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.

---

* 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.

What's Up in Division 1 (No. 12)

After a little bit of downtime this summer, Division 1 back to planning upcoming events and programs.  For those construction litigators, mediators, arbitrators, or other neutrals, now is the time to revisit your business plan and give Division 1, which specializes in construction litigation and dispute resolution, a try.  

We have lots of opportunities to write, speak, and plan events (in-person and virtual).  I am super excited to serve as Division 1's Chair for the next two bar years and I look forward to growing our division and building the level of our engagement.  But, we cannot do it alone.  Please review some of the upcoming opportunities and contact me if you want to learn more (rtdunn@PierceAtwood.com).

Some of Upcoming Division 1 Opportunities

• TODAY, Sept. 23 at Noon Eastern.  We are holding our next Toolbox Talk Series on Examining the GC's Project Manager.  This is a casual 30-minute zoom discussion led by two excellent discussion leaders from Division 1 and our friends at Division 9.  Join us today! Zoom Meeting info for the program is below:

https://americanbar.zoom.us/j/92804834893?pwd=K00vSUNYdzl5TG96a0E5OTU5Mkptdz09

Meeting ID: 928 0483 4893

Passcode: 292788

• NEXT WEEK, Sept. 30th and Oct. 1.  The Forum is putting on in-person (6 cities) and virtually the Fundamentals of Construction Law and Sticks and Bricks CLEs -- both excellent programs. Register here or by clicking on the image below:

• October 13 @10AM PT - Division 1's Planning Retreat.  We hold a planning retreat each year where we think about what we are doing as a division and planning for the bar year.  This year we are doing it at the Fall Meeting in Seattle, WA.  We will have virtual access as well.  Please email me if you want an invitation.  
  
  
• October 13-15 - Fall Meeting in Seattle.  The meeting is on construction project management. This program is available both in-person and virtually. Register here. 

• D1 Neutral Directory and Feature Series. If you want to be added to our directory of neutrals and/or be featured by our blog team, The Dispute Resolver,  reach out to me.  Marissa Downs did an excellent job of featuring D1 members, Kenneth Kupchak, Patricia Thompson, and Gregory Gillis, in recent months.  Thanks Marissa! 

•  The Dispute Resolver.  If you want to be published, contact me or blog lead editor, Catherine Delorey (cdelorey@grsm.com).  If you just went through a trial, arbitration, mediation, or other litigation/ADR adventure, this is a greaet place to share your lessons learned.  

• Concepts Committee. We appointed a committee, led by Joe Imperiale, to arrive at program concepts / initiatives for upcoming Forum meetings.  This is how Forum programs get planned and scheduled.  If you have program ideas, please reach out to me or Joe (joseph.imperiale@troutman.com).  We are looking to finalize our concepts by early November.

• Upcoming TTS Programs.  We hold our TTS programs on the 4th Thursday of every month at 12PM ET.  These are 30 minute programs led by one or two discussion leaders on a specific topic of interest for D1 members.  If you want to propose a topic, please contact me or Jade Davis (jadavis@shumaker.com). 

I am looking forward to an excellent 2021/2022 bar year with you all.  I am very excited to see many of my Forum/D1 Friends in person in Seattle next month.  I am bringing some new D1 swag to pass out at the meeting! 

Thank you for your interest and involvement in Division 1.  

Meet D1’s Neutrals Series: GREGORY P. GILLIS

 

Company: Sacks Tierney P.A.

Location: Scottsdale/Phoenix, AZ

Email: greg.gillis@sackstierney.com

Websites: https://www.sackstierney.com/attorneys/gillis.htm

https://www.nadn.org/greg-gillis

Law School: University of Nebraska – Lincoln - BA 1982; JD 1986

ADR Services Offered: Arbitration & Mediation

Affiliated ADR Organizations: AAA & National Academy of Distinguished Neutrals

Geographic Area Served: Arizona/the Southwest

---

Q: Describe the path you took to becoming and ADR neutral.

