The binding arbitration of disputes on private construction projects has become commonplace in recent decades. While arbitration has its critics (and there are some valid criticisms), its popularity demonstrates its appeal as an expeditious means of resolving disputes. Statutes and case law leave little doubt regarding the enforceability of arbitration clauses and arbitration awards. But mandatory arbitration can present some interesting twists for the parties to those agreements.
In a recent case, a contractor arbitrated a claim against a project owner for unpaid retainage. The contractor prevailed and received an arbitration award. The contractor then went into court seeking attorney fees under a state prompt payment statute. The contractor said the fees were authorized by the statute, not the construction contract containing the arbitration clause, and were therefore not subject to arbitration. The owner argued – successfully – that the contractor was too late. The claim for fees should have been included in the arbitration demand. The contractor could not take a second bite at the apple.
In another recent case, a contractor liened a project to secure payment. The only way to foreclose the mechanic’s lien, under state statute, was to file suit. But the project owner argued that the mandatory arbitration clause in the construction contract precluded such a suit. The matter was resolved by a judicial stay of the foreclosure suit pending the outcome of the arbitration proceedings.
I welcome your comments on arbitration – both its efficacy as a dispute resolution mechanism and its interplay with statutory remedies.
Don't miss next week's issue of Construction Claims Advisor:
- Liquidated Damages of $26.9 Million Were Not an Unenforceable Penalty
- Bid Nonresponsive Due to Failure to List Prior Projects
- Appeal Rights Determined by Contractor’s Claim Submittal
Bruce Jervis, Esq., Senior Editor
Construction Claims Advisor
