Friday, September 18, 2020

COVID-19 Leadership Series: The Seven Month Itch: Pandemic Fatigue and the AEC Work Force

Free Webinar: September 22, 2020 at 4pm ET



Labor and employment challenges for all stakeholders in the construction and design industry continues. Our panel will discuss the latest developments in government responses, updates on Paycheck Protection Program along with job-site safety, retention, and working from home, among other topics.

Speakers:
Erin Ebeler Rolf, Attorney, Woods Aitken LLP, Lincoln, Nebraska
Oded Sten, Chief Commercial Officer, The Conti Group, Edison, New Jersey
Jodi Taylor, Associate General Counsel, Brasfield & Gorrie LLC, Atlanta, Georgia

In order to serve and provide resources to our Forum members, the greater ABA, and the general public, the ABA Forum on Construction Law and strategic partners have developed a multi-part webinar series exploring how the COVID-19 pandemic is impacting construction and design and identifying options for response and risk management/mitigation. In these free, non-CLE webinars, industry leaders and attendees will have the opportunity to exchange information, learn from one another, raise questions, and offer options for addressing the deepening effects of the crisis.

Wednesday, September 16, 2020

CLE Webinar: Become the Master of Your Master Construction Subcontract Agreements

September 24th, 2020 | 1-2:30 PM ET
CLE 1.5
 
Construction attorneys and their clients are increasingly using master agreements, especially at the subcontract level, to become more efficient in their contract negotiations.

This webinar will explain the advantages and potential traps you should look for in this new development. You will learn the contractual tools necessary to create master prime agreements and master subcontract agreements. You will learn how to structure and organize terms in the master agreement as well as a project order so that project specifics and master terms complement each other and avoid conflicts between the contract documents. An emphasis will be placed on best practice in negotiating subcontract terms. The recently published ConsensusDocs standard master subcontract agreement and project work order will help illustrate how an industry standard master contract can assist construction attorneys and their clients focus on risk allocation advantages and avoid potential pitfalls.


Panelists
Brian Perlberg - ConsensusDocs | Arlington, VA
Kevin F Peartree - Ernstrom & Dreste, LLP | Rochester, NY
Kristen Lynn Wendler - Independent Contractor | Syracuse, NY

Co-Sponsor: ConsensusDocs

Click Here to Register NOW


Tuesday, September 15, 2020

Best Practices for Remote Mediation

Despite the ongoing pandemic, attorneys require effective methods for resolving construction disputes. 2020 has proven that legal conflicts are the natural result of the unprecedented uncertainty a global pandemic can produce. Parties need to resolve conflicts to continue business operations, pay employees, and protect property. Litigators have increasingly utilized virtual meeting software to achieve these goals.

Mediation can be a great opportunity for litigators to resolve construction disputes without the time and expense of going to trial. Given the ongoing COVID-19 pandemic, mediations are increasingly being held virtually using technology like Zoom. While many of the same best practices apply, certain aspects of the virtual mediation process are a brave new world. Construction lawyers should be prepared to embrace the new challenges and opportunities offered by the “new normal” of remote mediations.

Like a traditional mediation, successful attorneys invest their time to select the best mediator, prepare clients for the process, and manage expectations. Although these fundamentals continue to apply regardless of the format, this article will focus on steps particular to virtual mediations.

Preparation and Communication

A pre-mediation call remains critical to a productive mediation. Clients, regardless of their level of sophistication, should hear an explanation of the mediation process. This call should both manage a client’s expectations and answer remaining questions about how mediation differs from litigation.

Next, discuss the special characteristics of a virtual mediation. The mediation may include a pre-mediation session with the mediator. One obstacle lawyers report with Zoom mediations is establishing trust and good communication with the mediator. A virtual pre-mediation conference with the mediator may be helpful to help get this process started.

The client may require reassurance that private communication remains available in the context of a virtual meditation. Review expectations about confidentiality and security, such as whether the Zoom mediation should be password protected, and additional security measures, such as utilizing the most current version of Zoom and controlling access to the participants’ locations. Multifactor authentication may be a good idea when privileged, confidential, or sensitive information is involved.

Getting Comfortable with Zoom

This is where things really start to get interesting. Attorneys should make sure to discuss the specifics of Zoom or other virtual meeting technology with clients prior to the mediation. Part of this process is simply increasing a client’s comfort level. Many lawyers have reported conducting a practice or dry-run helpful to walk the client through the process. Some clients may benefit from a friendly reminder about selection of appropriate clothing and location. The client should be in a location with a strong WiFi connection which should be tested in advance. Ideally the location will be without background noise or other potential distractions.

The parties should make sure to allocate a specific amount of time to devote to the mediation, free from distractions and interruptions. This is often challenging when participants are located in their own homes or offices with their phones and computers close at hand. Multitasking and phone pick-ups can easily distract participants from the business at hand.

Plan for confidential communications with your client during the mediation. An additional, private virtual room should be made available. Depending on the client and the case, texting, emailing, or instant messaging may be a workable backup solution.

What About Documents?

Sharing information in advance can help resolve logistical and technical issues prior to the mediation. Zoom allows sharing documents during the mediation through its “share screen” button.

Sharing documents in advance will allow the mediator and other parties the opportunity to review. When confidential documents need to be shared with the mediator only, it is a good idea to establish a standard procedure. Dropbox, Google Drive and other tools can be extremely helpful when used with appropriate precautions and safeguards. Depending on the document, having a hard copy in your hands is never a bad idea. In addition to serving as a back-up for unexpected technology issues, many of us benefit from having a physical document to reference.

The same logic applies to draft settlement agreements. Like other documents, these should be circulated in advance. This way everyone has the opportunity to digest the proposed terms. Hopefully this can help parties focus their energy on the most important disputes. Often a settlement agreement can be edited and shared during the mediation. Adding appropriate labels such as the date and time can help make sure everyone is referencing the identical, most up to date version.

Many mediators will encourage parties to share their mediation briefs with each other. This can be a context where tone becomes very important. A diplomatic tone in a mediation brief may be even more important for Zoom mediations. In virtual meetings parties do not enjoy the same opportunities for building trust and rapport relative to a traditional, in-person meeting. Take this into consideration when deciding the appropriate voice for your mediation brief.

The Day of the Mediation

If the parties have prepared, planned, and consistently communicated leading up to the date of the mediation, the day itself can run surprisingly smooth. Using new technology can always bring unwelcome surprises, but a thorough WiFi test for internet speed can help identify and eliminate many common issues like frozen screens and interrupted audio.

Before any conversation, participants should confirm who is actually in the room. This practice can help maintain confidentiality and help parties feel comfortable to speak freely.

Most virtual meeting platforms will allow the mediator to create separate “breakout rooms.” It is a good idea for the mediator to set these up first, then visit each breakout room individually to confirm everyone is where they need to be. Like traditional mediations, Zoom allows a mediator to travel between separate rooms to conduct private conversations with attorneys and their clients.

