What's Up with Division 1 (No. 13)

 HAPPY HALLOWEEN DIVISION 1

I hope you have lots of fun with your friends and family this Halloween.  In this post, I want to talk about the Fall Meeting that FINALLY occurred earlier this month.  The meeting focused on project management and was originally scheduled to occur 18 months earlier in April 2020.  It was great seeing everyone in person at the meeting.  Congrats to D1 Steering Committee Members Rob Ruesch (Program Co-Chair) and Katie Kohm (speaker on legal project management) for their work at this meeting.  Here is a photo of Katie on the stage!

We had a planning retreat at the Fall Meeting.  We had a good discussion about what Division 1 is doing, what we can do more/less of, and strategies to collaborate with other organizations.  Thanks to all of the steering committee and D1 members for attending the meeting.  Minutes from the planning retreat are available on ABA Connect by clicking here (will need to sign-in).  

We held a technology practicum in Seattle.  It was planned by D1 Steering Committee Member, Joe Imperiale from Troutman.  He reported that the practicum was a HUGE SUCCESS - perfect attendance, great audience engagement, and dynamic/impactful speakers.  Below are some photos of the practicum - Congrats and thanks Joe!

On Thursday night after the welcome reception, we went to a German beer garden called Rhein Haus -- just a short drive from the hotel.  Our local connection, Ashley Sherwood did an excellent job finding this venue. it was perfect!

We had 6 indoor bocce ball courts reserved, german prezels/meats, and drinks courtesies of JS Held.  Big thanks to Erin Fallon, Jason Ulmenstine, and Andy Englehart from JS Held for sponsoring this event.  We teamed up with Divisions 5 and 10 for the event, but many people were able to join us at the last minute as well.  Tony Lehman and I teamed up for a bocce match against Katie Kohm and Jason Cagle.  While it was a close match, I am happy to report that Tony and I won!  Here are some of the photos from our social event.  

On Friday, we had a lunch program focused on concurrent expert witness examination -- referred to sometimes as expert hot-tubbing.  Cassidy Rosenthal did a great job planning this role-play program. I heard many positive reviews about the program and the excellent quality of the speakers.  

All in all, it was a great meeting.  After many months of virtual programs, it was fabulous seeing each other in person.  I made many new connections and was happy with all of the Division 1 programs we put on.  One of the things we did was pass out some Division 1 bling, including branded lanyards, umbrellas, and waterproof phone cases.  I will bring some of those to the San Diego meeting (except the umbrellas which we will not need) if you did not grab one in Seattle.  

On October 28th, we held our Toolbox Talk Series on Increasing Diversity with Construction Neutrals.  Jessica Sabbath (our D1 Diversity + Inclusion Committee Liaison) and Lisa Colon led the discussion.  Jen Millender with the AAA moderated the program.  We came away with some practical ideas to continue the discussion and advance the goal of increasing diversity including:

• Providing writing opportunities on our blog 
• Allowing for additional mentorship / shadowing opportunities 
• Providing a referral resource -- building off of D1's Neutral Database
• Working with AAA and JAMS on these recruiting efforts at national meetings and through virtual programs.  

Here was the flyer from the program:

Because our normal TTS dates run into holidays in November / December, we are going to combine our November/December programs into one TTS program on Thursday, December 9, 2021.  Stay tuned for the registration link and program information.  

Thanks to all of the Forum and Division 1 volunteers for their efforts at the Fall Meeting.  We are planning out for the future meetings including the next one in San Diego on February 23-25, 2022!

Here are some additional photos from Seattle (some from the plane).  

Tom Dunn, Division 1 Chair

Pierce Atwood, LLP

401-490-3418

rtdunn@pierceatwood.com

Meet D1’s Neutrals Series: BRENDA RADMACHER

Company: Akerman, LLP

Office Location: Los Angeles, CA

Email: brenda.radmacher@akerman.com

Website: https://www.akerman.com

Law School: University of Southern California, Gould School of Law, J.D./MA International Relations, 1996

ADR Services Offered: Arbitration & Mediation

Areas Served: California, Arizona, and nationally

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Q: How did you become an ADR neutral?

