Expert Witnesses – False Representation of Credentials – An Introduction

Everyone uses experts. But, can you tell the difference between an expert and a pseudo-expert?

Jim Cohen of Weidlinger Associates Inc., and Dan Valentine of Simpson Gumpertz & Heger, Inc. have seen a lot of good expert work in their practices, but they have also seen a lot of lawyers, clients, and courts misled by people through inflated credentials, slanted opinion, and advocative testimony.

In a four-part series, Jim and Dan will help you to avoid pitfalls in choosing experts and expose whether an opposing expert knows what they are doing.  As part of these articles, I am assisting Jim and Dan by providing an attorney's perspective -- or at least my perspective -- along the way so that, together, the three of us can help all of you in your work with experts.  

The Basics: The Federal Rules of Evidence

In nearly every construction case, the parties turn to expert testimony to support their respective positions. As most construction lawyers are aware, certain baseline requirements must be met for a purported expert to be allowed to testify.  The basic framework is set forth in Federal Rules of Evidence 702:

Rule 702. Testimony by Expert WitnessesA witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;(b) the testimony is based on sufficient facts or data;(c) the testimony is the product of reliable principles and methods; and(d) the expert has reliably applied the principles and methods to the facts of the case.

Note that although this rule sets forth criteria for the admittance of testimony, embedded in its first sentence is the requirement that the witness “is qualified as an expert.”  This qualification process is grounded in the Supreme Court’s holdings in Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993), and its progeny.

Establishing the Witness as an Expert

As a result, it is a threshold issue to establish whether your witness is an expert before even considering whether his or her proffered testimony satisfies the requirements of FRE 702.  As stated at the beginning of FRE 702, the witness may be qualified as an expert by virtue of the individual’s knowledge, skill, experience, training, or education.  These foundational issues are usually satisfied through a review of the individual’s curriculum vitae.

Having established the witness as an expert, one must then examine the four requirements of FRE 702 to assess whether the expert’s testimony is admissible.  An expert will demonstrate his or her scientific, technical, or other specialized knowledge through their curriculum vitae and by examination and cross-examination. The expert’s opinion and the principles and methods upon which it is based typically will be presented in an affidavit, report or testimony. The trier of fact, as well as the expert witness’s client, are typically insufficiently knowledgeable of the technical issues to fully and reliably determine if the credentials are real, the data are reliable, the principles and methods are acceptable and the application of those principles and methods are appropriate.  But once the witness’s proffered testimony meets the requirements of FRE 702, the trier of fact may then make his or her own assessment of the expert witness’s credibility and determination of the weight to be accorded to the expert witness’s testimony and expert opinion.

When Things Go Wrong: Experts Who Are Not Experts

Nevertheless, there is ample room for an unscrupulous individual to present themselves as an expert falsely and their opinions as coming from an expert. In the best-case scenario, you will uncover the overt misrepresentation of credentials and conclusions before engaging the expert.  Then, you choose a different expert and go into battle. 

A step worse is if you have engaged the expert already, only you are able to uncover their puffery, misrepresented resume, or lack of education or experience in the field in which you need expert testimony before the purported expert testifies in a deposition or provides a report.  At least at this point in time, you still have the opportunity to replace the expert. 

Even worse would be if the expert’s failure to be qualified is determined after a deposition but before Daubert motions are filed. You may still have the opportunity to change out experts at this point, but the damage may already be done. 

Going further, you could end up losing your testifying expert through a Daubert motion.  Then, your choice of experts has not only caused you problems – it has caused your client to lose a significant amount of money only to be left without a testifying expert and subject to losing a claim on summary judgment.

Perhaps the worst-case scenario might be when your opponent may defrock your expert under cross-examination at a hearing or, perhaps as a tactical maneuver, at trial when it is too late for you to retain a new expert or regain the trust of the trier of fact. Not only would you lose the claim on which the expert is testifying, you may also lose other claims as well due to your lost credibility.

Alternatively, suppose no one uncovers the fact that the expert really is not an expert.  In this case, assume that you, your client, and ultimately the trier of fact will innocently accept and rely upon the expert’s inexperience, poor judgment, lack of knowledge, or misapplication of principles and methods towards the issues being addressed. The bad result here is less obvious than before but perhaps even worse: your client loses faith in your abilities and spends lots of money chasing a claim that it otherwise might not have pursued except for your advice based on this expert’s work.  Then, when the case goes awry, it’s your fault and you have lost a client.

Cautionary Tales Involving Defrocked Experts

Is there a problem with an expert’s credentials? It’s better to know the answer to this question sooner rather than later, as illustrated by the following cases:

1)    A firearms expert scheduled to testify on behalf of the State, killed himself after it was discovered that he had falsified his credentials and training. The defendant, whose conviction was based, in part, upon the expert’s testimony filed a motion for a new trial citing as newly discovered evidence the fraudulent credentials of the expert.

