What Every Contractor Should Know About Mediation

By: Richard J. Capriola

There is a common misunderstanding about what mediation is and how it can be used to resolve a construction dispute. Client questions like “is mediation binding” and “will the mediator decide who wins” highlight the confusion between mediation, arbitration and trial.

Mediation is essentially a meeting where adverse parties sit down and try to negotiate a settlement with the assistance of a professional trained in conflict resolution called a “mediator”. The parties are typically represented by lawyers and the mediator is jointly hired to facilitate negotiations.  Mediation is a voluntary process and will only be binding if the parties choose to reach a settlement agreement. You don’t have to file a lawsuit or arbitration to use mediation, and it can be used at any point during a pending case.  Unlike an arbitrator, the mediator does not hear evidence or decide who wins or losses.

A skilled mediator, knowledgeable in construction disputes, can be very effective in resolving construction claims. For a mediation to stand the best chance of success, everyone must participant willingly, attend in person (not by phone), and do their homework in advance of the mediation so they know the facts and appreciate their liability.

Mediations are confidential, meaning that what is said in mediation cannot be used against you later. If, for example, you make an offer to accept less than you believe you are owed or acknowledge that your employees caused some portion of the claimed job delay, those statements cannot be used as evidence in the case against you should you not settle.

A mediation can take a few hours, all day, or even longer. This is particularly true in complex construction cases where there are multiple contractors, design professionals, bond issuers, and insurers. Regardless of when an agreement is struck, it is important to document the material terms of the agreement in a settlement memorandum signed by all parties before adjourning the mediation. When properly drawn, a settlement memorandum will be enforced as a binding contract by a court and is the best guard against buyer’s remorse.

Mediation can be a great tool to resolve a construction dispute. It provides an opportunity to reach a business decision before turning the matter over to a judge, arbitrator or jury. And when used correctly, mediation can hasten the end of a conflict and let you get back to running your business.