DISPUTES AND CLAIM RESOLUTION

Transcription

1 1 DISPUTES AND CLAIM RESOLUTION August 14-16, 2017 Presented by: Robert M. Fitzgerald Carter B. Reid 1765 Greensboro Station Place Suite 1000 McLean, Virginia

2 2 Presentation Outline Typical Methods for Dispute Resolution of Underground Construction Claims Alternative Methods and Approaches Recent Case Law on DRB Waiver and Enforcement What is Role/Responsibility of Surety in ADR

3 3 Background Disputes are an unavoidable fact in underground construction Formal disputes processes are costly /ineffective ADR started in underground industry

4 4 Typical Claim Resolution Methods Partnering Negotiation Mediation DRB/DAB Arbitration Litigation

5 5 New Concerns Involving DRB s Use of lawyers Problem solvers or problem creators Cost-effectiveness Owners requiring lawyers Bias in DRB s Sitting on multiple boards for same party Ex parte discussions Enforcement

6 6 Recent Cases on DRB s DRB s are condition precedent to litigation Lockett v. King Cty., 2016 WL at *5 (W.D. Wash. 2016) Non binding, non-admissible, DRB Decision has no impact in subsequent litigation Balfour Beatty Infrastructure, Inc. v. PB&A, Inc., 2017 WL , at *7 (N.D. Cal. 2017) NY upheld DRB decision even though based on legal/contractual basis Laws Constr. Corp. v. Contract Dispute Resolution Bd., 145 A.D.3d 523 (N.Y. App. Div. 2016)

7 7 DRB s Are Not the Only Answer Why ADR? The speed, frequency, cost and complexity of formal dispute resolution processes have linked true project success and efficient claims resolution more closely than they ever have been in the past New role for experts

8 8 Typical Use of Experts in Construction Disputes Part of our adversarial system Party selects expert in support of its position Staggered presentation of experts as part of each parties case (separation could be days, weeks or even months) Typified by polar-opposite conclusions

9 The Hot Tub and the Move to Make Expert Testimony Less Adversarial 9

10 10 Origin of the Hot Tub Has roots in Australian Competition Tribunal considered Australian approach to expert testimony Designed to remove partisan advocacy from expert testimony Allows experts to appear concurrently or side by side Allows experts to respond directly to their colleagues Minimizes the lawyers control in the presentation of expert testimony

11 11 Key Elements of the Hot Tub Process Preparation and exchange of written expert reports Best case - experts meet and confer in order to prepare a joint report Experts testify after both parties cases-in-chief have been heard and all lay witness testimony has been offered Expert may present a brief summary of their positions Attorneys may cross-examine experts During this stage, experts are allowed to continue questioning each other

12 12 Pros and Cons of the Hot Tub Pros Efficient approach Cost effective Consolidated presentation Reduction in volume of information Perceived decrease in bias Experts can use their own words Facilitates the unfiltered communication of scientific or statistical information Cons More experienced expert can dominate process Depends on trier of fact to moderate discussion Potential for non-productive communication Less attorney control over presentation of client s position Not conducive to documentintensive cases

13 13 Best Practices When Using Hot Tubbing Trier of Fact must be able to facilitate and control the proceeding Controversies at issue are identified and discussed Prevent derogatory or combative tones Expert critical traits Ability to convey ideas in simple terms Ability to communicate in a non-condescending manner Ability to question other experts without being antagonistic Ability to be a good listener and use information from others to enhance his/her own argument Ability to stay on message with his/her client s position

14 14 Conclusion ADR is a constantly evolving area check contract Use of attorneys Admissibility Scope of jurisdiction Work to encourage DRB s and ADR with owners Encourages more bidders Avoids poor claims Saves time and money

15 15 The Surety and ADR Law developed regarding arbitration may apply to other ADR as well

16 16 Basic Surety Relationship Tripartite Owner General Contractor Surety Surety does not sign Contract Owner does not sign Bond

17 17 Types of Bonds/Timing Performance time of GC Contract Payment before Subcontracts

18 18 Multiple Bond Forms Statutory mandated public Private multiple (check)

19 19 Is Surety Bound by Arbitration Clause? Incorporation by reference? Typical Performance Bond Rarely Payment Bond If yes, majority Surety must arbitrate Obligee can force it Surety can force it If Surety does not participate Still may be bound by outcome of Contractor v. Owner arbitration If: Notice Opportunity to participate Not Surety defenses

20 20 Super-Incorporation Federal/State Courts favor arbitration Example Commercial Union Ins. V. Gilbane, 992 F.2d 386 (1st Cir. 1993) GC had Performance Bond from Subcontractor Performance Bond incorporated Subcontract by reference Subcontract no arbitration clause Subcontract clause that Subcontractor s obligations/right to GC same as GC s obligations/rights to Owner and incorporate terms of GC/Owner Contract by reference GC Contract with Owner had an arbitration clause Did Subcontractor s Performance Bond Surety have right to arbitrate with GC?

21 21 Stay Pending Arbitration Arbitration heavily favored Judicial economy not a reason to refuse stay

22 22 Payment Bonds Rarely incorporate Subcontract/P.O. How ensure arbitration? Write into Subcontract/P.O. Incorporate GC Contract containing arbitration clause

23 23 Insurance Different vehicle No separate party in GC v. Owner or GC v. Sub dispute See policy in coverage dispute re arbitration or ADR

24 24 ILOC See terms of Letter of Credit ADR not contemplated fraud only defense Preemptive strike on Owner

25 25 Questions and Comments Robert M. Fitzgerald Carter B. Reid 1765 Greensboro Station Place Suite 1000 McLean, Virginia