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VIRGINIA: An Introduction to Construction

LESSONS IN DISPUTE RESOLUTION FROM THE WORLDWIDE PANDEMIC

The Imperative of Efficient Claims Resolution 

Efficient adaptation to change has always been a hallmark of successful project delivery. Now, even more so, the industry drivers that are actively transforming construction projects are making effective claims resolution a necessity. Rapid advances in technology continue to alter the way projects are planned and constructed and also increase the speed, frequency, and complexity of changes to the work. Indeed, global construction companies and worldwide supply chains introduce communication, regulatory, and product availability challenges to project success, while a volatile world economy and shrinking project budgets affect construction and heighten the need for prompt and effective dispute resolution. The interdependency of the participants in the construction process and the stresses of collectively overcoming unanticipated changes were highlighted during the global pandemic. Collaboration was at a premium, and access to traditional dispute resolution forums was interrupted. As a result, the claims resolution mechanisms that continued to serve projects were those that were adaptable and allowed continued connectivity. As we begin to emerge from the hardships presented by the pandemic, it is important to reflect on what new strategies and claims resolution techniques are worth keeping when we can leave our masks behind us and return to resolving disputes face-to-face.

The Impact of the COVID Pandemic on Litigation in Virginia

As was the case worldwide, Virginia courts were impacted by the pandemic. On March 12, 2020, Virginia’s Governor entered an executive order declaring a state of emergency due to the novel coronavirus COVID-19. Three days later, the Governor announced a statewide ban on all events over 100 people, and requested that the Chief Justice of the Virginia Supreme Court issue a judicial emergency to protect the health and safety of court employees, litigants, judges, and the general public. Thereafter, as elsewhere in the world, federal and state courts in Virginia ceased normal operations. Court closures and restrictions, as well as extensions to filing deadlines and statutes of limitations, were memorialized in serial orders issued by the Supreme Court of Virginia, followed by orders issued by circuit courts and federal courts across the Commonwealth. On May 3, 2021, the Virginia Supreme Court issued its twenty-first order extending the declaration of judicial emergency guaranteeing that limited access to Virginia courts will continue through May 30, 2021, and likely beyond.

While no industry went unscathed, construction in Virginia and across the country ultimately was deemed “essential” and was exempted from the most severe pandemic-related restrictions. As construction continued, so did construction disputes. At the outset of the pandemic, all civil and criminal trials were continued or suspended. Following months of planning, Virginia state and federal courts reopened for trials with retrofitted courtrooms that allowed for social distancing and other health and safety protocols. Not surprisingly, courts are facing a significant case backlog and, in light of constitutional speedy trial considerations, the scheduling of criminal trials takes priority over civil disputes. As a result, construction litigants and their disputes remain in limbo.

The challenges facing the courts and those that rely on them have underscored the value of alternative dispute resolution (“ADR”). Indeed, even at the height of the pandemic, complex construction disputes were negotiated, prosecuted, defended, and resolved by utilizing more nimble approaches to dispute resolution, including step negotiation, project neutrals, mediation, and arbitration. Given the inherent adaptability of ADR, parties that included ADR processes in their construction contracts retained control over the advancement and resolution of their disputes, even throughout the seemingly uncontrollable pandemic.

Increasing the Reach of Step Negotiations 

Parties to construction contracts inevitably encounter events and impacts that have the potential to increase costs and cause delays. As such, the importance of the early resolution of disputes involving time and cost impacts on the project cannot be over-emphasized. While there are any number of approaches to resolving construction disputes, negotiation is often preferable to other methods of dispute resolution simply because it requires the smallest investment of time and resources. Moreover, as negotiations do not involve referees or third-party decision-makers, the methods, manner and outcome of negotiations remain squarely within the parties’ control. As an added benefit, the lines of communication and mutual respect established by the parties during project negotiations may assist with the resolution of larger, end-of-the-project disputes.