Mayes v. Maryland, 2010 U.S. Dist. LEXIS 114741, 6, 2010 WL 4238149 (D. Md. Oct. 26, 2010)

2)    The Supreme Court of Wisconsin vacated an inmate’s conviction concluding in a trial “rife with conflicting and inconclusive medical expert testimony” that it was likely that the jury would have had a reasonable doubt had it discovered that the expert witness lied about his credentials.

State v. Plude, 750 N.W.2d 42, 53 (Wis. 2008)

3)    Appellants challenged a decision that vacated an arbitration award on the basis of fraud.  They argued that the trial court erred because the appellants committed no fraud and because the only fraud was that of the appellees' own expert witness, who presented false credentials.

A. G. Edwards & Sons, Inc. v.Petrucci, 525 So. 2d 918, 918 (Fla. Dist. Ct. App. 2d Dist. 1988)

4)    A landowner involved in litigation engaged an expert witness to testify at the damages stage of the trial. At deposition and at trial the expert testified to his extensive educational and experiential credentials, but the other side impeached him with strong evidence of their falsity and obtained a large verdict in their favor. The landowner then sued the expert for deceit and misrepresentation, arguing that it relied on the expert's assurances, made in his resume and other materials, in retaining him as an expert and then presented him at trial based on his further assurances at deposition. The court agreed, because the landowner presented documentary evidence of its reliance on false information while the expert presented only his self-serving, conclusory affidavit in response.

Sturbridge Isle Realty Corp. v. Brown, 2001 Mass. Super. LEXIS 467, 1, 13 Mass. L. Rep. 607 (Mass. Super. Ct. 2001)

5)    A prisoner's petition for writ of actual innocence was denied properly because the discovery that the ballistic expert’s credentials were falsified did not create a substantial or significant possibility that the result might have been different.  In addition, there was no showing that evidence regarding the "expert's" education could not have been discovered through the exercise of due diligence.  Based on this, the "expert's" false testimony regarding his credentials was not material, but merely impeaching. His claim to have college degrees that he did not actually possess has nothing to do with the accuracy of his conclusion concerning the distance the victim was from the gun when it was shot.

Jackson v. State, 86 A.3d 97, 98 (Md. Ct. Spec. App. 2014)

6)    A pro se defendant sought a new trial on the grounds that his counsel failed to properly investigate the credentials of a government expert witness who falsely testified that he was a "board certified pharmacist." The government opposed the defendant's motion on the grounds that the defendant could neither show that his counsel was ineffective nor that he could show that the government should [2]  have known of the witness' perjury.

In considering the defendant's supplemental pleadings regarding the claims of ineffective assistance of counsel and that the government should have known of the expert witness' perjury, the Court concluded that the defendant failed to put forth a viable ineffective assistance of counsel claim and that the defendant failed to put forth any evidence that the government should have known of the expert's perjury.

 

United States v. Price, 357 F. Supp. 2d 63, 65 (D.D.C. 2004)

It is unlikely that, in the cases cited above, the attorneys employing the expert witnesses were aware of the false credentials. In addition to credentials, Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), highlight the need for careful scrutiny of data, methodology, and conclusions reached in regard to expert testimony. 

Notwithstanding Daubert and Kumho, the problem of misrepresented credentials continues to surface as late as at trial by which time any review of the expert’s credentials, facts, methodology and relevance should have long been completed. A recent case is a cogent example, in which the court concluded that, “plaintiffs' choice of Dr. Sullivan as its expert witness is surprising as he is singularly unqualified in the necessary areas.” Estate of Jaquez v.City of New York, 2015 U.S. Dist. LEXIS 60734, 23 (S.D.N.Y. May 8, 2015)

What Will Follow

As these cases illustrate, many experts can con good lawyers into believing that the expert knows what he or she is talking about, that the expert has proper credentials, and that the expert follows proper procedures and methods to arrive at conclusions.  

How do you figure out whether your expert is really an expert?  

We will explore how individuals may seek to present fraudulent, inflated, or otherwise misleading credentials, facts, conclusions, and testimony in our next three installments, including 1) initial presentation of credentials; 2) preparation of their report; and 3) during testimony.

Authors:

James Cohen, PE, Associate Principal, Building Pathology and Investigations, Weidlinger Associates Inc.

Daniel P. Valentine, Esq., P.E., Senior Project Manager, Simpson Gumpertz & Heger, Inc.

Publication Opportunities

There are currently a few publication opportunities with both The Construction Lawyer and Under Construction. The Construction Lawyer has opportunities for its mid-winter edition. Under Construction has opportunities for its upcoming editions as well. If you are interested, please email Anthony Osborn (anthony@goosmannlaw.com) or Division One Chair Nick Holmes (NHolmes@nkmlawyers.com) and we will put you in touch with the right people. This is a great way to get your name out there, especially for younger lawyers.

