How to Select the Right Arbitrator for a Construction Dispute
This article discusses strategies to select an arbitrator for a construction dispute. This is a critical decision with a seemingly infinitesimal number of considerations and approaches. Nevertheless, the process must be pursued with a reasoned, well-considered plan. This article offers practical advice for developing this plan.
For additional information on the use of arbitration in construction disputes, see Arbitration of Construction Disputes under the Rules of American Arbitration Association and Arbitration of Construction Disputes under JAMS.
So you have either negotiated strenuously with your counterpart to include an arbitration provision in your construction contract or picked up a form contract that selects arbitration as the universal method of dispute resolution and, perhaps, even identifies the American Arbitration Association to administer your arbitration.
Alternatively, you may have focused on the arbitration clause to a higher degree, selecting not only the structure of the panel, but also the discovery permitted, the discretion of the arbitrators and whether there will be some method of permitted appeal.
Regardless of the circumstances, when the time and need for arbitration comes, the question remains, who will be the arbitrators charged with the fate of my dispute, my client, my company or my project?
Welcome to the arbitrator selection process. It is craft and a science, experience-driven, with a heavy dose of instincts and perception, a great deal of it based on your experience as both advocate and counselor. So, with that as the backdrop, let us begin.
The variables of the arbitration selection process are myriad. Still, when it comes down to it, there is a human component to be considered. You are picking one or more people to literally sit in judgment on you, your client, your witnesses and your case.
All potential panelists come with their own experiences, views and perhaps unconscious biases — notwithstanding the outstanding professionalism that exists within the general ranks of the construction bar and its arbitrator community.
So, keeping in mind that while there is no intended disparagement of any, there are individual strengths to be considered with each of these options, and perhaps some things to be mindful of that fall more in the cautionary scale.
The Retired or Former Judge
This may appear, at first blush, the easiest choice of all.
After all, who could be a better choice to preside over your dispute than someone who has decided hundreds to thousands of motions, disputes and cases? There may even be published decisions out there that to provide insight on their viewpoints and predilections. Plus, there is that gravitas factor.
Now, keep in mind there are no robes present in these proceedings, and more often than not, no gavel to be seen or heard. Still, the fact that this person has in the past wielded the hammer of judicial decorum allows this arbitrator to ascend to a level higher than the parties themselves, even with no wooden or marble bench towering over the remainder of the participants.
In fact, even the advocates may find themselves addressing this arbitrator as "your honor" without thinking twice.
Judicial temperament also comes into play. Even without the robe or for that matter a striped referee's shirt, the judge is used to navigating and controlling the tensions that can spill over during proceedings, especially late in the day, the week, or even the case. This is where that gavel sometime come in very handy, but a skilled jurist can deliver the same crack of order metaphorically.
The judge has assessed credibility, read and interpreted difficult legal principles, and sorted out and balanced the costs versus the needs of in-depth discovery and electronically stored information complexities.
The judge has also synthesized the morass of evidence and presentation skills into a reasoned determination that generally can withstand further scrutiny by those on the other end of the determination.
So, what possibly could go wrong? Pick the retired or former judge, research their decisions on the pertinent points of your case, and move on to the next phase, right? Simple, done, over and out. Full stop.
Not so fast. Keep in mind that being in arbitration in the first place was likely a conscious decision. There were things about being in the court system that were not appealing. Maybe it was the congested court calendar or the uncertainty of who you would draw as a judge.
Other considerations could have been the availability of more open-ended discovery or the right to appeal. It also might have been because you preferred having your case decided by someone with construction knowledge and experience.
These days, more jurisdictions have a dedicated construction law judge or a panel of jurists who are conversant on the issues construction lawyers may take for granted as being widely known and appreciated. However, many courts still do not have that resource available, and the parties to a construction dispute might be left with the luck of the draw when it comes to who will sit in judgment.
And that brings us back to the question, why not the retired or former judge as the ultimate choice?
First, does the judge have construction law experience? There is something different about the issues we address, the knowledge we are required to possess as a baseline, and an appreciation of the various players and technologies involved. Is a judge with a non-construction-based background really going to be the best option?
Second, does the judge's approach to case presentation suggest you might find yourself in a more formal and rigid setting regarding points like statutes of limitation, rules of evidence and Daubert motions, to name just a few? Does that suit you, your case, your evidence and your strategy?
Finally, in a panel scenario, will the judge diffuse or neutralize the impact of other panel members? Remember that gravitas factor.
The Construction Manager, Contractor or Design Professional
Admittedly, each of these probably deserves a dedicated discussion, but for the sake of brevity, this potential pool of arbitrators is discussed collectively, as many of the categorizations are more universal in nature.
Clearly, having someone familiar with the details of air entrainment of concrete might be an advantage if your case turns on why an entire loading dock was showing signs of premature cracking, scaling or worse, right? Then again, maybe not, if the facts are murky.
This is just one example of the benefit and downside of selecting an industry professional, but it is an important microcosm of a potentially larger point of consideration. Do you want an arbitrator or an expert? Is your viewpoint altered if this person will be the sole arbitrator or on a panel of three?
Consider initially the issues in the case. In light of your position and preferred outcome, will they benefit from review by someone with particular technical expertise? Also, does the potential arbitrator's background suggest this would not be their first time conducting a proceeding and weighing the evidence?
In other words, are they experienced enough that you feel assured they will not let the process become a metaphorical bare-knuckled brawl? Most, if not all, professional arbitrators have some requisite training before they sit as an arbitrator, but nothing begets experience like experience.
