Deposition Preparation

Robert J. Franco | Franco Moroney Buenik

Depositions are probably the worst experience faced by those in the construction industry. Apart from the annoyance and distraction, people do not like sitting in an office answering questions.

A deposition is a formal legal proceeding. It is neither a “statement,” nor an “interview.” Before the deposition begins, you will be sworn to tell the truth by the court reporter, who is a notary public authorized to administer oaths.

One or more of the other lawyers in the case has requested your deposition. The typical purpose for taking a deposition are: 1) to prove something through the witness’ testimony; 2) to evaluate the opposing party as regards his credibility, appearance and demeanor; 3) to educate oneself about the opposing party’s position on the facts; and 4) to lay a foundation for impeachment at trial. The last item requires some explanation.

If you answer a certain question in a certain way at your deposition, you will be expected to answer it the same way at the trial. If you do not, the jury will probably conclude: 1) that you lied during the deposition, 2) you are lying at trial, or 3) you are not a reliable witness because you “changed your story” from one time to another. Therefore, you must take great care to ensure that each answer you give is accurate, since you will have committed to that answer, right or wrong. However, if you realize during the deposition that any answer you have given is inaccurate, correct the error immediately. If you realize an error after the deposition has been completed, you should notify your lawyer immediately.


The deposition proceeds on questions and answers. After you are sworn, one of the other attorneys, usually opposing counsel, will begin to ask you questions. After he has completed his questioning, each of the other attorneys in attendance is entitled to question you as well. After all the attorneys have finished their questions, the deposition is concluded. Thereafter, the court reporter, with the aid of a computer, will have all of the questions and answers transcribed into a booklet or transcript. The attorneys usually do purchase copies of the deposition transcript for their own use. Your attorney will likely purchase a copy of your deposition transcript and will make it available to you.


Your deposition will probably be taken in the conference room or library of the office of one of the attorneys who are involved in the lawsuit. The people who are usually present during the deposition are the witness, the court reporter and the attorneys for all the parties. Anyone who is a party to the lawsuit is also entitled to be present, but is not required to be there. People who may be called to testify at trial who are not parties are generally not entitled to be present. If for any reason you would like for someone to be in attendance with you at the deposition in addition to me, advise your lawyer as this can often be arranged by agreement.


If any special preparation for the deposition is required other than a pre-deposition conference, your lawyer will advise you. Aside from this, the best preparation for your deposition is to relax, avoiding undue tension or anxiety about the deposition procedure.

ADVICE


The following advice is usually helpful to people who are about to give a deposition. This is general advice and is not tailored to apply to you or your case in particular. If there is something special about you or your case that requires attention, your lawyer will address this in the pre-deposition conference, where he will discuss the facts of your case and your anticipated testimony.

  1. TELL THE TRUTH.

    You will be under oath and legally required to tell the truth. If you do otherwise, you will be guilty of perjury, which is a felony criminal offense. If you lie, this will probably be exposed by adverse counsel and the results will be disastrous for you. Moreover, telling the truth will relax you by making you comfortable in your testimony.
  2. MAKE SURE YOU UNDERSTAND THE QUESTION BEFORE YOU ATTEMPT TO ANSWER IT.

    If for any reason you do not understand the question, do not answer it. When confronted by a question you do not understand, you should say: “I do not understand the question,” or “Your question is too vague (or unclear, or ambiguous, or broad),” or “Your question is too long and complicated,” or “I don’t understand the words you are using,” or whatever similar response is appropriate under the circumstances. The lawyer will explain the question or rephrase the question as many times as necessary until you understand the question. You should never be embarrassed about having to respond to a question in this way.

    Once you answer the question, it will be assumed that you understood it. If you did not understand the question, it is inevitable that your answer will be wrong. When opposing counsel demonstrates at trial that the answer you gave during the deposition was wrong, as he probably will, your credibility will suffer.

    As part of this, you should seek to avoid overly broad questions, such as “tell me what happened here.” Do not be afraid of asking the questioning attorney what he means, to clarify his questions, or to break-up a compound or two-part question. Make the lawyer ask specific questions, and do not answer anything other than what is asked. Do not speculate what the interrogator is seeking. If you listen to the precise question being asked, and only listen to that question, you will be better served.

    Beware of questions which are stated in a strange manner. Consider the following: “Isn’t it true that you are not an OSHA trained safety inspector?” If it is true that you are not OSHA trained, is the answer “yes” (meaning you are not OSHA trained) or “no” (it is not true that you are not, not OSHA trained). In such instances, do not be afraid to clarify the question.
  3. GIVE A NARRATIVE ANSWER WHERE POSSIBLE.


    At trial, if you are evasive, the jury will probably conclude that you have something to hide, or that you are fearful that direct answer to the question will prejudice you. Evasion equates with cunning or deceptiveness in the minds of most jurors. By contrast, direct answers, even those that may involve some sort of an admission on your part, will give the jury the impression that you are an honest, candid and fair person. The jury’s perception of you will almost certainly have an effect on the outcome of the case.

    In most states, the only portion of your deposition which may be read to a jury is that testimony which is inconsistent with your trial testimony. With respect to direct answers, be advised that they make for very good impeachment. Narrative answers make for limited impeachment.

    Assume for example that a witness is testifying in a construction case involving a crane cable which broke due to overloading. Consider the impeachment effect of the different responses:

    Question: Isn’t it true that the cable failed due to your company overloading the crane, which caused the load to fall.

    Answer: Yes.

    As you can see, this response is very direct, and does not allow the witness any latitude. It admits to overloading and causation. Certainly, any attempt to retreat from this response at trial will subject the witness to excruciating impeachment. Instead, consider the following:

    Question: Isn’t it true that the cable failed due to your company overloading the crane, which caused the load to fall.