Update: Be Careful What You Ask For: Missouri Court of Appeals Also Upholds Arbitrator’s Attorneys’ Fee Award Based on AAA Construction Industry Rule 45 When Both Parties Requested an Award of Fees

In our January 15, 2015, post, linked here, we noted the decision in Lasco Inc. v. Inman Construction Corp., et al., 2015 WL 129024 (Tenn. App. 2015), in which the Tennessee Court of Appeals reversed the trial court and upheld an arbitrator’s attorneys’ fee award. The court found that, while the contract at issue did not explicitly provide for the award of attorneys’ fees,  the parties incorporated the AAA’s Construction Industry Rules into their agreement - particularly Rule 45, which authorizes arbitrators to include an attorneys’ fees in an award when both parties request attorneys’ fees. Because both parties had requested attorneys’ fees, the court held that the arbitrator had not exceeded his authority in awarding attorneys’ fees to the prevailing party.

Recently, in City of Chesterfield v. Frederich Constr., Inc., 2015 WL 1814471 (Mo. Ct. App. 2015), the Missouri Court of Appeals held similarly. The contracts at issue provided that all disputes were to be resolved under the AAA’s Construction Industry Rules, but the contracts did not contain explicit attorneys’ fee provisions. There was also no statutory authority for an attorneys’ fee award. The arbitrators noted those points in their final award, but the panel nevertheless awarded fees against the City of Chesterfield under Rule 45 of the AAA’s Construction Industry Rules. Despite the City’s urging that its prior requests for attorneys’ fees were merely “boilerplate” requests, the Court of Appeals found that both parties had indeed requested attorneys’ fees. Therefore, the court held that the panel’s award of fees was proper.

For your reference, a copy of the unpublished decision is linked here. 

Respondent Refuses to Pay Arbitration Fee/Deposit - What is the Remedy? Recent Article Advocates for an Immediate Default

The Problem: Respondent purposefully does not pay its share of the arbitration fee/deposit out of a motivation to delay the adjudication process and/or make it more difficult for the claimant to proceed with the contractual arbitration process.  Upon non-payment, and following a cure period, the arbitrator terminates the arbitration.

Options for Claimant:

     (1) Proceed in court litigation. This denies claimant of the bargained-for choice of arbitration.

     (2) Seek an order from court to compel payment. There is no certainty with this approach.  The court may regard the respondent's breach of arbitration agreement to mean that the parties must proceed with litigation in court.  Or, the respondent may still refuse to pay thereby dragging out the process further with increased transactional costs.

     (3) Pay Respondent's portion of the fee. This is not fair.  Especially because most arbitration agreements and arbitration rules call for an equal sharing of the initial fees/deposit.  Also, fronting the full cost of the arbitration changes the dynamics of the case and could create greater concern from the claimant about the ability to recover the amount awarded plus the arbitration costs.   
Despite its unfairness, and where collectability against Respondent is not a major concern, a claimant is most likely to proceed with Option #3.  Option #3 (paying 100%) enables the claimant to have the benefit of its choice of dispute resolution and it gives respondent fewer options to evade a prompt resolution of the matter as could be the case in litigation. 


A recent article, published by the Harvard Negotiation Law Review, suggests a fourth option:

Where a commercial party fails to pay for its share of arbitrator compensation and the proceeding is terminated as a result, that, in and of itself, constitutes a default on the merits of the parties' underlying dispute, thereby entitling the paying party to proceed to court to an inquest on damages.    

In Stiffing the Arbitrators: The Problem of Nonpayment in Commercial Arbitration, Neal Eiseman and Brian Farkas advocate for a default on liability followed by a hearing on the award of damages in Court. 

The authors state the three options cited above are not equitable for the paying party and do not provide a remedy for the material breach of the contract by the non-paying respondent.  Like a defendant's failure to follow the rules of civil procedure and timely respond to a complaint in court proceedings, a respondent's failure to follow the arbitration rules by paying its share of the arbitration fees should similarly result in a default. 

This approach makes sense, but as stated in footnote 27 of the article, courts are not always receptive of that approach. See Whitestone Constr. Co., Inc. v. Varied Constr. Corp., 118 A.D.3d 418 (1st Dep't. 2014) (Eiseman/Farkas advocated for a default in this matter). 

As it relates to the AAA's Construction Arbitration Rules, Rule 56(b) permits an arbitrator, in the event of non-payment, to take certain measures:

Such measures may include limiting a party's ability to assert or pursue their claim. In no event, however, shall a party be precluded from defending a claim or counterclaim . . .

AAA Rule 56(b) states, at least as interpreted by the Whitestone Court, that such a default remedy cannot be ordered by an arbitrator based solely on nonpayment. 

Can a court enter a default against a respondent/defendant following respondent's failure to pay its share of the arbitration fees?

