Is Arbitration on the Briefs Right for your Client?

Megan K. George | Forum on Construction Law

As clients increasingly demand options for timely, efficient dispute resolution, attorneys need to stay apprised of all available alternatives. Private arbitration was developed with efficiency in mind and has become wildly popular in the construction industry, providing parties a means to avoid delays caused by backlog in state and federal court dockets as well as evidentiary and procedural formalities. The American Arbitration Association’s Fast Track Procedures within the Construction Rules further trim the usual arbitration procedures, pushing parties through a streamlined pleading and discovery process. However, even the AAA Fast Track Procedures require significant time and resources, primarily those invested in conducting a hearing before an arbitrator.

Submitting a case for decision on briefs alone, without presenting in-person evidence or argument to the adjudicating body, is common in appellate litigation. It is also frequently used in trial court-level litigation, sometimes without the parties’ consent. Parties agreeing to arbitration on briefs alone, however, is exceedingly rare. Yet, when employed in the appropriate situation, agreeing to submit a dispute to an arbitrator on briefs alone can be a useful tool for quick and efficient dispute resolution and a highly satisfied client. On major construction projects, the commitment to arbitrate certain matters is often made before a dispute arises. So, when is arbitration on the briefs the right choice for your client’s project? And, what can you do to ensure a successful resolution? Let’s explore.

Arbitration on the briefs has two primary benefits. First, it can be highly cost-effective. Eliminating the costs associated with witness and hearing preparation and presentation can significantly reduce the overall price tag of arbitration. Second, arbitration on the briefs provides for speedy dispute resolution without sacrificing equity or expertise. Again, jettisoning a hearing can expedite a final resolution on the merits by weeks, if not months; certain disputes may even be submitted for a decision on the briefs without a traditional discovery process, which all practitioners know can be extremely time-consuming. Furthermore, the arbitration agreement allows the parties to dictate the timeline for decision, eliminating uncertainty and facilitating easy mid-project or mid-term dispute resolution.

Foregoing a hearing is not without its downsides. Without a hearing, an arbitrator may miss or misunderstand certain complex factual issues, and the parties have limited opportunity for clarification. Thus, astute construction attorneys will recognize that arbitration on the briefs is not one-size fits all. Predicting the nature of disputes likely to arise on your project and the evidence necessary to resolving those disputes is critical in 1) deciding whether arbitration on the briefs is appropriate for your client’s project and 2) drafting the terms of such an arrangement. When considering an agreement to arbitration on the briefs, keep in mind the following tips for success.

Identifying the Issues Subject to Arbitration. Not all disputes lend themselves to resolution on written arguments alone. For the same reasons decisions without a hearing are regularly issued in an appellate court setting, an arbitrator’s decision on the briefs is most successful when the dispute is straightforward and turns on a few narrow questions if not a single, objective issue. Lay witness and/or subjective evidence-heavy fact patterns and other, more complex disputes may be difficult for an arbitrator to grasp on paper alone and key details may be lost without an opportunity for the arbitrator to ask questions. Conveying witness credibility and evidentiary context may also be difficult. Accordingly, disputes involving competing expert testimony are not well-suited to resolution by this method. By contrast, a foreseeable, single-issue quarrel that requires either interpretation or application of a contract clause to a limited factual scenario is easily decided with limited party input. For example, in an agreement based primarily on unit prices, disputes over adjustments to unit prices may be well-suited to arbitration on the briefs. Adjustments to unit pricing are often necessitated by either 1) market fluctuations or 2) significant changes to the quantity of units subject to the agreement. Hence, few subjective factual issues will compound a dispute over the equity of an adjustment to an agreed unit price. Design ambiguity controversies and cost-only change order disputes may also lend themselves to resolution through arbitration on the briefs, particularly when employed mid-project to mitigate damages resulting from postponing a final resolution.

Careful Clause Drafting. Once you have identified the types of disputes amenable to arbitration on the briefs, your arbitration clause should carefully identify and describe those disputes to be subjected to arbitration. In addition, the language should plainly outline the particularities of the arbitration process itself. Each condition applied to the process should promote swift and cost-effective adjudication. Contemplate the following terms when developing an agreement to arbitrate without a hearing:

Arbitrator Selection. Before agreeing to arbitration on the briefs, consider the qualifications an arbitrator needs to provide a speedy and fair resolution. Ideally, an arbitrator should be able to jump into a dispute with minimal education on the intricacies of the particular dispute. In pricing disputes, an arbitrator with an accounting or financial background might be valuable. Alternatively, in a design ambiguity scenario, an arbitrator with architectural or design expertise will require less explanation to understand the parties’ respective positions and reach an equitable decision. To avoid wasting the expediency provided by arbitration on the briefs, the parties should also delineate explicit terms as to how a candidate pool will be developed and how the arbitrator will be selected in the event the parties cannot agree.