    Answer: Actually, the crane was not ours, but was leased from a different company which knew about the excessive live load on the crane, we did not actually know that information.

    The answers are similar, but the answers are stated much differently: the first answer having a far greater impeachment value. The second answer gives the witness latitude. Remember, short “yes” or “no” answers tie down the witness. Narrative responses do not. Yes or no answers should be avoided, as they provide for tight impeachment. Do not let a lawyer goad or intimidate you into making a “yes” or “no” answer. Answer the question asked in a short narrative.
  4. DO NOT VOLUNTEER ANY INFORMATION.

    Always give the shortest and most direct answer possible that is truthful and accurate. Do not add anything, even if you think that doing so will be helpful to you position. Keep in mind that one of the reasons that opposing counsel is taking your deposition is to educate himself regarding your knowledge of the facts pertaining to the matters in dispute. Everything he learns at the deposition helps him prepare for trial, which information he will use against you.
    Therefore, you should make the lawyer earn the information he receives by requiring him to ask for information before you provide it to him.

    Your deposition will probably be your first opportunity to meet and confront opposing counsel. It is a natural human tendency to seek to convince the attorney for your adversary that your position is correct and his is incorrect. Therefore, you will have a natural tendency to volunteer information that you think is favorable to you in an effort to convince the attorney of the correctness of your position. However, the lawyer’s job is not to judge the merits of the controversy, but rather to advance the interests of his client. Therefore, no amount of persuasion by you will dissuade opposing counsel from his task. By telling him much about your position or your recollection, whether he asks you about them or not, will help him prepare to attack those points at the time of trial. If the interrogating attorney fails to ask you something that is important and, therefore, fails to find out about it prior to trial, your interests are advanced.

    Remember that the deposition should be cross-examination, where the answer is suggested. This represents adverse counsel’s opportunity to bring out the facts that are favorable to his side of the case. Do not be frustrated that you are seemingly deprived of an opportunity to talk about the things that are favorable to you. At the trial, you will have a full opportunity to tell your side of the story in answer to the direct examination by your own lawyer. You cannot and will not win your case at your deposition. However, you can lose your case at your deposition by volunteering information. DO NOT EDUCATE THE OPPOSING LAWYER.
  5. BE BRIEF.

    While your responses should be brief, the longer your answer, the more you will tend to volunteer information or say something that is likely to damage your position. However, do not sacrifice truthfulness or accuracy for brevity.
  6. DO NOT BE CONCERNED WITH PAUSING BETWEEN THE QUESTION AND ANSWER.

    A deposition transcript cannot measure time. Therefore, do not be concerned with taking your time in answering. Once the deposition is over, the transcript will not reflect the delay. However, this is not the case in video depositions where delays are recorded.
  7. IF YOU DO NOT KNOW THE ANSWER TO A QUESTION, SAY “I DON’T KNOW”. LIKEWISE, IF YOU DO NOT REMEMBER THE INFORMATION YOU ARE ASKED FOR, SAY “I DO NOT REMEMBER.”

    In order to operate efficiently, our legal system must rely on facts, not guesswork. If you attempt to guess, your answer will almost certainly be wrong. Many times, a lawyer will ask a question already knowing the answer, hoping to trap you with an incorrect answer. If you guess, you will be accommodating him. By prodding you to give an answer that is nothing more than a guess, the lawyer will be in a position to discredit your entire testimony by proving that your answers were clearly wrong.

    Do not be embarrassed to say that you do not know or do not remember something. You are not required to know or remember any particular thing about your case. Do not let opposing counsel coerce you into guessing about something by acting as if it is incredible that you do not know or remember it.

    If a particular fact is important, remember that it can probably be proved through the testimony of some other witness, or by a document, or some other form of tangible evidence. Your testimony is only one part of the mosaic that will be assembled at the trial. It is not necessary, therefore, for you to know or remember everything that is pertinent to your case.

    Do not start the answer to any question with the words “I guess” or “I assume.” If you are guessing or assuming, you should be saying “I don’t know,” or “I don’t remember.” Do not assume or presume anything. Stick to the facts and let the jury supply the assumptions and presumptions.
  8. BE PARTICULARLY CAREFUL ABOUT TIMES, DISTANCES, SPEEDS AND LOCATIONS.

    When the lawsuit involves a dynamic transaction, such as an automobile accident, there will inevitably be questions about your estimates of such matters as speed of the vehicles at various times, the time that elapsed between one event and another, the distance that a vehicle covered in a particular time frame, and the locations of various vehicles and other objects at various times. For some reason, people are particularly prone to guess about these things when they really have absolutely no basis for that testimony.

    Time lapses cause the most problems because people tend to grossly over-estimate time, speed and distance. For instance, witnesses will often say that they sat at a red light for five minutes. This is usually impossible. No traffic signal that is working properly will display a continuous red signal for more than about two minutes. Likewise, when asked a question such as “How long was it from the time you saw the other vehicle until the time of the collision?” people will sometimes respond “Thirty seconds,” or even “One minute.” It is rare that the correct answer to such a question will be more than a few seconds. Therefore, on any question involving a time, speed, distance, or location, you should be particularly cautious that your answer is an estimate and not a guess.
  9. BE SINCERE, PATIENT, TOLERANT AND COURTEOUS AT ALL TIMES.

    If you allow yourself to become upset at your deposition, or if you argue with the opposing lawyer, you will focus more on jousting with the opposing lawyer than on the accuracy of your answer. The result will be that your answer will be imprecise, and may be a response that you later regret. Too, lawyers will often bait witnesses, as if they can rile you in a deposition, they believe they will attack and rile you at trial.

    In addition, lawyers generally write reports that summarize witness testimony. Included is a witness evaluation. If you make a poor witness, that will depreciate the effect and impact of your testimony, and will affect the settlement value of the case.
  10. AVOID CONCLUSIONS.