If so, under what rule of civil procedure assuming the only basis is non-payment of the fee? Federal Rule of Civil Procedure 55 does not fit unless the defendant fails to answer the complaint. 

Is it collateral estoppel or issue preclusion? Can't be unless there is a final adjudication on the merits. The termination of the arbitration appears to be an administrative termination rather than a substantive conclusion of the case with binding and preclusive effect.  Even if this theory worked, or assuming a valid theory of material breach without disputed material facts, the end result would be a dispositive motion on liability -- not a default.   
As acknowledged by the law review article, the prevailing judicial mindset is that a Court's primary function (and limitation) is simply to confirm or vacate arbitration awards and to go no further (even if equity warrants it).

Thus, where there is an enforceable arbitration clause, a court is likely to presume that the finding of a default is an issue for the arbitrator -- not the courts. See, e.g., Benihana, Inc. v. Benihana of Tokyo, LLC, Docket No. 14-841 (2d Cir. April 28, 2015), quoting McDonnell Douglas Fin. Corp. v. Pa. Power & Light Co., 858 F.2d 825, 832 (2d Cir. 1988) (Trial Court erred in issuing an injunction preventing a party from introducing a claim in the arbitration proceeding because "[o]nce arbitrators have jurisdiction over a matter, 'any subsequent construction of the contract and of the parties' rights and obligations under it' is for the arbitrators to decide.")

Eiseman/Farkas suggest that attorneys work around the problem of the non-paying respondent in their clients' arbitration clauses.  What would such an arbitration clause look like? If any Division 1 member has seen one, please post it for review/comment.

If working with the AAA Construction Rules, must the clause specifically override Rule 56(b) and expressly empower the arbitrator with the ability to enter a final default against a party for non-payment?  If default is entered by an arbitrator, should the damages hearing immediately go to court or should it stay with the arbitrator?  If the scope of the arbitration was an evidentiary hearing on damages, a claimant may be much more likely to front 100% of the arbitration costs.

Check out this thought-provoking law review article - http://www.hnlr.org/wp-content/uploads/HNLR-Eiseman-and-Farkas-.pdf - and share ideas on how to deal with the problem of party nonpayment in arbitration. 

Annual Meeting Highlight: In Case You Missed It

As I mentioned in my previous post regarding the Annual Meeting, we were privileged to have civil rights leader Fred Gray speak to us.  His message was powerful -- and it will remain powerful for years to come in light of our continuing discussions on race and diversity in America.

Not everyone can make the annual meetings, though.  In most cases, missing the meeting means missing the message.  But, with Mr. Gray's speech, the Forum and the American Bar Association believes that the message should be accessible to all -- even those persons who could not attend the meeting.

So, if you missed Mr. Gray's speech and would like to see it, or, if you would like to watch it again, please go to vod.videostreamz.net and use the login credentials - login: BocaResort (case sensitive) and password: ABAFCL (case sensitive).

This is an opportunity to hear directly from someone who witnessed and made history. Take advantage of it.

Litigation Tips: 4 Things to Never Forget

1. People lie. Don't expect your opponent to tell the truth. Be prepared to surgically extract the truth.
2. A good attitude goes a long way. As a lawyer, party or witness, your attitude can really impact the case. Judges and juries have to make a lot of “close calls.” If you are positive, professional and respectful, you are more likely to be liked and believed.
3. Appearances matter. Appearances affect how we feel about ourselves and how others portray us. A little confidence is a good thing. However, when it comes to the appearances of attorneys, clients and witnesses, the safest approach is to look good, but not too good. Generally speaking, you (and clients) should err on the side of dressing conservatively. Cufflinks might not be well-received by a rural jury. Exposed tattoos are risky. ALWAYS consider your venue and audience.
4. For the most part, you can't change the facts or the law. Sometimes you can't play the role of hero and must resort to damage control. That doesn't mean you're losing, it just means you have to adjust your expectations and redefine a "victory."

Highlights from the Annual Meeting

Thank you to everyone who attended the Annual Meeting of the ABA Forum on Construction Law from April 16 to April 18 in Boca Raton, Florida.  As our previous post mentioned, Division 1 held our planning retreat on Wednesday, April 15, prior to the seminar sessions, and we have set into place a number of exciting and interesting initiatives that will be revealed as we move forward into the next bar year.

What did people miss who did not attend the meeting?

Well, a lot!

First, who could turn down a view like this? The palm trees and warm temperatures that attendees enjoyed were in stark contrast to the rain and cold in many other parts of the country.

But, it was not just sunshine and beach days.

Our first session featured a panel discussion regarding what to do when a disaster hits a project and the media get interested.  Other sessions included a discussion on the future of business development tools, liquidating agreements, insurance coverage disputes, and how to draft invoices that clients will pay.  And those are just a few of the great topics attendees heard.