Signing the Agreement

If the mediation was productive and the parties are ready to sign an agreement, now what? Electronic signatures can be applied using “DocuSign” and other similar programs. If completing a written settlement agreement is not possible, parties can tentatively agree that all material terms are resolved. Memorialize this agreement in a term sheet.

Even if only a limited or partial agreement is reached, a term sheet can still be created and signed. A good mediator should remind everyone that, notwithstanding this positive development, such a limited, tentative agreement will be unenforceable. Make sure to schedule a second mediation date to keep things moving towards settlement.

Conclusion

Out of necessity, the COVID-19 pandemic has given birth to a flourishing market for virtual meeting technology. The legal uses of Zoom and other platforms will continue to evolve and improve in the future. For now, litigators have already developed enough best practices to settle many disputes remotely. Fortunately, many of the same tips apply. Communication, planning, patience, and preparation continue to be crucial for a successful mediation both on and offline.

Author Patrick McKnight is an associate in the Litigation Department at Klehr Harrison Harvey Branzburg LLP in Philadelphia, Pennsylvania. Patrick also serves on the Klehr Harrison Coronavirus Task Force. He can be reached at pmcknight@klehr.com.

Monday, September 14, 2020

COVID-19 Leadership Roundtable Series: If There's a Silver Lining, Where's the Playbook?

September 15th, 2020 | 4-5PM ET
A Special Forum Crisis Series
Join the discussion!

Contrarian investors and companies find opportunities in good times and bad. More than half a year into the COVID-19 crisis what sectors of the economy are prospering in spite or because of the pandemic?  How will these developing trends shape the future of the construction economy and determine?  Join our Panel to gain insights into how COVID-19 is shaping our economy.

Ken Simonson
Chief Economist
The Associated General Contractors of America

Michael J. Vardaro
Managing Partner
Zetlin & De Chiara LLP

Frank Giunta - Moderator
Partner and President, Americas
HKA Global

Click Here to Register NOW


Free, Non-CLE Webinar

Thursday, September 10, 2020

Join the Forum's D&I Brunch on September 17 at 1pm ET

The Keynote Speaker will be Jimmie L. McMillian, Senior Corporate Counsel of the Indianapolis Motor Speedway. Mr. McMillian will discuss his journey from the South Side of Chicago, to Partner at an Am Law 100 firm (which was the subject of New York Times Article), and then to the Speedway. Along the way he learned about the importance of mentorship, the challenges facing black lawyers, and the need to advocate for social justice issues that were important to him. Mr. McMillian will also provide some fascinating facts about his role as senior counsel, and the challenges of hosting the single largest day sporting event in the world (with this year hopefully being the only exception to that distinction).

Click Here to Register NOW


Tuesday, September 8, 2020

Is Arbitration on the Briefs Right for your Client?

As clients increasingly demand options for timely, efficient dispute resolution, attorneys need to stay apprised of all available alternatives. Private arbitration was developed with efficiency in mind and has become wildly popular in the construction industry, providing parties a means to avoid delays caused by backlog in state and federal court dockets as well as evidentiary and procedural formalities. The American Arbitration Association’s Fast Track Procedures within the Construction Rules further trim the usual arbitration procedures, pushing parties through a streamlined pleading and discovery process. However, even the AAA Fast Track Procedures require significant time and resources, primarily those invested in conducting a hearing before an arbitrator.

Submitting a case for decision on briefs alone, without presenting in-person evidence or argument to the adjudicating body, is common in appellate litigation. It is also frequently used in trial court-level litigation, sometimes without the parties’ consent. Parties agreeing to arbitration on briefs alone, however, is exceedingly rare. Yet, when employed in the appropriate situation, agreeing to submit a dispute to an arbitrator on briefs alone can be a useful tool for quick and efficient dispute resolution and a highly satisfied client. On major construction projects, the commitment to arbitrate certain matters is often made before a dispute arises. So, when is arbitration on the briefs the right choice for your client’s project? And, what can you do to ensure a successful resolution? Let’s explore.

Arbitration on the briefs has two primary benefits. First, it can be highly cost-effective. Eliminating the costs associated with witness and hearing preparation and presentation can significantly reduce the overall price tag of arbitration. Second, arbitration on the briefs provides for speedy dispute resolution without sacrificing equity or expertise. Again, jettisoning a hearing can expedite a final resolution on the merits by weeks, if not months; certain disputes may even be submitted for a decision on the briefs without a traditional discovery process, which all practitioners know can be extremely time-consuming. Furthermore, the arbitration agreement allows the parties to dictate the timeline for decision, eliminating uncertainty and facilitating easy mid-project or mid-term dispute resolution.

Foregoing a hearing is not without its downsides. Without a hearing, an arbitrator may miss or misunderstand certain complex factual issues, and the parties have limited opportunity for clarification. Thus, astute construction attorneys will recognize that arbitration on the briefs is not one-size fits all. Predicting the nature of disputes likely to arise on your project and the evidence necessary to resolving those disputes is critical in 1) deciding whether arbitration on the briefs is appropriate for your client’s project and 2) drafting the terms of such an arrangement. When considering an agreement to arbitration on the briefs, keep in mind the following tips for success.

Identifying the Issues Subject to Arbitration. Not all disputes lend themselves to resolution on written arguments alone. For the same reasons decisions without a hearing are regularly issued in an appellate court setting, an arbitrator’s decision on the briefs is most successful when the dispute is straightforward and turns on a few narrow questions if not a single, objective issue. Lay witness and/or subjective evidence-heavy fact patterns and other, more complex disputes may be difficult for an arbitrator to grasp on paper alone and key details may be lost without an opportunity for the arbitrator to ask questions. Conveying witness credibility and evidentiary context may also be difficult. Accordingly, disputes involving competing expert testimony are not well-suited to resolution by this method. By contrast, a foreseeable, single-issue quarrel that requires either interpretation or application of a contract clause to a limited factual scenario is easily decided with limited party input. For example, in an agreement based primarily on unit prices, disputes over adjustments to unit prices may be well-suited to arbitration on the briefs. Adjustments to unit pricing are often necessitated by either 1) market fluctuations or 2) significant changes to the quantity of units subject to the agreement. Hence, few subjective factual issues will compound a dispute over the equity of an adjustment to an agreed unit price. Design ambiguity controversies and cost-only change order disputes may also lend themselves to resolution through arbitration on the briefs, particularly when employed mid-project to mitigate damages resulting from postponing a final resolution.