    A fact is something you know based upon personal, first-hand experience. A conclusion is something you have figured out based upon the factual knowledge which you have assembled. You should testify about the former, but you should avoid the latter. The reason for this is that there is a relatively large margin for error in any conclusion, since it is based on less-than-perfect personal knowledge about the facts. Although you may know certain facts that seem to lead to a particular conclusion, other witnesses may know many other facts which, when added to the facts you know, might lead to a completely different conclusion. If you testify to a conclusion you have drawn and it seems to be inconsistent with facts testified to by other witnesses who the jury chooses to believe, then your conclusion will be discredited and the accuracy of your entire testimony will be subject to doubt. You should restrict your testimony to facts about which you have personal knowledge and let the jury draw its own conclusions from all the testimony they hear.
    The purpose of a non-expert deposition is to discover facts, not conclusions or opinions.
  11. DO NOT GIVE AN OPINION UNLESS YOU ARE ASKED FOR ONE. IF YOU DO GIVE AN OPINION, MAKE SURE IT IS A RELIABLE ONE.

    With certain limitations, all witnesses are permitted to testify about their opinions. However, you generally should not have or give an opinion unless you are an expert. It is much easier for a lawyer to attack opinion testimony than factual testimony. Therefore, you should be even more reluctant to volunteer your opinion than to volunteer facts.

    When you are asked for an opinion, the first decision you have to make is whether or not you have an opinion at all. You are not required to have an opinion about anything. If you do not have an opinion regarding the matter about which you are being asked, simply respond by saying that you do not have an opinion. It is difficult to form a reliable opinion on the spur of the moment during a deposition, when conditions are not usually ideal for a calm thought and deliberation. Therefore, do not be embarrassed to say that you do not have an opinion about something.

    If you do choose to express an opinion, or are an expert, pause briefly to think about the matter and assure yourself that the opinion you are about to give will be reliable and defensible. In order to be reliable, an opinion must be based upon:

    1) Adequate, detailed factual information, and

    2) Adequate education, training and/or experience in the area under discussion.

    If either one of these elements is lacking, you cannot express a reliable opinion and should decline to express one. The first part of this test is particularly important as regards hypothetical opinion questions. If you are asked to express an opinion based upon hypothetical facts, the first question you should ask yourself is whether you have been given sufficient factual information in the question to enable you to give a reliable opinion. If you give an opinion based upon broad, vague hypothetical facts, you will be making a great mistake. When confronted by a questions asking for your opinion, you may respond that you do not have an opinion if that is accurate. The question may not contain enough factual information for you to be able to base a reliable opinion on the facts at hand. The interrogating lawyer may then add additional hypothetical facts to his question. These additional facts may or may not make it possible for you to give an opinion. However, you should not be goaded into stating an opinion when you do not have an opinion.

    With respect to documents, do not interpret the writings of other people. You are incompetent to do so. However, you may be called upon to interpret your own writings.
  12. BE CAUTIOUS ABOUT RECOGNIZING ANY PARTICULAR PUBLICATION AS “AUTHORITATIVE.”

    If opposing counsel can persuade you to agree that any particular work is “authoritative,” then he will be entitled to quote passages from it under the guise of asking you if you agree with those passages. What the lawyer is really doing, however, is reading to the jury out of the book in the hope that the jury will believe the statements contained therein. Of course, these quotations, taken out of context, will seem to support his position and to be contrary to yours. Unless the opposing lawyer can persuade you or some other witness who is knowledgeable in the topic at hand that the work is “authoritative,” he cannot proceed to read passages from the book. Therefore, you should never agree that any particular publication is “authoritative” unless you are thoroughly familiar with it and agree with virtually everything in it. Otherwise, you should say that you do not regard the work as “authoritative,” or are unable to make that statement.
  13. DO NOT TESTIFY ABOUT WHAT SOMEONE ELSE TOLD YOU UNLESS YOU ARE ASKED DIRECTLY ABOUT IT.

    You should assume that you are being asked for your knowledge of the facts based upon personal, first-hand information, unless the question makes it obvious that you are being asked for second-hand information. For example, if you are asked what time of the day a particular automobile accident happened and you were not present when it happened, but you have read the police accident report which indicates that it happened at 2:00 p.m., do not give as your answer “2:00 p.m.” Rather, you should say “All I know about that is what I have read,” or “All I know about that is what I have been told.” If the lawyer then wants to pursue the matter, he will ask you what you have read or what you have heard. If you volunteer that information in the first instance, you are implying that you have personal knowledge about the matter under inquiry when you do not. This would be misleading; unnecessarily risking your credibility, since second-hand information often turns out to be wrong. If the second-hand information indeed is wrong, your testimony will have been erroneous.

  14. DO NOT BE AFRAID TO ASK FOR A CONFERENCE DURING THE DEPOSITION.

    If you need to speak with your lawyer, request a break. This is permissible, and is better than venturing into uncharted waters. Sometimes, the opposing lawyer will attempt to intimidate you by stating something to the effect that: “Let the record reflect that counsel and his client are meeting in the hall to discuss their answer to my last question.” However, that statement is not admissible, and will not come into evidence. It is an intimidation ploy, and cannot be used to prejudice you at trial.
  15. DO NOT REFUSE TO ANSWER ANY QUESTION.

    Generally speaking, the law permits opposing counsel great latitude in his cross-examination during a deposition. He is not required to confine his questions to those matters which are strictly relevant to the issues in the lawsuit. Anything that is “reasonably calculated to lead to the discovery of admissible evidence” is fair game during your deposition.

    The decision as to whether or not a particular question is proper is not yours, but rather is for the judge to decide. Therefore, you should not respond to a question by saying that you refuse to answer it, or that it is none of counsel’s business, or by asking what the question has to do with the lawsuit. All of these responses are likely to show that: 1) You are arrogant and rude; or 2) You have something to hide. Obviously, we do not want this.

