Articles Posted in Arbitration and Mediation

Steve Siegfried 2013 srhl-lawFirm partners Steven M. Siegfried, Stuart Sobel and Berenice M. Mottin-Berger were featured in an article about their work on behalf of one of the firm’s construction clients that appeared in today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The report, which was titled “Caribbean Construction Firm Scores $4M Judgment,” chronicles the highly contentious litigation and arbitration that led their securing a $4.3 million judgment against DeVry Education Group (NYSE: DV) for Moorjani Caribbean Ltd., a Barbados-based construction company.  The article reads:

Stuart Sobel 2013-thumb-180x270-86799Coral Gables lawyers won a $4.3 million award against a subsidiary of for-profit college company DeVry Education Group in what they say was one of the nastiest arbitration battles they’ve ever fought.

Barbados-based construction company Moorjani Caribbean Ltd. sued over alleged underpayment for the construction of student housing and classroom projects at DeVry’s St. Kitts veterinary school.

Although both parties admitted some aspects of their work relationship was relaxed, with unsigned contracts and loose deadlines, the father-and-son construction company claimed it submitted detailed accounting for both projects and spent years trying to get payment before filing suit.

DeVry Medical International Inc. fought back with counterclaims, alleging it spent more than $1 million fixing design and construction defects in Moorjani Caribbean’s work on the student housing project.

BerenicMottinBergerBut arbitrators found DeVry made improvements to the residence hall so that it could qualify as a place of refuge during a hurricane, not because of deficient construction.

By the time the 2009 bills for the two projects came to the arbitration panel this year, interest and attorney fees made the award much larger than it might have been, Moorjani Caribbean’s lawyers said. Interest on the award continues to grow at a rate of about $593 per day, according to the Aug. 19 final arbitration award.

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Stuart Sobel 2013-thumb-180x270-86799Firm shareholder Stuart Sobel authored a guest column that appeared in the May issue of Construction Executive magazine, one of the leading construction industry trade publications in the country.  His article, which was titled “Dispute Review Boards: An ADR Technique That Works,” focused on the use of DRBs for major projects as an effective means to avoid or resolve disputes that may arise during construction.  Stuart’s article reads:

Disputes are endemic to the collaborative nature of construction. It seems prudent to anticipate the disputes, even where the precise nature of the dispute is unknowable, and create a structure for proactively addressing and resolving them when they do arise. Traditional dispute resolution, whether arbitration or litigation, when invoked at the end of the project, takes place too late to save it or get it back on track. Instead, proactive onsite real-time dispute resolution is warranted to protect working relationships, cash flows and schedule progress.

Arbitration has become the preferred alternative dispute resolution forum for resolving construction disputes because it is private, streamlined and presided over by experienced construction professionals.

However, just as with litigation, arbitration only comes into play after a dispute has ripened. The arbitration process usually extracts a considerable toll on the project participants through damaged relationships and expenses. The parties involved are very unlikely to continue doing business together in the future. In addition, discovery in arbitration proceedings is now wider, longer and more expensive, and its growing resemblance to litigation has become unmistakable. Thus, despite its reputation as a cheaper alternative to litigation, arbitration has become more expensive as the process permits more litigation-like discovery, with attendant administrative costs and arbitrators’ fees.

Instead, consider the scenario where an independent person or board, respected by all project participants, is designated in the operative construction contracts to stay abreast of the design and construction and to attend and observe all pertinent meetings (owner/architect/contractor meetings, change order meetings and even important contractor/subcontractor meetings). Through this process, the dispute resolution neutral or, where there is more than one, the Dispute Resolution/Review Board (DRB), can quickly understand theConstruction-Executive-Logo nature and genesis of disputes that are blossoming — before they slow or stop the construction progress.

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StuartSobel2013.jpgThe firm’s Stuart Sobel has once again written an article that appeared in the annual special report on Alternative Dispute Resolution published by the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. Stuart’s article, which was published in today’s edition of the DBR and also appeared in Texas Lawyer and the Daily Report (Atlanta), focused on the use of formal mediation proceedings to resolve claims involving catastrophic construction accidents. Earlier this year he represented Miami Dade College in a $33.5 million mediated settlement that included 22 defendants for the collapse of a parking garage during construction.

Stuart’s article reads:

Tragically, a collapsed structure introduces personal injuries, wrongful deaths, economic losses and disappointed expectations on top of the impact to the completion of the project. As such, any formal dispute resolution, whether it be arbitration, litigation or several of both types of proceedings, will involve many parties and claims as well as many issues related to each party and each claim.