A: I was a 30-year construction and commercial litigator. Attorneys and others kept asking if I wanted to become a judge because of my temperament. I always responded no because I enjoy practicing law but it started me thinking about ADR. I received ADR training, served as a judge pro tempore in our trial level court conducting settlement conferences. I applied and was accepted onto the AAA’s Construction, Commercial and Consumer Panels. I discovered I liked alternative dispute resolution as much as I liked practicing law and now, I have the best of both legal worlds.

Q: Describe your background and experience mediating construction cases?

A: As all Forum members know construction law is a unique practice area and not learned overnight. When I first started practicing, our firm represented a large material supply company. That client led to more construction-related cases involving payment disputes and construction defect claims. Having litigated these types of cases provides the breadth of knowledge and experience to mediate complex construction disputes. My background causes me to be more of an evaluative mediator frequently identifying issues parties may not have realized they may face. This can lead to a negotiated resolution where one might not have been achievable otherwise.

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

A: Not all mediators are right for all cases. Counsel should consider the following things when selecting a mediator:

1. The type of dispute. Select a mediator with industry specific knowledge.

2. Consider the parties. Different parties respond differently to different mediators. Do the parties need a forceful or collaborative mediator?

3. Consider the mediator. This is the corollary to consider the parties.

4. Talk with others about the reputation of any given mediator to confirm you select the right neutral.

Q: What experience do you have arbitrating construction cases?

A: I have been an AAA Construction Panel Arbitrator since 2015. Since then, I have arbitrated construction cases involving a municipal sewer line installation, commercial HVAC system, flooring installation, as well as single and multi-homeowner construction defect claims.

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

A: I think timing and discovery limits are the key to a less costly and more efficient arbitration. First, I review the ADR provision to see what the parties agreed to and then strive to preserve their agreement. If both counsel and their clients agree, I will grant some latitude for discovery. No one wants to be surprised at arbitration, but arbitration is designed to avoid overturning every stone like litigation. Any discovery allowed is typically with limits as to number and time. Reducing delay and costs of discovery will help ensure that arbitration is more efficient and less costly than litigation.

Q: What role should traditional rules of evidence play in the arbitration hearing?

A: Most arbitrators are current or former litigators so are familiar with the Rules of Evidence. I think arbitrations are streamlined by not requiring the formality of the Rules of Evidence without sacrificing the integrity of the process. Arbitrators typically understand the weight to be given to evidence that may have been excluded in a hearing conducted pursuant to the Rules of Evidence.

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

A: One positive from COVID-19 was the common adoption of videoconferencing and video appearances at hearings. There is no substitute for live testimony where the witness is present and you can “see” the witness and all their nonverbal cues. I think, if at all possible, counsel and the parties should be present, but videoconferencing is here to stay. It is hard to justify the cost of flying witnesses or experts to the location of the hearing to testify for an hour or two.

Improving Arbitration By Private Right of Appeal

The belief that there can be no appellate remedy for erroneous arbitration awards is widespread but mistaken. Granted, the Federal Arbitration Act (FAA) and many state arbitration statutes provide limited judicial relief from a final arbitration award.¹ Indeed, the FAA does not allow for any judicial appellate review of an award, even by agreement of the parties.² However, neither the FAA nor state arbitration codes prohibit parties from contracting for the right to a full appellate review of an arbitration award, on the merits, via a private panel of appellate arbitrators. On the contrary, parties have the right to agree to this option in their original arbitration contract or by written stipulation at any time after a dispute arises.³

Parties may be surprised to discover that they need not sacrifice the finality, cost savings or speed of arbitration by preserving their appellate rights. The appellate rules established by JAMS, AAA and CPR – although each slightly different – generally empower the parties to design a fast, cost effective and final process, with many advantages over judicial appeals. 