A: As a construction attorney, I became involved with many mediations as an advocate. I observed that many attorneys (and mediators) were not readily able to engage in mediation negotiations and had a hard time taking off the litigation advocate “hat.” I enrolled in a Mediator Training Program through the American Arbitration Association and obtained my mediator’s certification.  I concurrently was asked to be an adjunct faculty member at the University of Southern California Gould School of Law teaching negotiation and mediation advocacy.  As a result of wanting to see more effective court-ordered mediations, I began to serve as a court-appointed mediator for the Los Angeles County Superior Court.

Q: Describe your experience mediating construction cases.

A: I am a construction lawyer and have been involved in the construction industry as a litigator and dispute resolution consultant for contractors, developers, and design professionals.  As an advocate, I have been engaged in hundreds of mediations.  I have mediated various types of cases as neutral, including real estate, construction, and personal injury cases.

Q: Mediators are oftentimes described as “facilitative,” “evaluative,” or “transformative.” Do you have a style?

A: My style is generally more facilitative in nature.  I will pull in some evaluative comments and insights, particularly when parties are stuck or uncertain of how to proceed.

Q: What should attorneys and their clients take into consideration when selecting a mediator?

A: I recommend three key considerations in mediator selection: personality of the mediator, the needs of the case, and the parties and people involved in the matter.

Q: What can attorneys do to best position their clients for a successful mediation outcome?

A: Preparation, preparation, preparation! Prepare (a) yourself, (b) your client, (c) your mediator, and critically (d) your counterpart.  The client who is prepared and has counsel who has prepared in detail will be best positioned for a result that is closest to their goals. Preparation is more than just knowing the facts and the law of your case.  You also must understand and know the motivations and goals of your counterpart. Taking those issues into consideration can best inform your negotiation approaches, who needs to be “in the room,” and how to make moves during the mediation negotiations.

Q: Are virtual mediations as effective as in-person mediations? Do you anticipate that mediations will continue to be conducted virtually post-pandemic?

A: Virtual mediations can be as effective as in-person mediations, but they need to be approached differently.  A successful virtual mediation may require more advance planning, additional pre-mediation caucuses, separate discussions, and a more extended timeline instead of a mediation all occurring on one day.  Based on all I have seen, I anticipate virtual mediations will continue, but that most mediations will be more of a hybrid approach with some of the stakeholders in person and some appearing remotely.

Q: Do you think limits should be placed on discovery in the arbitration context?

A: I believe limits on construction arbitration discovery are critical but would prefer to see more careful and thought-out discovery plans and approaches.  In arbitration, you can—and I believe should—design the discovery process to suit the needs of a particular case.  Staged discovery efforts and potentially limited issue-related hearings may be an appropriate and creative approach to dispute resolution.

Q: What role do you think videoconferencing will play in the arbitration landscape post-pandemic?

A: I anticipate that most arbitration post-pandemic will feature having some witnesses appear via videoconference but will still strive to have key witnesses in person. I also can foresee many party representatives monitoring the hearing remotely to take advantage of the time and cost savings from not attending the entire hearing in person.

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Editor Marissa L. Downs is a construction attorney in Chicago, Illinois where she has been practicing law for over a decade. Marissa is a partner at Laurie & Brennan, LLP and represents owners, general contractors, and subcontractors in all phases of project procurement, claim administration, litigation, and arbitration/trial. Marissa can be contacted at mdowns@lauriebrennan.com.

Litigation in Mexico and Vaccines

The Mexican legal system contains a mechanism called the “amparo,” which literally means “protection” in Spanish.

The “amparo” is a trial to protect human and constitutional rights when individuals believe their rights have been affected by any act of authority. Protected “individuals” include private companies such as those in the construction industry  as well as their employees.

 One important part of the amparo is that it allows for the “suspension” of any such act of authority.

The suspension may consist of an injunction against the act itself or not obligating the person requesting the suspension to comply with the act. In order for the judge to grant the suspension, the petitioner must request it expressly, and prove that the suspension is not contrary to public order and social interest.

The suspension can be granted provisionally pending a final decision, or definitively.

How is the amparo related to vaccines?

On June 24, 2021 the Federal Commission for the Protection against Sanitary Risks (Cofepris) issued the communication 23/2021 which authorized the Pfizer-BioNTech COVID-19 vaccine for the general population over 12 years old.

As a result, parents interested in vaccinating their children older than 12 years applied for their kids to be vaccinated. However, in one case, the request was denied.

