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Guiding Mediation to Meet Demand: Achieving More Effective Mediation in Construction Litigation

Category | Briefing Papers

Dean and Julia are members of the firm’s Construction Law Department. Dean can be reached at 612.359.7624 or dthomson@fwhtlaw.com. Julia can be reached at 612.359.7622 or jdouglass@fwhtlaw.com.

All standard construction industry contract forms require mediation of disputes as a condition precedent to proceeding toward binding dispute resolution,[i] so it is a fair assumption that parties want their disputes to settle and use mediation to achieve that goal.  There is wide variation in how the mediation process proceeds, but a common approach, which this article will refer to as the “Standard Approach” is a follows: The parties (or some dispute resolution service[ii]) selects the mediator; the parties and mediator schedule the mediation session; several days before the mediation, the parties send their position statements to the mediator and each other; finally, the parties attend the scheduled mediation session to see if the mediator can help them settle their dispute. Most construction disputes eventually settle, so the Standard Approach works, but to examine how it might be improved, we conducted a survey of 330 construction law attorneys from across the country to determine whether the Standard Approach was delivering all that practitioners desired.[iii]  This article discusses some of the results of that survey, and, based on the responses, proposes several modifications to the Standard Approach to better achieve the results desired by the survey respondents.

Setting Your Mediation Up for Success – The Importance of Preparation

The general lack of mediation preparation by the parties is shown by answers to the survey question asking whether all parties were usually adequately prepared at the mediation session to reach a settlement; the average response was only 5.2 out of 10, and it does not bode well for a successful mediation session if parties are only adequately prepared close to 50% of the time.  The responsibility to ensure parties are properly prepared to address issues that are likely to come up during mediation falls to the mediator.  The mediator is in the best position to have confidential discussions with the parties and their counsel before the session begins to discover issues that are important to them and impediments to settlement so the mediator can get all parties to properly prepare to address those issues at the eventual session.  Yet when asked on a scale of 1 – 10 whether the mediators usually knew the particular impediments to settlement before the mediation session began, the average score was only 6.4. In order to be more effective at the mediation session and focus on solving the impediments, it is obviously preferable to know them well in advance before the session starts rather than discover them at the end of the day.  One respondent stated that when acting as a mediator his goal was to make sure there were no surprises at the eventual sessions so the parties could focus on how best to settle the case; that can only be done if the mediator is actively engaged with the parties well before the session.

An important case in point is a mediation involving insurers.  If insurance coverage is involved in the claims at issue, the respondents were asked on a scale of 1 -10 how prepared the insurers were to reach a settlement at the scheduled mediation session?  The average response was 4.8 or less than 50% of the time.  Given the long lead time insurers need to make a decision, set their reserves, or change their evaluation of a case, it is unrealistic to expect substantial contributions from insurers at a mediation session without substantial pre-mediation discussions with them. When counting on insurance dollars to fund significant parts of the settlement, one must lay the foundation for that recovery well before the mediation, which is another reason for early mediator engagement. During these pre-mediation discussions, the mediator should explore basic insurance issues, such as: what is a particular insurer’s “time on the risk”; which exclusions are at issue; are there one or multiple occurrences; is there excess as well as primary coverage available; are there opportunities for parties to assert claims as Additional Insureds; and what are the self-insured retentions applicable to the policies. The mediation session is not the time for the insurers to only just start monetizing risk, and if coverage issues and demands are saved until the mediation or shortly beforehand, the advocate is hurting its cause because the insurer needs time to process those demands.

To determine whether they were receiving the type of pre-mediation service they desired from mediators, the respondents were asked on a scale of 1-10 whether it would be helpful for a mediator to have a confidential discussion with them and their clients about obstacles to settlement and information needed before a decision before the mediation session.  The average answer was 8.5.  The respondents were then asked how often mediators contacted them before the mediation session began to have a substantive, confidential discussion about the dispute.  The average response was 5.1. Clearly, there is a significant gap between the demand for early engagement by mediators and the mediation services that are being supplied.