Careful Clause Drafting. Once you have identified the types of disputes amenable to arbitration on the briefs, your arbitration clause should carefully identify and describe those disputes to be subjected to arbitration. In addition, the language should plainly outline the particularities of the arbitration process itself. Each condition applied to the process should promote swift and cost-effective adjudication. Contemplate the following terms when developing an agreement to arbitrate without a hearing:

Arbitrator Selection. Before agreeing to arbitration on the briefs, consider the qualifications an arbitrator needs to provide a speedy and fair resolution. Ideally, an arbitrator should be able to jump into a dispute with minimal education on the intricacies of the particular dispute. In pricing disputes, an arbitrator with an accounting or financial background might be valuable. Alternatively, in a design ambiguity scenario, an arbitrator with architectural or design expertise will require less explanation to understand the parties’ respective positions and reach an equitable decision. To avoid wasting the expediency provided by arbitration on the briefs, the parties should also delineate explicit terms as to how a candidate pool will be developed and how the arbitrator will be selected in the event the parties cannot agree.

Specific Timeframes. As discussed above, a timely resolution of your dispute is a principal benefit of arbitration on briefs alone. Thus, the parties should settle on hard and fast deadlines for brief submission and the arbitrator’s decision. If needed, a limited timeframe for seeking clarification or enforcement of the arbitrator’s decision should also be employed.

Evidentiary Limitations. Your arbitration agreement should place strict limitations on the type and volume of evidence each party is permitted to submit in conjunction with its brief. Disputes that may be decided on objective, empirical, and/or documented evidence will find the most success in arbitration without a hearing. This is not to say that no fact witness testimony should be admitted; a successful arbitration on the briefs provision will permit submission of an affidavit or similar sworn statement to verify documentary evidence and provide necessary project details to put the dispute in context. Still, the primary source of evidence submitted to the arbitrator should be documentary, not testimonial. Taking it a step further, restricting evidence included in the briefs to evidence exchanged prior to submitting the case to arbitration may facilitate the arbitrator’s decision making process, and may even promote interparty resolution without arbitration. Similarly, you might also consider a page limitation on the briefs; a limited writing will force each party to concisely state its position, and it will assist the arbitrator in identifying the key issues she must consider in making her decision.

Decision Implementation and Cost Allocation. Finally, consider how an arbitrator’s decision should be effectuated. Should the decision or award be applied retroactively? If so, at what point should its application begin? Take our example of a unit price disagreement. Should the arbitrator’s decision apply only to future units? Or, if the pricing decision applies retroactively, should it apply to all units from the time the adjustment was requested forward? Or from the time the dispute was submitted to arbitration? The answers to these questions depend on the projected disputes and your client’s anticipated position. Another important term to consider in an arbitration on the briefs agreement is an attorney fee-shifting provision. In keeping with the cost-efficiency goal of opting for arbitration on the briefs, an agreement that the prevailing party will recover its attorney’s fees will aid in ensuring only truly unresolvable disputes reach the arbitration phase and dis-incentivize over-lawyering.

Arbitration on the briefs is an interesting dispute resolution procedure to consider for your clients’ future projects and disputes. While it may not benefit all clients or all projects, under the right circumstances, proposing this procedure can yield dividends for your client and allow you to appear strategically savvy and cost-minded.

Author Megan K. George is an attorney in the Lexington, Kentucky office of Stites & Harbison PLLC.  She counsels clients on a diverse array of construction matters and routinely drafts, negotiates and reviews contracts for clients. She also frequently handles complex construction litigation and arbitration, advising clients in all stages of dispute resolution.

Friday, September 4, 2020

New Division 1 Opportunities Video -- by D1 Steering Committee Member Katie Kohm

Happy Labor Day Weekend Division 1 Members!  

I am happy to announce that Division 1 (Litigation & Dispute Resolution) Steering Committee Member, Katie Kohm, created a video about ways to get involved with D1!  

Please check out the video and contact me (rtdunn@pierceatwood.com) or Katie (kkohm@pierceatwood.com) if you have any questions or want to learn more about getting involved with Division 1!





I hope you all have a safe and relaxing Labor Day Weekend!  





Monday, August 31, 2020

What's Up with Division 1 (August 2020)

Tomorrow (September 1st) is the start of the ABA Bar Year.  This is when the changes in the ABA leadership positions formally go into effect.  As such, tomorrow I will officially be the Chair of Division 1! 

I want to take this opportunity to say THANKS to Cassidy Rosenthal for doing a fabulous job as Division 1 Chair.  After serving on the D1 steering committee for many years together and planning the Fall 2017 Meeting together in Boston, I have been really impressed with Cassidy's work ethic, professionalism, and skill.  Division 1 is SO LUCKY to have Cassidy's leadership and friendship.  

During her term as Division 1 Chair, Cassidy created our logo during her term and used the division funds to purchase insulated mugs.  Without complaint, she hauled those mugs to two different meetings to hand them out to members.  I think there may still be a dozen or so of those mugs which I will likely bring with me to San Diego at the midwinter meeting in January 2021.  

During this month's steering committee call, we discussed what we should purchase for the 2019/2020 Bar Year.  We selected D1 branded desk vacuums

I will be mailing these vacuums to Division 1's Steering Committee Members, Liaisons, and other active volunteers.  If you are interested in receiving one of these, please contact me (rtdunn@PierceAtwood.com).  Once you agree to take on an initiative for Division 1, will mail you one of these vacuums!!

We are starting the bar year off with a lot of ideas and energy.  Here are some highlights!

1. Getting Involved in Division 1 Video.  Katie Kohm created a 7 minute video for interested Forum members to learn about how to get involved in Division 1.  She will be sending it out to new members who have joined our ABA Connect page and otherwise circulating it.  Thanks Katie!

2. Law School Outreach Event.  We have our team for this panel discussion assembled.  The event will be moderated by The Dispute Resolver contributor, Lexie Pereira.  The panelists will be Ed Green (D1 In-House Counsel Liaison), Roy Wagner, Alex Dockery, and Patrick McKnight (also The Dispute Resolver contributor).  MJ Torres-Martin and Chris Sullivan are helping plan this event which will likely occur in mid-October.  

3. Construction Checklist Book.  An editor for the Construction Checklist Book sent an email to all Division Chairs asking for input regarding the publication and seeking authors.  I have asked Mike Lane and Jade Davis to lead this effort for Division 1.  

4. Rescheduled Forum Meetings.  The Fall 2020 Meeting in Memphis is not going forward this October.  The Forum leadership is considering conducting this meeting in the Summer of 2021.  The Annual 2020 Meeting is going forward on October 13-16, 2021 at the same location where it was supposed to occur in April -- Sheraton Grand Hotel, Seattle, WA.  

5. Division 1's Tool Box Talks.  Tom Nocar, Dave Ponte, Scott Griffith, and Jade Davis are planning these roundtable discussions for Division 1.  Some are going to be topical while others will be social in nature.  If you have an interest in joining this planning team, please contact me.  

6. The Dispute Resolver.  The TDR team has done a great job with this blog.  They are using video in their posts which is really cool!  Keep up the great work!

I look forward to working with you all as the Division 1 Chair.  Please send your ideas or just raise your hand and we will find a place for you to get involved!    