Specific Timeframes. As discussed above, a timely resolution of your dispute is a principal benefit of arbitration on briefs alone. Thus, the parties should settle on hard and fast deadlines for brief submission and the arbitrator’s decision. If needed, a limited timeframe for seeking clarification or enforcement of the arbitrator’s decision should also be employed.

Evidentiary Limitations. Your arbitration agreement should place strict limitations on the type and volume of evidence each party is permitted to submit in conjunction with its brief. Disputes that may be decided on objective, empirical, and/or documented evidence will find the most success in arbitration without a hearing. This is not to say that no fact witness testimony should be admitted; a successful arbitration on the briefs provision will permit submission of an affidavit or similar sworn statement to verify documentary evidence and provide necessary project details to put the dispute in context. Still, the primary source of evidence submitted to the arbitrator should be documentary, not testimonial. Taking it a step further, restricting evidence included in the briefs to evidence exchanged prior to submitting the case to arbitration may facilitate the arbitrator’s decision making process, and may even promote interparty resolution without arbitration. Similarly, you might also consider a page limitation on the briefs; a limited writing will force each party to concisely state its position, and it will assist the arbitrator in identifying the key issues she must consider in making her decision.

Decision Implementation and Cost Allocation. Finally, consider how an arbitrator’s decision should be effectuated. Should the decision or award be applied retroactively? If so, at what point should its application begin? Take our example of a unit price disagreement. Should the arbitrator’s decision apply only to future units? Or, if the pricing decision applies retroactively, should it apply to all units from the time the adjustment was requested forward? Or from the time the dispute was submitted to arbitration? The answers to these questions depend on the projected disputes and your client’s anticipated position. Another important term to consider in an arbitration on the briefs agreement is an attorney fee-shifting provision. In keeping with the cost-efficiency goal of opting for arbitration on the briefs, an agreement that the prevailing party will recover its attorney’s fees will aid in ensuring only truly unresolvable disputes reach the arbitration phase and dis-incentivize over-lawyering.

Arbitration on the briefs is an interesting dispute resolution procedure to consider for your clients’ future projects and disputes. While it may not benefit all clients or all projects, under the right circumstances, proposing this procedure can yield dividends for your client and allow you to appear strategically savvy and cost-minded.

Subtle (and Not So Subtle) Effects of COVID-19 on the Construction Industry

Frank T. Cara | Troutman Pepper

When is it going to return to “normal”? We all have been asking that question. Well, for the construction industry, it may never return to “normal.” COVID-19 may have permanently changed the landscape of the construction industry in many ways. Depending on your perspective, many changes could be for the better. We may have to alter how we do business to address some new issues and business concerns. Here are just a few issues that the pandemic has brought to the forefront of our industry.