    If a question is improper, your lawyer will object. If your lawyer does not say anything, you should assume that the question is a proper one that you must answer.
  16. VERBALIZE ALL YOUR ANSWERS.

    Say “yes” and “no,” rather than “uh huh” and “uh uh.” It may be difficult for the court reporter (and the jury) to distinguish between “uh huh” and “uh uh.” You certainly want to be clear whether you meant “yes” or “no.” For the same reason, you should avoid “talking with your hands.” Unless your deposition is taken by video tape, the jury will not be able to see the hand motions you make as you testify. Therefore, you must express your testimony completely in words. When talking about a distance, for instance, say “It was six inches,” rather than holding up your hands six inches apart and saying “It was this far.” Similarly, if you are asked to identify and testify about exhibits, such as documents or photographs, always mention in your answers the exhibit number of the thing you are referring to, so that it will be clear to the jury who hears your testimony what document or thing you are talking about.
  17. DO NOT INTERRUPT.

    The court reporter is unable to take stenographic notes when more than one person is talking at the same time. Therefore, you should let the lawyer completely finish his question before you begin your answer. Do not anticipate what the question will be and cut the lawyer off mid-sentence, even where it is perfectly clear from his first few words what he is going to ask. If you do interrupt, it will be necessary for the lawyer to stop you and start the question all over again. This will prolong the deposition, make the court reporter unhappy, and make your testimony difficult to follow.
  18. BEWARE OF THE QUESTION THAT ASSUMES SOMETHING TO BE TRUE THAT IS NOT OR MAY NOT BE TRUE.

    You should not attempt to answer any question that contains a statement or assumption of fact which you know or believe not to be true. The classic example of such a question is: “When did you stop beating your wife?” The question assumes that you have beaten your wife in the past. If this is not true, then you should say something like “I cannot answer that question the way you have asked it.” Do not, however, volunteer what the problem with the question is. If the lawyer wants to know that, he will ask you. If he does ask, your answer in this particular situation would be something like “The question assumes that I have beaten my wife in the past, which is not true.” If you attempt in the first instance to give a substantive answer to a question like “When did you stop beating your wife?” your answer will probably sound like a tacit admission that the statement or assumption of fact contained in the question is correct.
  19. RELAX, BE COMFORTABLE AND BE YOURSELF.

    While giving your deposition is not likely to be the most pleasant experience you will ever have, it need not be unpleasant either. Forget everything you have ever seen on television or in the movies. The other lawyers will not be permitted to abuse you, or argue with you. If your lawyer feels that you are being abused, he will terminate the deposition. The vast majority of attorneys treat the opposing party and witnesses with courtesy and respect.

    While hopefully attempting to follow all of the advice given herein, you should try to be yourself during the deposition. Do not attempt to put on an act or pretend to have knowledge or personal qualities that you do not have. Do not attempt to use words or phrases that do not come naturally to you. Remember that the primary audience at whom your testimony is aimed is the jury, which is composed of laymen. The jurors are neither judges nor lawyers and will not expect you to speak in Latin phrases or use any kind of special terminology. If you attempt to change your personality or your mode of expression just for the deposition, your testimony will appear stilted and awkward and, more importantly, it will lose the quality of genuineness which is required in order for your testimony to be credible. Within the bounds of good taste and common sense, you should express yourself in language that is usual and customary for you.
  20. ASK FOR A BREAK IF YOU NEED ONE.

    You are entitled to a break in the deposition at any time and for any reason. If you need to go to the rest room, make a telephone call, or take care of any kind of personal business, do not hesitate to ask for a break. You will not be a good witness if your mind is on something other than the questions being asked. Take as many breaks as you need during the deposition.

    You should always ask for a break if you become mentally fatigued and begin to have trouble concentrating on the questions.
  21. DO NOT SPECULATE

    Lawyers will often ask you to speculate. The short answer is that the lawyer placed you under oath to tell the truth about the facts you recall. Asking you to speculate asks you to go beyond the facts, and delve into the unknown. In essence, this calls for you to violate your oath and go beyond the facts.
  22. OBJECTIONS

    During the course of the deposition, your lawyer will likely voice objections, and will tell you if you should refuse to answer.
  23. REHABILITATION

    If there is testimony elicited from you which is damaging to our case, your lawyer may ask you questions to clean-up or “rehabilitate” you and your testimony.
  24. DOCUMENTS AND DEPOSITION PREPARATION

    Do not be surprised if you are asked about documents you produced as part of the written discovery process. You should be prepared to answer questions about the steps you took to identify documents responsive to the discovery request, the privilege log, and the documents produced. Generally, you should not answer any questions about documents unless the document is in front of you.
    You will also be asked about what you did to prepare for the deposition, including everything you reviewed, all of the people you spoke with, and other preparation. Your discussions with your lawyer are privileged and are not discoverable.
  25. SIGNATURE

    At the conclusion of your deposition, you will be given the opportunity to declare your intent to read the transcript, checking for errors. This is called “reserving” signature. While you cannot change the substance of your testimony, you can note errors in the transcript.
    Alternatively, you may “waive” signature, and accept the transcript as it is written.
    CONCLUSION

    If you have any questions about the nature or purposes of a deposition, or about any of the foregoing advice, please do not hesitate to ask them during the pre-deposition conference.
    In terms of deposition mechanics, the single most important points are for you to tell the truth, to listen to the question and to only answer what is asked. Above all else, ensure that you are relaxed


Large-Scale Construction Projects: To Arbitrate, or not to Arbitrate – That is the Question

Robert B. Garner, David Kiefer and Gregg Jacobson | King & Spalding | March 8, 2019

Owners and contractors involved in large-scale energy and manufacturing projects face unique challenges in bringing projects to fruition. One challenge is negotiating and drafting a contract that places the parties in a fair position if problems arise during the project. In construction contracts for large-scale projects, multiple areas can be vitally important, such as intellectual property, change order rights, limitations of liability, liquidated damages and insurance. Somewhat overlooked, however, is the dispute resolution clause.

