Multiparty Mediations: Strategies for Success

Construction projects are often complex, involving many parties, materials and systems. Likewise, many construction-related disputes are complex because they involve multiple parties as well as complex technical and legal issues. Mediation is a proven method for resolving all types of construction disputes more quickly and economically, allowing the parties to control the outcome. The complexities of construction disputes make them ideal candidates for mediation. As one judge advised the parties at a pretrial conference in a construction dispute case, “The object of litigation is to do substantial justice between the parties litigant, but the parties litigant should realize that, in most situations, they are by their particular training better able to accomplish this among themselves.”[1]

Successfully mediating complex, multiparty construction disputes requires planning, organization and strategy to encourage all necessary parties to participate and have enough information to make informed decisions. Engaging with the mediator early to create a mediation plan can streamline the mediation process and improve outcomes. Here are some tips that may be helpful in your next multiparty construction mediation. 

1. Begin preparing well in advance.

Advance preparation is essential in multiparty mediations. This includes identifying the necessary parties early, ensuring they are properly notified of claims and providing them with sufficient information and documentation so they can make informed decisions about settlement. This applies to all parties expected to contribute to any settlement (such as guarantors, sureties, indemnitors, partners and subcontractors) and is especially important for insurance companies, which need adequate time to investigate a claim and document their files before making any settlement payment.

2. Share information confidentially before mediation. 

Engaging the mediator early on in the dispute, which allows for preliminary information exchanges under mediation privilege, is a key component of “guided choice mediation.”[2] Planning a mediation path from the beginning streamlines the process. This method gives the parties sufficient time to prepare before engaging in settlement discussions, thus preventing the mediation from dragging on after the initial session.

As the ICDR Guidelines for Arbitrators note: “A prime cause of construction disputes is insufficient knowledge by either or both parties to the dispute.”[3]

3. Don’t forget about damages.

Sometimes parties focus all their efforts on the liability aspect, leaving damages as an afterthought. It’s especially important in multiparty mediations for plaintiffs to allocate responsibility, not just make an overall demand. It is in the plaintiff's interest to help convince other parties of risk and set expectations about their exposure. The computation of construction damages can be quite complex.[4]

Preparing a damages summary with backup and sharing it with opposing parties are critical for success in multiparty mediations. Parties should explain their damages theory and methodology. This may require preliminary expert analysis (which should be provided confidentially as part of the mediation process) before the mediation session. In some cases, it’s helpful for the experts to discuss their damages calculations to determine areas of disagreement.

 Damages information is important for insurers and all other parties expected to contribute, such as subcontractors. If a general contractor has indemnity claims against subcontractors, it is good practice to send a demand letter to each subcontractor before mediation outlining their expected monetary contribution. General contractors should be aware of the additional insured defense and indemnity obligations under their subcontractors’ commercial general liability insurance policies and include those in the demands. 

4. Understand insurance requirements. 

Multiparty claims often involve many different types of insurance, and understanding the interplay between them is complicated. Having insurance coverage counsel involved early to review the different policies and coverages helps to make sure all potential insurers are properly and timely notified of claims. Creating a matrix of insurance policies and coverages is a useful tool for counsel and the mediator. The matrix can include policy limits, deductibles and self-insured retentions, as well as sub-limits for particular coverages, such as pollution. In some cases, insurers need to do their own investigation before mediation. It’s important to advise clients not to destroy potential evidence before insurers or other parties have an opportunity to inspect and document conditions, to avoid spoliation or prejudice claims.

5. Inform the mediator of settlement obstacles. 

From the mediator’s perspective, having counsel provide confidential information (under the mediation umbrella) about potential impediments to settlement in advance can assist the mediator’s discussions with the parties in negotiating sessions, improving the possibility of a good outcome. This is a better strategy than merely showing up at mediation and hoping the mediator will figure it out. It’s also helpful for the mediator to have briefing on important legal issues involved in the case well in advance of the mediation. 

6. Explain the mediation process to client representatives.

Knowing the parties’ experience level with mediation is important for a successful outcome, but this is sometimes overlooked. Even sophisticated parties may not have experience with the mediation process. Counsel should not assume that principals or operations people in design or construction firms are familiar with mediation or know what to expect. Scheduling time to explain how mediation works well before the mediation session helps manage client expectations. Keep in mind that public bodies often need to go back to the full body for approval of any settlement. Also, counsel should be aware of political issues that may impact the public body’s ability to settle, and share this information confidentially with the mediator.

7. Determine if there are influencers not in the room.

Sometimes there are potential contributors or influencers who are not formal parties to the dispute or litigation, such as guarantors, partners and indemnitors. The mediator should be told about such nonparties and discuss with counsel whether they should attend mediation. The owner may not want to file a claim against the design professional while litigating with the contractor. However, if there is a dispute involving both design and construction elements, having all parties at the same mediation is optimal. Getting all parties to agree to attend mediation may take considerable negotiation, but it is important to a global resolution. 

8. Be aware of the logistics of multiparty mediations.

The logistics of multiparty mediations can be difficult to navigate. Virtual mediation can reduce travel costs and make scheduling easier. A mediation with an extremely large number of parties may benefit from having co-mediators, who can work with different groups. Breaking out groups by topics (e.g., specific design or construction defects) or relevant issues (e.g., different causes of delays) for presentation can make process more efficient.

Successful multiparty mediations require counsel and the mediator to work together in planning the mediation process. As difficult as this can be, it is less difficult and costly than taking a case to final hearing or to trial, and it allows the parties to control the outcome.

_{[1] E.C. Ernst, Inc. v. Manhattan Const. Co., 387 F. Supp. 1001, 1006 (S.D. AL 1974)
[2] https://gcdisputeresolution.com
[3] ICDR Guidelines for Arbitrators Concerning Exchange of Information (May 2008)
[4] See Bruner and O’Connor on Construction Law, Chapter 19 (2023)}