Guy Randles, The Daily Record Newswire
Most businesspeople dread the prospect of going through litigation. Even those who consider the costs and uncertainty of the process rarely appreciate how onerous it can be unless they have personally endured the ordeal. Veterans of litigation typically have the experience seared into their memories as something to be avoided.
Litigation can be bad, but construction-related litigation can be particularly bad. Construction projects typically extend over weeks, months and sometimes years. They usually have many participants, most whom regularly generate hard copy and electronic documents.
When litigation happens, it is always a major task to compile and analyze the massive amounts of documentation and electronically stored information. In big construction litigation, the cost of obtaining and copying documents alone can be enormous. Potential witnesses must be identified and interviewed. Depositions and trial testimony require substantial prep.
When even a simple construction-related claim is presented at a trial or hearing, significant time is needed to provide context and details necessary for a decision.
Financial and time commitments to litigation are the primary reasons the construction industry was one of the earliest pioneers in implementation of alternate dispute resolution procedures such as mediation, dispute resolution panels and arbitration.
Almost to a person, the reaction of the uninitiated to construction litigation is that it is difficult, but a great learning experience. What do they learn? One lesson is that general principles of fairness are usually less important than the black-and-white wording of contracts, change orders and notice letters.
In construction disputes, contract documents are of critical importance almost without exception. Those who rely just on good faith or common sense usually do so at their own peril, particularly after the parties ‘lawyer up.’ Achieving a fair result is usually difficult, if not impossible, when parties ignore the importance of contractual documents.
Another thing litigants come to appreciate is how proper documentation of project events, progress and understandings can be helpful in the case of a dispute. Reconstructing what occurred or what was discussed months or even years after the fact is a daunting task, even when one is trying to be honest and accurate. Doing so can be even more difficult and expensive when a party has a self-serving incentive to shade the truth. There is nothing like contemporaneous documentation in the form of proper schedules, a well-annotated video or picture, or a clear memo or email to establish the facts of a situation.
To their chagrin, litigants also learn that inaccurate documentation or careless internal communications can prejudice the ability to present and win otherwise worthy claims. Currently, the biggest culprits of this nature are internal emails, frequently from those not directly involved with an issue, that suggest an improper motivation or unfair attitude concerning claim issues. Flip or “clever” emails that were never intended to see the light of day can be major headaches that undermine legitimate positions and generate arguments.
Litigants also often learn that their dispute is going to be decided by third parties who may know little to nothing about construction in general, but rather only what the evidence rules will allow about the particular project at issue.
There is nothing more disconcerting to sophisticated construction professionals than to realize their professional reputations and economic futures may be decided by judges or juries with absolutely no construction background whatsoever.
In one of my federal court construction cases, the judge announced to the parties that, while he would do the best he could, he knew nothing about construction and he was concerned about making the right decision. He suggested that the parties settle their dispute before he had to decide the case. Fortunately, he ended up getting it right from my clients’ perspective, but the point was made: even if a smart and sophisticated judge is deciding the case, a wild card may be dealt.
Another lesson is that after a certain (usually early) point, litigation takes on a life of its own. Once the legal apparatus gains momentum, it is hard to stop it before significant costs are incurred. As a general rule, the earlier that attempts are made to resolve a case, the better it is for all involved, even if full development of the facts has not occurred.
One unfortunate conclusion that litigants often reach is that the opponent is so desperate, unreasonable or hardheaded that settling the case on a reasonable basis will be difficult or impossible.
Of course, litigation frequently brings out the worst in people. However, selecting quality people to contract with will not only reduce the chances of litigation in the first place, but ensure that any litigation that does result will not turn into a death match. The time to consider whether the party you are dealing with is reasonable and fair-minded is when you are contracting, not when you are in the throes of litigation.
As bad as it may be, it is often true that a party has little choice about whether it will be involved in litigation. An opposing party may initiate litigation or take an uncompromising position that simply must be challenged.
As a result, all parties should be forearmed with the lessons learned from the litigation school of hard knocks:
Pay attention in advance to legally important documents such as contracts, notices and change orders;
Document project events clearly and contemporaneously;
Ensure that internal communications and emails about claims and project events are worthy of disclosure;
Consider using arbitration where the triers of facts have a sophisticated construction background;
Try to resolve claims early in the process, including via mediation; and
Try to pick contracting parties who will avoid litigation in the first place or who will be reasonable in dispute resolution.
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Guy Randles is an attorney in Stoel Rives’ construction and design group. Contact him at 503-294-9288 or garandles@stoel.com.