For example, the finality of JAMS appellate review may surprise those who fear the delays of vacatur or remand as the reward for reversal of judgment on appeal. Instead, JAMS procedures prohibit remand for further hearing or “retrial” and limit the appellate panel’s authority to affirming, reversing or modifying an award.⁴ Even if a panel re-opens the record to receive any evidence excluded in error, at most, the panel will issue a new, final award.

Brevity of the time necessary for this appellate process is not only baked into the short deadlines proscribed by the applicable rules, but may be furthered by the parties’ agreement to shorten deadlines, limit briefing or waive oral argument. Additionally, in the right case, the parties can save time and expense by agreeing to an interlocutory appeal of a key issue, such as which party is in breach or the existence of insurance coverage, before incurring the – possibly unnecessary – additional expense of proving the amount of damages.

Further cost savings may result if the parties follow the lead of the European Court of Arbitration,⁵ by having a single arbitrator decide the underlying case, subject to the right of a subsequent review on the merits by three highly experienced, specially chosen appellate arbitrators. Obviously, using one arbitrator to manage and hear a dispute will significantly reduce the cost of the underlying arbitration, which cost savings will be much less than the fees for the appellate panel, which meets relatively briefly. 

The right of the panel and parties to customize the appellate process itself is another plus: arbitration appeals need not follow any hard and fast rules. The parties and panel may agree to several hours of oral argument. The panel may request additional information after initial briefing or argument, including submission of clarifying evidence to supplement the record. If the parties want the results of the appeal to be confidential outside the confines of the arbitration, that usually can be agreed to as well.

In summary, by assuring the review of awards finally, quickly, inexpensively, and fairly, by a hand-picked tribunal with specialized knowledge and experience, “… appellate arbitration enhances the benefits of arbitration itself.”⁶

---

1 See e.g., Patton v. Signature Insurance Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006). Additionally, in Hall Street Associates, LLC. v. Mattel Inc., 552 U.S. 576 (2008), the U. S. Supreme Court limited vacation of an award to statutory grounds such as “evident impartiality”, “fraud”, “corruption”, refusing to hear “pertinent and material” evidence, and acts exceeding the powers of the arbitrator. Note, however, some states have statutory arbitration procedures, promulgated as alternatives to litigation, which allow for judicial appeals of the resulting award judgments. See e.g., Florida Statutes, 44.104, which preserves the parties’ appellate rights to the state intermediate appellate court, although the scope of review is limited to essentially legal rather than factual issues.^↩
2 Hall Street Associates, supra.^↩
3 For a scholarly discussion of the legal bases for contractual, legislative and other ways of overcoming concerns about the limited standards of review allowed for most arbitration awards, see Philip L. Bruner, The Appeal of Appellate Arbitration, in 35 INTERNATIONAL LAW REVIEW, Pt. 4, 436, 444 et seq. (2018) (“Bruner”). For example, JAMS suggests the following model contract provision: “The Parties adopt and agree to implement the JAMS Optional Arbitration Appeal Procedure” with respect to any arbitration award “arising out of or related to this [arbitration] agreement”. JAMS Comprehensive Arbitration Rules and Procedures rule 34 also allow parties to “agree at any time” during an arbitration to adopt the JAMS optional appellate procedures as an optional remedy in that proceeding. CPR and the AAA have their own, slightly different model contract language and rules.^↩
4 Thus, providing a remedy for the lament voiced in Enforcement of the Arbitration Award and Limited Rights of Appeal, in ARBITRATION AND THE SURETY, 79, 80 (A. Belleau, et al. eds. Am. Bar Ass’n 2020), that after vacatur of an arbitration award, the remedy is often no better than a costly “do over”.^↩
5 See, Attempts to Set Aside an Award, in THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 216, 217 (Margaret L Moses, 3rd ed. 2017).^↩
6 Bruner, p. 448.^↩

Author Patricia H. Thompson, Esq., FCIArb, is  a full-time neutral at JAMS, with experience conducting virtual and in-person mediations, arbitrations and other ADR proceedings in construction and other complex commercial disputes.