One of the highlights of a great week came at the Diversity Luncheon on Friday when civil rights icon Fred Gray spoke to the assembled lawyers and was simulcast to multiple school systems, colleges, and law schools nationwide.  Mr. Gray was introduced by past ABA President Robert Gray of Hunton & Williams.  Mr. Fred Gray was the first African-American president of the Alabama Bar and is notable for his role in representing the leaders of the civil rights movement -- including Rosa Parks and Martin Luther King, Jr. -- in their challenges to Jim Crow laws in the South.

Our own Division 1 breakfast featured the Honorable Marian Blank Horn, Judge on the United States Court of Federal Claims, speaking candidly regarding the use of ADR in government contracts cases that come before her court.

Of course, when you are talking about Division 1 and the ABA Forum on Construction Law, it is not all seriousness and seminars.  We have a lot of fun as well.

I mean, where else could you put the leader of your entire organization into a dunk tank?

Of course, the Welcome Reception on Thursday night was one of the most fun events. Here is a panoramic shot of that event.

Division 1 joined Divisions 10 and 12 on Friday night for networking, cocktails, and food.  While I did not get any photos at that event, rest assured that it was a great time meeting and eating with all the folks who made it to the event.

Then, on Friday, we were on a boat -- a catamaran, to be exact -- and we went on an enjoyable, sunshine-filled cruise south on the Intracoastal Waterway to an outlet south of Deerfield Beach then back north on the Atlantic Ocean to get back to Boca.

Nearly everyone enjoyed the cruise, the fun talking with each other, a few beers, and the ride on the ocean.

Our next national meeting will take place in Austin, Texas -- in the week in between the two weekends of the Austin City Limits music festival.

As you can see, it's the Construction ADR Summit -- right in Division 1's wheelhouse -- so be sure to make your reservations now for the seminar and for your hotel room!

Division 1 Planning Retreat

The Steering Committee for Division 1 and a group of interested Division members met on Wednesday in Boca Raton to discuss our future plans for programs, publications, and distance learning initiatives.  The group of happy and excited D1 members who attended are pictured here (other than yours truly, Tony Lehman, who took the photo).

We have a lot of great ideas for the upcoming bar year, and we would love for you to get involved. Please contact Nick Holmes if you want to get involved with a publication, a program, or with some new ideas of your own!

Second Circuit Holds That Arbitrators -- Not the Federal Courts -- Should Determine the Preclusive Effect of a Federal Judgment Confirming An Arbitration Award

In Citigroup, Inc. v. Abu Dhabi Investment Authority, 776 F.3d 126 (2nd Cir. 2015), the issue was whether the federal court had the authority to enjoin a second arbitration filed by Abu Dhabi Investment Authority (“ADIA”) against Citigroup, Inc. (“Citigroup”) after the United States District Court for the Southern District of New York had confirmed a previous award in favor of Citigroup and against ADIA. Citigroup claimed that ADIA’s new claims were barred by claim preclusion and res judicata of the federal judgment that had confirmed the prior award because ADIA’s current claims were or could have been raised in the first arbitration.

Citing to its previous decisions that held that arbitrators are to resolve the preclusive effects of an arbitration award confirmed by a state court and a federal judgment that had been issued on the merits, the Second Circuit held that it was the arbitrators, not the federal courts, who should determine the preclusive effect of a federal judgment confirming an arbitration award. The court noted that, in confirming the award, the district court did not review the merits of any of ADIA’s substantive claims or the context in which the claims arose, considering only whether the panel’s evidentiary rulings and application of New York’s choice of law provisions violated the FAA. Accordingly, the court found that a district court unfamiliar with the underlying circumstances, transactions, and claims was not the best interpreter of what had been decided in the arbitration proceedings.

A copy of the Second Circuit’s decision is linked here.

Litigation tip: Less is often more

Below is a link to a recent article in the Oregon State Bar Bulletin authored by a legal research and writing professor at the University Of Oregon School Of Law.  While many of us find courtroom advocacy more exciting and enjoyable than legal research and writing, brief writing is arguable one of the most important skills needed for a litigator. 

The article focuses on ridding our briefs of needless words.  The author provides four techniques for brevity that all litigators should practice: 1) use a high ratio of working words to glue words; 2) use the active voice; 3) avoid word-wasting phrases; and 4) use base verbs rather than nominalizations.  These points are not novel, but this article does provide a good refresher course on the art of brevity.  In staying true to the topic, this concludes my post! 

 
http://www.osbar.org/publications/bulletin/15apr/legalwriter.html

Appointing an Expert with Final and Binding Decision Authority

By Ben D. Nolan, III PE PSP, Managing Director, Construction Consulting, Berkeley Research Group LLP

Based on a True Story

The Situation

Imagine a situation where a large international general contractor has been terminated for default mid-project on two major unbonded educational campus projects on a UK protectorate island.  The government takes assignment of the subcontractors, who happen to be the only competent subcontractors on the island, to continue progressing the work until a completion General Contractor can be hired.  A year later, there has been only an additional ten percent progress and, due to a payment dispute, the subcontractors decide to terminate the government for default. After some negotiation, the parties agree to a termination for convenience and attempt to follow the contract ADR procedures, but they are generally unworkable given the peculiarity of the situation.  As a last resort, the parties agree to a mediation using an experienced Quantity Surveyor from the UK; the mediation fails miserably and the parties are at the end of the contractual ADR options.