Add to this, many parties will have insurance available, but the coverage may be offered in layers, with underlying and surplus policies introducing even more grist for the dispute mill. Insurance policies may have several of the construction participants as additional insureds, and they may also have subrogation waivers and other nuances that must be considered in working toward a just resolution. Additionally, there will also likely be performance bond sureties that will have indemnity rights to bring to the party.

Consider then what the trial or arbitration hearing will look like. How long will it take to select a jury given the number of peremptory challenges? How long will a simple side-bar in a jury trial take? How long do depositions take to conclude, with 20-plus parties each having the opportunity to question important lay and expert witnesses? And, how much will all this cost?

How then best to manage this not so rare occurrence? At the risk of being accused of blasphemy, the answer is to run a mediation track parallel to the formal dispute resolution track.

Statistics tell us that nearly 99 percent of all filed lawsuits are settled. The settlement rate of arbitrations is not quite as high, but we should take some solace in the fact that, in all likelihood, a well-managed mediation process can also resolve our catastrophic construction claim.

So then, what is a well-managed mediation process? It must begin with the recognition that mediation is, itself, a process, not an event. Mediation is most effective when the parties understand the process, which calls for everyone to be brought together with a common goal — settling the claim — even if the goals diverge when each party wants someone else’s money to be used. Still, with everyone in the room, the opportunity for cooperative compromise in furtherance of the common goal becomes possible.

His article concludes:

When successful, mediation also allows for creative solutions that may not be available through formal dispute resolution. Correction of work, rather than the payment of money, may prove an attractive piece of a settlement. Resolutions may be kept confidential and private, while a jury verdict is never confidential.

Successful mediation requires a clear vision of what success will look like on paper. With so many parties, claims and issues, documenting a settlement reached in principle presents its own challenges.

Will all the insurers join in the settlement, disclosing their contributions and submitting to the jurisdiction of the court for the purpose of enforcement? If not, what default mechanism will work best to ensure that all of the parties pay, so that the plaintiff is not left with some paying, some not, and questions about collectability? Consider bringing a draft settlement agreement, leaving numbers blank, to the mediation so that it too can be negotiated, rather than leaving that task, with its own hazards, for the days or weeks after the dollar settlement is achieved.

Mediation provides parties the opportunity to see how their presentation of their case is received by others, and also to see their opponent’s case articulated in a manner that allows for more objective consideration. The process enables principals to sit across from each other with the ability to control the outcome of the dispute — as opposed to placing their fate in the hands of a judge, a jury or a panel of arbitrators. That control is appealing, and it has led the construction industry to embrace mediation as an important tool for the resolution of disputes involving construction catastrophes.

Our firm congratulates Stuart for sharing his insights into this important topic with the readers of the Daily Business Review, Texas Lawyer and the Daily Report. Click here to read the complete article in the DBR’s website (registration required).

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A recent editorial by the Miami Herald commemorated the one-year anniversary of the opening of the PortMiami Tunnel by highlighting the impact that this remarkable project has already made.

The editorial reads:

. . . it has been largely smooth sailing for the $643-million tunnel, which came in $90 million under budget — a feat unheard of for such massive projects. “We did it without the drama,” Christopher Hodgkins, CEO of Miami Access Tunnel, told the Editorial Board on Monday.

Built through an innovative public/private partnership, the tunnel is operated and maintained by Miami Access Tunnel, which also built the facility through a contractor, the French firm Bouygues — all with the help of a German-built tunnel boring machine.
In its first year, the tunnel has diverted 80 percent of the street-clogging cargo trucks headed for the port away from downtown Miami. Thousands of cruise-ship passengers have done the same. Now passengers landing at Miami International Airport don’t even have to get on Biscayne Boulevard. They can travel on state roads 836 or 112 and connect to I-395 east to the tunnel, which spills out at the port.

MHerald2015.jpg“The tunnel has been a great success,” Mr. Hodgkins said. “We have changed the quality of life in downtown Miami.”