Through a dispute resolution clause, the parties decide in advance how disputes will be handled. The owner usually leads this discussion and develops a dispute resolution strategy early in contract negotiations, carefully considering the various parties (contractors, suppliers, and engineers) involved in the project, their typical requirements and expectations, and its own needs. The most basic question in developing a dispute resolution clause is whether arbitrators or a judge should decide the outcome of the case (and in the latter case, whether or not to permit a jury to have a role in the decision process). Both arbitration and litigation have advantages and disadvantages based on the circumstances.

Once that decision is made, the next issue is drafting the provision. If arbitration is chosen, one significant drafting concern is what law applies – the federal arbitration act or a state arbitration act. Even if the state arbitration act applies, drafters need to keep in mind that the federal act may govern in certain, specific situations. A well-drafted, customized dispute resolution clause will help ensure that the process goes smoothly, protecting against risk and potentially saving untold amounts of time and money.

To Arbitrate . . .

Enforcing a Foreign Judgment

Many sophisticated parties prefer arbitration in their agreements. One significant reason is that it can be much easier to enforce an arbitration award against a foreign party than a court judgment. This is due to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Convention.” Judgments from U.S. courts can be enforced overseas, but it is often a difficult and drawn-out process involving the Hague Convention. And of course, the longer the process to enforce the judgment, the more expensive it can be and the greater the opportunity for potential assets to slip away.

On the other hand, if a foreign country is a signatory to the New York Convention (and over 150 countries are), that arbitration judgment is directly enforceable in that country, barring a few narrow exceptions. Thus, owners of large-scale construction projects who envision using foreign contractors or suppliers, or contractors dealing with foreign ownership, will almost always find it easier in a foreign country to enforce a U.S. arbitration judgment than one issued by a judge.

Confidentiality

Another potential advantage to arbitration is the confidentiality of the arbitration process. Unlike litigation, which is presumptively public, arbitration proceedings are confidential. This means that whatever the allegations, you are unlikely to read about them in the press. This could be especially useful to owners who may be accused of various safety and environmental violations. However, it is also useful to contractors who are concerned about future clients learning about the number of claims they have made in past projects. However frivolous the lawsuit, if it is in court, it is public, and ripe fodder for the many legal websites following newly-filed litigation. If it is in arbitration, it is private.

Evidence

Construction cases are notorious for involving an extraordinary number of documents. Courts have strict evidentiary rules regarding documents – each one must be authenticated, and each one must have an adequate foundation to meet an exception to the rule against hearsay. These requirements can be a large burden for both sides. For example, if there is no witness to testify as to the date a photograph was taken, a court may exclude that evidence due to lack of authentication. Arbitrators, on the other hand, are likely to consider such evidence and determine on their own how much weight to give it. Thus, parties will face less procedural scrutiny to getting their evidence considered in arbitration than they would in a court.

Experienced Arbitrators

Another arbitration “plus” is the experience of the arbitrators themselves. Arbitrations are products of contract – the arbitration only exists because the parties agreed to arbitrate. Thus, the parties can agree to certain requirements. For example, the contract can state that three arbitrators shall hear the case, and that each party may choose one of the arbitrators (with those two choosing the third member of the panel). This gives flexibility to tailor the arbitrator to the dispute. If the claim involves intellectual property, an IP lawyer can be designated. If the disagreement covers specifications or scope, it could be a construction lawyer, or even an engineer or architect. If the main claim concerns delay, it could be a scheduling expert. Ensuring that certain expertise is on the panel can be extremely beneficial.

Enforceability of Choice of Law and Choice of Venue

Finally, one last arbitration advantage is the likelihood that choice of venue and choice of law provisions are upheld. Many states across the nation have statutes that invalidate choice of venue provisions if the provisions require that the parties resolve disputes outside the state where the project is located. These state laws not only invalidate choice of venue provisions, but often restrict choice of law clauses as well. However, an advantage of arbitration is that there is ample precedent indicating that the Federal Arbitration Act preempts these laws with respect to venue and choice of law restrictions. In those cases, the parties are free to determine the location of where the disputes will be handled and the law governing the parties’ agreement.

. . . or Not to Arbitrate . . .

Neutrality

While there are many advantages to arbitration, litigation also has its benefits. One advantage is the neutrality of the judges. While using experienced arbitrators can be an advantage for complex disputes, one must keep in mind that along with experience comes biases and pre-conceived notions. That experienced arbitrator who looks wonderful on paper may harbor a hidden animosity against one party due to a lifetime defending owners or contractors. Or, he may deem unenforceable any clause that he would not have agreed to himself. Most construction dispute arbitrators will be current or former construction litigators who have, throughout their career, primarily represented one type of party. A judge, on the other hand, is unlikely to have presided over many construction cases in his career. He or she is a blank slate, waiting to be informed. Savvy lawyers can use this to their advantage.

Dispositive Motions

Another benefit to litigation is the strict rule of law found in courtrooms, particularly regarding dispositive motions. A dispositive motion (typically a summary judgment motion) is a motion that decides part or all of a case just on the written motion – no testimony or hearings needed. Those with well-written, customized contracts hold a huge advantage here if the contract requirements are clear and unambiguous. These summary judgment motions are much more likely to be granted in litigation than in arbitration. One reason, as stated above, is that a judge is truly neutral – he or she typically does not care about the case itself, and is happy to make the docket lighter if part or all of a case can be dismissed on summary judgment. Conversely, an arbitrator has a financial disincentive to grant a dispositive motion. Arbitrators get paid by the hour and by the day, and any motion that removes part of a case cuts down on that work. Arbitrators will say that this disincentive does not come into play, and for most arbitrators it does not. At the least, however, that disincentivising undercurrent exists.