Construction contracts sometimes include provisions requiring that the parties attempt to negotiate and resolve claims at two or more levels of company personnel as a prerequisite to arbitration, litigation, or other methods of dispute resolution. The “step negotiations” may require the parties to refer disputes to upper management if personnel at the project level reach an impasse in their negotiations in an effort to ensure that negotiations get a fair chance at success. While project personnel may have the most direct knowledge of the issues in dispute, they may also have an emotional stake in the dispute, which may impede effective compromise. Senior management may have a greater interest in maintaining the overall business relationship between the parties as well as the authority to fashion a settlement that is more creative than a simple financial deal. Perhaps out of necessity, these step negotiations played a greater role in dispute resolution during the pandemic. Moreover, the growing familiarity with virtual meeting platforms allowed for broader input in the problem solving effort, including from company personnel located in offices worldwide. As we put the limitations of the pandemic behind us, greater consideration should be given to utilizing the ease of meeting virtually outside the job trailer and including these types of tiered negotiations in the disputes provisions of construction contracts.

Benefiting From “Mini-Mediations” 

Utilizing increasingly available virtual meeting platforms, mediating construction claims also proved to be a vital means of dispute resolution during the pandemic. Initially, there was a collective apprehension that not being able to bring the parties together physically for the shared purpose of mediating disputes would debase the effectiveness of this oft used approach to dispute resolution. Indeed, the adage of “don’t let them leave the room” still rings true upon reflection. Nonetheless, mediations persisted, and disputes were resolved. Virtual hosts shepherded parties from joint sessions into individual caucus rooms while the individual participants were anchored at their laptops in remote home offices. While there is no substitute for the dynamics of in-person mediation, the flexibility and efficiency of virtual pre-mediation meetings provided parties a new opportunity to frame the issues, and to facilitate the exchange of information in advance of formal mediation sessions. A more thoughtful pre-mediation process was utilized to subtly begin loosening hardened positions through virtual meetings that engaged the participants in re-evaluating their stance and caused them to consider opposing views. The proliferation of virtual platforms and a greater acuity in their use allowed skilled mediators to conduct these “virtual” face-to-face pre-mediation sessions far more efficiently than having a series of pre-mediation in-person sessions. The hope, of course, was that emphasis on early preparation would counter-balance what is lost by the inability to conduct an in-person mediation.

As we engage in post-pandemic mediations, the use of virtual platforms to engage in a pre-mediation procedure aimed at framing issues, exchanging information, and softening galvanized stances is a method that should be considered in connection with drafting dispute procedures. Moreover, the ability to convene inexpensive sessions with a mediator, complete with virtual break-out rooms, allows for the possibility of more frequent, issue-based mediations. These “mini-mediations” can be structured to include such things as issue-specific advisory opinions or binding determinations should the parties fail to reach a negotiated solution. Sound consideration should be given when drafting mediation provisions to instituting a process whereby proposed change orders or time extensions within a designated dollar bracket will be directed to virtual mediation for prompt, flexible and relatively inexpensive dispute resolution.

Expanding the Reach of Arbitration 

As with virtual mediation, there was substantial trepidation early in the pandemic about conducting arbitrations remotely. While courts have more recently implemented measures to encourage cases to proceed, state and federal procedural rules still lack the flexibility to address remote presentation in the same way arbitration does. For example, while witnesses are generally required to appear in court, remote testimony quickly became commonplace in virtual arbitrations, allowing the arbitration of disputes to proceed while litigation ground to a halt. This may be particularly advantageous in complex construction disputes involving witnesses who reside outside the US or who are otherwise unable to attend proceedings in person. Additionally, the practice of submitting written testimony, once limited to international arbitrations, is becoming more prevalent in domestic arbitrations, facilitating the presentation of remote witnesses. As these practices have increased, witness availability has become less of a driver to scheduling arbitration, resulting in the ability to move forward faster and more efficiently to the resolution of disputes.

One principal advantage of arbitration as a means for resolving disputes is that it occurs by agreement of the parties. While most arbitration clauses address venue and the arbitral forum, a well-drafted arbitration clause can accomplish much more toward efficient and timely dispute resolution. As we engage in post-pandemic contract drafting, consideration should be given to tailoring arbitration clauses to address the parties’ use of technology to conduct discovery, present witnesses and participate in hearings.

TAKEAWAYS  

As we move forward and put the global pandemic behind us, we should not forget the lessons learned through necessity and ingenuity. The burgeoning technologies and new approaches that allowed the continued resolution of construction disputes, despite shuttered courthouses, are here to stay. Careful consideration should be given to drafting dispute resolution clauses to include these and other innovations learned from the pandemic to increase the effectiveness and streamline the process of resolving disputes.