Mr. Hodgkins is absolutely correct, as more than 14,000 vehicles are now using the tunnel every day and bypassing the city’s downtown streets. He is also right about the fact the builder was able to avoid “the drama” that typically accompanies construction projects of such a massive scale, and I was pleased to have helped tunnel builder Bouygues Civil Works Florida to do so when it encountered unexpected site conditions that required additional work and funds to overcome. The issue could have created a lengthy impasse during construction, and my work as the lead legal counsel for the builder helped the company to secure a $58.5 million settlement that was the subject of a front-page article in the February 5, 2013 edition of the Daily Business Review titled “Dispute Resolution Board Reaches Rapid Settlement with PortMiami Tunnel Builder.” The article read:

Imagine securing a $58.5 million settlement from a dispute panel that bans lawyers from the room.

That’s the scenario Coral Gables attorney Stuart Sobel faced while representing Bouygues Civil Works Florida Inc., which is constructing the $1 billion tunnel that will connect PortMiami to I-395.

It didn’t surprise Sobel — he helped set up the tunnel’s Technical Dispute Resolution Board when his client won the project.

The report chronicled how I devoted many hours to preparing for the hearings on liability before the Technical Dispute Resolution Board outside of normal schedules. “My work was at night, trying to anticipate the issues that were going to be discussed the next day,” I was quoted in the article, which continued to read:

For the board presentation, Sobel put together PowerPoint presentations for his witnesses to use and coached them on how to answer the panel’s anticipated questions. The board heard evidence for 13 days before making its decision largely in favor of Bouygues.

dbrlogo.jpgThe article explained that the tunnel dispute was over extra work for grouting the limestone as the company dug. “We determined there was a changed condition. The geologic conditions were different than what we’d been led to expect,” I noted.

I was also quoted discussing the merits of using Technical Dispute Resolution Boards for major construction projects. “The concept is you have construction people dealing with construction problems,” I concluded.

I am very proud of our firm’s work in enabling the tunnel builder to quickly and fairly resolve this matter and avoid any delays during construction. The award-winning tunnel is emblematic of the potential for public/private partnerships, which are expected to continue growing as the predominant paradigm for such large scale infrastructure projects in the years to come.

The firm’s Stuart Sobel, Steven Siegfried and Michael Clark represented Miami Dade College in securing a $33.5 million settlement over the partial collapse of its parking garage while it was under construction at the school’s West Campus in Doral in 2012.

After repeated mediations over period of more than a year, the construction settlement that was finalized last week enabled all of the 22 parties that were involved to avoid the uncertainties and vicissitudes of litigation.

According to Stuart, the most significant obstacle for the college was to have all of the parties accept the engineering reality that the remaining portion of the newly constructed garage had to be demolished, including removal of its foundation, with a new garage being constructed from the ground up. Based on its belief that it was the safest and most appropriate course, the college demolished the remaining portion of the garage while the mediation was still in progress and before a settlement had been reached. It relied on its trial team to either convince the responsible parties and their insurers through the mediation process or, if necessary, convince a jury through trial that its action was justified. Through the settlement, the SRHL trial team achieved consensus supporting the college’s course of action.

Click below to watch the video of the report by Willard Shepard of NBC 6, click here to read the article from the Daily Business Review (registration required), and click here for the article that appeared in The Miami Herald.

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A recent ruling by the Fourth District Court of Appeal reiterates that Florida’s courts will favor arbitration when there is a clear arbitration provision in construction contracts, even if the contracts also include a jury waiver provision.In the case of Bari Builders, Inc. v. Hovstone Properties Florida, LLC, a condominium association sued the developer for construction defects, and the developer filed a third-party complaint against Bari Builders (its subcontractor). The subcontract with Bari included both a provision that the parties agreed to binding arbitration to resolve any claim as well as a separate provision stating that “the parties waive the right to jury and agree to determination of all facts by the court.”

Hovstone prevailed in having the trial court find that the jury waiver provision in its subcontract with Bari rendered the arbitration provision ambiguous and unenforceable. 4th DCA photo.jpg The Fourth DCA reversed this decision, finding that under Florida law arbitration is a preferred method of dispute resolution, and all doubt regarding the scope of an arbitration clause should be resolved in favor of arbitration. The appellate panel also found that the two provisions were actually not in conflict, as the jury waiver provision would be applied if the parties waived their right to arbitrate.

The ruling reads:

“The jury waiver language in the subcontract does not render the arbitration provision ambiguous, as the two provisions can be reconciled in favor of arbitration. Read together, the provisions provide that the parties agree to submit any ‘controversy or claim’ to arbitration and, thereafter, any award may be reduced to judgment in court without the right to a jury trial. Additionally, in the event that the parties choose to waive their right to arbitration, the clause provides that any ‘action’ in court will be in the form of a bench trial.”