The parties are determined to keep the pending dispute out of the island court system, so they get creative.  Queen’s Counsel suggests the appointment of an independent Expert to decide the disputes.  Candidates are identified from a global pool, a short list of face to face interviews are held, the preferred Expert spends a week with the parties working through representative issues and the parties agree on the Expert.  The resulting appointment agreement includes this clause:

“The parties agree that all decisions and awards made by Expert in the course or at the conclusion of the Valuation Exercise shall be final and binding on the parties…and the parties also waive irrevocably their right to any form of appeal, review, or recourse to any court or other authority with jurisdiction, insofar as such waiver may be validly made.”

This clause is the essence of the Expert with Final and Binding Decision Authority (“BDA”) ADR process.  To coin a phrase, I’ll call this particular ADR process the “BDA” process and the Expert the “BDA Expert”.

To Bind or Not to Bind

Having been that appointed BDA Expert and having issued that final, binding decision, I see many complex construction disputes that could potentially benefit from this BDA approach to ADR.  However, US litigators have not been inclined to take the leap of faith required to entrust a BDA Expert with their client’s fate in a construction dispute.  I believe with a little more understanding of their slightly altered role in the ADR process, US litigators could accept this binding ADR process to fairly resolve certain types of construction-related disputes.

There are many popular variations of non-binding ADR which involve independent expert analysis and recommendations, but none that I’m aware of that give the Expert this final and binding decision authority.  The primary reason is that the US litigators want to stay in control of the legal process.  This fear of being out of control (i.e. out of appeal options) is largely unfounded.  In the BDA process, the US litigators are still in control of the legal process, they are simply dealing with a very involved Expert instead of a lesser involved Dispute Resolution Board, a neutral listener, a mediator, an arbitrator, a panel of arbitrators, a judge or a jury.  Any arguments that would be made on appeal are made during the review of the Draft decision.

It is also crucial to recognize the difference between the level of involvement of the BDA Expert and these other triers of fact: the BDA Expert has complete access to all the facts from all parties throughout the analysis phase and decision process.  While the starting point is the traditional plaintiff’s statement of claim, from that point forward, the BDA Expert decides which claims merit consideration, works with the plaintiff and defendant to perfect the claim facts and conclusions, allows rebuttal from the defendant, allows re-statement of claims from the plaintiff, finalizes the BDA Expert analysis and issues a written DRAFT decision.  The parties can respond to the DRAFT decision, discuss any final points with the other parties and the BDA Expert and, after hearing all arguments, the BDA Expert finalizes the decision on that issue.  This process is repeated for all issues that are agreed to be decided.  In my experience, both parties were satisfied with the fairness of each decision, knowing that they had enjoyed the full benefits of natural justice.

Recognizing the Situation to Suggest Expert BDA

US litigators with experience in international construction dispute resolution will likely recognize the BDA Expert model, as it is an established ADR process in international venues.  In the US, disputes with certain characteristics would likely be good candidates for the BDA Expert approach:

• When the parties desire to design an expedited decision-making process on key disputed issues.
• When the parties desire the trier of fact to master the technicalities of large, complex technical disputes in order to fully understand and consider the underlying root cause of the dispute, including:
  • causes of late and out of sequence work,
  • causes of labor productivity problems,
  • assessing “or equal” equipment or material substitutions,
  • causes of equipment and material cost escalation,
  • responsibilities for design versus shop drawing details,
  • causes of equipment performance problems, and other things.
• When the parties desire to have individual decisions on a large number of disputed issues, such as:
  • an independent valuation of base contract work completed;
  • an analysis of entitlement to and valuation of disputed change orders;
  • an analysis and valuation of partially completed value engineering work;
  • a valuation of deductive credits for incomplete work or work not performed;
  • auditing of incurred costs in a termination for convenience;
  • an adjustment of final contract value due to the costs of correcting defective work;
  • an interpretation of disputed contract terms, such as the “value” of work completed under an AIA contract, i.e. is it the contract value or the actual cost incurred?
• When the parties desire to keep the dispute in a private ADR venue.
• When the parties desire to turn the decision over to a trusted third party.
• When the situation is so peculiar that other forms of ADR are unworkable.
• When the parties need to disclose, yet protect, commercially sensitive and auditable information.
• When the percipient witnesses are still available to participate as fact accelerators in the dispute resolution process.
• When the parties desire to maintain their business relationship with each other by reaching a fair resolution.
• When the parties desire an “open-book” approach to dispute resolution.

