I once had a teacher who called the word “please” a magic word.  For instance, if you asked to go to the restroom, the response was usually, “what’s the magic word?”   Then you said “please” and got to go the restroom.

This exchange repeated itself numerous times a day as students made various requests.  The word “please” usually worked.  Of course, there were other times when even if you used the word “please,” your request was still denied, which sort of muddied the water as to what was so magic about it to start with.

As it turns out, in construction law, there are also some magic words.  In fact, the recent case of Nu-Build & Associates, Inc. v. Sooners Group, L.P. illustrates this point because in that case, failing to use the magic word “reasonable” caused $3.6 million in damages to disappear.

You read that correctly.  One minute there was an award of $3.6 million in damages, and the next minute – “poof” – the damages were gone.

Here’s what happened.  Nu-Build was the general contractor for a project owned by Sooners Group.  Sooners Group terminated Nu-Build before the project was complete and hired a replacement contractor.   As often happens, a lawsuit followed.

Following a bench trial, the Court awarded Sooners Group $3.6 million in damages for its costs to complete the project after Sooners Group terminated Nu-Build.  On appeal, however, the Court of Appeals reversed the $3.6 million damages awarded to Sooners Group, and the court’s opinion is instructive to construction lawyers.

Here are two important statements from the Court of Appeals that construction lawyers should remember related to recovering damages for the cost of completing a project:

  1. One,  when seeking damages for completion costs, whether based on a contract or a tort, you must establish that the completion costs are reasonable.
  2. Two, proof of the amounts charged and paid are not evidence that the amount is reasonable.

The Court of Appeals determined that Sooners Group had not adduced any evidence at trial that the completion costs were reasonable, therefore, the entire amount was reversed.

Point number 2 seems illogical to owners and contractors who have had to complete a terminated party’s work.   From their perspective, the amounts charged and paid to complete a project or scope of work are inherently reasonable or else they wouldn’t have paid them.  Why would someone intentionally pay unreasonable costs to complete a project?

Despite the appeal of that logic, the law takes a different view.  There has to be evidence that the completion costs were reasonable to support an award of damages.

So what does this mean for construction lawyers?  One thing it means is that careful thought should be given to selecting experts and contractors that can establish that completion costs are reasonable.

And as simple as it sounds, it means making sure your experts literally say the magic word “reasonable” several times.  There’s no way to know for sure, but if one of Sooners Group’s experts had testified that Sooners Group’s $3.6 million in completion costs were reasonable, those damages costs may not have disappeared.

 

 

 

Like most sports fans in the Dallas area, I’ve spent the last couple of weeks paying attention to the countdown for one our local sports heroes, Adrian Beltre of the Texas Rangers, to reach the magical baseball milestone of 3,000 hits.  Even at the age of 38, Beltre is still playing at a high level and all season long there was never any doubt about whether he would reach the 3,000 hit plateau, it was just a question of when.

The “when” was answered on Sunday, July 30th, when Beltre became the 31st player in the history of baseball to amass 3,000 hits.  I was fortunate enough to be at the ballpark Sunday to experience it live.

 

 

Thankfully baseball is a game that acknowledges some milestones are so rare they should be celebrated.  So after the hit, the game was stopped down for several minutes as Beltre’s family and teammates all came onto the field to congratulate him while a banner commemorating the achievement was unveiled on the outfield wall.  The opposing players that were on the field at the time also made it a point to personally congratulate him.

It was a great moment to see.  And I don’t think that the cheering and congratulations were just because a player reached the 3,000 hit milestone.  A lot of it was due to the fact that the player reaching that milestone was Adrian Beltre.

Adrian Beltre is one of those players who by all accounts, does it the right way.  He is respected by players whether they play with him or against him.

Any time I’ve heard his teammates talk about Beltre, they all say he the consummate teammate.  Everyone can see that he plays hard, but it is also obvious that he enjoys playing the game. And you also don’t accumulate 3,000 hits unless you treat every at bat with the same intensity regardless of the score or conditions.

In addition to his performance on the field, Beltre is also a good person off the field.  He gives back to his community through donations to charitable organizations and giving his time to participate in events hosted by charities.  It’s no wonder he has been a fan favorite in Texas since arriving a few years ago.