This recent ruling is another reminder to developers and general contractors of the significance of arbitration clauses in construction contracts and subcontracts, and it highlights the importance of working closely with qualified and experienced legal counsel in order to ensure that the provisions of their subcontracts adhere with those of the primary contracts for all construction projects.

Our firm’s other construction law attorneys and I write regularly in this blog about important legal and business issues that impact the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

Stuart Sobel 2013.jpgThe firm’s Stuart Sobel played a very important role in helping the builder of the new PortMiami Tunnel, which opened for traffic last month, to resolve a significant dispute and avoid a potentially lengthy delay during construction. Stuart served as the lead legal counsel for tunnel builder Bouygues Civil Works Florida, Inc., and he was instrumental in helping the company to secure a $58.5 million settlement that was the subject of a front-page article in the February 5, 2013 edition of the Daily Business Review.

The article, which was titled “Dispute Resolution Board Reaches Rapid Settlement with PortMiami Tunnel Builder,” read:

“Imagine securing a $58.5 million settlement from a dispute panel that bans lawyers from the room.

That’s the scenario Coral Gables attorney Stuart Sobel faced while representing Bouygues Civil Works Florida Inc., which is constructing the $1 billion tunnel that will connect PortMiami to I-395.

It didn’t surprise Sobel — he helped set up the tunnel’s Technical Dispute Resolution Board when his client won the project.”

The report chronicled how Stuart devoted many hours to preparing for the hearings on liability before the Technical Dispute Resolution Board outside of normal schedules.

dbr logo.jpg“My work was at night, trying to anticipate the issues that were going to be discussed the next day,” he was quoted as saying in the article, which continued to read:

“For the board presentation, Sobel put together PowerPoint presentations for his witnesses to use and coached them on how to answer the panel’s anticipated questions. The board heard evidence for 13 days before making its decision largely in favor of Bouygues.”

The article explained that the tunnel dispute was over extra work for grouting the limestone as the company dug. “We determined there was a changed condition. The geologic conditions were different than what we’d been led to expect,” Stuart noted.

Stuart is also quoted discussing the merits of using Technical Dispute Resolution Boards for major construction projects. “The concept is you have construction people dealing with construction problems,” he said.

On behalf of all of the attorneys and professionals at our firm, we congratulate Stuart on his work in helping the builder of this vital new infrastructure project for South Florida to quickly resolve this dispute and avoid a delay. Click below to watch a remarkable time lapse video that illustrates the extraordinary work that went into the construction of the new PortMiami Tunnel.

Florida’s Second District Court of Appeal recently issued an important opinion in the case of Snell v. Mott’s Contracting Services, Inc., over the issue of lien rights and the differences between arbitration and litigation.

The case involves a construction contract between homeowners and a contractor that included a provision calling for disputes to be resolved through arbitration. When a dispute arose, the contractor recorded its claim of lien, and the homeowners filed a lawsuit asking the court to determine that the lien was invalid. The contractor responded by asking the court to stay the litigation and compel the parties to arbitration, as stipulated under the contract, and the court agreed.

After the arbitration proceeding, the arbitrator found in favor of the contractor and determined that it was entitled to recover its attorney’s fees in accordance with the Florida Construction Lien Law.

2dca.jpgHowever, the appellate court found that the contractor did not bring an action “in a court of competent jurisdiction” within one year of recording its lien as required under the lien law because it had requested to have the dispute resolved through arbitration. The appellate panel found that the contractor’s rights under the construction lien law had expired, and it now had no legal basis for recovering its attorney’s fees.

Arbitration has become a popular and effective alternative to litigation in the construction field, and this recent decision now calls into question how contractors and other lienors in the industry can protect themselves if they turn to arbitration to resolve a dispute as stipulated by their contracts. Given this ruling, lienholders would now be well advised to first file an action in a court of competent jurisdiction within a year and promptly request that the court stay the proceedings so that the parties can turn to arbitration to resolve the dispute. Otherwise, they may risk losing their right to recover fees or even enforce a lien.

Arbitration is one of the most common forms of dispute resolution in construction today, but the recent ruling by the Third District Court of Appeal illustrates some of the difficulties that parties to arbitration proceedings can face in appealing or vacating the arbitrator’s award.