Our next Division Steering Committee Call is on Monday, September 14th at 3PM ET. Login information is below: 


Meeting ID: 669 178 3882

Password: 826501

Tom Dunn
Division 1 Chair
rtdunn@PierceAtwood.com
401-490-3418

Thursday, August 20, 2020

Don't Let the Distance Destroy Your Communication -- Lessons Learned from Arbitration by Zoom


Is “Remote Arbitration” an oxymoron? Or is it the wave of the future?  While most of the ADR rules allow for video presentation of evidence in an arbitration, there is little guidance on full hearings being conducted through remote procedures. In the past, parties have agreed to present one witness via videotape or videoconference where the witness was not able to travel to the venue of the hearing. However, most parties, lawyers and neutrals have been reticent to agree to fully remote proceedings.  With the continued restrictions required by the COVID 19 pandemic, parties, lawyers, and arbitrators are all starting to look at the need to embrace remote proceedings. Click here for an introductory video from the author.



So What’s the Big Deal About Remote Arbitration?

Most lawyers handling dispute resolution and litigation count on the use of their keen communication skills to present persuasive arguments to the trier of fact in a lawsuit.  In arbitration, the neutral (or panel) is the target of the communication. Lawyers are known for using skill in how to examine a witness to elicit the facts and information needed to present their client’s case. Also, the timely use of an exhibit is key – with the technological advances, some of the best trial lawyers have become quite adept in using video clips, charts, and visual images to effectively communicate information and facts, as well as to engage the tier of fact.  However, the successful lawyer also will use various forms of communication other than the presentation of evidence through witnesses, exhibits, and written briefs. Body language and non-verbal cues are critical to the trial lawyer. In addition, the lawyers in an arbitration often “read” the room – both the neutral and the other parties and counsel present to see how various factual and legal arguments are landing, and the reaction can cause a change in strategy, tone, or emphasis.

Non-verbal communication plays an integral part in effective communication.  “In fact, experts have argued that 70 percent of communication is non-verbal and that includes workplace communication.” Body language can tell you how urgent or serious an issue is. Eye contact and posture can convey confidence or sometimes lack of it. Gestures and movements can show enthusiasm or communicate more than the words express.

“One study from Columbia University found that gesticulation helps a speaker communicate effectively with an audience. Researchers explained that someone who gesticulates actually helps convey the fullness of the message they’re trying to deliver. They’re speaking on two levels at once!” “Business Insider also revealed some rather telling facts on verbal communication. Those stats showed that content is only valued at 7% in a presentation. This was verified in Science of People’s research as well. We can’t stress it enough – it’s not what you say, rather, how you say it." While this may or may not be fully accurate, it is telling that much of our effective communication is not just the words and content of your presentation but how you communicate it that will bridge the gap, even across a video screen.

This is why many lawyers are wary to arbitrate via remote processes – it loses the “feel” of the proceeding where the human interchange and interaction communicates so much more in person across a conference room table than through a screen.

However, with the status of the corona virus pandemic, the future of dispute resolution clearly will be dependent upon the use of remote proceedings, and the well-informed practitioner should come to the proverbial table with an approach to make the most of the remote process.

Four Key Considerations For An Effective Remote Arbitration

As more cases are presented through remote arbitration (potentially jury trials in the near future), there are several considerations that practitioners should keep in mind to ensure the most effective representation of their clients. Of course, reams have been written about communication skills and styles, but there are four key considerations for a remote arbitration proceeding to consider: (1) understanding your audience; (2) getting the evidence to your arbitrator; (3) controlling the room; and (4) managing the technology.

1. Understanding Your Audience

While it is important to know your arbitrator’s background, most counsel are not vetting the neutral’s ability to use technology or how the neutral will be able to engage in the process over video or control the process and witnesses.  This is a difficult skill to assess. However, many arbitrators have been working diligently to come up to speed on the technology and have familiarized themselves with the various platforms.  Once more arbitration occur, some neutrals will likely further distinguish themselves in their abilities to manage remote arbitration hearings.

Don’t let the age or background of a neutral be your guide, however.  There are many younger neutrals who are not adept in using the remote programs and older neutrals who are tech savvy and have every cutting edge device available.

Regardless, it is imperative to know and understand who your arbitrator or panel is and the work with your neutrals to ensure that they feel comfortable with the process, the platform, and the related technology needed, such as the right video camera(s).  Before you begin a remote hearing, if the arbitrator does not ask for it, request a joint session to practice on the platform, including ensuring that the arbitrator understands and knows how to control the process and that all can access and view the exhibits effectively. You may wish to have a technology person available for the practice and the remote hearing itself to assist the arbitrator.

2. Getting the Evidence to the Arbitrator

Be sure that you have worked with the arbitrator to have all of the proper procedures and rules in place to allow for an effective remote hearing as well as to ensure that you can get the necessary evidence to your arbitrator.

Do the Rules Provide For What You Need?

Each of the main arbitration providers’ arbitration rules have some rules that address – at least in part - virtual hearings. However, the perceptive practitioner will review the rules and scheduling order carefully to ensure that the evidence needed can be effectively presented. Notably, there is little formal guidance currently for a full merits hearing by internet or other remote presentation.

JAMS Rule 22(a) acknowledges that an arbitrator may vary procedures so long as they are reasonable and appropriate. Rule 22(g) authorizes an arbitrator, at his or her discretion, or upon the parties’ agreement, to conduct the hearing through virtual platforms, stating: “(g) The hearing, or any portion thereof, may be conducted telephonically or videographically with the agreement of the Parties or at the discretion of the arbitrator.” Like JAMS, the American Arbitration Association is mindful of maintaining the efficiency of arbitrations while securing the parties’ rights to be heard and to present their cases (See, R-32(a), AAA Commercial Arbitration Rules and Mediation Procedures). Rule 32(c) gives the arbitrator the right to “allow for the presentation of evidence by alternative means including video conferencing, internet communication, telephonic conferences and means other than an in-person presentation” but also requires that “[s]uch alternative means must afford a full opportunity for all parties to present any evidence that the arbitrator deems material and relevant to the resolution of the dispute and, when involving witnesses, provide an opportunity for cross-examination.”

Neither the International Institute for Conflict Prevention & Resolution (“CPR”) the International Chamber of Commerce (“ICC”), the London Court of International Arbitration (“LCIA”), nor the Singapore International Arbitration Centre (“SIAC”)  provide any specific rules for full merits hearings by video. There are not specific rules for how such video hearings should proceed in any of the ADR providers’ rules; therefore, counsel should seek a scheduling order with specific details on how the proceedings are to be conducted including the split of time, presentation of witness testimony and hearing timetables, production of exhibits, and opening and closing statements.