Meet D1's Neutrals Series: PATRICIA H. THOMPSON

Company: JAMS

Office Location: Miami, Florida

Email: pthompson@jamsadr.com

Website: https://www.jamsadr.com

Law School: Vanderbilt University School of Law, JD, 1976

Types of ADR services offered: Arbitration, Mediation, Neutral Evaluation, Project Neutral, Neutral Appraiser, Special Master for Discovery

Areas served: US and International 

---

---

Q: What did you do prior to your work as a neutral?

A: Trial and appellate work in construction, commercial insurance, employment, and commercial/banking law.

Q: What experience do you have arbitrating construction cases?

A: I had over 40 years of experience as a practicing attorney negotiating, litigating, and arbitrating construction and commercial disputes of all kinds. Since joining JAMS in January 2017, I have served as a mediator, single arbitrator, and panel member or chair, in numerous U.S. and international construction disputes.

Q: What should attorneys and their clients take into consideration when vetting or selecting an arbitrator?

A: The arbitrator’s experience in construction law and the types of project or construction methods at issue in the dispute; whether the arbitrator will enforce the rules and the meet the parties’ expectations in managing a cost effective and efficient proceeding; and the arbitrator’s reputation among the construction and arbitration community.

Q: What advice do you have for parties when considering whether to choose a single arbitrator or a panel?

A: A single skilled arbitrator can usually get a matter resolved just as fairly as a panel but more quickly and less expensively. If the parties want the assurance of another set of eyes, they can reserve the right to have a private arbitration appellate panel review the single arbitrator’s award, without sacrificing undue delay or cost. However, if the issues and the amount in controversy justify a panel, then it is important to select an experienced panel of neutrals who respect each other. Then they are more likely to collaborate on an award that is the result of their collective wisdom. Selecting a panel that does not mesh – for whatever reason – may foster intra-panel disagreements. In which case, it is very possible the award will be the result of “tiebreaking” decisions by the chair and the parties will not realize the full value of the cost of three arbitrators.

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

A: I limit motion practice significantly, but, when justified, I will grant dispositive relief if it eliminates or reduces the time and expense necessary to resolve the issues remaining in the case. I also limit pre-hearing briefing unless it is needed. I limit discovery to that justified by the nature of the dispute and the reasonable need for the information sought. I encourage bifurcated hearings, giving priority to proving those issues that may eliminate the need for later hearing(s). I strongly encourage and reward collaboration and cooperation among counsel for the parties.

Q: Is there anything the parties can do to control costs incurred by their arbitration panel?

A: In a three-arbitrator panel, I encourage the parties to vest the pre-hearing authority in the chair, so most of the cost of the other arbitrators is not triggered until the actual evidentiary hearing. The cost of arbitrator travel may be reduced by virtual evidentiary hearings and having virtual post hearing arbitrator conferences when drafting awards.

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

A: Absolutely, and when parties chose to follow the rules of a given arbitration organization, they are giving consent to such limits.

Q: What role should traditional rules of evidence play in the arbitration hearing?

A: Rules of privilege must be respected; otherwise, the traditional rules of evidence should be used to inform an arbitrator as to the weight to give to the evidence that the arbitrator finds to be admissible, because it is relevant, material, and trustworthy.

Q: In what way do you use technology in the arbitration process?

A: Every way the parties and I can find ways to use it, depending on the nature of the case and the evidence to be offered. At the very least, it should be used to save money, accommodate witnesses, and manipulate and view exhibits.

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

A: Videoconferencing will continue to allow for preliminary hearings on short notice without need for travel and enable parties and witnesses to attend hearings virtually. It should allow the evidence, especially expert testimony, to be sequenced to allow the parties to more logically present the issues. And it should facilitate bifurcation of hearings.

Meet D1's Neutrals Series: KENNETH R. KUPCHAK

Company: Damon Key Leong Kupchak Hastert

Email: krk@HawaiiLawyer.com

Website: https://hawaiilawyer.com/

Law School: Cornell University (1971)

Types of ADR services offered: Arbitration

Affiliated ADR organizations: AAA

Geographic area served: Hawaii (and elsewhere if costs covered)

---

Q: Describe the path you took to becoming an ADR neutral.

