Modern Contractor Solutions January 2025 - 35

or the exchange of information will be
conducted, how an award may be enforced,
and other details impacting the initiation,
duration, and conclusion of the arbitration. In
other circumstances, the parties may need to
first file a lawsuit with a court and then move
to compel arbitration. After the arbitration
has been initiated, typically the parties will
select one or more arbitrators. This arbitration
selection process can vary greatly based
on whether the contract provides a specific
process and what arbitration rules govern.
Once an arbitrator has been appointed, the
arbitrator will schedule a preliminary hearing
where the arbitrator will gauge whether there
may be any jurisdictional or other threshold
challenges to the arbitration, learn about the
parties' respective positions, understand any
confidentiality concerns, and work with the
parties to develop a plan for the exchange of
documents and other information.
PROCEDURES
In its fullest form, an arbitration is a complete
alternative to litigation in a court. A complex
arbitration may feel much like accelerated
court-based litigation proceedings with
written interrogatories and formal document
requests, depositions, various motions
and hearings with arguments by attorneys,
culminating in an evidentiary hearing-
effectively, a trial-where the parties will
provide detailed written legal briefs, call
witnesses, show documents and other
evidence, and offer opening statements and
closing arguments of counsel.
Not all arbitrations are so complex. For
example, the current AAA Construction
Industry Arbitration Rules allow " Fast Track "
procedures when a dispute is only between
two parties with no claim or counterclaim
exceeding $150,000. Typically, these
accelerated procedures significantly shorten
the hearing process, reduce the pre-hearing
exchange of information, and limit the
evidentiary hearing to one or two days.
Under the AAA Rules, smaller disputes under
$25,000 may even be decided on documents
alone, with no live evidentiary hearing.
Regardless of the procedures, at the
conclusion of the arbitration, the arbitrator
will determine findings of fact and conclusions
at law and issue an award (with varying
levels of formality). Barring exceptional
circumstances, the arbitration award is
binding and cannot be challenged in a court
or appealed unless the parties' agreement
allows. Further, an arbitration award can be
confirmed by a court, entered as a judgment,
and enforced like any other judgment.
CONCLUSION
While mediation and arbitration are very
different legal processes, both may have a
place in a construction industry professional's
toolbox. Due to its relatively low cost and time
burden, many construction contracts require
mediation before initiating an arbitration or
litigation. This can provide the parties with
an opportunity to reach a resolution without
enduring the cost and burden of litigation, or
at least to better understand the opposition's
position. The chief downside of including
mediation as a necessary step prior to more
formal proceedings is this sometimes serves
to simply delay the inevitable. Relatedly, a
mediation may prove fruitless if attempted too
early in a dispute, as the parties are simply
too set in their respective positions, and most
courts or arbitrators will allow (or may even
require) mediation later during the course
of proceedings.
Arbitration is typically regarded as more
expedient and less costly than traditional
litigation. However, large and complex
disputes in arbitration often still require
months or years from the initiating demand
to the culminating evidentiary hearing,
with discovery of thousands of documents,
dozens of depositions, multi-week evidentiary
hearings, and administrative fees, arbitrator
expenses, attorneys' fees, and other costs
that can often rival litigation in state or
federal court. The lack of appealability is
a risk with arbitration, as most often the
parties must simply accept the outcome the
arbitrator determines.
Confidentiality can be a particularly
appealing aspect of both mediation and
arbitration. In most jurisdictions, mediators
are bound to maintain confidentiality, and
in many even the parties may not discuss
mediation proceedings. Arbitrations are
likewise typically confidential, with the
current AAA Construction Rules further
embracing confidentiality unless otherwise
required by law, a court order, or by the
parties' agreement.
While both powerful tools, mediation and
arbitration are not for every construction
contract, and legal counsel can help
determine whether and how these tools may
prove beneficial. Including legal counsel in
the process from the contract negotiating
and drafting phase can ensure the right
dispute resolution tools are in place. Legal
counsel can also help to ensure that dispute
resolution processes will function as intended,
given disputes sometimes arise years after
the ink has dried. Additionally, for arbitration
particularly, some jurisdictions require
specific language or notice for an agreement
to arbitrate to have binding effect, particularly
when the other party is a consumer. Of
course, once a dispute arises, including legal
counsel as early as possible can be critical to
understating a contract's dispute resolution
provisions and to help ensure appropriate
procedures are followed.
Arbitration and mediation (discussed in
Part 1 of this article, published in December
2024) may sound similar, but they could
not be more different than hammers and
screwdrivers. As ultimately any contract
may end in a dispute, understanding these
two tools of the trade is crucial for any
construction industry professional.
about the authors
Dixie T. Wells is a partner in the Greensboro,
North Carolina, office of Ellis & Winters LLP.
She represents clients in lawsuits involving
engineering issues, higher education law,
complex commercial transactions, and products
liability. She is a member of the Construction Law
and Litigation Committee of the International
Association of Defense Counsel. She can
be reached at dixie.wells@elliswinters.com.
Chris Flurry is an attorney in the Raleigh,
North Carolina, office of Ellis & Winters LLP.
He focuses his practice on construction law
and commercial contract disputes. A Marine
Corps veteran and son of a brick mason, he
is a member of the Associated Builders and
Contractors of the Carolinas. He can be reached
at chris.flurry@elliswinters.com.
www.mcsmag.com
JANUARY 2025
35
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Modern Contractor Solutions January 2025

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