Getting the Witness Testimony Clearly Communicated

Many practitioners are concerned about the ability to test the credibility of witnesses in a videoconference format. However, this issue can be overcome with careful preparation of the witnesses, and having clear rules in the scheduling order addressing where and how witnesses can be presented (ensuring there is no coaching or others in the room).  In fact, many arbitrators assert that credibility issues are not as critical as many lawyers may believe. The arbitrator will still be able to observe the witness during video testimony and observe facial expressions and reactions. In fact, as stated by arbitrator Wayne Brazil, “We can see initial reactions to questions, reluctance to respond, indirection, indecision, circularity, obfuscation — as well as forthright, straight-on answering (which, we've learned, sometimes can pose the greatest threat to making accurate findings). Given these facts of videoconferencing life, the real question is this: How much is an arbitrator's ability to assess credibility compromised, really, when he or she watches a witness testify, live, on a big screen, instead of watching the witness testify a few yards away in person?”

Instead, when it comes to witness testimony, you must ensure that you are preparing your witness to testify to the arbitrator – but instead of looking at the small screen of the questioning lawyer, the witness needs to be trained to look at the camera on his screen.  When reviewing an on-screen exhibit, the witness should also be trained to periodically look up at his or her camera to respond to the question. One tip is to advise witnesses to imagine the arbitrator is ‘in the camera” and to focus on that instead of the small box of the questioning attorney.

Who Has Control – Remote Exhibits

One of the most important issues that is a difference for many practitioners is the handling of exhibits in a remote proceeding.  Depending on the agreement of the parties, the exhibits can be exchanged in advance between the parties and a set provided to the arbitrator electronically for use during the hearing, or the exhibits can be uploaded onto the remote proceeding site.  If the exhibits are exchanged in advance, a set will also need to be provided to the witness in advance; it is recommended that they be placed in a sealed envelope to be opened by the witness on screen once under oath.

If the exhibits are presented “live,” the question of how to maneuver through the document can be handled by giving the witness “control” of the screen and mouse to scroll through to specific portions of the document. To do this effectively, counsel will need to have carefully pre-prepared the documents and have a separate copy either in hard copy or on a second screen to ensure a crisp and clear presentation of the information to the arbitrator.

Cross-examination and introduction of exhibits that were not pre-planned will be a bit more challenging in a remote setting.  However, having a set of potential exhibits pre-marked can address this issue. For rebuttal, one good option is to have anticipated potential exhibits saved on your desktop and carefully described/labeled with your prepared cross-examination.  Counsel should practice in advance of the hearing uploading the exhibits and while asking questions.  If appropriate, particularly for document-intensive cases, like many construction cases, having a paralegal or tech assistant participate and upload your exhibits will make the process more streamlined and prevent counsel from distractions of trying to find the right exhibit.

3. Issues Raised By Who Is “In The Room”

One other question to consider before you proceed with the arbitration hearing is how to maintain the confidentiality of the process and who will be allowed to be in the videoconference and when. Will witnesses be held in a “waiting room” and be admitted when their time slot is ready?  Will counsel have pre-set times for when witnesses will be called? Will witnesses be called out of order? These issues will require a discussion of counsel and the arbitrator to resolve these issues in advance.

4. Technology- Choose the Platform

What platform will be used is another consideration that will need to be agreed upon early on. This will allow counsel sufficient advance time to practice and be familiar with the platform. In addition, you can work with your witnesses to practice, particularly with how to work with the exhibits and how to readily find sections on the documents in response to questions posed.

One key issue is to anticipate and plan for technology hiccups.  Have a designated person for trouble-shooting on standby to jump in and have a ready text message to bring them into the call. In addition, be sure that the arbitrator and counsel provide and exchange contact information and the arbitrator should also be provided contact information for all witnesses in case of connection issues.  You also may want to consider having a fall back of what to do if there is a problem with connection for any particular witness – will you have them dial in only or require webcam access? Thinking through and having a backup plan will give you more peace of mind and take away the distractions during the hearing.

Overall, conducting a remote arbitration is not the most ideal scenario, but effective lawyers can prepare their witnesses, ensure clarity and credibility of their cases and presentations by being aware of use of non-verbal communication to support their cases, and pre-planning and preparing exhibits carefully and having a plan in place for maneuvering through exhibits to ensure that the information you want the arbitrator to see, understand, and digest.  In addition, paying careful attention to the technical details and discussing how the witnesses will be presented will allow for a smoother process where the more confident counsel’s case can be effectively presented to the arbitrator.

Addendum: Construction companies and practitioners should be aware that some of the ADR providers are starting to develop protocols for remote arbitrations. In fact, CPR has developed a Model Procedure Order for remote arbitrations. The model order can be found here.

Author Brenda Radmacher is a Partner in the Los Angeles office of Gordon Rees Scully Mansukhani LLP and a noted expert in construction law.  Ms. Radmacher is called on as a counselor, litigator, and noted speaker on issues involving land owners, general contractors, developers, and builders.  Ms. Radmacher's practice emphasizes resolving complex construction disputes through negotiation, mediation, and, when necessary, arbitration and litigation, on projects in California, nationwide, and internationally.


Wednesday, August 12, 2020

Virtual Arbitration CLE - August 19 1PM ET

With many civil court proceedings on hold or delayed indefinitely, online arbitration is becoming more and more prevalent.

The ABA Forum on Construction Law's panel includes two litigators (including a Division 1 member - Jessica Sabbath) who gained their experience in virtual hearings after their in-person hearing in New York City was shut down abruptly due to the pandemic. 

The panel also includes a senior representative from the American Arbitration Association. 
This CLE will explore the legal issues presented by online hearings, applicable arbitral institution rules, and discuss important considerations and best practices for conducting an arbitration hearing remotely.

Register: https://www.americanbar.org/events-cle/mtg/web/402246508/

1.5 credits of CLE are eligible and registration closes at 10am ET on August 19th.  

Friday, August 7, 2020

Forum's Diversity + Inclusion Brunch (August 20th at 1-2PM ET)

Division 1 Members, the Diversity and Inclusion Committee of the Forum is starting a monthly brunch series.  The first one is scheduled for later this month on August 20th at 1PM ET.  Please register!   

Diversity + Inclusion Brunch

 

This free webinar will be featuring speaker Tewanee Joseph, CEO of Tewanee Consulting Group, a First Nations-owned and operated company, and leader in planning the 2010 Olympic and Paralympic Winter Games. Mr. Joseph, will discuss how the 2010 Winter Games’ management team’s focus on inclusion was a critical element in ensuring the Games’ success and lasting legacy. 

Date: August 20 | 1-2:00 pm ET

Speaker: Tewanee Joseph, CEO of Tewanee Consulting Group

 

Register Now  ❯❯

Tuesday, August 4, 2020

Meet D1's Neutrals - Adrian L. Bastianelli, III

As the litigation and dispute resolution division of the Forum, our members regularly serve as arbitrators, mediators, and other neutrals who resolve disputes. In an effort to promote and educate our membership about our talented neutrals, D1's Incoming Chair, Tom Dunn, decided to spearhead a series here on The Dispute Resolver blog to feature our Division 1 Neutrals (email him at rtdunn@pierceatwood.com if you'd like to be featured!).