A: My legal practice has centered for 50 years on construction, land use, complex litigation, mergers & acquisitions (including a handful of  West Coast and Pacific Basin landmark design and construction companies), and eminent domain. In many of these areas, my representation has included business formation, acquisition, contracting and disputes arising from operations from “soup to nuts.” A number of  cases resulted in State Supreme Court and nationally recognized decisions, including one that prompted the insurance industry to alter its ISO. I have represented land owners, developers, designers, contractors, subcontractors and suppliers. 

Q: What percentage of your current legal practice is spent on ADR work? What do you do when not serving as an ADR neutral?

A: While my practice still focuses on representing clients, I have been asked to arbitrate disputes in related fields over at least four decades by those who know that I have some familiarity with the industry and/or law in question or the contextual setting. If the case is interesting, I agree and try to efficiently decide the matter presented.

Q: What should attorneys and their clients take into consideration when vetting and/or selecting an arbitrator?

A: Depending on the matter in question, the selection of an arbitrator may turn on whether the parties desire an inquisitive active arbitrator or passive one. I tend to be inquisitive and appreciate counsel addressing my queries. To enhance this process, before hearings on motions or final argument, I often provide questions ahead of time that I would like counsel to be prepared to address. This ensures they know what issues I believe may help decide the matter and gives them an opportunity to suggest why those matters or impressions are not necessarily controlling.

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

A: If the parties are so inclined, I allow direct examinations to be submitted in writing in advance. During the hearing, there is only a brief summary for opening examination, followed by cross. This allows the offering party to get in their case the way that they want it, while allowing the opposing party time to assess and plan cross and is usually much more efficient. I also allow “dueling experts” if the parties are amenable.

Q: What role should traditional rules of evidence play in the arbitration hearing?

A: More often than not evidentiary logic goes to weight rather than admissibility. I find that few counsel object to admissibility because of the risk of having to redo the matter if some offer is improperly excluded from an arbitration. On the other hand, attorneys shouldn’t offer exhibits if they are not going to meaningfully refer to them. Unlike Judges, arbitrators are usually paid by the hour, so Counsel might wish to advise their clients that every exhibit has an associated cost of the Arbitrator's time studying it.

Q: What are some of your interests or hobbies outside of your ADR Neutral practice?

A: When not practicing or arbitrating, I hike around the world in areas with significant natural history, from the Arctic National Wildlife Refuge and Bhutan to the Dolomites, Tasmania and Patagonia, plus of course Hawaii and the National Parks of the USA. I played Lacrosse until age 52 and co-founded the Hawaii Lacrosse Club. I have served on the boards of a number of construction companies, many non-profits and as a trustee of a Pre-K-12 Independent School of 1,500 students for 21 years and as its Chair for 4.

Mastering Rule 30(b)(6) and the New Confer-in-Good Faith Requirement for Construction Corporate Representative Depositions

The recent amendment, effective December 1, 2020, to Federal Rule of Civil Procedure 30(b)(6), provides:

Before or promptly after the notice or subpoena is served, the serving party and the organization must confer in good faith about the matters for examination. A subpoena must advise a non-party organization of its duty to confer with the serving party and to designate each person who will testify.

Practitioners knew some form of change would come due to the absurd amount of stonewalling and abuse to minimize the impact of a corporate representative deposition as well as the contentious gamesmanship to obtain impermissibly broad discovery from an opposing party. For many, 30(b)(6) was kicked to the side or treated as the “forgotten rule.” (Mark A. Cymrot, The Forgotten Rule, 18 Litig. 3 (1992) (discussing the failure of litigants to use Fed. R. Civ. P. 30(b)(6) for the 20 years after its promulgation).) In the context of construction litigation, which is usually highly contentious, complex and multi-faceted, the conferral requirement provides litigants another opportunity to streamline issues in order to focus on the heart of the matter. 

