Construction arbitration: the arbitration process and practice tips for advocates.

• Author: Underwood, Christi L.

The objective in construction arbitration is to resolve a dispute privately, promptly, and economically by one or more experts in the construction industry. Resolving construction disputes via private arbitration means there are no reported opinions to guide the participants in how these private judges, the arbitrators, make their decisions. This can produce anxiety for the party looking to the arbitrators to make a fair and reasoned decision. In a court proceeding a party may have a basis for appeal. In arbitration a party is generally bound by the arbitrators' decision as there is little opportunity to appeal, even if the arbitrators make a mistake. (1) Arbitration awards can be appealed only on very narrow grounds, some statutory (2) and some common law. (3)

This article examines the arbitration deliberation process from the perspective of a construction arbitrator, and it provides a list of 10 recommendations an arbitrator should consider when determining a construction dispute. The goals are to 1) allay anxiety and fears about the arbitration process by parties and their advocates; 2) aid advocates in better presenting their cases to arbitrators; and 3) encourage arbitrators to refresh their objectives and adopt habits that enhance the process for the benefit of end users and the perception of the general public. Depending upon the type of case and the facts, one item on this list could be more important than another, but this list generally covers the deliberation process for construction arbitrations.

The Contract is the Roadmap

In a construction dispute, the contract is the arbitrators' (4) roadmap, and it should be carefully reviewed and referenced by advocates during the hearing. The arbitrators will read the contract before, during, and after the hearing. Arbitrators take their roles seriously and appreciate that they were selected because the parties and their attorneys trust their ability to analyze the facts fairly and apply them to the duties and obligations in the contract documents. Advocates should use common sense while applying the facts of the case to the terms in the contract. Do not create new provisions that simply are not there, and do not ignore clauses that are there. If the contract does not support a position, inform the arbitrators why the law provides an exception. Practitioners should use the basic contract rules to their client's advantage.

The arbitrators will look to the contract for answers about what the parties intended as well as what the parties have asked them to decide. A one-page summary of pertinent contract clauses would be helpful to the arbitrators during the hearing and deliberation. If it is not provided, arbitrators may create their own. Arbitrators also look at documents that are incorporated by reference, such as technical specifications and general conditions, and these documents should be referenced by the advocates where helpful or refuted if necessary.

Though infrequent, some arbitrators have taken the position of crafting a subjective "fair outcome," without deference to controlling law and ignoring the terms of the contract. Arbitrators should not engage in such tactics because members of the construction industry do not want social legislation performed in arbitration cases. They want the certainty the contract provided, consistent with recognized construction legal principles. If the contract or law is unclear, then they want a commercially reasonable interpretation based on the arbitrator's expertise in this industry.

What is the Law in the Case?

Before, during, and after the hearing, advocates should take advantage of opportunities to familiarize the arbitrators with the legal principles guiding the outcome of the case. Most arbitrators do their homework and start the hearing with a good understanding of the disputed issues, the parties' roles, and the parties' general allegations. The arbitrators' familiarity with the controlling legal theories is also crucial before the hearing commences so that he or she can ask the right questions if they were not asked and explained by the witnesses or counsel for the parties. These legal principles also instruct on how to assess the burden of proof and whether it is met. Arbitrators may also consult their own legal resources for answers.

If the contract specifically provides that the law of a certain state will be followed, then tell the arbitrators which jurisdiction's law applies. When relying upon legal cases or statutes, provide the arbitrators highlighted copies. Many arbitrators are not lawyers or, if they are, they may not subscribe to a case reporting service. A party runs the risk of an arbitrator's not reading relevant cases if copies are not provided.

If the contract is silent about construing the contract in accordance with the law of a certain jurisdiction, then arbitrators must use their reason and common sense, coupled with generally recognized principles of construction law to compare the ultimate facts with the contract's requirements. The arbitrators' job is not to create new laws but to apply the facts to the existing laws. Arbitrators, as private judges, are not legislators. If they are in doubt as to what the law is in a certain area, then they should always give the parties an opportunity to brief it, even if the hearing must be reopened. The parties do not want arbitrators to guess.

Another resource is the American Arbitration Association (AAA). (5) One benefit of AAA arbitration is that those arbitrators must complete ongoing training classes such as award writing, dealing with delay tactics, chairing a panel, best practices in a construction case, and other practice topics. These course materials are particularly useful during the initial management of the case and through the process of writing an award. AAA arbitrators may also consult the AAA's "Arbitrator Update." This resource contains an abundance of information on arbitrator authority, procedures, ethics, arbitration rules, and recent nationwide, arbitrationrelated court cases. All of these resources may be utilized before, during, and after the hearing in the deliberation period.

Arbitrators try to "do the right thing" pursuant to the law governing the case if legal precedent is applicable. The advocate's job is to help arbitrators follow the roadmap...