First up is Adrian Bastianelli, III, one of the most seasoned construction lawyers who has served as a Chair of the Forum, is a fellow of the American College of Construction Lawyers, and was among the first class of construction neutrals. D1, Meet Adrian!



ADRIAN'S MEDIATION PRACTICE

When and why did you choose to become a mediator?

In approximately 1988, a mediation provider in Seattle, who saw construction as a new mediation market, contacted a group of construction lawyers who were active in the Forum and invited us to a weekend training session.  After taking the course, all of us were convinced that mediation was the wave of the future in resolving construction disputes.  I devoured every course and writing available on mediation.  Since I had been doing arbitration for ten years by that time, AAA put me on their initial mediation panel, where I have resided for the last thirty years.

While serving as a mediator is very taxing because you are being pushed by both lawyers and their clients, who know the facts and law far better than you and are trying to convince you to help them maximize their position in the settlement, it is very satisfying when you can help the parties reach a settlement that they might not have achieved without you.


Can you describe your mediating style? 

I follow the principals of Guided Choice mediation.  I encourage parties to mediate as early as possible because that is when (1) there are more opportunities for business solutions to achieve a win-win settlement, (2) costs can be minimized, and (3) positions may not have hardened as much.  I prefer a robust pre-mediation phase during which I attempt to ensure that the parties have an adequate exchange of information, without an expenditure of an unreasonable amount of money.  I also use the pre-mediation phase to develop a relationship with the principals and lawyers, educate the parties, design the mediation process for the particular dispute, and identify the interests and positions of the parties, obstacles, and people problems.  While a vigorous pre-mediation phase has become more accepted in recent years, it still is often limited to ex parte conference calls between the mediator and each of the lawyers.  With the advent of virtual mediation due to COVID-19, I am using Zoom for pre-mediation with the decision maker, lawyer, myself, and possibly others on a video call, thereby, developing a relationship with the principal and more thoroughly delving into the issues.  The virtual pre-mediation conference is far better than the perfunctory telephone call with the lawyers.  As a result, I believe the virtual pre-mediation will be around long after the virus is gone.

I am first a facilitator to help the parties explore and focus on the reasons for settlement including their business interests and issues. In addition, I help the parties understand the alternative if a settlement is not reached. If facilitation does not work, I engage in evaluative mediation.  I attempt to educate each party regarding the other party's arguments and how the trier of fact might view the issues.  I review the cost of litigation and arbitration with the parties, including the non-legal costs and potential damage to business interests.  I look for innovative ways and opportunities to help both parties achieve their goals and interests.  For example, in one case a public owner and contractor were locked in a high stakes battle in the middle of the project over a very difficult legal issue and were headed for the court room and ultimately the State Supreme Court to determine a winner many years later.  At the same time, the public was being severely inconvenienced by the actions of the contractor allowed by the contract and which the owner had no ability to stop.  I changed the focus of the mediation from the risks and costs involved the legal issue, which was the original focus of the mediation, to the business interests of the parties, i.e., could the contractor change its method of operation to eliminate the public inconvenience.  The result was a win-win resolution for the parties.   I use closing techniques that are appropriate for the circumstances of each case, including a mediator's proposal.  However, a well-known precept of mediation controls the bounds of my closing techniques: it is the parties' choice on whether to settle and on what terms.  The parties ultimately control the decision to settle.  If the parties cannot reach a settlement, I try to help them develop a cost-efficient and expeditious method of resolving the dispute in litigation or arbitration, including selection of an arbitrator, developing a plan for discovery, and limiting the issues in the arbitration.


What is a common mistake you see parties and/or their counsel employ in mediation and what steps do you recommend to avoid it?  

Probably the most common mistake I see parties employ in mediation is making an inaccurate evaluation of the party’s likelihood of success, risk, cost of litigation, and business interests, which often comes from a lack of preparation and an objective view of the facts and law.  Mediation is well suited to address this problem because the parties’ evaluations and analyses will be tested at every turn, which hopefully will cause each party to change their expectations and analyses at the end of the mediation resulting in settlement.


What is the most important skill to have as a mediator?

I always cite the three P’s: preparation, patience, and persistence.  Too many people shoot from the hip in mediation and don’t recognize that the more prepared you are, the better you will do in mediation.  Nothing is more important than preparation.  Culturally, most Americans want to achieve settlement as quickly as possible.  Patience is seldom viewed as a virtue.  However, in mediation, the person who hurries will seldom do as well as the patient one and may, therefore, lose the settlement entirely.  Finally, when a party says no, the mediation is not over.  Instead, the party who is still on the ship needs to be persistent and try other approaches, or at least find other objectives, that can be achieved in the mediation.  Don’t ever give up.


ADRIAN'S ARBITRATION PRACTICE

When and why did you choose to become an arbitrator?

I started a new law firm with another lawyer in 1978 and was afraid we would go broke, so I walked across the street to AAA and asked to be put on its panel. Mind you, this was at a time when the AAA’s pay for arbitrators was minuscule and there were few construction arbitrators.  It was a very lucky move for me because my personality and background fit the job, and ADR grew dynamically in construction, as the industry searched for and found better ways than litigation for resolving disputes that are inevitable in large construction projects. .


Can you describe your arbitrating style? 

The arbitration is a dispute resolution process agreed to by two parties through a contract.  Therefore, I try to work with parties to help them find an arbitration process that economically and expeditiously achieves a fair and just result that is in line with what they contracted for.  I encourage parties to be innovative in developing their procedures. However, I also understand that my job is to call balls and strikes, and I must do so in a fair, decisive, and expeditious manner if the parties cannot agree amongst themselves. I bring an engineer’s mind and training to the table, and, therefore, am not afraid to dig into the technical and scheduling issues. I take command and maintain control of the hearing room, while remaining courteous and respectful to the lawyers, witnesses, and party representatives.


What is the most important skill to have as an arbitrator?

Neutrality.  The minute the parties believe you are not neutral, you will no longer have an arbitration practice.  In addition, decisive analytical skills are essential. The construction arbitrator needs to have the ability to sift through and analyze extensive factual information and difficult legal arguments to arrive at a logical award in an expeditious and decisive manner.


What should drafters consider when drafting an effective arbitration clause?

One size seldom fits all. Too often the parties attempt to draft a single detailed clause that fits all disputes from the $10,000 mini-dispute to the $100 million mega-dispute.  That does not work. In my opinion, the parties’ primary goal in drafting an arbitration clause should be to agree on a method to select an arbitrator or arbitration panel that both parties trust to assist them in developing procedures that fit the specific dispute that is being arbitrated. The ability to design the procedures to fit the dispute and parties is one of the real advantages of arbitration over litigation.  Thus, in my opinion, the key to an arbitration clause is arbitrator selection, since selecting the right arbitrator can provide an expeditious, economical, and just result.  The parties can list a group of pre-approved arbitrators in the contract alongside a clear method of selecting the panel from that group when the dispute arises. The rules of an arbitration provider, such as AAA, should be incorporated into the agreement as well, so as to cover issues not specifically addressed in the clause.


