ConstructionPro Week, Volume: 3 - Issue: 40 - 10/03/2014

Is Arbitration Always an Efficient Way to Resolve Disputes?

By Bruce Jervis

 

Much has been written about the interplay between arbitration and litigation – the inability to get all parties together in the same room, the danger of inconsistent results, and the inefficiencies of dual forums. A recent federal appellate decision illustrates some of these problems.

 

There was a consolidated arbitration proceeding involving a mechanical subcontractor, the prime construction contractor, the project owner, the owner’s project architect, and the mechanical engineer. The subcontractor asserted a claim only against the prime contractor, electing not to claim against the design professionals even though they had been brought in as parties to the arbitration by the project owner.

 

The arbitration lasted almost a year and generated 10,000 pages of transcripts, more than 1,400 exhibits, and testimony from 50 witnesses. The subcontractor was awarded $2.4 million from the prime contractor. The sub was then allowed to sue the architect and engineer in federal court for professional negligence. A dissenting judge criticized the waste and inefficiency of the dual proceedings, saying the subcontractor was taking a second bite at the apple.

 

To be fair, it must be noted that the subcontractor never agreed to arbitrate with the design professionals and objected to the consolidation of the arbitration proceedings. Yet, the end result was the waste and redundancy decried by the dissenting judge. What is your opinion? Can arbitration be efficient when parties cannot be forced to assert all of their claims at the same time in the same forum? I welcome your comments.

 

COMMENTS

I am a custom home builder with 35 years experience. I have been involved in 2 lawsuits. One lasted over a year. Finally, we went to arbitration and the lawsuit was settled in 7 hours. The second lawsuit was settled in 2 months. I insisted that we go to arbitration immediately and it was settled in 3 hours.

Since then, all of my contracts have a clause that any dispute that arises will be settled in an legal arbitration setting.....no exceptions.

The dissenting judge in the above story was right in his assessment. Most court cases start out on a very emotional level and evolve into a greed level complete with an extensive circus show. Lawyers and plaintiffs are both guilty of wanting more than a fair settlement.
Posted by: Karl Hancock - Friday, October 03, 2014 10:40 AM


Most arbitrations I have been involved in have resulted in positive outcomes without being excessively long or costly. The longer ones generally involved large, complex projects with extensive contracts/discovery materials. The ones that dragged on were generally long due to the intractable position of one or more parties rather than anyone trying to pad their fees.
Posted by: Lee Martin - Friday, October 03, 2014 11:06 AM


Arbitration takes a shorter time in comparison to a lawsuit and it is cheaper in the long run. All concerned parties should be involved in order to resolve the dispute to avoid further arbitration(s) or lawsuit(s) related to the same issue. It must be spelled out clearly in the contract and signed by all involved parties before the commencement of the job.
Posted by: Samir Janho - Friday, October 03, 2014 11:42 AM


when a conflict arise the first thing parties do is bring their lawyers to the ring. That is the problem. At that point the parties are not thinking that the lawyers charge per hour of their involvement and the longer the conflict the more money goes to their lawyers pockets.Lawyers will do everything possible to take a case for years. I think everybody's life will be easier if people go to mediation and or arbitration and keep lawyers away.
Posted by: Lelia - Friday, October 03, 2014 11:52 AM


 









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