Litigants can either embrace the rule by maximizing the opportunities conferral brings or continue to deal with disputes and motion practice premised upon inadequately prepared witnesses and ambiguous topics incapable of putting any reasonable person on notice regarding the information sought. For many construction lawyers, the amendment is not a shocking change from best practices as construction law continues to be one of the more collaborative areas in litigation. But the amendment did send waves throughout the legal community since it has not had any significant modifications since its adoption in 1970. 

Plaintiff’s expressed concerns regarding their inability to prepare for corporate examinations hindering their success in utilizing 30(b)(6) and defense counsel expressed similar discontent regarding the overreaching of the rule, “gotcha” moves, the incredible expenses of preparing designees, and the similarly high expense of investigating which designee or designees should testify as to each topic noticed or provided. 30(b)(6) depositions are binding; therefore, preparation, understanding the topics and proper witness designation is key. 

The amended rule instructs parties to confer concerning the matters of examination, but it does not preclude further matters for conferral. Therefore, the sky is the limit. After six months in the wild, what we suspected to occur is true—the good, the bad and the ugly. Productive construction related 30(b)(6) conferences have enabled parties to identify issues and focus on what topics the deposing party intends to cover, why each side believes the matters of examination are meritorious or not, and alternatives to the deposing party’s specifications in pursuit of resolution of the dispute. Uncooperative parties have certified intentions and efforts to confer without success. 

The rule does not mandate specific designees be decided upon. In fact, it was considered and rejected in a proposed amendment. However, the topics and/or areas of inquiry continue to require painstaking specificity. Conferral topics may include date and time of the deposition, duration, method (in person, remote, video, etc.), topics and specification. 

Parties receiving a notice or subpoena should:

1. Meet early and actually confer;
2. Focus on specifying the noticed topics to eliminate confusion and ambiguity;
3. Confirm that proper entity was selected; and
4. Designate appropriate deponent(s).

Is this the only option to gather information about an organization? No; this is one tool in your toolbox. 30(b)(6) depositions do enable litigants to nail down the opposition’s position and to determine defenses and theories. However, this tool is not a case determinant. 

Furthermore, the amendment does not mandate that parties must reach an agreement—it requires good faith efforts to confer. Many proponents for additional rule components vehemently opposed the revisions arguing that although intentions are good, the amendment is not going to change much at all. However, the goal was to avoid disputes about “overlong or ambiguously worded lists of matters for examination and inadequately prepared witnesses.” 

The rule change is an attempt to reduce one aspect of discovery that can result in satellite litigation. Lawyers defending corporate deponents should use this new arrow in their quivers to shoot down overly broad topics. For those noticing corporate depositions, this rule change underlines what should have been the practice previously – sharper, narrower topics are better topics to get binding testimony for use at trial.

If you are interested in further discussion about this topic, please join the authors on June 16, 2021, for the Webinar CLE sponsored by the Forum called “Mastering Rule 30(b)(6) and the New Confer-in-Good-Faith Requirement.” Just click the link to sign up. 

Author Anthony D. Lehman is a partner with the Atlanta, GA office of Hudson Lambert Parrott Walker, LLC. He is licensed in Georgia, Florida, and Alabama and is Board Certified in Construction Law. He is a past chair of Division 1 and is a member of the ABA Forum on Construction Law’s Governing Committee.

Author C. Jade Davis is an associate attorney with the Sarasota, FL office of Shumaker, Loop & Kendrick, LLP. She is experienced in representing manufacturers of building products and engineers in all phases of construction litigation and trial.

What to become a AAA Arbitrator / Mediator? But don't know how? Join Us on June 30th at 3PM ET

Have you ever thought about what it would take to serve as a Construction Arbitrator or Mediator? Do you think you have to wait until the end of your career to pursue an ADR Practice? You don’t. Most arbitrators on the American Arbitration Association (AAA) Construction Panel still maintain a full-time practice. 

