So, you’re in a lawsuit? Now what?

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By Jeremy Vermilyea
Dolan Media Newswires

Construction contracting is an adversarial process. Three principal players, various contractual relationships and profit motives can and often do lead to conflicts. These conflicts generally concern money, time and scope. The advent of alternative delivery methods, increased emphasis on the importance of relationships, and better understanding of the costs of dispute resolution have reduced the number and extent of disputes on construction projects, but they still arise.

When disputes occur, clients are often shocked at the cost and time it takes to “get to” a resolution. In order to make informed business decisions, it is important to ask the right questions to understand the true value of an opportunity to resolve a dispute early. Failing to adequately evaluate a case can needlessly cost time and money, and lead to an unsatisfying result.

1. What does the contract say?

Construction disputes are, generally speaking, contract disputes. Yet parties often forget to look there first to answer key questions. The contract is your best guide to answer questions about scope, delays, how changes will be compensated for, whether claims have been waived or not, and myriad other issues. A good contract will answer those questions and help you make the first assessment about your case.

2. Are there prevailing-party attorney fees?

Fees can and often do drive decision-making in construction litigation. That is particularly so in “smaller” disputes, where the cost of litigating can outpace the “value” of a case. The case can quickly become more about winning to recover fees, rather than about the merits. Conversely, a dispute without attorney fees at issue is much less “valuable” for either side, because win or lose, each side will have to eat its fees. The incentive to continue the fight may therefore be much less.

3. Where is the case filed?

Is the dispute in state or federal court? Is it in your local county or is it in the remote location of your project? The forum and venue of your dispute can have a significant impact on the cost of the dispute. If you are located in Milwaukee, but the project, all the subcontractors (potential witnesses), the opposing party and the owner are located in Oshkosh, you will spend a lot on travel to conduct discovery in the case. If the contract or applicable statute requires that the dispute proceedings take place in the remote location, it will likely increase costs even further.

4. Who are the opposing parties and opposing counsel?

Many state’s construction industries are relatively small. Over time we all get to know each other, either through direct contact or by reputation. How a contractor and its attorney approach disputes will affect the cost, length and overall value of the dispute. In any case, each party can only control, at most, half of the equation.

You can assess your case, you can determine your own costs, and you can ultimately decide what, if anything, you are willing to do to resolve the case. But the other side may assess the case differently, or not at all, or may have unknown pressures that drive it to different conclusions about the value of the case. These and other factors can make the case more difficult and more costly, and they are largely out of your control.

This is one of the most frustrating things that litigants confront – the disbelief that the other side doesn’t “get it,” or won’t be reasonable. It is important to remember that you only have a full understanding of and control over your own part of the case. Attempting to understand or control the unknowable or uncontrollable is an exercise in frustration and will often push the parties further from a possible resolution.

5. How complex is the case and how much is at stake?

These two questions are both separate and intertwined. They each contribute to the effort it takes to litigate a case and the cost to get to a resolution. A simple payment dispute is likely less complicated and less costly than a multi-party dispute involving schedule delays and scope disputes. Those cases will involve more expansive discovery as well as the need for experts. Having a good understanding of the issues and what it will take to assess the facts will assist the decision-makers when it comes time for important decisions, such as whether and when to attempt to settle, or whether to take the case through a trial or arbitration hearing.

6. How much will it cost to litigate?

Trying to forecast litigation costs is a very tricky business because so many factors are beyond one party’s control. However, experienced attorneys are generally able to give rough estimates early on, and those estimates can be refined as the case evolves. All the factors discussed here, and more, go into the development of a litigation forecast. These budgets are by their nature imprecise, but they can give an important general understanding of the cost of litigating, which in turn helps with the overall evaluation of the case.

These are certainly not all of the factors that a contractor, or any litigant, should review when evaluating whether to pursue, or how to defend, a dispute, or whether to settle if an opportunity presents itself. They can, however, be an important part of your first steps. In any litigation scenario, these and other factors should be discussed with your attorney so you can collectively make informed business decisions about how to proceed.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. He has nearly 20 years of experience advising construction businesses. Contact him at [email protected], or follow him on Twitter – @NWConstLaw.