4.3 Disputes Involving Architectural or Engineering Services

• Library: Virginia Construction Law Deskbook (Virginia CLE) (2019 Ed.)

4.3 DISPUTES INVOLVING ARCHITECTURAL OR ENGINEERING SERVICES

4.301 Dispute Resolution Mechanisms.

A. In General. There are a number of methods of dispute resolution available to owners and design professionals to address and resolve any disputes that arise during the course of a project. While litigation is the default avenue for dispute resolution, parties are free to select from a variety of alternative dispute resolution (ADR) mechanisms for a particular project. The selection may be made at any time by the consent of the parties or may be established in the parties' agreement.

These various means of resolving disputes comprise a spectrum of choices. At one end are those that are the least time consuming and expensive and afford the most control over both the process and the means of resolution. Those at the other end are the most time consuming and expensive and afford the least amount of control over the process or means of resolution. While Dispute Resolution Boards, Med-Arb, Arb-Med, Early Neutral Evaluation, Mini-Trials, Summary Jury Trials, and the like are used to address construction disputes, negotiation, mediation, arbitration, and litigation are the most commonly used in Virginia for the resolution of disputes between owners and design professionals.

B. Communication and Negotiation. Communication and negotiation are the most effective way of dealing with issues that arise during

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the course of a project and often prevent those issues from becoming fullblown disputes. Clients should be encouraged to develop and use good communication and negotiation skills. The earlier issues are identified, addressed, and resolved, the less likely they will become critical disputes that disrupt the project and result in significant expenditure of time and money by all involved.

Negotiation, unlike the other ADR mechanisms, does not involve a third party. It is consensual in nature and offers the maximum flexibility in both the process and the means available to achieve a resolution. Moreover, the effective use of communication and negotiation not only saves time and money but nurtures strong and respectful relationships.

C. Mediation. Mediation is a negotiation in which a third party (the mediator) facilitates communication between the parties in an attempt to reach a mutually acceptable resolution of the issues between them. By statute, the rules of evidence, and (usually) the terms of the agreement, mediation affords a confidential approach to the resolution of disputes. Mediation is voluntary and collaborative; it is a process, not an event, and the parties are partners in the process of resolving the issues between them.

The mediator is a neutral, impartial facilitator who assists the parties throughout the process. The role of the mediator is to help the parties develop an objective understanding of the dispute and recognize each other's position and the interests at stake. The mediator may play an evaluative role in the process if requested by the parties, which often occurs in construction disputes. However, while the mediator might on occasion provide legal information, he or she should never provide legal advice.

While the stages of the mediation process may vary considerably, it is generally recognized that the process has five main aspects: (i) reaching agreement as to the nature and components of the process; (ii) sharing information and views regarding the operable facts and legal aspects of the dispute; (iii) identifying the underlying interests of the participants; (iv) problem solving and negotiation to develop a solution to the matters at issue; and (v) concluding the mediation by agreement or otherwise. The focus of the process is on the underlying issues, the interests of the parties, removing barriers to resolution, exploring available options, promoting communication, and exchanging information.

The parties to the mediation are in charge of deciding whether to settle and what the terms of settlement will be. If the mediation results in a

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settlement, the parties usually will enter into a written settlement agreement that will be binding and enforceable.

D. Arbitration and Litigation. Arbitration and litigation are a quantum leap from mediation on the spectrum of ADR mechanisms. Most importantly, they are not collaborative, problem-solving approaches to dispute resolution but adversarial, adjudicatory processes. Like the mediator, the arbitrator and the judge are neutral and impartial, but there the similarity ends. The arbitrator or judge, instead of the parties, will determine the resolution of the dispute.

Arbitration may be characterized as simply hiring a private court system and judge to resolve a dispute. While normally the parties prospectively agree to arbitrate contractual disputes arising between them, they may agree to arbitrate at any time by mutual consent. Often, they agree to pursue arbitration under the auspices of one of the private dispute resolution providers, such as the American Arbitration Association ⁵⁶ or the McCammon Group. ⁵⁷ While many of these groups have their own form agreements and rules governing the arbitration proceeding, the parties are free to establish their own agreement to arbitrate and the rules under which the arbitration will be conducted.

Arbitration has traditionally been favored over litigation as a dispute resolution mechanism because it had fewer rules (in particular, rules of evidence), required little or no discovery, and was faster and less expensive. Over the years, however, arbitrators have allowed, or the parties have agreed to, more extensive discovery. This has resulted in a slower process and greater expense. At the same time, courts have moved toward expedited dockets and more streamlined discovery processes. These changes, together with laws severely limiting the right of appeal from arbitration decisions, diminished the perceived advantages of arbitration. Accordingly, arbitration is now less favored than previously. Indeed, the form contract agreements used by the American Institute of Architects, which have contained a mandatory arbitration procedure since 1888, were revised in 2007 to make arbitration optional.

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4.302 Common Legal Issues.

A. Limitation of Actions.

1. Statute of Limitations. The Virginia Supreme Court, in Oleyar v. Kerr, ⁵⁸ held that an action for the negligence of an attorney in performing professional services, while sounding in tort, is an action for breach of contract and thus governed by the statute of limitations applicable to contracts. ⁵⁹ Subsequently, in Comptroller ex rel. Virginia Military Institute v. King, ⁶⁰ the court ruled that the "same principal . . . applies with equal logic" to actions involving architectural malpractice.

The statute of limitations applicable to most contracts for the provision of architectural and engineering services is found in section 8.01-246 of the Virginia Code. A five-year period is applicable to actions on any contract "that is in writing and signed by the party to be charged thereby, or by his agent . . . ." ⁶¹ A three-year period is applicable to "actions upon (i) any contract that is not otherwise specified and that is in writing and not signed by the party to be charged, or by his agent, or (ii) any unwritten contract, express or implied . . . ." ⁶²

With respect to the accrual of actions against a design professional, the Virginia Supreme Court, in Comptroller ex rel. Virginia Military Institute, held that a cause of action alleging improper or defective design accrues when plans are tendered by the design professional to the owner. ⁶³ The court reasoned that, at that time, the design professional had the right to demand payment for its services and the owner, had defects been discovered, could have initiated legal action against the design professional. ⁶⁴

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In reaching its conclusion, the court observed that it followed "the general rule that the applicable period of limitation begins to run from the moment that the cause of action arises rather than from the time of discovery of injury or damage" and that "difficulty in ascertaining the existence of a cause of action is irrelevant." ⁶⁵

The court, however, found that the contract between VMI and the architect was a "divisible one" which, in addition to design, included "duties of supervision during construction." As to those obligations, the statute of limitations would run from the date the architect breached its agreement to supervise.

2. Statute of Repose. Virginia's statute of repose, section 8.01-250, provides a limitation on certain actions arising out of the defective and unsafe condition of an improvement to real property. It states, in pertinent part:

No action to recover for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained as a result of such injury, shall be brought against any person performing or...