Due to the imminent in-person return to school, the parents of the child who was denied vaccination intiated the amparo arguing violations to the right to health as well as the superior interest of children, stating that the return to in-person school would put students at greater risk of getting infected by Covid.

In that regard, the suspension was requested to order the vaccination of the child whose parents submitted the amparo.

By means of interim resolution dated August 16, 2021, a Federal District Judge granted the parents the provisional suspension requested, ordering the responsible authorities to perform the appropriate measures in order to comply with the plan of vaccination, and to vaccinate the child whose parents requested the amparo.

In conclusion, the amparo is a helpful institution to protect human rights, including the rights of minors and other sectors of the population that are at risk. Examples like this lead us to conclude that the amparo and the judicial system is helping the legal system as a whole to address important issues timely and fairly.

Author Juan Pablo Sandoval García is an Associate at COMAD, S.C. (www.comad.com.mx). His email address is jpsandoval@comad.com.mx.

Flow-Down Showdown: The Interplay of Arbitration Agreements and Flow-Down Provisions

Flow-down, or pass-through, provisions are among the most important provisions in all subcontracts, at least from the perspective of general contractors. These classic risk-transfer provisions provide that the subcontractor will be bound to the general contractor in the same fashion that the general contractor is bound under its contract with the owner. (As a practical matter, general contractors must provide access to the owner contract in order for the flow-down provision to be enforceable against the subcontractor. Prudent general contractors ought to redact sensitive information, including business terms (like their fee and other aspects of the deal) and bank wire transfer information.) These provisions are often accompanied with language throughout the subcontract that dually requires the subcontractor to follow the prime contract between the owner and the general contractor, in the event there exists a conflict or gap between provisions in the subcontract and the prime contract. For example, a prudent general contractor could draft a notice provision that requires a subcontractor to submit notice in writing within a desired amount of days and include the language “unless the General Contract Documents require notice sooner.” In short, flow-down provisions are a nice backstop for general contractors to ensure that they are following the requirements set forth in their contracts with the owner. 

However, even the best of backstops have their limits – and such limits often come to light in the face of agreements to arbitrate. In a recent flow-down showdown, the California Court of Appeals illustrated these limits when it refused to enforce an arbitration agreement that was flowed-down from a prime contract. See Remedial Construction Services, LP v. AECOM, INC., 65 Cal. App. 5th 658, 666 (Cal. App. 2d Dist. 2021). There, the subcontract incorporated by reference a prime contract that included an arbitration agreement and required, like all flow-down provisions do, that the subcontractor assume towards the general contractor “all obligations and responsibilities contained in the Prime Agreement.” Notably, the subcontract itself did not contain an agreement to arbitrate. The court thus found that since “[t]he Subcontract [did] not evidence an intention, clear or otherwise, for arbitration of disputes,” the agreement to arbitrate was unenforceable against the subcontractor in its disputes with the general contractor.

For those tracking flow-down showdowns, this result was unsurprising. Just over a decade earlier, the New York Court of Appeals came out the same way in a very similar case. See Wonder Works Construction Corp. v. R.C. Dolner, Inc., 73 A.D.3d 511, 514 (N.Y. App. 1st Dep’t 2010). There, a subcontract also lacked an agreement to arbitrate and, instead, simply incorporated by reference the prime contract which contained such agreement. Like California, the New York Court of Appeals reasoned that an arbitration agreement must be unambiguous in expressing a clear intent of both parties to arbitrate disputes. Id. at 513; see Remedial Construction Services, 65 Cal. App. 5th at 661 (“In the absence of a clear agreement to submit a dispute to arbitration, we will not infer a waiver of a party’s jury trial rights.” (citing Avery v. Integrated Healthcare Holdings, Inc. 218 Cal. App. 4th 50, 59 (2013)).

To avoid having their own flow-down showdowns, general contractors – and their lawyers – must keep in mind that the duty to arbitrate can only be imposed by clear written agreement. See 9 USC § 2; New York Convention of the Enforcement of Foreign Arbitral Awards, Article II. As recognized by the Supreme Court in the series of cases known as the ‘‘Steelworkers Trilogy,’’ ‘‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit.’’ United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960); accord AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986). Since “[a]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit,” determining who actually agreed to arbitrate is always a threshold matter. See “Steelworkers Trilogy”; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (quoting Moses H. Cone) (“The first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute. The court is to make this determination by applying the ‘federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [Federal Arbitration] Act.’”).

