Construction & Commercial Project Disputes
"There is one thing stronger than all the armies in the world;
and that is an idea whose time has come." -Victor Hugo
Frequently Asked Questions
Q. Why mediate?
A.
Reasonable, intelligent people simply owe it to themselves to put forth their “best efforts” in good faith to resolve their disputes. It is in their rational self-interest to seek first a peaceful, prompt, and cost-effective recourse that gives them maximum control over the outcome.Here are a few other good reasons:
The law protects mediation with a “cloak of confidentiality” that is not accorded negotiations in the ordinary course of business
Since mediation is a close cousin of “negotiation,” it is easily the most user-friendly form of alternative dispute resolution (ADR) available today
Q. If mediation is just another form of “negotiation,” then why do we need a mediator?
A.
Although negotiation and mediation are similar in several respects, the former is “opportunity-driven,” whereas the latter is always “problem-induced.” In practicality, most parties who become embroiled in serious conflict either lack, or at some point lose, the objectivity needed to sustain constructive, purposeful communications with one another. All too often, one or both succumb to the “blame game” of making the other party out to be “the problem.” In such cases, a professional mediator can be instrumental in facilitating resolution in the following ways:-
A mediator will keep discussions objectively focused and businesslike by separating the people from the problem
A mediator will “level the table,” uphold “good faith,” and prevent a verbal free-for-all
A mediator will get more relevant information out on the table, thus enhancing the quality of critical decision-making by the parties
A mediator provides an impartial reality check in testing positions and propositions, thereby helping parties to discern what is in their “best mutual interest”
A mediator serves as a mutual coach, lending a constant reconciling presence to the discussions
Q. Do parties who go to mediation automatically forfeit their right to other legal recourse or remedies?
A. No. In the event mediation does not result in a settlement, parties preserve their right to relief through the courts, or before any other forum of dispute resolution as they may mutually decide. Similarly, most agreements for mediation services executed by and between the parties with the mediator expressly provide for ongoing voluntary participation of the parties, with the withdrawal of any party permitted “without prejudice,” at any time in the process and for whatever reason. Customarily, when an agreement is struck, one or both parties will seek, as consideration for execution of a final and binding settlement document, a release of all liability as well as a waiver of rights to pursue all other relief at law on matters settled at mediation.
Q. Are agreements reached in mediation legally binding and enforceable?
A.
It is common practice that once parties reach an agreement “in principle” for the mediator to document a “memorandum” of agreement, resolution, or understanding prior to adjournment of the session in which a “meeting of the minds” occurs. As a provisional document, a memorandum enumerates basic points of agreement and frequently includes instructions for draft of a final and legally binding settlement agreement to be executed, pending review by legal counsel for each party, at a future date set forth in the memorandum. Parties have the option of designating in the memorandum that in the event a more detailed settlement agreement is not ratified by a certain date, then the memorandum, itself, shall serve as their final and complete expression of settlement. Resolutions reached in mediation thus become legally binding settlement agreements enforceable at contract.
Q. Can parties to a written contract submit their dispute to mediation without a specific provision in their agreement?
A.
Yes. As long as the parties mutually agree to engage in mediation, they may utilize it on a discretionary, or ad hoc, basis to the extent that their choice does not violate any form of alternative dispute resolution clause contained in their contract. If the contract sets forth arbitration as the sole alternative means of dispute resolution, the parties may, by mutual consent, alter the terms and specify mediation as a “condition precedent” to arbitration. This approach allows for the most cost-effective use of arbitration by reserving its application for those issues that prove irreconcilable at mediation. Mediation oftentimes enables parties to dispose of several issues at once, thus either resolving the dispute completely or simplifying arbitration of residual issues. Ideally, parties to a commercial transaction should expressly provide for mediation at the time of contract. In so doing, parties can save precious time and avoid wrangling over procedural details when an actual dispute does arise.
Q. How confidential is the mediation process?
A. Pennsylvania law recognizes the existence of a professional “privilege” between mediators and parties to a dispute whom they serve. Codified as 42 Pa. C.S.A.5949, the law establishes confidentiality for mediation documents and communications—both oral and written. Except in certain limited circumstances, the law prohibits the admission of mediation documents and communications in any action or proceeding, including, but not limited to, a judicial, administrative, or arbitration action and proceeding and prevents discovery of documents created and communications made during or in connection with mediation. The statute does, however, identify four basic exceptions to the confidentiality/privilege rule, which are as follows: (1) enforcement of a signed, written settlement document; (2) threats of injury to persons or damage to property; (3) fraudulent oral or written communication which result in a mediated agreement; and (4) documents which have an independent legal existence.
Q. Should problems routinely be submitted to mediation as soon as one or both parties believe there is a disagreement?
A. No. The initial response of parties in conflict should always be to directly conciliate their differences with each other-–preferably in person. In fact, most reputable mediators will not enter upon a dispute unless the parties have made at least one good faith attempt at conciliation. When further self-initiated conciliation/negotiation of the disagreement appears fruitless, however, the addition of a third party mediator can frequently enhance the process and salvage a settlement. Mediation or arbitration clauses should never be used or construed to pre-empt the goodwill inclination of parties to seek first to resolve their differences through direct communications in the normal course of business.
Q. What about evidence, witnesses, and lawyers at mediation?
A. Since mediation is neither a legal proceeding nor a quasi-judicial process like arbitration, parties are free to exchange information as well as make summary presentations secure in the knowledge that their disclosures do not rise to the level of “evidence.” As such, mediation makes no accommodation for “witnesses;” rather, it encourages participation from those individuals who have either a direct working knowledge of the problem, or who are a “resource person” to those who have such knowledge, while requiring participation of those vested with the authority to settle the dispute on behalf of their respective parties. Any party may at any time throughout the mediation process choose to be represented by legal counsel and to have counsel participate fully in all aspects of the mediation.
Q. How are mediator fees structured?
A. Many mediators charge for their services on a traditional flat hourly basis; others require a non-refundable filing fee or retainer per party as a “show of good faith” in addition to their hourly rate. Recently, there has been a trend toward a flat daily, or per diem, rate regardless of the actual time expended by the mediator. There is but another persuasion of mediators who charge a per diem rate for session work and an hourly rate for non-session, or preparatory, work. Some mediators assess parties a “cancellation” fee, in the event one or both withdraws after notice of confirmation of the mediation conference. Yet other practitioners, believing that parties have an appreciable interest in wanting to know their maximum cost outlay, will place a ceiling on their professional service fees. It is customary for mediators to seek reimbursement for all expenses that are incurred out-of-pocket and which are necessary and incidental to the performance of services.
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