What is construction mediation?
Mediation is a form of “alternate dispute resolution” that is common in the construction industry. Unlike litigation or arbitration, mediation is almost always not binding. Mediation can always be voluntarily agreed to by the parties after a dispute, but in construction is it often contractually agreed to before there is any dispute. While the most common contractual mediation provisions require mediation before the American Arbitration Association (AAA), other services can be used and some, like JAMS, are becoming more commonplace in the construction world.
In a typical mediation the parties will jointly agree to appoint a mediator or, if they cannot agree, they will agree to “strike and rank” from a list of mediators and the mediation service will then appoint the highest ranked mediator from the combined party lists. After the mediator is appointed there is usually a conference call to schedule the mediation and briefly give the mediator an idea of the claims. It is common for the mediator to ask for position statements to be submitted before the mediation along with copies of important documents.
On the day of the mediation the parties will usually meet together in the same room briefly and then break off into separate rooms. The mediator will then go back and forth between the rooms discussing the claims and negotiating. Complex claims can take several hours and sometimes several days to mediate. But because mediation is voluntary, there is no set time limit. In fact I have been in mediations that did not last thirty minutes and others that lasted until 10 p.m. Every case is different and the parties are free to continue negotiating or go home.
Is construction mediation worth it?
One of the most interesting things about construction law is that every claim is different. Because of that, it is impossible to give a blanket yea or nay to mediation. Some construction claims are great for mediation and allow the parties to quickly resolve their dispute without spending extensive time and money on arbitration or litigation. Others are a waste of time.
If mediation is mutually agreed upon after parties have commenced arbitration or litigation then mediation is typically a good thing. If it wasn’t, then the parties would not agree to it. If the mediation is successful then it resolves the dispute and that is good for everyone. But even if the mediation fails it can help the parties hone their strategies and focus on the strengths and weaknesses of their claims and defenses.
However, if mediation is contractually required and the parties are simply going through the motions so that they can commence arbitration or litigation then it can be a waste of time and money. Not every claim is ready to settle and mediation sometimes is just an expensive speed bump on a long road. Construction mediators typically charge between $500 and $1,000 per hour and the mediation service typically also charges a service fee on top of the mediator’s fee. The mediator will charge to read through the documents before hand too so the bill can quickly run up.