Especially if you have a one-person panel, this analysis is crucial. You may not want the formality of a court trial, but you still want some dependable structure. You also want someone who will listen to your case, your arguments, your witnesses and your experts, and those of the other side, not someone simply making the decision based on their own views and interpretation of the technical information.
On a multiperson panel, with all three sitting as true neutrals, having this person could be essential regardless of their alternative dispute resolution experience. The other panel members, and likely the chair of the panel — usually, but not always a lawyer — will drive the proceeding and control the prehearing, hearing and possibly even deliberations.
On this last point, that drive will not mean dictating the result, but rather the process on what is presented and heard, what it all means, and how it translates to an outcome and award.
So, that brings us to the last and likely the most common choice: selecting a lawyer as your arbitrator. This decision is again, and should be, a complex and thoughtful one.
What is the lawyer's background? Do they have a construction, design or engineering background in addition or prior to their time as a lawyer? Are they an in-house lawyer, which brings with that experience another layer of business strategist perspective? Are they a litigator or a contract lawyer?
Given that lawyer-advocates will follow the more traditional case presentation pathway, having a lawyer as the sole arbitrator or the likely chair on a multiparty panel can make the arbitration resemble the process with which advocates are most familiar.
Drilling down further, evaluating that lawyer's background experience becomes essential. Have they typically represented owners, contractors, subcontractors or design professionals? Will that produce a subconscious bias in favor of you or your opponent? Are there reported cases available showcasing their arguments or indicating they have taken positions directly in line with the theme you are planning for your own case?
Likewise, how seasoned are they as an alternative dispute resolution professional? One size does not fit all here.
Too much of their own experience might give way to preperceptions you do not want or need.
Too little background and you might find yourself pushing the evidentiary boulder up the hill or drilling to the needed depth of case understanding to split open the dispute in ways that are as challenging, as they might be in a courtroom where the judge or jury does not have the fingertip appreciation of your construction project, much less how what you showcase will establish that your position is the correct one.
Finally, on this particular selection, consider the locale of the attorney. There are, at times, six or fewer degrees of separation among us in our lives, and those degrees of separation drop significantly within the construction industry and community.
We are talking not about improperly wielded prejudice, but rather small nuances of perception that influence what we hear, what we see and how we process that all to a conclusion.
So, you have done all your research, your due diligence beyond sending a night-before-the-pick email to colleagues asking whether anyone has heard of those listed, considered the best selection for your particular matter, and created your short list. All set, right?
Again, not so fast. Consider the likelihood that your opponent has made these calculations as well and assembled their own list that meets their requirements and needs of case presentation. As such, you find yourself wondering how to reach an agreement on the arbitrators, possibly in an environment where you, your opponent and the parties themselves may not be able to agree on anything.
Still, there is an advantage to putting all those issues aside and working to agreement. Both parties have an equal advantage and disadvantage here. Get along on this decision, and you will both at least have confidence that you have done your best for your client. Continue to disagree, and the process may break down and become even more costly, not to mention uncertain.
Regardless of the governing rules or the administrative body running the arbitration, there is always room for the parties to agree on the arbitrator or panel. Likewise, a commonly accepted permutation is for each party to select one arbitrator and then have those arbitrators agree on the third, preferably from prevetted list.
A very important caveat to consider is whether each party-selected arbitrator will be neutral. If the party-appointed arbitrators are not neutrals, you must make your selection with that in mind, especially when, in an identified nonneutral role, that party-appointed arbitrator could be a partner from your opposing counsel's firm.
If that is the case, you have to approach the core of the selection process in a fashion that focuses on not only the knowledge and gravitas of your party-appointed nonneutral arbitrator, but also who will be the truly neutral, panel chair position.
Returning to the scenario where any and all of the arbitrators are neutral, and you are trying to come to agreement with opposing counsel, think about each of you picking one as a matter of your own discretion and then working diligently to reach consensus about the final panel member. It may very well become a pathway to cutting through some of the tension to get to a section consensus.
Another process that can be followed is a strike-rank-pick approach that is administered by the arbitration organization you have selected. Once the basic and desired qualifications are communicated, a list of potential panel members is generated.
The parties independently strike any arbitrators they consider objectionable — the reason need not be stated — and rank from one whom they most prefer from the remaining list. By some rules, the number of strikes is limited, thereby helping to assure that at least a few arbitrators remain and are ranked for consideration and appointment.
Still, there is a possibility that in a listing of potential panel members, between the strikes of the respective parties, not one arbitrator is left. What would then follow is the issuance of a secondary list, with the same striking and ranking instructions.
This should not be viewed as an infinite loop. At some point, the parties may lose all control of the process, with the administrating organization making the picks. This scenario should be avoided if at all possible.
This brings us back full circle to the power of the agreement on the panel, or at least on part of it. Fortunately, the construction bar as a whole tends to be highly collegial as many of the practitioners already know each other, and may also likely know most, if not all, of the potential cast members under consideration.
Keep in mind as well that the selection process need not await the emergence of a dispute. On some projects, particularly more complex ones, a panel is identified at the outset. This might be advantageous as the parties are generally in a consensus-reaching mode as the relationship is just beginning and optimism rules these early days.
Regardless of the approach and the method and timing of selection, there is really no excuse in this internet age to not fully vet any potential arbitrator. As an advocate, you have the ability under a variety of budgetary approaches to research and assess whether a particular panelist will be the right choice for your case.
Then, with all that information at your disposal, you will be in a much better position to get the arbitrator or panel you want, whether by agreement, partial agreement or through the strike-rank-pick process. After all, the choice is yours — at least in part!
“How to Select the Right Arbitrator for a Construction Dispute,” by Edward Gentilcore was published in Law360 on March 10, 2023. Reprinted with permission.