What measures do you take as an arbitrator to ensure arbitration is less costly and more efficient to litigation?

I am always trying to fit the process to the dispute in a way that reduces costs and time.  One example of a technique that has worked for me when there are a lot of claims is an Excel spread sheet that lists each claim by number, a short description of the claim, the amount claimed, a list of exhibits that support the claim, the defense to the claim, the maximum amount Respondent believes Claimant can recover assuming it wins, and a list of exhibits refuting the claim.  With this spreadsheet in hand, the proceedings may be streamlined and often little or no testimony is needed on the smaller claims. The advantage of arbitration is that there are many ways to reduce costs, which is, of course, mostly dependent on the nature of dispute and the parties to the arbitration.


GET TO KNOW ADRIAN & HEAR HIS TIPS FOR FELLOW DISPUTE RESOLVERS

What geographic area will you serve as a mediator/arbitrator?

I serve on arbitrations and mediations throughout the United States and internationally.  My home turf is Washington, D.C. and the surrounding areas including, Baltimore, western Maryland, and Northern Virginia.


What is your experience and thoughts regarding virtual ADR?

I have just started doing virtual mediation and have several virtual arbitrations on my calendar for which I am preparing.  I have taught three webinars on virtual ADR and have written a paper on virtual mediation that will be published shortly. 

Live music is better than recorded music, even if it is Memorex – likewise, live ADR is better than virtual ADR.  However, virtual ADR is what we have at this time and we can, and must, figure out how to make it work.  In addition, there are some real advantages to virtual ADR, i.e., the reduction in cost to fly and house witnesses, lawyers, company representatives, and arbitrators/mediators to the site, the lack of standby for those participants waiting for their turn, the ability to reconvene the next day if the case does not settle, and many others.  As mentioned above, maybe the most significant development is virtual pre-mediation. As lawyers handle more virtual cases and improve their virtual skills, so too will the viability and acceptance of virtual ADR.


How can ‘dispute resolvers’ better resolve disputes?

Dispute resolvers can improve their likelihood of success by laying a strong foundation, i.e., being thorough and realistic in their evaluation of the risk and cost of litigation and imaginative in developing the procedures to resolve disputes. Although most lawyers simply default to what they are used to doing, there are so many ways to attack resolution of a dispute that will produce reasonable results at a lower cost.


How does the Forum and Division 1 relate to your mediation and arbitration practices?

The Forum and Division 1 have been one of the main reasons my mediation and arbitration practices have been successful.  Many of my cases come through acquaintances I have made at the Forum.  In addition, the Forum has provided me with many great educational programs that have, in turn, made me a much better mediator and arbitrator.


What was your first Forum meeting?

My first Forum meeting was a lunch in Washington, D.C. in approximately 1985.  There were only a few attendees and most of them were surety lawyers.  Wow, how the times have changed.


What hobbies, activities, or interests do you do outside of work and the Forum? 

I spent twenty years coaching kids’ basketball and many years playing basketball, tennis, golf, and running.  My creaky bones now limit me to the golf course.  While I have no musical talent, I love music of all kinds, and my wife has led me to the theater.

_____________________________________________________________

Adrian L. Bastianelli, III is a Partner at Peckar & Abramson. His practice focuses on construction claims and litigation, with an emphasis on government construction contracts. He represents all sectors of the construction industry, including general contractors, subcontractors, owners, design professionals and sureties. Mr. Bastianelli also has an active alternative dispute resolution (ADR) practice. He has served as an arbitrator, a mediator, and a DRB member on hundreds of construction disputes.

Contact Adrian: ABastianelli@pecklaw.com | 202.293.8815

_____________________________________________________________

Neutrals interested in being featured can contact Tom Dunn here: rtdunn@pierceatwood.com

Editor Lexie R. Pereira is an incoming third year J.D./M.B.A. student at Boston College Law School and Carroll School of Management, studying to become a litigator, with a specialty in construction law. Currently, she works as a legal intern at Consigli Construction Co., Inc., serves on the Editorial Team of the ABA’s Forum on Construction Law’s Dispute Resolver blog, and acts as the new 2020 Student Liaison of the ABA's Forum on Construction Law. This summer, she was invited to rejoin Hinckley Allen as a Summer Associate with a focus in the Construction and Public Contracts group. At school, Lexie is the President of the Real Estate Law Society and the President of the Eagle-to-Eagle Mentoring Program. Lexie earned her B.A. and a varsity letter from Boston College in 2017. 

Contact Lexie: pereirle@bc.edu | https://www.linkedin.com/in/lexie-pereira/

Wednesday, July 29, 2020

What's Up with Division 1 (July 2020)!

I hope you all are enjoying your summer so far and staying healthy and safe.  In this message, I want to announce a couple of changes with Division 1 (Litigation & Dispute Resolution) and some upcoming events / ideas.

Announcements New Division 1 Leadership

Division 1's Liaison to Special Programs and Education Committee (SPEC).  

After many years of dedicated service on serving as our liaison, Anthony Osborn, Gehling Osborn Law Firm, PLC, is stepping down as our SPEC liaison. Thank you Anthony for all your years of service in this role and for your future involvement in other Division 1 activities!

Longtime Division 1 member, George Fink, BRG, is stepping into this role.  George is energetic about getting involved in this committee.  We look forward to your ideas and feedback on how Division 1 can greater contribute to the SPEC Committee.








Division 1's Liaison to Diversity and Inclusion Committee.  

Kelsey Funes, Phelps, a Division 1 Steering Committee Member, has become an at-large member of the D&I Committee.  In her role as Division 1's liaison, Kelsey has been a leader on numerous initiatives including but not limited to planning numerous D&I breakfasts at the national meetings.

I am excited to announce that Jessica Sabbath, King & Spalding, has agreed to take-on the liaison role to the D&I committee. Nick Holmes, a past chair of Division 1, is the Chair of that Committee and we wanted to send one of our best new, active members to help him.  Good luck and thank you Jessica!






Division 1's Liaison to Technology Committee 

Like Kelsey, Katie Kohm, Pierce Atwood LLP, has served as the Technology Liaison for many years.  In that role, Katie has taken on almost every initiative and become the technology specialist and go-to Forum volunteer because of her skill and commitment.  Most recently, Katie is the volunteer in charge of coordinating updates to ABA Connect -- which is a very important role given that is our means to communicate with each other.  Katie has been appointed as an at-large member of the Technology Committee.

