Strategically utilized in the construction industry, Dispute Resolution Advisors (DRA) have the potential of resolving disputes fairly, quickly, and cost effectively in a vast array of settings and contractual arrangements.
DRAs can be most effective in pursuing “Real Time Mediations” and crafting dispute resolution mechanisms that are proportionate, progressive and cost effective.
Often the dispute resolution needs of the parties cannot be met with standard “boiler plate” dispute resolution provisions. In those instances, particularly when dealing with stakeholders critical to the long term success of the organization, DRAs are a viable option worthy of consideration.
The benefits of this ADR technique, which has proven very successful in the construction industry, can be substantial.
Regardless of the dispute resolution provisions contained in the agreement of the parties, the parties can always agree post dispute to utilize the services of a DRA to assist in repairing relationships and minimizing the costs of the dispute.
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 is contractually empowered to perform any number of functions. For example, the DRA may participate in “meet and confer” meetings to assist the parties in an early resolution of a dispute (“Real Time” mediation). The DRA, once an impasse has been reached but before the parties expend significant costs to gear up for arbitration or litigation, can also assist the parties in tailoring a dispute resolution mechanism that is best suited to resolving the specific dispute 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 $100,000.00. In Scenario B there is a dispute between the parties over whether or not parts supplied to the Buyer meet the contract specifications and, if not, whether the Supplier will incur the costs of a potential recall. The damages that will potentially be sustained by the Buyer are in the range of $10,000,000.00 to $15,000,000.00. Any litigation between the Buyer and the Seller has all the earmarks 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 in the contract.
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. In Scenario A the parties agreed to the following graduated and proportionate dispute resolution steps: (1) the voluntary exchange of specified information; (2) a hybrid facilitative mediation – arbitration process within two months of the exchange of information; (3) if the mediation is unsuccessful the mediator will become an arbitrator; (4) the arbitration will be governed by the following agreed upon rules: the parties will stipulate to those facts that are not in dispute at the outset of the arbitration, there will be no formal discovery, no more than 4 witnesses will be presented by each side, the arbitrator’s award must be the last demand made by ABC at the conclusion of the mediation or the last offer made by XYZ; and (5) 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.
In light of the flexibility the contractual DRA brings to the process, the dispute resolution mechanism established in Scenario B is entirely different: (1) the principals will meet and confer with the DRA preset; (2) 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); (3) immediately following the “hot tub” meeting the representatives will meet and confer; (4) if a settlement is not achieved the parties will participate in a non-binding Neutral Expert Evaluation who will issue a decision; (5) if the parties do not accept the decision of the Neutral Expert the parties will participate in a facilitative mediation; (6) if the facilitative mediation is unsuccessful the parties will have the option of proceeding to litigation or arbitration; and (7) the parties agree that during any litigation or arbitration they will be governed by the following: the litigation budget will not exceed $500,000 by either party; an agreed upon Protective Order will be entered; an agreement to voluntarily exchange specified information before any ordered scheduling conference; the number of depositions that will be taken will be limited to 10 for each party; 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 or arbitration incurred by the prevailing party (not to exceed $500,000).
The scenarios only underscore the incredible flexibility that a contractual DRA provision may bring to the dispute resolution process. Rather than using dispute resolution provisions that can be a one size fits all approach, DRAs can assist the parties in being as flexible, innovative and proportionate as the parties’ desire. In Australian and Hong Kong construction projects the use of DRAs has been extremely positive. 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 should be ignored.
Even if the parties’ contract does not provide for a DRA, before taking the trip down the hellacious “litigation highway,” the parties may want to consider the use of a DRA. As discussed below, the Business Courts will likely require an ADR plan very early in the life of the lawsuit and, prior to the initiation of litigation, a DRA my prove extremely helpful to the parties in the crafting of a dispute resolution strategy that best suits their needs and will be acceptable to the Business Courts.