Customizing the Proper ADR Process for Your Project

Last month, Mike Marra and Rod Toben of the American Arbitration Association gave a Hot Topic presentation on Customizing the Proper ADR Process for Your Project – So little time now . . . so much effort later. In case you missed it, here are a few highlights from their presentation to remember when drafting your next ADR clause.

When drafting, adopting, or recommending a dispute resolution clause in a construction contract, parties or their attorneys do not always spend the time needed to make sure the dispute resolution clause works for their particular client or project.  A little time spent at the contracting stage can go a long way toward saving time and money should a dispute arise.

Construction Industry standard form documents have included ADR clauses for more than fifty years and most of them provide what is needed to get you into the process: agreement to arbitrate, administrator, a set of rules and judgment language.  But what should you think about when you want to draft an ADR clause that is unique to a particular client or project?  Below are some examples of items to consider when drafting your next ADR clause:

Rules:

First and foremost a good set of ADR rules will help move the process in an efficient manner because of their self-executing nature.  The AAA Construction and Commercial Rules provide parties a time tested roadmap for both arbitration and mediation. 

Step Clauses:

Mediation prior to arbitration is a condition precedent in most construction industry form contracts but in the interest of saving time consider whether both processes could move in conjunction with each other.  Think about including project meetings, project neutrals and other steps prior to mediation and arbitration.  While these steps can be effective, it is important to have a mechanism, such as time limitations, in place to keep the process moving to final disposition. 

The Simple Things in Life made complicated:

Keeping the clause simple should be a priority.  Locale, Time Limits and Arbitrator qualifications are examples of simple items that can be made complicated.  

Rule 12 of the AAA Construction Rules give parties guidance on where the hearings will take place, but is that enough?  What if there are multiple locations in a single contract?  Specifying the locale in the contract can undoubtedly save time and money should a dispute arise. 

Time limits, if they are drafted into contracts, should also be thought through.  While parties may want a quick resolution, having unrealistic timeframes may have the reverse effect and not allow each party to effectively present its case. 

Arbitrator expertise is something that can certainly be drafted into the clause, but how specific should you be?  If parties to a complex project are looking for specific expertise, an engineer, architect or contractor for example, how detailed should they be?  Thought should be given to specifying only the broad category of expertise, whenever possible, as getting too specific may limit the number of qualified arbitrators and become yet another argument in the dispute.

Another important issue to think about when drafting an ADR provision is joinder of parties and consolidation of cases, which can greatly delay the process.  If you are the lead drafter you should think about how the issue of joinder and consolidation are dealt with by all project participants.  When one set of contracts has a joinder provision and others do not, it creates great delay and expense because of the argument that ensues.  Making sure all downstream contracts are in line with the main project document will save all involved the pain of resolving yet another conflict in an arbitration. 

These are just some examples of the things to consider when drafting your dispute resolution clause.  Even the most experienced lawyer can surely benefit from following a basic checklist of items to consider at the contracting stage.  For additional information and sample language, feel free to build your ADR clause online at www.clausebuilder.org.