Mediation Offers Plenty Of Benefits Over Construction Litigation

As all construction lawyers know, construction projects regularly result in some sort of dispute: payment claims, defects in the design or construction of the work, or even personal injuries that occur on the job. Construction claimants then must choose the appropriate dispute resolution process to pursue their claims. While certain factors such as statute of limitations, mandatory arbitration clauses, or jurisdiction requirements like the Illinois Court of Claims Act dictate when and where a claimant must file its claim, at some point construction litigants should evaluate whether to retain a third-party neutral to mediate the case. Although a successful mediation and settlement inherently requires the parties to compromise and move from their positions, the efficiency of mediation offers win-win opportunity for all parties and their attorneys, especially compared to the alternative of pursuing a claim all the way through trial.

Some of the biggest problems with litigating a construction case in state or federal court are the risks, cost and time of proceeding through discovery and trial. Because of these concerns, industry-specific form contracts require mediation as a precondition to litigation. For example, Section 15.3.1 of the AIA A201-2017 General Conditions of Contract for Construction requires "[c]laims, disputes, or other matters in controversy arising out of or related to the Contract ... shall be subject to mediation as a condition precedent to binding dispute resolution." Although form contracts are often modified, the preference for mediation and concern for litigation costs should not be disregarded.

For large construction projects, multiple parties are usually involved, including the owner, design and engineering professionals, general contractor, possibly a construction manager or owner's representative, material suppliers, and lower tier trade contractors. Many of the parties will not have contractual privity with the other parties on the project, but will rely on those parties to timely perform their work or contractual duties, including payment to other parties. When a complaint is filed, it may take an entire year of litigation simply to get all the parties served and responsive pleadings filed. For both defect and payment claims, the parties' performance or breach of contract will be at issue. It may be unclear if the cause of any defect arose from faulty construction, negligent design or surveying, or defective...