Another reason is the general informality of the arbitration process. Arbitrators prefer a less formal hearing than a trial, and generally allow the parties to put on all relevant evidence. Then, the arbitrators decide for themselves what weight to give that evidence. Courts, on the other hand, strictly follow the rule of law. If the contract is clear and unambiguous, the court can decide a dispute for itself – no hearing or trial needed. Thus, while an arbitrator is more likely to allow the evidence to be heard and then decide whether it affects the outcome, a judge will pare down the dispute as he or she can. Here, customized and clear contracts hold the advantage.

Discovery

Construction projects, perhaps more than any other type of case, involve a huge number of documents. Depending on the arbitration, the rules may restrict discovery so that it is difficult for either side to get all the information it wants. For example, international arbitrations typically rely on the IBA Rules on the Taking of Evidence and do not allow for pre-trial depositions. A court is much more likely to allow for broad discovery.

Further, any dispute will likely involve a third-party – someone not directly involved in the dispute, but someone who has important, perhaps even dispositive, information. Information from a third-party is much easier to obtain in court than in arbitration. In court, the process is relatively easy. The court (or even just the lawyers themselves) issues a subpoena, and the third-party is obligated under law to produce documents. The process may be a bit more complex for out-of-state parties, and more so for foreign parties, but it is still a straightforward process. Third-party discovery in an arbitration, conversely, is anything but straightforward. To obtain discovery in arbitration, you would need to specify that discovery is permitted in the contract itself, and that depositions may be held.

If the discovery rules for the arbitration are not clearly set out in the contract, you have to figure out whether third-party discovery before the hearing is even permitted. Currently, there is a circuit split in the courts as to when third-party discovery is allowed. The Federal Arbitration Act states that arbitrators can summon any third-party to come before the arbitrators and bring any documents. Some courts interpret this as only allowing certain discovery on the day of the hearing (trial), while others allow discovery in line with the federal courts. In court, those rules are already set.

Right to Appeal

Finally, the automatic right to appeal a court’s decision is a benefit to choosing litigation over arbitration. If you are dissatisfied with the court’s judgment, you have the right to appeal that decision to the state or federal Court of Appeals, and you can even try to have the case heard by the applicable Supreme Court. Conversely, you can only appeal an arbitration decision in a very few, narrow circumstances. The American Arbitration Association does allow for an appeal process, but it is optional. Therefore, contract drafters need to remember to put the appeal process in the contract if that option is desired. If it is not there, even if you did not know about it, you cannot use it.

What to cite

Once the decision to arbitrate is made, the next issue is knowing exactly what to say in the contract itself. Arbitration clauses, especially for large, complex projects, can be extremely detailed. Provisions regarding the number of arbitrators (which may change depending on the size of the claim), the arbitrators’ experience, the process through which the arbitrators are chosen, and the governing law, among other things, must be set out. It is especially important to set out what arbitration law applies. Many agreements, especially on large projects such as power projects, choose the Federal Arbitration Act (“FAA”). The FAA is federal law and can be used throughout the United States.

The FAA states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable.” Thus, for the FAA to control, the agreement must “involve[e] commerce.” A contract involves commerce to the same extent that Congress has power over interstate commerce under the Constitution. Congress’ interstate commerce power is extremely broad, and all agreements involving international parties should be covered. However, for domestic contracts involving local parties, the answer might not be so clear-cut – make sure to check with counsel.

Therefore, if the parties agree to arbitrate, the contract involves interstate commerce, and the FAA is cited, the FAA will control. On the other hand, if the parties decide that they would prefer to use a state arbitration act, they may do so as long as they cite it in the agreement. The FAA will only step in and govern over that state arbitration act if the state act renders the arbitration clause unenforceable. For example, even in an international construction project, the parties might agree to have a state arbitration act apply. Perhaps the project is in South Carolina, and through negotiation, the parties agreed to use the South Carolina arbitration act. That act states that notice of the arbitration clause must be proximately displayed on the very first page of the contract. Even if the notice is on the second page, the arbitration clause is unenforceable. If the agreement is rendered unenforceable due to the state arbitration act, and the agreement involves interstate commerce, one argument is that the FAA preempts, and controls on that issue. Federal law holds that in such a case, even though the state arbitration act holds otherwise, the arbitration agreement will likely be found enforceable.

. . . that is the Question.

There are numerous reasons to choose arbitration over litigation, and many reasons to do the opposite. Project owners and contractors in large-scale construction projects should consider the specifics of each project, and, with the advice of counsel, determine what best fits each endeavor. Some agreements may even use both arbitration and litigation, stating that only claims under a certain amount use one method, while all other claims use the other. Further, if the parties do agree to arbitrate, the agreement must be written so that the right arbitration act controls.

Though not as flashy as a negotiation over payment terms and scope of work, the time used on the dispute resolution clause will be well-spent if issues arise during the project. Thus, it is important to determine what is right for each development project, and to write each contract accordingly.

Insurance Companies Know Their Customers Do Not Read Insurance Policies

Chip Merlin | Property Insurance Coverage Law Blog | March 11, 2019

Insurance companies and insurance agents know that their customers do not read their insurance policies. Proof is found by the Squaremouth Insurance Company offering a prize which could only be found if a policyholder read the insurance policy and won a secret contest. Here is the story:

A self-proclaimed ‘nerd’ from Georgia read the often-ignored fine print on an insurance contract — and it ended up winning her $10,000. Donelan Andrews recently bought travel insurance from a Florida-based company, Squaremouth. Andrews and six of her closest friends are traveling to London together in September, and the high school teacher wanted to secure their trip, she told CBS News.

