Chapter 12 Alternative Dispute Resolution

• Library: Arkansas Construction Law Manual (2016 Ed.)

Alternative Dispute Resolution

Allen Dobson^* and Jeffrey Swann^**© 2016

12.1 Scope of Chapter........................................ 12-1

12.2 Mediation.................................................. 12-2

A. Arkansas Statutes and Caselaw.................... 12-2

B. Process, Generally...................................... 12-3

C. Arkansas Voluntary Appellate Mediation

Pilot Program............................................. 12-5

D. Advantages................................................ 12-6

12.3 Arbitration................................................. 12-6

A. Arkansas Law............................................. 12-6

B. Arbitrability Under the Arkansas

Uniform Arbitration Act............................. 12-7

C. Compelling Arbitration............................... 12-9

D. Third Parties............................................. 12-11

E. Effect....................................................... 12-12

F. Federal Law.............................................. 12-17

G. Federal Arbitrability – Preemption and

Choice of Law........................................... 12-18

H. Arbitration Clauses in Contracts................ 12-21

I. Advantages / Disadvantages...................... 12-23

12.4 Other Forms............................................ 12-24

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12.1 Scope of Chapter

With the rising costs of civil litigation and the evolution of the modern construction project, the construction industry has resorted to more controllable, cost-effective, and speedy means of resolving disputes outside the courtroom. This chapter presents those alternative methods for resolving construction disputes outside of civil litigation in Arkansas. This chapter focuses on those methods that are common in the practice of Arkansas construction law. It is not intended to cover every single method for resolving construction disputes. For organizational purposes, the chapter is divided into three subparts: mediation, arbitration, and other forms of alternative dispute resolution. Part 12.2 provides an overview of the law of mediation, general processes, and the value of mediation in resolving Arkansas construction disputes. Part 12.3 generally discusses Arkansas arbitration law, the Federal Arbitration Act to the extent it preempts Arkansas law, and the process and procedures of arbitrating a construction dispute. Lastly, Section 12.4 briefly presents other forms of alternative dispute resolution that are less common in Arkansas construction law practice.

12.2 Mediation

Mediation broadly refers to an informal method of dispute resolution that requires an impartial third party to assist the parties in negotiating a resolution.

A. Arkansas Statutes and Caselaw

In 1993, the Arkansas General Assembly adopted a policy of encouraging attorneys to counsel their clients about alternative dispute resolution (“ADR”) in all manners of practice, including mediation of construction disputes.¹ In addition, the General Assembly created the Arkansas Alternative Dispute Resolution Commission to oversee the implementation of ADR through regulations and guidelines.² With the assistance of the Administrative Office of the Courts, the seven-member Commission establishes certification guidelines and training for mediators, and engages in activities to promote the use of ADR in Arkansas. Standards, grants, and fees are all in its areas of responsibilities.

It is important for those involved in a construction dispute to understand that while parties may choose to submit to mediation before or during litigation, Arkansas courts possess the power to compel mediation.³ In 2003, the Arkansas Legislature authorized circuit and appellate courts to order mediation in civil lawsuits, including construction-related cases.⁴ The intent of the legislature was to encourage the use of dispute resolution processes and encourage courts and governmental agencies “to become versed in, accept, use, develop, and improve processes appropriate to the fair, just, and efficient resolution of disputes, cases, and controversies of all kinds in this state.”⁵

B. Process, Generally

The mediation process is relatively simple. The parties to a dispute agree, or are ordered by a court, to mediate a dispute. The parties either select a mediator, or if the mediation is court-ordered, the court may appoint a mediator. In Arkansas, if a court orders the parties to mediation, the parties may choose a mediator meeting the requirements from the Arkansas Alternative Dispute Resolution Commission or select a mediator not on the Commission’s roster, if approved by the court.⁶

Once the mediator is selected, a date, time, and location are set for the mediation. The mediator will typically send the parties a mediation agreement and confidentiality agreement for execution prior to the mediation.