Brett Henson, Shumaker, has agreed to jump into this role.  Brett is very active in the Florida Bar construction litigation section.  I am confident that he will bring fresh ideas and perspective into Division 1 from his experience working with that group.  With COVID, the Technology Committee has increased importance to find new and creative ways to reach and collaborate with Division 1 members. Thanks Brett for taking this on.  I look forward to working with you.





Upcoming Programs and Ideas

Division 1 has started a few working groups to find ways to foster communications and sharing of information with each other during this period.  Some of them are highlighted below:

  • Division 1 ADR Neutral Feature Series.  We are the litigation and dispute resolution division of the Forum.  Our members regularly serve as arbitrators, mediators, and other neutrals to resolve disputes.  To promote and educate our membership about our talented neutrals, we decided to start a series on The Dispute Resolver blog to feature our Division 1 Neutrals.  The first of those features will be published next month.  
  • Law School Outreach Program.  We are in the planning stages of putting on a Division 1 / Forum law school outreach program to provide an overview of construction law and ADR to law students.  We are communicating with the Membership Committee and Forum leadership to get this scheduled for mid to late September.  There will be a panel followed by a brief networking session.  If you are interested in helping out with this program, please contact me (rtdunn@pierceatwood.com).  
  • Distance Learning CLEs.  Our steering committee member, Rob Ruesch, Verrill, heads up the Forum's distance learning CLEs / webinars. There will be in increased focus with webinars in the coming months and we want to help Rob's team out as much as possible. Bill Shaughnessy, Jones Walker, and George Fink are going to lead up our team to help generate CLE content for distance learning in the coming months. If you have ideas or would like to be involved in this group, contact me, Bill, or George.  
We have other ideas that we are in the early implementation stages such as scheduling a series of discussion / round-table series on a variety of topics.  

Big thanks to Lexie Pereira who was instrumental in helping me and Division 1 get the ADR Neutral Series and Law School Outreach program off the ground.  Lexie is a law student at Boston College Law and a contributor to The Dispute Resolver blog.  

As you can see, Division 1 has room for many to contribute.  We invite your ideas -- especially those that are creative and embrace how we can help each other with our practices during the COVID era.  Reach out to me and any other Division 1 Steering Committee Member.  

Make sure to join us on D1's ABA Connect Page and follow our blog - The Dispute Resolver!  

On a personal note, since March, my daughter demanded a new pet.  In fact, she wanted a pet ferret!!!  After many, many, many discussions about it, we decided to add a third cat to our family.  Here are two photos of pumpkin!  A kitten has to make you smile and read this post, right! 

Pumpkin visiting me at my home office desk.
Pumkin likes playing in dirt. Here he is our pepper plant.  We had to take all of these outside :)

I hope you enjoy the rest of your summer!  I look forward to hearing from you!

Tom Dunn
Incoming Division 1 Chair
Pierce Atwood LLP
401-490-3418 (d)
508-838-9779 (m)





Friday, July 10, 2020

Why Every Lawyer in the Construction Industry Should Pay Attention to Level 10 Construction v Sea World LLC

“We will not process outstanding payments to contractors or subcontractors until the pandemic restrictions are lifted.”

Since the pandemic began, I have wondered what courts across the country would do when businesses started breaking contractual obligations and blaming, or using, pandemic restrictions as their defense. Most lawyers would agree that a force majeure clause would likely be the deciding factor in these types of breach of contract claims. However, the United States has never experienced the pandemic restrictions we have faced over these last few months and many companies recognize that their force majeure clause might not be as reliable as they might have once hoped. Now, we have the unique ability to witness what a California federal court will rule regarding this exact argument.

On June 8, 2020, California contractor Level 10 Construction, LP (“Level 10”) filed a Complaint in the United States District Court for the Southern District of California alleging Sea World declined to pay for construction of a 2020 theme park attraction until Sea World reopens. Specifically, Level 10 alleges that the payment for work, originally over $11 million, “was not conditioned upon Sea World San Diego’s theme park being open for business to the public,” that Sea World San Diego repudiated the contract by stating “Sea World San Diego would not process any outstanding payments until the parks open,” and that “Sea World San Diego understands they are in breach of contract.” As a result, Level 10 is claiming damages in the principal amount of not less than $3,278,471.30 plus interest.

The fact that Sea World has recognized that they are in breach of contract means that they may be relying on their force majeure clause or the doctrine of impossibility to justify their delayed payments to Level 10. Typically, the party relying on their force majeure clause may be granted relief from performing their contractual obligations if certain events render performance untenable or impossible.

As a refresher, the legal definition of force majeure, or “act of God,” describes any event that is unexpected by all parties, not caused by any party, and affects the relationship between them. A force majeure clause indicates that a party owes no liability to the other in the event force majeure makes performance impossible. A force majeure clause includes not only natural events but also acts by a human agency that are usually not within the scope of “acts of God.”

The pivotal moment in Level 10 Construction v Sea World LLC might be whether the pandemic restrictions make Sea World’s contractual obligations “impossible.” Performance of a duty is excused when a change of circumstance renders it impossible. Impossibility of performance of a duty under a contract is a defense for a claim of breach for non-performance of that duty when the performance of the duty becomes impossible due to unforeseen but changed circumstances.  Simply stated, impossibility is a condition in which an event cannot physically or lawfully take place.  Sure, the pandemic could easily be argued as an unforeseen event, but is the contractual obligation impossible?

SeaWorld Entertainment, Incorporated owns Sea World San Diego, and, according to their most recent Securities and Exchange Commission Form 10-Q filing (quarterly period ending March 31, 2020), they have roughly $192,760,000 in cash and cash equivalents. Sea World San Diego will likely need to show how meeting their contractual obligation is impossible due to the COVID-19 pandemic restrictions, when they seem to have enough cash on hand to pay Level 10. While this seemingly simple breach of contract case might depend on Sea World’s force majeure clause or the doctrine of impossibility, the effects of this case are potentially deafening.

Assume for a minute that Sea World San Diego argues that they are, for all intents and purposes, bankrupt due to COVID-19. An argument which is not so absurd because it was reported that SeaWorld Entertainment recently raised $227.5 million through a private offering that it could use to help pay its bills after projecting a revenue decease of roughly 32%. The court might be put in a position to determine just how far they are willing to stretch the definition of impossibility. Having to raise money in order to make ends meet might be enough to make courts agree with Sea World’s defense.

Every industry, especially the construction industry, should be paying attention to Level 10 Construction v Sea World LLC. If Sea World is successful, then businesses that have requested a Paycheck Protection Program loan might have an argument that the doctrine of impossibility applies in their contractual obligations. This could lead to thousands of businesses refusing to honor their contractual agreements and significantly increase the number of cases in an already inundated court system.

Author Christopher M. Wise is an attorney and the Managing Member of Wise Law, LLC in Louisville, Kentucky. He focuses on contractor-subcontractor litigation and family law litigation.