Andrews says as nerdy as it sounds, she always reads the fine print on contracts, policies and agreements. This time, her diligence paid off. Hidden deep within the text of her Squaremouth insurance policy was a contest to win $10,000. The company buried instructions for claiming the grand prize in the fine print of every Tin Leg Travel Insurance contract.

‘If you’ve read this far, then you are one of the very few Tin Leg customers to review all of their policy documentation,’ the fine print read. It included an email address and said the first person who replied would win the prize.

. . . .

Squaremouth explained the secretive contest on their website after Andrews won. ‘We understand most customers don’t actually read contracts or documentation when buying something, but we know the importance of doing so,’ the company wrote. ‘We created the top-secret Pays to Read campaign in an effort to highlight the importance of reading policy documentation from start to finish.’

‘Over the past 16 years, we’ve learned that many travelers buy travel insurance and just assume they’re covered if anything goes wrong, without actually reading the details of their policy,’ Squaremouth wrote. ‘However, this often leads to claims for losses that are not covered. This lack of understanding is one of the biggest reasons travel insurance claims are denied.’

In, When Words Collide: Resolving Insurance Coverage and Claims Disputes, Bill Wilson agrees that virtually nobody reads their insurance policy:

Who reads rental agreements at the counter when renting a car? Pretty much no one. Who reads 78-page software or phone app licensing agreements? Almost certainly no one. Did YOU read the Copyright and Disclaimer page of this book? (That’s a rhetorical question.) Who reads insurance policies? Virtually no insureds and far too few insurance professionals like agents, underwriters, and adjusters. Why? In the case of insureds, one reason might be that the actual policy forms are not provided for days or weeks after coverage is bound. A presumption of an insured might be that, if the insurer doesn’t see a need for the insured to read the policy before entering into the insurance contract and perhaps weeks afterwards, is there really any need to read it when received? Would whether or not an insured reads the policy make any difference in how a claim is resolved?

So, how do customers of the insurance product know what they are insured for? I would suggest that they learn from their insurance agents and from advertising. If Wilson is correct, it is certainly a very precarious proposition because then even the agents who customers rely on are not reading the policies and the often-comedic advertising of insurers.

Policyholders do not read their policies. If they did, few would fully understand what they are covered for. The reality is that most people “hope” they have coverage. After a loss happens, that “hope” is a lot more nervous than at the point of purchase.

Insurance agents are extraordinarily important. Policyholders should select truly professional agents, as I discussed in, Choose Insurance Agents Wisely to Avoid Insurance Coverage Gaps:

Educated, hardworking and professional insurance agents play an important role in the insurance industry. They recognize their obligations to customers extend far beyond being mere order takers and providing the cheapest insurance premium. Instead, they are the agents who procure insurance policies which provide the “peace of mind” the insurance industry promises and advertises to those who purchase its products.


Imitation is the greatest form of flattery, as I have been told, and as such, we will imitate what Squaremouth has done. If you are reading this – you have won free admission for you and up to four others to our 4th Annual Midwest Construction Defect & Dispute Conference in Chicago on May 20th. Travel, food and other expenses are not included. Email jeff@adviseandconsult.net to take advantage of this offer and claim your reward!

You Are Indemnified…. Until You Are Not

William F. Bresee | Leech Tishman Fuscaldo & Lampl LLC | February 11, 2019

In the ordinary course of a construction project (or any commercial transactional arrangement, for that matter), something can go wrong. People can get injured; property can be damaged. For that reason, one of the significant risk allocation tools available to business people is indemnification. The concept is elegantly simple – you are an owner and engage me to provide you equipment or services. If there is a deficiency in my deliverable or service and, as a result of that deficiency (which could be negligent performance, a warranty breach, or similar), a third party is harmed by injury or economic loss and sues you, I step in and protect you against the impact of the claim made against you. The simplicity of the arrangement does not, however, mean that you do not have to read the language of indemnification provisions and of contract documents through the product or service supply chain. The ruling in Oliver Communications Group, Inc. v. Schneider Electric Buildings Americas, Inc., Case No, 07-17-00396-CV, Court of Appeals, Seventh District of Texas (November 2018) is instructive.

Schneider Electric Buildings Americas, Inc. (“Schneider”) contracted with the Delaware River Port Authority for installation of security cameras on the Benjamin Franklin Bridge; Schneider then subcontracted portions of the work to Oliver Communications Group, Inc. (“Oliver.”) A provision of the Bridge Contract allegedly obligated Schneider to indemnify Port Authority against certain claims. In the Subcontract, Oliver also agreed to indemnify Schneider against certain claims. An employee of Oliver, Patrick Burness, slipped and fell on steps at the job site. Burness sued the Port Authority, among others. The Port Authority demanded indemnification from Schneider, and, in turn, Schneider demanded indemnification from Oliver. Oliver refused, while Schneider did not. Burness settled his lawsuit, Schneider paid the settlement, and Schneider sued Oliver for indemnification upon the subcontract with Schneider. Both litigants filed motions for summary judgment. The trial court granted that of Schneider, denied Oliver’s, and awarded Schneider over $1.2 million against Oliver. Oliver appealed on the basis of the existence of an obligation to indemnify Schneider and the enforceability of the indemnity agreement, as well as whether it was obliged to also pay pre-judgment interest on attorney’s fees. Noting that Texas law strictly construes indemnity agreements against the indemnitor, the Texas Court of Appeals reversed the trial court and denied judgment for Schneider.