The Recommendation

Based upon my favorable experience with this BDA process, I recommend that US litigators consider this form of ADR in certain construction disputes.  It is a bold step for litigators to suggest an approach to ADR providing a BDA Expert with such final decision authority.  However, there is more fairness designed into this ADR process than in most other ADR processes, given the opportunities to state and re-state claims and to assure all your arguments are heard, fair and square.

Contractors, be mindful of unit prices at bid time: Massachusetts court upholds rejection of REA for differing site conditions on $0.01/CY unit cost submitted in bid

On March 2, 2015, the Massachusetts Appeals Court affirmed a motion for summary judgment granted to the town of Avon in an action with Celco Construction.  The dispute resulted from a water main extension project and the rejection of a request for equitable adjustment for differing site conditions.



Celco was the successful bidder of a contract for the extension of a water main and the reconstruction of any disturbed roadways.  The bid documents required the submission of a series of unit prices for work activities that maybe encountered during construction.  The project bid documents further denoted an estimated quantity of 1,000 cubic yard of rock to be excavated.  A note on the bid documents gave the caveat that the 1,000 cubic yard quantity was for the purpose of bid comparison only. Celco submitted a unit price of $0.01/CY for the excavated rock in its winning bid.  Celco also listed $0.01 for unit prices of other work activities.



Celco commenced construction and found that the actual quantity of rock required for excavation far exceed the 1,000 cubic yard quantity in the bid documents.  Celco submitted a change request to increase the unit price of excavated rock from $0.01/CY to $220/CY.  A few months later, Celco submitted another change request for $190/CY of excavated rock, calling the increased quantity of excavated material a change from the bid plans and specifications.  The final total amount of rock excavated by Celco was 2,524 cubic yards. The town of Avon rejected these claims for equitable adjustment and Celco filed an action in Superior Court. The Superior Court granted the town of Avon’s motion for summary judgment.



The Appeals Court upheld the motion for summary judgment finding that Celco’s request for equitable adjustment failed to show that the type of rock encountered, and the means and methods required to excavate it, deviated in any manner from what could be anticipated in the bid documents.   The court stated that in a contract which contained multiple line items of unit prices “no equitable adjustment is warranted by reason of a variation in the estimated quantities, standing alone, as compared to a deviation in the condition or character of the physical condition”. Furthermore, the court stated that if Celco had submitted a true unit cost instead of a “wholly artificial and unrealistic value of one penny, it would be in no need of adjustment to the contract price.”



The ruling should give pause to companies who bid unit price contracts by burying or sprinkling costs in some unit prices, and ignoring other as a means of driving down overall unit costs for comparison and award purposes.  That strategy may win the project, but the risk of unforeseen quantities is one you own.

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This is the second case summary Brendan Carter, former Law School Liaison to the ABA Forum on Construction Law, wrote for The Dispute Resolver.  Thanks Brendan! He can be reached by email at bcarter@umassd.edu.

What Should the Remedy be when an Arbitrator Exceeds His Authority? Remand for Clarification or Vacate and Require a New Arbitration?

In an opinion issued on March 2, 2015, The United States District Court for the Southern District of New York joined other courts by ruling that an arbitrator who issues an improper form of award has in fact exceeded his power.  In the case of Tully Construction Company/AJ Pegno Construction Company, J.V. v. Canam Steel Corporation, No. 1:2013cv03037 - Document 27 (S.D.N.Y. 2015), the court ruled that an arbitrator who did not issue the “reasoned award” required by the Arbitration Agreement had exceeded his power, and the proper remedy is to remand the award back to the arbitrator for clarifications and a true “reasoned award”.

The dispute arises out of a project awarded to Tully Construction Company/AJ Pegno Construction Company, J.V (Tully) by the State of New York to replace a portion of the Whitestone Bridge.  Tully contracted with Eastern Bridge LLC (Eastern) for several million dollars to fabricate and deliver structural steel to the project.  In July of 2007, Canam Steel Corporation (Canam) entered into an Asset Purchase Agreement (APA) with Eastern and acquired the project contract. 

Steel fabrication and delivery disputes plagued the project in 2007 and 2008.  Tully and Eastern entered into a revised fabrication schedule and agreement in May of 2007.  The agreement stipulated that any disputes would be settled with binding arbitration in accordance with the rules of the AAA.  Tully filed a Demand for Arbitration with the AAA on December 30, 2009 seeking damages in excess of $20 million for breach of contract and intentional and negligent misrepresentation. Canam counterclaimed for nearly $5.25 million in damages for delays caused by Tully. 