Normally, at the mediation, the mediator will outline the ground rules for the mediation, allow each party an opportunity to make an opening statement, and then the mediator separates the parties into separate locations where the mediator can caucus with the parties. The mediator will then shuttle back and forth between or among the parties to attempt to craft a resolution. If the mediation is successful, the mediator will have the parties sign a settlement agreement at the mediation, which is typically followed by a more comprehensive settlement agreement drafted by counsel for the parties.

Following the mediation, the mediator typically sends an invoice to the parties for the mediator’s fees, as agreed upon in the mediation agreement. If the mediation is a court-ordered mediation, the court has authority to enter appropriate orders to confirm and enforce the results produced by the mediation.⁷

C. Arkansas Voluntary Appellate Mediation Pilot Program

The opportunity to amicably resolve a construction dispute may exist during the appellate stage of litigation as well. Since 2008, the Arkansas Supreme Court has utilized an Arkansas Voluntary Appellate Mediation Pilot Program to provide additional opportunities for parties involved in certain litigation, including construction lawsuits, to reduce costs, time, and uncertainty through mediation. This voluntary program was authorized by Per Curium Order of the Arkansas Supreme Court and allows parties involved in an appeal to voluntarily mediate prior to submitting briefs and incurring significant costs on appeal. The Program strives to realistically consider the possibility of settlement of the entire case or issues in the case, discuss limiting and simplifying the issues on appeal, take actions that may reduce costs, and aid the speedy and just resolution of any case.

Assuming all parties are represented by counsel and agree to participate, the parties must file a joint motion to stay proceedings with the court of proper appellate jurisdiction. Upon the issuance of the stay, all appellate deadlines—with the exception of the seven-month deadline set by Arkansas Rule of Appellate Procedure 5(b)–will be tolled for 60 days from the date of the order granting stay or until the mediation is complete and an order lifting stay is entered, whichever is first in time. To the extent resources are available, the mediator appointed by the coordinator will be paid by the pilot program, not the parties. If the mediation is unsuccessful, the appeal will proceed in the usual fashion, and the discussion had during the mediation will remain confidential.⁸

D. Advantages

Compared to litigation, mediation often provides a less expensive, less adversarial, less formal, and much faster means of resolving a construction dispute. Parties are afforded much more control over the process, as they select the mediator, participate directly in discussions, and decide the outcome. And lastly, the discussions, representations, arguments, and offers to compromise between the parties or the mediator during mediation are confidential.⁹

12.3 Arbitration

Arbitration is a voluntary, adversarial method of dispute resolution that requires the submission of contending positions on an issue or issues to an impartial third party, mutually chosen by the disputants, for a final binding decision.

A. Arkansas Law

Arkansas first adopted its version of the Uniform Arbitration Act, which was promulgated by the National Conference of Commissioners on Uniform State Laws, in 1969 (the “Arkansas Uniform Arbitration Act” or “AUAA”).¹⁰ In 2011, the Arkansas Legislature completely revised Subchapter 2 of the AUAA, i.e., Ark. Code Ann. §§ 16-108-201 et seq.¹¹ Act 695 of 2011 applies to all agreements to arbitrate made on or after July 27, 2011.¹² Although not stated, presumably any agreements to arbitrate made before July 27, 2011, are governed by the prior Act No. 616 of 1981. For agreements to arbitrate made before July 27, 2011, the parties may agree to be governed by Act No. 695 of 2011.¹³

B. Arbitrability Under the Arkansas Uniform Arbitration Act

Arkansas courts strongly favor arbitration as a matter of public policy.¹⁴ Arbitration is looked upon with approval by courts as a less expensive and more expeditious means of settling litigation and relieving docket congestion.¹⁵ Because no person may be compelled to arbitrate a grievance unless he or she has agreed to do so, arbitration is a matter of contract construction.¹⁶

The question of whether the parties have submitted a particular dispute to arbitration, i.e. the question of arbitrability, is an issue for judicial determination unless the parties clearly and unmistakably delegate that question to the arbitrator or provide otherwise.¹⁷ Arkansas courts apply state contract law in determining the arbitrability of disputes.¹⁸ Courts will seek to give effect to the intent of the parties as evidenced by the arbitration agreement itself.¹⁹ When contracting parties express their intention in a written instrument in clear and unambiguous language, it is the court’s duty to construe the writing in accordance with the plain meaning of the...