The subcontract entered into by Schneider and Oliver has Oliver agreeing “to indemnify, save and hold harmless the Contractor, Contractor’s agents and employees, and all parties indemnified by Contractor in Contractor’s Contract from and against all claims, damages, losses and expenses…. to the extent caused in whole or in part by any negligent act or omission of Subcontractor, … or anyone for whose acts Subcontractor may be liable” and further provides that “Subcontractor expressly so agrees, whether or not said liability, claim, demand, loss or expense arises in part from the negligence of Contractor or any party indemnified by Contractor in Contractor’s Contract.” The subcontract was to be interpreted and enforced according to Texas law (even though the work was done in Pennsylvania). It makes clear that Oliver was obliged to indemnify Schneider and anyone Schneider was obligated to indemnify. The appellate court easily found that “Contractor’s Contract” was the contract between the Port Authority and Schneider. It then found, however, that Schneider was not obligated to indemnify the Port Authority against the claim of Burness.

The contract between the Port Authority and Schneider was comprised of a Request for Proposal and a Purchase Order from the Port Authority. The Purchase Order was unsigned; contained only elementary terms, and contained no indemnity provision; although referring to a “Solicitation” and “Supplier’s Bid or Proposal” and “documents attached to this Purchase Order or incorporated by reference,” nothing was attached to or expressly incorporated into the Purchase Order. Only the Request for Proposal contained an indemnity provision; that requiring Schneider to indemnify the Port Authority against claims “arising out of or resulting from: (a) performance or non-performance of the Work; (b) breach of any of the Design/Builder’s obligations under the Contract Documents, or (c) acts or omissions of the Design/Builder, its contractors, consultants, suppliers, or anyone directly or indirectly employed by any of them or anyone for whose acts they may be responsible, regardless of whether or not such claim, demand, cause of action, damage, liability, loss, or expense is caused in part by a party indemnified hereunder.” However, although alluding to a “Solicitation,” none was attached or defined by the Purchase Order. Finding that Schneider failed to establish the necessary linkage between the “Solicitation” and the Request for Proposal through its summary judgment evidence, the appellate court found that there was no evidence that Schneider contractually agreed to indemnify the Port Authority and that Oliver’s obligation to indemnify Schneider was never triggered.

The appellate court found that Schneider’s summary judgment evidence failed for a more telling reason pertaining to the scope of Oliver’s duty. Oliver’s indemnity arose “…to the extent caused in whole or in part by any negligent act or omission of Subcontractor [Oliver], [Oliver’s] employees, agents, suppliers, subcontractors or anyone for whose acts subcontractor may be liable and [Oliver] expressly so agrees, whether or not said liability . . . arises in part from the negligence of Contractor [Schneider] or any party indemnified by [Schneider] in Contractor’s Contract.” The court noted that this language required (i) causation “in whole or in part” by Oliver or one of those under it for whose acts Oliver accepted liability, and (ii) a negligent act or omission by Oliver or someone in that group. Finding that the language excluded the sole negligence of Schneider or another indemnified party, the also court found the language required multiple causes, one of which had to a negligent act or omission by a party within the Oliver group. Finding that the record was without evidence of negligence of Oliver or those under it (including Burness), the court found that Schneider’s summary judgment motion would have nonetheless failed on that point.

Whether the obligation to indemnify is in place through the contractual chain, and whether the specific requirements of an indemnity provision are to be triggered are key to being comforted that the intended allocation of risks between and among contracting parties is in place and enforceable. The review should be accomplished upon contracting as well as at the time a claim for indemnity arises.

Church vs. Church – Court Uses Dictionary to Define “Decay”

Jason Cleri | Property Insurance Coverage Law Blog | March 8, 2019

Easthampton Congregational Church submitted an insurance claim to Church Mutual Insurance Company when their roof suddenly collapsed. Church Mutual denied coverage for faulty construction after they sent their engineer, Joseph Malo, out to inspect the property. Mr. Malo noted, and the insured agreed, there was “progressive failure of the fasteners used to attach the layers of the ceiling to the ceiling joists due to the weight of the ceiling” which eventually caused the collapse.

Easthampton asked Church Mutual to reconsider their position stating that the roof was entirely effective in that it had lasted for approximately sixty years and that the loss was covered under the collapse provision which stated:

2. We will pay for direct physical loss or damage to Covered Property, caused by collapse of a [covered property]…if the collapse is caused by one or more of the following:

b. Decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;

f. Use of defective material or methods in construction, remodeling, or renovation if the collapse occurs during the course of the construction, remodeling, or renovation. However, if the collapse occurs after construction, remodeling, or renovation is complete and is caused in part by a cause of loss listed [in the previous sections]; we will pay for the loss or damage even if use of defective material or methods, in construction, remodeling, or renovation, contributes to the collapse.

The insurer, in its denial also rejected the insured’s allegation that hidden decay contributed to the collapse.

The trial court held that “the most reasonable reading of the word ‘decay’ as it is used in the Policy is that it refers to the broader concept of the word.” That is, a “gradual decline in strength” or “progressive decline” as opposed to a narrower definition that entails organic rotting.

The appellate court, while not necessarily agreeing with the trial court’s reasoning, affirmed their decision to grant summary judgment in favor of the insured because it was clear that an ambiguity existed as to the definition of the word decay.1

Notably, the First Circuit was not too fond of the insurer’s argument that the chosen definition of decay would encompass all collapses, because “it is difficult to imagine any collapse, of any structure, being cause by something other than ‘decay.’” The court noted:

But, even if the insurance company did not intend to provide coverage for collapses like the one in question, that is a self-inflicted problem. The insurance company, which wrote the policy, could simply have defined “decay” narrowly or limited the coverage period.

I leave you with a quote from English philosopher, Thomas Hobbes:

“[i]magination, therefore, is nothing but decaying sense. . . .”
______________________
1 Easthampton Congregational Church v. Church Mutual Ins. Co., No. 18-1881, 2019 WL 851191 (1st Cir. Feb. 22, 2019).