Tully and Canam entered into an ad-hoc, private arbitration in November of 2012 governed by the AAA rules.  The arbitrator heard seventeen days of testimony from nine fact and two expert witnesses along with more than 800 exhibits of evidence.  The arbitrator released his two page final award with monetary awards for Tully in nine individual line items and one grand total in the amount of $6,883,936.00. Canam’s award was identified in seven individual line items with one grand total in the amount of $366,914.00.  There was no language expressly giving the rationale behind the awards.  Two days after the award, Canam requested that the arbitrator withdraw his final award and issue a final award in accordance with the Arbitration Agreement’s “reasoned award” requirement.  The arbitrator responded to Canam that his final award was a “reasoned award” and Tully moved to confirm the award. Canam filed an opposition to Tully’s petition and cross-moved to vacate the award. 

 The court examined Canam’s claim that the arbitrator failed to issue a “reasoned award”.  It found that a “reasoned award” was required as part of the private Arbitration Agreement citing Rule 44 and L-6 of the AAA Arbitration Rules for Complex Construction Cases. The court also found that all parties expected a “reasoned award”, not a line item award as issued.

The court examined what constitutes a “reasoned award” and settled upon the definition offered in Cat Charter, LLC v. Schurtengerger, 646 F.3d 836, 844 (11^th Cir. 2011), that “a reasoned award is an award that is provided with or marked by the detailed listing or mention of expressions or statements offered as a justification…[for] the decision of the [arbitrator].”  The court further cited Rain CII Carbron v. ConocoPhillips Co., 674 F.3d 469 (5^th Cir 2012) and the Fifth Circuit’s decision that the award in that controversy was “reasoned” because in the, “eight page [award], the arbitrator laid out the facts, described the contentions of the parties, and decided which of the two proposals should prevail.” The court found that the arbitrator’s line item award did not satisfy either of those criteria and therefore was an improper award.

The Second Circuit has not addressed whether an improper award constitutes an arbitrator exceeding his authority.  Therefore, the court looked to rulings of the Third, Fifth, Sixth, and Ninth Circuits to determine that an improper award does exceed an arbitrator’s authority.  The multiple circuit court cases the court examined framed the issue of an improper award within a contractual framework. The parties private Arbitration Agreement stipulated that the AAA Arbitration Rules for Complex Construction Cases would govern.  Those rules required a “reasoned award”.  The arbitrator’s line item award did not comply with the agreement and therefore the authority granted to the arbitrator in the agreement was exceeded, and accordingly, the award cannot stand. 

Tully presented the argument that if the line item award was found to be improper, the proper remedy would be to remand it back to the arbitrator for an actual “reasoned award”.  The court presented the view from two district courts that a remand to the same arbitrator would be improper due to functus officio. Citing T.Co. Metals, LLC v. Dempsey Pipe & Supply, Inc. 592 F.3d 329, 342 (2d Cir. 2010), the court defined, functus officio as a “doctrine [which] dictates that, once arbitrators have fully exercised their authority to adjudicate the issues submitted to them, ‘their authority over those questions is ended,’ and ‘the arbitrators have no further authority, absent agreements by the parties, to redetermine th[ose] issues.’”  The court also presented three exceptions to the doctrine, the third and most relevant stated an exemption exists in order, “to clarify an ambiguity in an otherwise seemingly complete award.” Cat Charter, 691 F. Supp. 2d at 1345

Looking to the circuit courts, the court found that functus officio has been rejected in similar circumstances of an improper award.  The circuit courts pointed to the third exception to functus officio stating, “the purpose of this exception is to permit the arbitrator to complete and assigned task…”Green v. Ameritech Corp., 12 F. Supp. 2d 662, 666. The court further found that the circuit courts require remand back to an arbitrator in order for the arbitrator to explain his award so that it can be effectively enforced. Functus officio is not applicable because the duty charged to the arbitrator has not been completed and remand “serves to give the parties what they bargained for – a clear decision from the arbitrator.” Galt v. Libbey-Owens-Ford Glass Co., 397 F.2d 439, 442 (7^th Cir. 1968).

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This case summary was written by Brendan Carter, former Law School Liaison to the ABA Forum on Construction Law.  Brendan is a recent graduate from the University of Massachusetts, Dartmouth School of Law.  He has worked in the construction industry for many years, most recently for a general contracting company in Massachusetts.  

It's Not Far Down to Paradise

That is Christopher Cross's 1979 hit Sailing, from which the title to this post comes.  It is an appropriate title as well, since Divisions 1 and 13 are going sailing in Boca Raton on a catamaran.

In fact, we are going sailing on THIS catamaran:

On Friday afternoon, April 17, starting at 2:30 PM, Divisions 1 and 13 are teaming up to hold a Catamaran Sail social event.  It will be a 2-hour cruise on an ocean-sailing catamaran yacht.

Participation is limited to 49 passengers on a first-come, first-serve basis, and the cost for each participant is $55.  The cost includes snacks, beverages, music, and gratuities.

If you are interested in joining in the fun or if you have any questions, please contact Cassidy Rosenthal of Stites & Harbison PLLC in Lexington, Kentucky to RSVP and to pay the fees for the trip.