The best way to achieve both a clear agreement to arbitrate with a subcontractor and one that is not in conflict with the dispute resolution procedures in the owner contract is to draft a flow-down dispute resolution provision that explicitly references arbitration. So, just like how prudent general contractors can draft notice provisions that require subcontractors to submit notice in writing within a desired amount of days, “unless the General Contract Documents require notice sooner,” the same can be drafted in the dispute resolution context. For example, a subcontract should explicitly provide that disputes must be resolved in strict conformance with the General Contract Documents. The subcontract should also provide that, “at the election of the General Contractor,” disputes will be arbitrated or submitted to court of a specified location (either a convenient jurisdiction for the general contractor or the project). The arbitration agreement should provide (1) the rules of arbitration, generally it is the American Arbitration Association’s Construction Industry Arbitration Rules, (2) the situs of the arbitration, (3) the number of arbitrators, (4) consideration of a nominal sum included in the subcontract price, and (5) a waiver to jury trial, in all-capitals. The rule of thumb when it comes to arbitration agreements is to keep them clear. And that same clarity should be carried forth by flowing-down the requirements of the owner contract – nobody wants to be in the position of both litigating and arbitrating essentially the same case because the arbitration was not fully agreed to.

In the event your agreement lacks a clear agreement to arbitrate, courts,* like those in Remedial Construction Services and Wonder Works, must determine the scope of the arbitration clause at issue, so as to determine what the parties actually agreed to do. The Federal Arbitration Act (or “FAA”) provides a liberal policy of promoting arbitration because it was drafted to override the then long-standing judicial hostility towards arbitration and to make arbitration agreements “valid, irrevocable, and enforceable.” 9 USC § 2; Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983) (noting that courts are to “rigorously enforce agreements to arbitrate.”) So, on the one hand, if a court determines that an arbitration clause exists, “any doubt concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Id. at 24. However, it is “equally clear that the ‘federal policy alone cannot be enough to extend the application of an arbitration clause far beyond its intended scope.’” Fuller v. Gutherie, 565 F.2d 259, 261 (2d Cir. 1977). “After all, the purpose of the FAA ‘was to make arbitration agreements as enforceable as other contracts, but not more so.’” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967). Thus, on the other hand, arbitration cannot be compelled unless it is found that both of the parties (1) agreed to arbitrate and (2) intended the arbitration clause to cover the particular dispute. Another way to avoid being a party to the arbitration agreement is to assert that you lack the ability to pay. In such scenarios, there is a possibility that the fees of an arbitration (like the institutional ones and the ones going to the tribunal, but not the legal fees) might provide a basis for invalidating an arbitration agreement in its entirety. In other words, the right to be heard trumps the federal policy favoring arbitration. 

In conclusion, general contractors ought to continue transferring risk through flow-down provisions, but must be particularly prudent in the face of agreements to arbitrate. Again, the best way to achieve the upper hand is by explicitly reinforcing the application of the flow-down provision and referencing the agreement to arbitrate within the subcontract. And, if a subcontractor challenges the applicability of arbitration, at least you brought the bigger gloves to the fight.

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* Note, however, that pursuant to the Doctrine of Kompetenz-Kompetenz, arbitrators are competent enough to decide their jurisdiction. See Schein v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (upholding this principle in a recent January 2019 case where parties contracted to have an arbitrator decide not only the merits of a particular dispute, but also gateway questions of arbitrability). Thus, court interference may not be necessary at this initial jurisdiction stage.

Author Lexie Pereira is a JD/MBA candidate at Boston College Law School and Carroll School of Management graduating in Spring 2022 and studying to become a litigator, with a specialty in construction law. Currently, she works as a Law Clerk 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 Student Liaison of the ABA's Forum on Construction Law. At school, Lexie is the President of the Real Estate Law Society and the President of the Eagle-to-Eagle Mentoring Program. Lexie grew up in the construction industry and has spent time working as an estimator, field engineer, laborer, and, of course, in the legal capacity at Consigli and formerly Hinckley Allen and Pillsbury as a Summer Associate. After graduation, she will be joining Pillsbury Winthrop Shaw Pittman LLP as an Associate.