On June 30th, Division 1 (Litigation & Dispute Resolution) is teaming up with the AAA, Construction Litigation Committee of the ABA Section of Litigation, and the Forum's Diversity + Inclusion Committee for a virtual program on how you can design your career path to have a successful neutral practice.  Our panelists from the AAA, Forum/D1, and CLC will discuss what it takes to be an arbitrator or mediator with the AAA's Construction Panel, give tips for building the type of experience that the AAA looks for and offer insight and advice for building a successful ADR practice. Understanding that parties often seek diverse viewpoints in dispute resolution, the AAA has made a concerted effort to attract and mentor diverse arbitrators and mediators. During this session, the Panelists will discuss the training and continuing education offered by the AAA to its panelists, as well as its mentoring program.

It is never too early to start planning your career goals and aspirations.  We hope you join us for this discussion.  There will be time for questions at the conclusion of the program.  

REGISTER

Questions about this program or Division 1 in general, contact me, Tom Dunn, Division 1 Chair, at rtdunn@PierceAtwood.com.  

Return on Investment of Construction Claims: How to Best Advise Clients on Legal Strategy in Construction Claims

On March 31, 2021, Division 1 held a program with DPA on Construction Claims. The program focused on process from the start of the claim through dispute resolution.  If you missed the program, please watch the video here.  

 Thanks to Brenda, Marc, and Philip for putting together this program for us.

What's Up at Division 1 (No. 11)

Our May Toolbox Talk Series was great last month.  David Ponte and Joe Wallwork from Nautilus discussed discovery tips in Delay Claims.  They provided the attached listing of documents (shown below) and explained the most important documents to obtain to evaluate delays.  

In addition to the documents, they explained how experts can be very helpful in attending and preparing for other expert depositions.  Thanks David and Joe for leading that discussion.  

Our next TTS is scheduled at its regular time (4th Thursday at noon eastern -- June 24th).  Be on the lookout for the registration email on that program.  If you have a TTS topic or would like to contribute to the planning of these programs, please reach out.  

In addition to our TTS, Division 1 and the Forum has some great events coming up in June including:

• Challenges and Opportunities Women Face within the Legal Profession: The Impact of Covid-19 on our Work-Life Balance.  June 8 at 1PM ET.
• Mastering Rule 30(b)(6) and the New Confer-in-Good Faith Requirement, June 16, 1PM ET.  This CLE was planned by Division 1 superstars, Tony Lehman and Jade Davis.  Please attend to support and learn from Tony and Jade!   
• Taking the Next Steps: Overcoming Implicit Bias to Improve Diversity + Inclusion in Law Firms (and Law Departments). June 17, 1PM
• Charting Your Path to an ADR Practice: Practical Advice to Help You Prepare to Serve as a Construction Arbitrator or Mediator, June 30, 3PM ET. I am really looking forward to this event.  Division 1 is teaming up with the American Arbitration Association, the Forum's D+I Committee, and the Construction Litigation Committee of the ABA Section of Litigation.  Kelsey Funes is taking the lead planning and moderating this program.  

Want to join the fun with Division 1 -- join us for our next D1 monthly call on Monday, June 14, 2021 at 3PM ET. 

https://americanbar.zoom.us/j/6691783882?pwd=NUh3SE42eWMrc0ZrdW5pdEgyMFo0Zz09

Meeting ID: 669 178 3882  |  Password: 826501 

I hope you all had a great Memorial Day Weekend!  In New England we had weather in the 40s, freezing rain, 50 MPH wind gusts, and very little sun.  But, we fought through the nasty conditions and made the best of it in our winter clothes (even fishing)!  Below is a photo of my kids fishing on Cape Cod (we caught a bunch of Sea Robins -- weird fish).  

As always, if you want to learn more about Division 1, please contact me.  

Tom Dunn

Division 1 Chair

rtdunn@PierceAtwood.com