  1. Virtual Dispute Resolution: Social distancing and closure of the courthouses in many jurisdictions across the country caused numerous meetings, court appearances, depositions, mediations, hearings and arbitrations to be held virtually instead of in person. Once over the initial “discomfort” with using virtual platforms such as Zoom, Skype, BlueJeans, etc., the feedback from many in the industry is that this approach is incredibly efficient. Video conferences eliminate travel time and permit people to participate who would normally not be able to meet in person, due to distance or other commitments. We believe that the use of video conferencing has become entrenched into the daily routine. One additional outcome of this, that everyone needs to understand from the very beginning of a project, is the need to document everything — absolutely everything. Due to the difficulty of meeting in person, we have seen many more disputes initially handled on paper submissions. It is easier to be successful in your claim if it is well-documented. This was true before COVID-19, but now is even more critical.
  2. Work Backlog: Early on in the pandemic, during the initial shutdowns and stay at home orders, private work projects came to a halt, while many public work projects were deemed essential. Not only did these projects proceed, but some public agencies took advantage of the lack of commuters and quiet streets to add work to existing contracts. Now we are seeing a distinct turn. While stay at home orders are being lifted and private construction is returning to pre-pandemic levels, the pandemic has devastated municipal capital budgets. We have seen contracts terminated or suspended, work deleted and future tenders put on hold. For public contractors, as the current backlog of work is burned off, the scarcity of future work can significantly strain cash flow and possibly the viability of the company. It is imperative to remain disciplined in bidding, watch your margins, stay within the geographical footprint and industry sectors. This is not necessarily the best time to expand. Sometimes the best project is the one you did not win.
  3. Employee Safety and Unions: Skilled craft persons working side-by-side on a project has always been the cornerstone of construction. Social distancing is not always possible, and people are worried about contracting COVID-19. This has heightened the health and safety protocols on projects. From additional PPE, social distancing and limiting the workforce on site, these protocols have possible negative effects on productivity and costs. Reduced efficiency and productivity directly translates into increased costs. These additional costs and productivity impacts have to be built into future bids. Additionally, these new necessary worker protections may inject new life into the power of unions. Will this be the rebirth of union strength in certain parts of the country?
  4. Material Procurement: The pandemic has slowed and shut down factories throughout the world. This has caused a scarcity of raw materials and equipment, causing increasingly long lead times and higher costs. It is unclear when the supply chain will recover. These factors need to be accounted for when developing schedules and budgets. You should consider going beyond your regular suppliers, and engage new and multiple distribution chains and suppliers, and even enter into long-term supply contracts to protect yourself from price swings.
  5. Legal Notices/Contractual Issues: The pandemic exposes (no pun intended) contractors to new and different claims and disputes related to COVID-19 You must thoroughly review your contract to assure you provide timely notices of all time and cost impacts, and comply with all claim documentation requirements. Additionally, as noted above, the pandemic has caused a significant increase in contract terminations and force majeure delays. You must understand what you can and cannot recover under your contract, and make sure you document your claims well and make all timely submissions.
  6. Health Insurance and Paid/Unpaid Medical or Family Leave: Local, state and federal responses to the pandemic have impacted the health care and leave benefits provided to workers. A flurry of new initiatives provide paid and unpaid medical leave related to COVID-19 exposures, mandatory quarantines and child and family care requirements. The conflicting requirements among overlapping local, state and federal mandates have created conflicts between employers, unions and benefit providers as to who is the responsible party to cover the additional costs of medical testing and leave. Having an understanding of all insurance policies, coverages, union agreements and your obligations as an employer is vital. It is critical that you take a team approach to assuring compliance with the myriad of benefits.

This is just a partial list of the impacts on our industry. 

OSHA Issues COVID-19 Guidance for Construction Industry

Garret Murai | California Construction Law Blog

This past month, after remaining relatively quiet following the coronavirus outbreak, OSHA began issuing industry-specific guidance on how to deal with the coronavirus in the workplace.

Until this month, the only construction industry specific guidance issued by OSHA was an OSHA Alert entitled COVID-19 Guidance for the Construction Workforce, a one page document providing little more guidance than that workers should stay home if sick, wear masks and frequently wash hands to prevent spreading and catching the coronavirus, and to sanitize tools and work areas.

Early this month, OSHA issued more comprehensive guidance for the construction industry. The guidance, as noted in the preface by OSHA is simply guidance, “is not a standard or regulation” and “creates no legal obligations. The guidance supplements general guidance applicable to all workplaces issued earlier by OSHA.

The new construction-specific guidance, which while more detailed than its earlier-issued OSHA Alert, continues to provide rather general guidance and encourages construction employers to engage in a three-step process to protect its workers including: (1) assessing the hazards to which workers might be exposed; (2) evaluating the risk fo exposure; and (3) selecting, implementing and ensuring workers use controls to prevent exposure.

The new guidance suggests that construction employers analyze potential coronavirus risks along a spectrum from “Lower” to “Very High”:

Engineering Controls

When working indoors and a person (e.g., coworker, visitor, resident, subcontractor) is suspected of having or known to have COVID-19 (Note: this seems a bit odd to me. If a co-worker or subcontractor is suspected of having or has COVID-19 they shouldn’t be at the worksite at all), the guidance recommends use of “closed doors and walls, whenever feasible, as physical barriers to separate workers from any individuals expriencing signs and/or symptoms consistent with COVID-19” including “erecting plastic sheeting Barrera when workers need to occupy specific areas of an indoor work site where they are in close contact (less than 6 feet) with someone suspected of having or known to have COVID-19.”

Interestingly, the guidance also recommends that construction employers “periodically reassess engineering controls (as well as work practices and administrative controls” to identify any changes that can be made to decrease the need for N95 respirators (or other respirators with a higher level of protection) and other personal protective equipment (PPE) ordinarily used for work activities that involve exposure to hazardous substances” (emphasis added) to “help conserve PPE that is in short supply or needs to be diverted to activities associated with higher SARS-CoV-2 exposure risks.”

