Nashville.          

  • Involve your client in the arbitrator selection.

In the AAA process for selecting an arbitrator, the AAA sends a list of potential arbitrators to both counsel,  who then send in a confidential list to the case manager with names crossed off and an order of preference (much like jury selection).  The case manager then reviews the list and appoints the arbitrator (subject to conflicts). In a private arbitration, both sides must agree on an arbitrator.  In most instances, the client will not have any idea of any potential arbitrator, so the client will be heavily relying on your advice, albeit tempered by the admonition that there cannot be any guaranties on how an arbitrator might rule. Another previous blog post in this series discussed the issues of not vetting potential arbitrators. The point here is to involve your client and explain who has been suggested as the private arbitrator. Because if the agreed upon arbitrator rules against your client, despite your fantastic efforts, a losing, disgruntled client may ask (when presented with your final post-hearing invoice), “I don’t recall agreeing to this arbitrator: why did you recommend we use that guy? You told me he would call balls and strikes, and he did not.”              

  • Managing post-arbitrator selection conflicts can be tricky.

While any potential private arbitrator will disclose any conflicts (same process as the AAA), arbitrator conflicts can come up after selection. An example would be the later disclosure of expert witnesses or fact witnesses. If that arbitrator uses or has used one side’s designated expert, there should be a disclosure. The difference is that when the AAA administers the case, if a disclosure is necessary, the arbitrator discloses to the case manager who then deals only with counsel. Under the AAA Rules, the AAA has the sole discretion to rule on whether the arbitrator can continue to serve. In a private arbitration, the arbitrator must manage the conflict directly with counsel. One solution is to designate, in the private arbitration agreement, another qualified arbitrator who is authorized by the parties to rule on any conflict.    

  • Handle party nonpayment issues.

When the AAA administers a case, the arbitrator provides an estimate of his total compensation/expenses, and the AAA bills each side one-half of the estimate. The payments go into the AAA “bank.” The arbitrator sends invoices to the AAA, and the AAA pays the arbitrator from the deposits. The difference is if one side does not pay its share. If a AAA administered arbitration, the case manager manages it internally and does not inform the arbitrator which side has not paid. If the payment is not timely made, the arbitrator is then given the option of proceeding with the hearings or putting the arbitration on hold. The AAA does give the paying party the option to pay the other side’s portion (but most of the time this does not happen). In a private arbitration, the arbitrator is the “bank.” The pre-payments are made to her, and obviously she knows which side has or has not paid. 

The bottom line is not making the mistake of allowing the “benefit” of a client not having to pay the AAA fees with the real and material issues that can occur with a private arbitration. Having good, experienced counsel on both sides helps, as well as knowing that many of the identified issues can be anticipated in a well-drafted private arbitration agreement.

Listen to this post

I have practiced law for 40 years with the vast majority as a “construction” lawyer. I have seen great… and bad… construction lawyering, both when representing a party and when serving over 300 times as a mediator or arbitrator in construction disputes. To be clear, I have made my share of mistakes. I learned from my mistakes and was lucky enough to have great construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Becoming a great and successful construction lawyer is challenging, but the rewards are many. The following is No. 7 of the top 10 mistakes I have seen construction lawyers make, and yes, I have been guilty of making this same mistake.

No. 7: Not Paying Attention to Your Arbitrator or Judge During a Hearing

Trial and hearing advocacy skills – whether you were exposed during law school or in the heat of a legal battle – can be both an art and a science. This blog post does not relate to jury trials, but to arbitration hearings (which can be in front of one arbitrator or a “panel” of three arbitrators). However, it is equally applicable to bench trials before a judge.

No matter how much we try to become a “paperless” society, most construction projects that turn into a legal dispute will be document intensive. In a typical construction arbitration hearing, there can hundreds of proposed exhibits, normally presented in scores of “exhibit books.” I was the chairperson in a three-week arbitration a few years ago that had 850 exhibits contained in 30 exhibit books. There were 45 disputed change orders, various delay claims, and multiple expert witnesses. There were attempts to present the exhibits through the use of flash drives and technology, but at the end of the day, most arbitrators will want hard copies.  

Of course, all of the significant lawyer and client preparation for an arbitration can be wasted if the parties’ presentations are not presented in a manner that takes the arbitrator into consideration. While an arbitrator will have some general knowledge of the issues, the majority of the time during the hearing, he is drinking through a fire hose of facts, witnesses, dates, issues, and exhibits, while at the same time trying to take legible notes.

Here are the two horrible, no-good mistake scenarios that often occur and can undermine even the best lawyer preparation and presentation:                

  1. You have prepared for days for a vital cross-examination. This is why you went to law school and became a construction lawyer. Your client representative can’t wait to see you in action. Your cross is going great. You are in the zone. You stare down the intimidated witness. You nail the witness many times, going back and forth between exhibits in exhibit book 1 (which has 55 exhibits). You are just about to complete your cross after getting the witness to admit a key fact when you look to the side, hoping to see the arbitrator admiring your prowess, and notice the arbitrator is… busy flipping through exhibit book… 4. Has the arbitrator even been following your devastating cross? 
  2. You have diligently prepared for a vital direct examination on which you and the witness have been working for days. You have five key areas to cover, and the examination will probably go for three hours. You start, and the direct is going great. You seamlessly run through multiple exhibits, complete the first three key areas, and make a vital point. But then the arbitrator says, “I am so sorry, counsel, I have been lost for a few minutes. What issue are you now addressing and to what exhibit are you now referring and what exhibit book is that in?”

In either horrible scenario, you can bet that the other side won’t let you just repeat your devastating cross (and even if so, the witness is now prepared) and certainly will object to a repeat of previous testimony. 

The obvious “no good” mistake made over and over again (by both young and old construction lawyers) is the failure to pay attention to the fact finder. But there are a number of practical solutions to avoid this mistake:

  • Slow… down… your examinations. Pause between questions.
  • When you move on to another subject or topic, tell the arbitrator to get her oriented — and to give her a chance to finish or make notes or put markers on the exhibits you have just used.
  • If you are going to be using multiple exhibit books during the examination, tell the arbitrator before you start an examination (“Mr. Arbitrator, for my direct examination of Mr. Client, I will be using exhibit books 5, 9 ad 10”) so he has a chance to have the exhibit books ready to go and follow along with you.
  •  Always look up and give the arbitrators time to get to another exhibit book and find the specific exhibit. Make sure they are caught up in all respects. It is perfectly fine to ask if the arbitrator is caught up and has the book/exhibit.
  • Use a co-counsel or client representative to keep an eye on the arbitrator and to let you know, as you begin to ask your vital questions (the “Perry Mason” moment), if the arbitrator is caught up, not taking notes, or has his nose in another exhibit book.           

The lesson to be learned is, in the end, pretty simple: Especially in arbitrations where an appeal is really difficult and many times there is not a court reporter, make sure that your fact finder hears your great advocacy on behalf of your client. That way you and your client can be assured that, win or lose, the arbitrator heard and considered your arguments.