COMMENTARY: The construction industry has added yet another tool to the ADR toolbox: Dispute resolution advisors

By Richard L. Hurford Adding to the panoply of ADR measures used in the construction industry there is now the Dispute Resolution Advisor ("DRA"). In its simplest terms the DRA is a neutral who meets with the parties once a dispute has arisen and assists in tailoring a dispute resolution mechanism that is best suited to resolving the dispute at hand and achieving the interests of the parties. Its efficacy is not confined to the construction industry as explored by two different scenarios. In Scenario A the dispute involves whether ABC Company has used its "best efforts" in marketing a particular product manufactured by XYZ Company. The amount in controversy involves approximately $100,000. In Scenario B there is a dispute between the parties over whether or not parts supplied to Buyer meet the contract specifications and, if not, whether Supplier will incur the costs of a potential recall. The damages that will potentially be sustained by Buyer are in the range of $10,000,000.00 to $15,000,000.00. Any litigation between Buyer and Seller has the potential of being a classic "battle of experts." In both scenarios the parties' contracts provided for the appointment of a neutral DRA whose duties were outlined. The DRA met with the parties and their attorneys and developed an agreed upon dispute resolution methodology specifically tailored to resolve these vastly different disputes. Scenario A * The parties agreed to a voluntary exchange of specified information. * The parties agreed to a facilitative mediation-arbitration process within 10 business days following the document exchange. If the mediation is unsuccessful in resolving the dispute, the mediator will become the arbitrator. * The parties agreed to the following in the event of an arbitration: --The parties will stipulate to those facts not in dispute for presentation to the arbitrator; --There will be no discovery; --No more than 4 witnesses will be presented by either side; --The arbitrator's award must be either the last demand made by XYZ or the last offer made by ABC ; --The arbitration proceedings and award will be confidential and the fact of and results of the arbitration will not be disclosed to any party except as necessary to enforce the arbitration award. Scenario B * The principals of the parties will meet and confer. * If no agreement is reached, there will be a so-called "hot tub" meeting between the parties' experts for the purpose of setting forth their respective positions and to answer questions that may be posed by the parties and their experts. Representatives of the parties with settlement authority must be present. Immediately following the "hot tub" meeting, the representatives of the parties will meet and confer. * If a settlement is not achieved the parties will participate in a non-binding Neutral Expert Evaluation who will issue a decision. * If the parties do not accept the decision of the Neutral Expert, the parties will participate in a facilitative mediation. * If unsuccessful the parties will have the option of proceeding to litigation or arbitration. * In the event of litigation or arbitration the following ground rules will be followed: --The litigation budget will not exceed $500,000 by either party; --An agreed upon Protective Order will be presented to the Court; --An agreement to voluntarily exchange specified information before any scheduling conference; --The number of depositions that will be taken; --An agreement to engage in another facilitative mediation no later than 20 days after the discovery cut-off date or such earlier date as the parties might agree; and, --The "losing party" will pay the costs of litigation incurred by the prevailing party. The scenarios only underscore the incredible flexibility that a contractual DRA provision may bring to the dispute resolution process. Rather than using boiler plate dispute resolution provisions that can be a one size fits all approach, DRAs can be as flexible and innovative as the parties' desire. In Australian and Hong Kong construction projects the use of DRAs has been extremely positive and the State of California and the U.S. Government require DRA provisions in certain contractual arrangements. Certainly, depending upon the nature of the contract, it is not a dispute resolution option that counsel should ignore or fail to explore with their clients. ---------------- Richard L. Hurford is the president of Richard Hurford Dispute Resolution Services P.C. Hurford has more than 30 years of experience in the litigation and resolution of construction disputes and the design of dispute resolution systems. Published: Fri, Mar 15, 2013