In The Village of Dolphin Commerce Center, LLC v. Construction Service Solutions, LLC, the contractor was not licensed at the time of the contract and became licensed after the execution of the contract with the Dolphin Commerce Center. The contractor recorded a construction lien subsequent to a payment dispute along with a demand for arbitration with the American Arbitration Association pursuant to the contract. The property owner responded by asserting that the contract was unenforceable under Florida Statute s. 489.128 which provides: “As a matter of public policy, contracts entered into . . . by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.” Section 489.128 further provides that, “[i]f a contract is rendered unenforceable under this section, no lien or bond claim shall exist in favor of the unlicensed contractor.”

arblogo.jpgThe owner also filed suit in circuit court seeking to declare that that the contractor’s claim of lien was unenforceable because of the contractor’s unlicensed status at the time of contract. However, the court ruled that the parties were compelled to arbitrate the dispute.

The owner, at the start of the arbitration, never objected to the arbitrator’s jurisdiction to rule on whether the contractor’s unlicensed status at the time of contract prevented it from enforcing the contract and the construction lien. The contractor went on to succeed in the arbitration and then moved to enforce the arbitration award in circuit court. The owner asked the court to vacate the award based on the unenforceability of the contract and lien because the contractor was not properly licensed. When the trial court affirmed the arbitration award, the owner appealed.

The Third DCA was asked to determine whether the arbitrator had jurisdiction to determine the enforceability of the contract and the lien pursuant to s. 489.128. The unanimous opinion held that “the issue of enforceability was submitted to the [arbitration] panel and neither party objected. As such, based on the American Arbitration Association rules, the panel had jurisdiction to determine the issue. To ask the trial court to revisit the issue would require the trial court to step into an appellate position. The Florida Arbitration Statutes do not provide for such. Pursuant to section 682.13, Florida Statutes, the authority of the trial court to vacate an arbitration award is very narrow.”

3rd district court of appeal.jpgBased on the United States Supreme Court decision in Buckeye Check Cashing, Inc. v. Cardegna as well as other Florida appellate decisions, the Third DCA wrote that when a party is challenging the legality/enforceability of a contract as a whole (versus only the arbitration provision), that determination must go to the arbitrator and not the court. “Those cases make clear that a trial or appellate court’s view that an arbitration panel wrongly decided the issue of illegality of a contract, and specifically illegality of a contract under section 489.128, is not a basis to vacate an arbitration award.”

The lessons to be learned for owners and contractors from this decision are clear. Parties are free to determine the scope of the arbitration provision and the issues to be determined by the arbitrator. If an owner seeks to avoid an arbitrator deciding licensing issues, it should specifically exclude the issue from the arbitration provision and make it clear that any licensing issues or issues concerning the enforceability of the contract, as a whole, are to be decided by the court. Additionally, if an owner disputes the authority of an arbitrator, an objection must be made in order to preserve the owner’s rights. For contractors, the case is yet another reminder of the importance of ensuring that they are properly licensed.

Our other construction law attorneys and I write about important legal and business issues impacting the construction industry in Florida in this blog, and we encourage industry followers to enter their email address in the subscription box at the top right of the blog in order to receive all of our future articles.

Sobel 2010.JPGThis article by Stuart Sobel appeared in the Daily Business Review on Oct. 24:

Board of Contributors: Avoiding Disputes Altogether Saves Money, Time, Relationships

By Stuart Sobel

Much has been written about alternative dispute resolution techniques, such as arbitration or dispute review boards. They are alternatives to traditional litigation that are often viewed as preferable to litigation in some respects. They may be more private, final and streamlined, for example.

But they can also be inferior to litigation. There is a limited ability to discover opposing evidence and, because of limited appeal, mistakes cannot easily be remedied.

And like litigation alternative dispute resolution still only comes into play after a dispute has ripened.

Traditional and alternative dispute resolution both take a toll on the clients who spend time and money with lawyers instead of their business. They also damage the clients’ relationship. It is not likely that a dispute, played out through any resolution process, will leave the parties willing to continue doing business in the future.

Making matters worse, dispute resolution has become increasingly uncertain.

Courts have been clogged with foreclosures, distracting judges from devoting the time necessary to properly consider and adjudicate complex business disputes. Court clerk budgets have been slashed, making it more difficult for the court staff to have files up to date and hearing times promptly available.

Courts have more matters and less staff with which to address their increased case load. Results become more erratic, slower and less predictable. At its heart, an effective dispute resolution process must be predictable; a result — or at least a range of outcomes — given a set of facts should be likely.

Unfortunately, that is no longer the case in too many instances.

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