Administrative Controls

The guidance also recommends that construction employers use administrative controls, when feasible, to reduce or eliminate potential exposure to the coronavirus by implementing and updating its workplace policies to reflect:

  • Standard operating procedures that follow the Centers for Disease Control and Prevention (CDC), OSHA, state/territorial, and local guidelines for preventing the spread of COVID-19 infection.
  • Training for employees on the spread of the disease in the geographic areas in which they work. 
  • Screening calls when scheduling indoor construction work to assess potential exposures and circumstances in the work environment, before worker entry.

The guidance provides sample questions for screening work assignments before sending a a worker to perform construction activities in an indoor work environment:

The guidance also recommends training workers on, among other things, the following:

  • The signs and symptoms of COVID-19;
  • Policies and procedures applicable to the employee’s duties as they relate to COVID-19;
  • Information on appropriate social distancing and hygiene practices;
  • Types, proper use, and limitations of PPE;
  • The importance of staying if sick, wearing masks, use of PPE, and use of EPA-approved cleaning chemicals.

Safe Work Practices

The guidance also recommends that construction employers adopt the following safe work practices:        

  • Screening visitors, to the extent possible, for signs and symptoms of COVID-19;
  • Adopting staggered work schedules;
  • Identifying choke points where workers are forced to stand together, such as hallways, hosts and elevators, ingress and egress points, break areas, and buses, and implementing policies to maintain social distancing in those areas;
  • Coordination of site deliveries to maintain minimal contact and cleaning protocols;
  • Keeping in-person meetings as short as possible; and
  • Ensuring clean toilet and hand washing facilities.

Personal Protective Equipment

Finally, the guidance states that under OSHA’s PPE standards for construction (29 CFR 1926 Subpart E), construction employers much consider wither their hard and risk assessments, including construction site job hazard analyses, indicate a need for the use of protective PPE.

The Impact of COVID-19 on the Construction Industry: Planning for the Inevitable

Neil Keenan, William Abramovicz and Matthew Bedan | Forensic Risk Alliance

The COVID-19 pandemic continues to impact all facets of the global economy, disrupting supply chains and work forces, and straining contractual relationships between businesses. These issues are especially important in the construction industry, which traditionally relies on precise schedules of workers and material, and endeavors to limit potential delay claims in order to ensure profitability. These critical schedules are being impacted in a variety of ways, including changing government executive orders, sick or quarantined workers, and supply chain interruptions. In many cases, COVID-19 orders from public officials impose new job site standards, such as mandatory social distancing, use of personal protective equipment, and quarantine periods for workers crossing state lines. In many areas, projects are shut down completely. For example, 85% of New York City operating sites were on pause by mid-April. As the industry reacts, we can expect an uptick in related litigation in the form of breach of contract actions and force majeure claims.

It is critical for construction firms to plan for this disruption to protect assets, ensure business continuity and renegotiate project planning and financing, with labor shortages among the primary concerns. This may be caused by the illness itself, mandatory state/local government quarantines, or even union guidelines encouraging workers to stay at home. This was the case when the North America’s Building Trades Unions (NABTU) and the Center for Construction Research and Training (CPWR) urged anyone feeling sick to not go to work on March 11 this year. Travel restrictions could similarly limit the availability of high-skilled personnel who are essential for the completion of specific key tasks, like experts traveling from one project to another to help teams on the ground resolving technical issues. In addition, certification visits and inspections may be delayed or canceled, resulting in delays for otherwise functioning construction sites.

The pandemic is squeezing supply chains and creating difficulties including late or canceled deliveries, and price escalation from suppliers. The consequence is that many construction sites have been shut down for an indefinite period of time. On March 27, ABC News reported that Ken Rigmaiden, the general president of the International Union of Painters and Allied Trades, estimated that “half of the construction sites in the country have shut down since the COVID-19 pandemic began.” These closures generate significant unanticipated costs that could grow due to extended periods of storage for some materials and equipment, which were delivered before the shutdown but have not yet been installed. There are also many construction sites with dangerous or valuable materials that must be secured and maintained around the clock, quarantine orders notwithstanding. Finally, late payments from customers may have a significant impact on firms and their capacity to finance the goods and services required to complete a project. As much of the world economy remains locked down, alternative financing sources begin to diminish, further endangering projects.

As COVID-19 testing increases and the required personal protective equipment becomes more readily available, we can expect work to resume on many sites, but not without glitches. In the short term, demand for construction materials and skilled resources likely will remain high. Shortages of key variables combined with cash flow and financing difficulties will result in additional costs and delays, potentially further fueling the litigation wave.

