Neutral Evaluation: Another Tool in the ADR Toolbox

• Author: By Andrew D. Ness
• Pages: 5-8

THE CONSTRUCTION LAWYER 5Fall 2020

Published in The Construction Lawyer, Volume 40, Number 4, Fall 2020. © 2020 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Neutral Evaluation: Another Tool in the

ADR Toolbox

By Andrew D. Ness

Andrew D. Ness is a full-time neutral at JAMS in

Washington, D.C., and a past chair of the ABA Forum

on Construction Law.

For almost thirty years, medi-

ation has been the dominant

alternative dispute resolution

technique for settling con-

struction disputes, and for

good reason. It seems every

signicant construction case

goes to mediation at some

point in the dispute’s life cycle,

and often it works. Mediation

continues to be a powerful

and effective tool for settling

a wide variety of cases in a

cost-effective manner. But, of course, not all mediations

result in a settlement.

Mediations fail for a wide variety of reasons. One com-

mon situation where mediation is not productive is where

both sides feel strongly and sincerely that they have a very

strong case. This mutual high degree of condence in the

merits of their case prevents the parties from making the

kind of concessions needed to get to a mutually accept-

able settlement gure. But, of course, they cannot both

be right. One party or the other, and often both parties to

some degree, is misreading the actual strength of its case.

If the case goes to trial or arbitration hearing, one side

is going to be very disappointed, while the other will be

proven to have been closer to the mark in its case evalua

-

tion. But which party is off the mark?

In multiparty cases, the same problems occur but are

often more complex. The various parties often have a wide

range of views, not just on the basic strength of the major

claims, but also on the relative strength of the various

claims, the damages, and the jurisdictional or procedural

hurdles to recovery. Mediators are skilled at nding a con-

sensus that is sufcient to drive a resolution, but this does

not always work—the views may be too disparate to nd

any common ground in dollars and cents.

Coming out of an unsuccessful mediation involving

this situation of rmly held but widely divergent views

of the strengths of their cases, counsel will generally have

learned from the mediator that one, both, or multiple

sides are entrenched due to their high level of condence

in their positions. The reaction traditionally has been

along the lines of, “well, some cases just need to go to

trial.” And there haven’t been many obvious alternatives

to doing just that.

Is there a better alternative besides proceeding to trial or

an arbitration hearing in these situations? Both trials and

hearings involve a full airing of the issues, as the witnesses

with knowledge are heard from at length and the key doc-

uments are reviewed, interpreted, and argued over, often

repeatedly. Most of the time this results in a reasonable

decision on the merits and assessment of the damages, but

this is a very time-and-resource-intensive process. A great

deal of effort and expense must be expended to answer

the basic question that precluded settlement: Which party

is being overly optimistic about the strength of its case?

At its essence, neutral evaluation is a tool for obtain

-

ing the answer to that key question in a much faster and

more cost-effective manner than a trial or hearing. A

well-designed neutral evaluation process will yield highly

practical, realistic feedback respecting the relative strength

of both sides’ positions and arguments at a small fraction

of the cost of a trial or arbitration hearing. If the views of

the neutral evaluator are set out clearly and persuasively,

and are well grounded in the facts and law applicable to

the dispute, then the chances are very good that both sides

will be substantially inuenced by the evaluation. The path

to settlement becomes much clearer and easier. Sometimes

a resumed mediation is needed to close the deal, but in

many instances the evaluation alone will be sufcient to

enable the parties to reach an agreement, often largely if

not entirely along the lines of the evaluation.

Structuring a Neutral Evaluation

The hallmark of neutral evaluation is its almost unlimited

exibility—the process can be shaped to meet the needs

of a very wide variety of construction disputes, from very

simple to extremely complex, and from modest in size to

very large claims. The three common elements, however,

are selecting an agreed evaluator (discussed further in

the next section), agreeing on an efcient process to get

the relevant facts and positions before the evaluator, and

then agreeing on what the desired evaluation will address

and look like. In all but the most straightforward situa-

tions, the three elements should be set out in an agreed

document, often called an evaluation agreement, signed

by all parties participating. Such agreements need not

be lengthy—most are only a page or two long—but they

establish the parties’ agreed mutual expectation for the

process. They also serve to guide the evaluator in pro-

ducing an evaluation that best meets the parties’ needs.

BREAKING AN IMPASSE

Andrew D. Ness