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.