Early engagement of a mediator and using techniques to resolve disputes as quickly as possible corresponds to a process known as “Guiding Mediation” which seeks to quickly resolve disputes and reduce the time-related expense of the adversarial process, preserve opportunities for maintaining valuable business relationships, and allow for innovative business ideas to facilitate settlement.[iv]  Getting the mediator involved early to help the parties design a successful settlement process are common themes of Guiding Mediation. The dynamics of each dispute are different, but a Guiding Mediator frequently seeks to have confidential discussions with each party and its counsel well before the mediation session in order to become familiar with the parties and their decision making processes, identify obstacles to resolution, and determine what discrete and specific information may need to be exchanged before a settlement decision can be made. A Guiding Mediator also seeks to ensure that all parties’ real decision makers are involved and prepared to negotiate by the time the mediation session is scheduled. If insurance coverage issues may be involved, the Guiding Mediator seeks to make sure the carriers are sufficiently informed about the dispute and engaged so they do not appear at the mediation claiming to need more time before they can determine their contribution, if any.

The Effectiveness of Evaluative Mediation

In addressing the type of mediator they prefer, 81 of the respondents in more narrative answers emphasized a strong preference for an evaluative mediator.[v]  When asked what techniques used by mediators that they have found effective, respondents provided these illustrative responses:

  • “Candid evaluative private feedback with the client in the room. Smart, experience-based understanding of the difficult issues and the risks the pose.”
  • “Speaking directly to parties (with counsel present) about strengths and especially weaknesses in their factual legal positions. Not doing is as just an exercise in “beating both sides up”, but truly as an impartial and experienced neutral who can provide an actual evaluation of the parties’ respective positions in an effort to facilitate a resolution.”
  • “My clients and I always appreciate hearing an objective, fact-based assessment of some of the key disputes in the case. Not standard mediator fare where both sides are told they will probably lose, but a truly independent perspective where the mediator frankly acknowledges some of our strong points, while also explaining where they think some of our weaknesses lie. That assessment carries a lot of weight with senior executives….”
  • “Speaking directly to clients about risks,… finding a way to develop trust of the parties,… and understand[ing] when to be facilitative and when to be evaluative depending on the circumstances.”
  • “Confidential delivery of frank – but informed and credible – assessments of strengths & weaknesses of both sides’ cases and a strategic plan for moving both sides to resolution.”

Of course, in order to provide well informed and trusted analysis, the mediators have to form a relationship of trust among the parties and understand the nuances of the dispute.  This task is difficult in the Standard Approach because the mediator only receives mediation statements shortly before the session, meets the parties for the first time at the mediation session, and typically has only one day with them before he may be asked to provide a well-informed evaluation.  In other words, under the Standard Approach, a mediator must spend the initial part of the mediation educating himself or herself about the case and may not have time to form a sufficiently informed evaluation or mediator’s proposal.  By contrast, a Guiding Mediator will typically have scheduled several private calls or meetings with each party before the session to become well informed about the issues in dispute and begin to establish credibility with the parties.  When asked to offer, or deciding to offer, an evaluation of the dispute, the Guiding Mediator will be in much better position to do so and the evaluation will likely be better received as it has a more informed and trusted basis.

To emphasize the importance of pre-mediation preparation, in answer to the same question about effective mediator techniques, 52 respondents answered that they found pre-mediation conferences among the mediator, parties, and counsel to be very effective:

  • “Receiving and reviewing key pleadings, documents, and expert reports before mediation, meeting with counsel for the parties privately before the mediated settlement conference takes place.”
  • “The mediator presiding over limited information exchange and exploring each party’s motivations for settlement beyond pure dollars before the mediation.”
  • “Being prepared by knowing the relevant barriers to resolution pre-mediation so time can be effectively used during mediation without having to spend a lot of time educating.”
  • “Private meetings with parties or attorneys prior to official mediation; multiple private meetings with adjusters prior to mediation to confirm they are ready, fully informed, and [have] proper authority; mediator’s assistance in ensuring parties have the information needed prior to mediation.”
  • “Long before settlement negotiations, the mediator diagnoses all the causes of impasses based on legal, factual, and human psychology and group sociology and recommends processes to satisfy the parties needs to change their position. Prior to negotiations, confidential videoconferences with each of the parties. Prior to negotiations, collaborative meetings with party experts to reduce differences.”

This degree of pre-mediation activity takes time, which may pose a challenge.  Many in-demand mediators are scheduled for mediations four or five days a week for several months, so finding time to engage in pre-mediation conferences will be difficult for those who are constantly in session on other matters.  If they are interested in early mediator engagement, parties and counsel have to make sure their chosen neutral has time for the process.