Businesses should remain aware of fraud risks inherent to the unprecedented situation.  The shortage of supplies and materials could lead suppliers to break contractual terms related to pricing so they could sell their goods to other customers willing to pay a higher price. This period of inactivity is also favorable to assets misappropriation. For example, inventory checks should be performed before and after the shutdown, as the risk of materials disappearing or being diverted would increase.

Businesses with ongoing construction projects’ top priority should be to document every event causing a delay or cost increase. Documenting this evidence daily is critical to establishing a potential claim—or defending against one—and later quantifying damages. At FRA, we have experience establishing and supporting—or defending against—such claims, including preparation of economic damages and quantum models, and providing forensic analysis of overcharges, improper payments, questionable or unsupported costs and other allegations. For example, we recently assisted an NYSE-listed real estate development firm with a multi-million dollar dispute involving one of its construction sites in India. This review included key vendor analysis, tax and royalty payments, daily construction reports, actualized project schedules, personnel interviews and onsite visits spanning multiple cities, which resulted in evidences of invoice padding. FRA has also achieved remotely what others could not, by deploying remote data collection, remote transaction testing, remote interviews, and other remote procedures. We plan to continue using these solutions in order to help our clients navigate through this pandemic and beyond.

Plot Twist: Construction Industry Groups Applaud Court’s Decision to Defer to OSHA

Lexie R. Pereira | Forum on Construction Law

Construction industry association groups applaud the June 11, 2020 U.S. Court of Appeals for the District of Columbia’s decision, which denied the AFL-CIO’s (American Federation of Labor and Congress of Industrial Organizations) emergency petition for a writ of mandamus against OSHA (Occupational Safety and Health Administration).1 In what some may call a surprising turn of events, the construction industry is celebrating deference to OSHA.
The administrative petition, filed on May 18, 2020 by the AFL-CIO, together with 23 national unions, was intended to compel OSHA to issue an emergency temporary standard (“ETS”) to protect U.S. workers against COVID-19. OSHA is authorized to issue an ETS upon its determination that an ETS is “necessary” because “employees are exposed to grave danger” in the workplace. 29 U.S.C. §655(c); see In re AFL-CIO, USCA Case #20-1158, (D.C. Cir. 2020). The court stated that OSHA is owed “considerable deference,” especially in these unprecedented times, and found that it acted reasonably when it determined not to issue an ETS at this time. In re AFL-CIO, USCA Case #20-1158, (D.C. Cir. 2020).
Construction industry association groups, such as the Associated Builders and Contractors and National Association of Home Builders, are happy with the decision because they considered an ETS to be an inappropriate measure in such turbulent times. Following the decision, OSHA will continue to develop guidance documents. Not only does this approach allow the agency to swiftly adapt to new COVID-19 information released by other government officials and scientists, it also allows OSHA to continue to rely on the Centers for Disease Control and Prevention.
The problem with this approach, as alleged by AFL-CIO, is that these guidance documents are not mandatory. As follows, AFL-CIO and its supporters are disappointed with the decision, claiming that OSHA’s guidelines are too flexible in that they do not pose a threat of OSHA action for an employer’s noncompliance. Given that OSHA in-person checks of construction sites have fallen to about 16% of pre-COVID-19 inspection levels, the concern may not be unfounded.2 Construction workers, perhaps to a layperson’s surprise, were among the most universally essential workers during the pandemic. This fact can be concerning since, as mentioned by Gaetano Piccirilli and Patrick McKnight in an earlier Dispute Resolver blogpost, construction workers had one of the highest mortality rates during the 1918 Flu pandemic. The combination of higher risk and less frequent OSHA visits may be a reason complaints have increased nearly tenfold.3 In fact, the AFL-CIO’s petition set forth that thousands of workers have been infected on the job.
Nonetheless, construction sites are certainly not going unwatched. Instead, the decrease of OSHA visits is most likely replaced with an increase of state and local inspections. States like Massachusetts, for example, have implemented their own Mandatory Workplace Safety Standards and sector-specific workplace protocols, including Safety Standards for Construction. And although nobody knows exactly how to proceed during COVID-19, after the U.S. Court of Appeal’s decision, at least some construction industry groups are comfortable leaving it up to the “experts.”
Learn more about the scope of OSHA, the extent it preempts (and does not preempt) state and local government action, and what state and local governments are doing to ensure the safety of workers within their jurisdictions at an upcoming ABA webinar on June 29 at 1 pm ET. More details here:

Court Rejects Bid for OSHA COVID-19 Emergency Standard, CONSTRUCTION DIVE (June 12, 2020).
OSHA Construction Safety Inspections Plunge 84% in Pandemic, BLOOMBERG LAW (May 14, 2020).