So what does any of this have to do with avoiding or minimizing construction disputes?  A lot really.  Sometimes people in the construction world focus on so many things, they overlook the importance of something very basic.  If you want to avoid or reduce construction disputes, focus on doing it right.

  • Show up on time.
  • Work hard.
  • Don’t take shortcuts.
  • Be accountable and be willing to hold those around you accountable.
  • Be honest.
  • Accept responsibility for your actions.
  • Treat every project and job with the same intensity and commitment regardless of the size or fee involved.
  • And commit to doing this day in and day out, regardless of the circumstances or conditions.

You see, a lot of the same principles that allow an athlete like Adrian Beltre to excel are the same principles that allow people to excel in any industry.  So just do it right.  It’s simple to say, but too often overlooked.

 

It is not uncommon for a construction contract to contain a dispute resolution section that typically requires the parties to mediate a dispute and, if mediation fails, they either arbitrate or litigate the dispute.

Chapter 154 of the Texas Civil Practice and Remedies Code outlines various alternative dispute resolution procedures available to parties.  Of the dispute resolution methods in Chapter 154, mediation and arbitration are the most prevalent.

Usually overlooked and seldom used are the following three dispute resolution options:

  • Mini-trial
  • Moderated Settlement Conference
  • Summary Jury Trial

Mini-trial and Moderated Settlement Conference

A mini-trial and moderated settlement conference are similar to mediation in that they involve the use of neutral parties, but the role of the neutral parties is different than mediation.

The Mini-trial

  • Conducted under an agreement of the parties.
  • Each party and their counsel present the party’s position before selected representatives for the parties or before an impartial third party.  This allows the parties to define the issues and develop a realistic basis for settlement negotiations.
  • The impartial third party may issue an advisory opinion regarding the merits of the case.  The advisory opinion is not binding unless the parties enter into a written settlement agreement.

The Moderated Settlement Conference

  • Is a forum for case evaluation and realistic settlement negotiations.
  • Each party and their counsel present the party’s position before a panel of impartial third parties.
  • The panel may issue an advisory opinion regarding the liability and/or damages of the parties, but the advisory opinion is not binding on the parties.

Summary Jury Trial

  • Intended to provide a forum for early case evaluation and development of realistic settlement negotiations.
  • Each party and their counsel present the position of the party before a panel of six jurors unless the parties agree to a different number of jurors.
  • At the conclusion, the jury panel may issue an advisory opinion regarding the liability and/or damages of the parties.

The summary jury trial is different than a mini-trial or moderated settlement conference because it is conducted in a courtroom using jurors from the jury pool.  Summary jury trials typically last one day, and each party has a predetermined amount of time to submit their arguments and evidence.  The rules of evidence are generally loosely enforced so as not to bog down the proceeding.

After the parties present their arguments, the jury is given a predetermined amount of time to deliberate, and then the jury provides its “verdict,” which is just an advisory opinion.  This allows the parties to have some idea of how a group of jurors will perceive their case.

The Benefits

There are many benefits to getting the perspective of a neutral third party through a mini-trial, moderated settlement conference, or summary jury trial.  It allows you to see what arguments or facts were well-received or were confusing to the neutral.  And it also allows you to see how a neutral will react to your opponent’s arguments and facts.  But most of all, it will hopefully give the parties a framework for settlement negotiations so that the case can be resolved.

Almost any type of case can be appropriate for a mini-trial, moderated settlement conference, or summary jury trial so keep them in mind for helping you get a case resolved.

 

 

When I was (much) younger, I recall hearing a preacher in church one Sunday say (multiple times), “The road to hell is paved with folks with good intentions.”

I had no idea what he meant, but I was pretty sure it was bad.  I want to borrow his words to describe something I’ve noticed about construction projects:  The road to project hell is often paved with folks with good intentions.

In other words, the seeds of many construction disputes and unprofitable projects often begin with good intentions by the people involved.

At the beginning of the project, everyone has good intentions.  I have never represented a client who started a project hoping there would be conflict.

I think most people want to trust the people they do business with (why would you do business with them if you didn’t trust them, right?).  As a result, as a project moves along, participants discuss scope change, payment, pricing, and ordering materials, among other things.