Another mediator technique the respondents found effective was for the mediator to issue a mediator’s proposal when impasse has been reached.  The respondents were asked, if a case does not settle at the mediation session, to rank on a scale of 1 – 10 how often they favored the mediator making a mediator’s proposal to settle the case (where both parties’ responses are kept confidential unless both parties said yes). The average response was 6.4.  The result indicates this is a favored technique, but in order for it to be effective, mediators need to have spent sufficient time with the parties and the issues to make a credible proposal that might be accepted by all the parties which is difficult if the mediator’s engagement is limited by the time constraints of the Standard Approach.

Key Takeaways for Contractors, Owners, and Designers

Based on the survey responses of practitioners, guided mediation is the most effective way to resolve construction disputes when they arise.  In a guided mediation, a mediator develops a better understanding of the dispute and the parties, thereby allowing him or her to provide a candid evaluation of a dispute that the parties are more likely to accept.  As part of guided mediation, a mediator is also in a better position to identify ways to preserve valuable project relationships and to allow for innovative business solutions to facilitate settlement.  For these reasons, if a dispute arises, parties should push for the early and active engagement of a mediator.

[i] AIA A201 § 15.3; ConsensusDocs 200 Article 12.4; EJCDC C-700 Article 12.01; DBIA Standard Form Article 10.2.

[ii] AIA A201 § 15.3 specifies mediation shall be administered by the AAA; ConsensusDocs 200 Article 12.4 permits the parties to choose mediation through either the AAA or JAMS; EJCDC C-700 Article 12 does not specify which service the parties must utilize; and DBIA Standard Form Article 10.2 specifies that the mediation will be conducted by a mutually agreeable impartial mediator or a mediator designated by the AAA if the parties cannot agree to select a mediator.

[iii] The survey was comprised of 21 questions and sent to members of the American Bar Association Forum on the Construction Industry and members of the Top 50 Construction Law Firms in the US as determined by Construction Executive  Magazine.  The authors wish to thank the survey respondents for their time in carefully answering the questions posed to them.

[iv] Dean B. Thomson, Early Mediator Engagement: Lessons from Master Mediators, 15 Journal of the ACCL 39 (No. 1, 2020).  Guiding Mediation is also sometimes referred to as Guided Choice. See Dean B. Thomson and Paul M. Lurie, The Guided Choice Process for Early Dispute Resolution, 1 The American Journal of Construction Arbitration & ADR, 23 (2017).

[v] The preference for evaluative rather than facilitative mediators was consistent with an earlier survey of Forum members done in 2001.  See Dean B. Thomson, A Disconnect of Supply and Demand: A Survey of Construction Mediation Practices, 21 The Construction Lawyer, 17 (No. 4, 2001).

Announcements

Fabyanske, Westra, Hart & Thomson, P.A. is pleased to announce that Dean Thomson and Julia Douglass will be speaking on Mediation Strategies on October 17th to the Florida Bar Association Section on Construction Law. For more information click here.

Congratulations to the nine attorneys from Fabyanske, Westra, Hart & Thomson, P.A. who have been named 2022 “Minnesota Super Lawyers”. The polling, researching, and selecting of “Super Lawyers” is designed to identify Minnesota lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of Minnesota attorneys receive this honor. FWHT’s 2022 “Minnesota Super Lawyers” include Mark Becker, Julia Douglass, Gary Eidson, Marv Fabyanske, Kyle Hart, Teresa Molinaro, Jesse Orman, Dean Thomson,  and Tom Vollbrecht. Dean Thomson was also selected as a Top 100 “Super Lawyer”. For more information click here.

Congratulations to the Fabyanske, Westra, Hart & Thomson, P.A. attorneys who have been named 2022 Minnesota “Rising Stars”. They are Hugh Brown, Colin Bruns and Alex Herman.  “Rising Stars” are nominated by their peers and must be 40 years old or under, or have been practicing for 10 years or less. No more than 2.5 percent of the lawyers in the state are named to the list. For more information, click here.

Hugh Brown will be presenting a live Webinar on Construction Law Hot Topics for the National Business Institute on July 27th, from 1:00 to 2:30 Central Time. For more information, including registration and how to view the program, click here.

This discussion is generalized in nature and should not be considered a substitute for professional advice. © 2022 FWH&T