Instructions are given and agreements are made.  However, sometimes the parties do not diligently document the discussion and agreement.

This results in disagreements about what was discussed and agreed to once someone gets around to preparing a document, or worse, it leads to a surprise (some would call it ambush) claim at the end of the project.

Next comes payments being withheld, liens being filed, litigation or arbitration, people having to talk to their lawyer way more than they want to, and you find yourself in project hell.

You’ve probably heard the old saying, “trust but verify.”  When it comes to a construction project, however, you should adopt the approach of:

Trust but Document.

Any time there is a discussion about any type of change or any kind of agreement is made, the main points should be documented immediately.  Technology makes this more achievable than ever before.

Use Smartphones and Tablets

When a discussion takes place onsite, it can be documented quickly and easily with a smartphone or tablet.

  • Smartphones.  Put the terms of a discussion and agreement in an email, which can be copied to all parties participating in the discussion so that they have a chance to speak up immediately if they disagree with any information in the email.  If you don’t have time to type out an email (which should be rare), then use your smartphone to make a quick video or audio recording to record everyone agreeing on what was discussed and what actions will be taken.  It would be very difficult for someone to later deny they agreed to something if you have them on video agreeing with the terms.
  • Tablets. Not only can you use a tablet to prepare a note or email, but certain tablets allow you to write with a stylus.  This allows parties to quickly put the terms of their discussion or agreement in a document (even a prepared form stored on the tablet or in the cloud), and then sign it using it the stylus.

Once you have documented the main points of a discussion, the information can later be included in a change order proposal or change order.  The suggestions above are not the only ways to use technology, but the point is that you should make technology work for you and decrease the number of potential disputes.  TRUST BUT DOCUMENT.  Because remember, the road to project hell is often paved with folks with good intentions.

Part 1 discussed how choosing the right mediator and watching for the right time can improve your chances for a successful construction mediation.  Here are additional thoughts on how to increase your odds for a successful mediation.

  • Prepare yourself and your mediator.  Many mediators ask parties for pre-mediation submissions, but too often parties provide very little information to the mediator.  If you have selected the right mediator, he or she will want to try and understand the case background, legal issues, damage claims, etc. before the mediation.  Help the mediator be prepared to help you.  Give them information on the claims, disputed fact issues, and critical legal issues. Also, prepare yourself for the mediation.  Before going to the mediation, parties and their counsel should make sure they have, at a minimum: (a) copies of relevant documents, deposition testimony, and important cases; (b) a strategy for how to approach the mediation, including prioritizing areas where concessions can be made; (c) thoroughly analyzed potential acceptable resolutions and identified potential obstacles that may have to be dealt with; and (d) a reality check conversation between the party and their counsel (see below) to discuss how to maximize the strengths of your case and minimize the weaknesses.  Keep in mind that there will not be time to review a large number of documents with the mediator.   So proper preparation will allow you to hone in on the key documents and areas of the case that will likely be relevant to the settlement negotiations.   Prior to the mediation, parties and counsel should discuss the mediation strategy and potential settlement positions.  If the only discussion parties and their counsel have had about the mediation is the location and time, then they’re not prepared.
  • Have a reality check conversation.  It is rare to find a dispute where the liability and damage issues are so clear-cut that it could be termed a “slam dunk” for one of the parties.  Yet, that’s what some clients want to hear from their attorney.  And sometimes, any mention by an attorney that there may be a weakness in some part of the case is met with an angry response from clients asking, “whose side are you on?”.  If an attorney avoids having tough conversations or tries to sugar coat things for a client because they think that’s what the client wants to hear, then the attorney is doing the client no favors. This approach is the perfect recipe for frustration at mediation because not only will the mediator be telling the client why the other party thinks they should win on some (or most likely all) issues, the mediator may also point out areas of weakness and question how the attorney and client plan to address those issues.   No client likes surprises.  If the first time a client hears about a potential weakness in a claim or defense is at mediation, then a resolution will be difficult, if not impossible, to achieve.  That’s why before mediation, lawyers and clients need to have a honest conversation about the strengths and weaknesses of the case.  If a client has hired the right attorney, he or she will have analyzed the strengths and weaknesses of the case and be prepared to have this conversation.