The Meter is Running
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When tempers flare between board and sponsor, take a breath and watch for a moment to talk calmly.
AUTHORRobert J. Braverman
Mediation offers litigants a chance to come out of the process feeling vindicated, economically and emotionally.
Braverman Greenspun, Partner
Robert J. Braverman
The client’s tale. Everyone on the board’s side was becoming battle-weary. No wonder: it had been in litigation for three years with the sponsor and more than a dozen contractors and design professionals over severe water and air infiltration, HVAC problems, and the lack of legally mandated firestopping – materials in the walls that will stop the spread of fire – at a newly constructed building. For a long time, the case was bogged down in discovery and motion practice, none of which are atypical in a construction defect claim.
As the lawsuit dragged on, the unit-owners were forced to pay large assessments to cover the costs of the litigation, and they were unable to refinance their mortgages or sell their units because of the existence of the litigation.
The case was getting ready for a trial, and all of the parties were tired of fighting, all attempts to negotiate a settlement had sputtered out, primarily because various members of the board and the sponsor were unable to put their emotions aside. The board members were convinced that they had been taken advantage of by an unscrupulous developer, and the sponsor was equally convinced that the directors were all disgruntled purchasers with buyer’s remorse, looking to have the sponsor pay for building improvements and items that were nothing more than routine maintenance and repair or betterments.
As for the contractors and design professionals (who were, for the most part, represented by counsel being paid for by their insurance companies), they simply pointed fingers at each other. It really looked like the case was going to trial, which would have been a bit of a gamble for everyone involved. Finally, at the urging of counsel, the litigants agreed to submit the dispute to nonbinding mediation before a mediator who specialized in construction-related disputes. The case was settled three weeks later.
The lawyer’s take. Sometimes a board has no choice but to begin litigation against a sponsor who has failed to deliver a building that is properly constructed and comports with what was promised in the offering plan. However, the start of such litigation should, in most cases, be viewed more as an exercise of “suing for peace” rather than “suing for victory.” In most cases, there will be points during the litigation process where the opportunity to sit down and negotiate presents itself. Board members are well advised to have their counsel be watchful for such instances and, no matter how high emotions may be running, to keep an open mind about taking advantage of them. We have found that, because of the complexity of issues that are typically involved in a construction defect case, the use of a professional mediator who specializes in these types of cases increases the probability of a successful outcome – and a tremendous savings of money for our client.
Case closed. While it is often difficult to get past our emotions when we feel we have been slighted or taken advantage of, more often than not settling a litigation makes more practical sense than not settling. Mediation offers litigants a chance to come out of the process feeling somewhat vindicated (both emotionally and economically). A talented mediator can work with the most acrimonious of combatants and forge a settlement as long as all involved are willing to work hard and keep an open mind. Our client saved a tremendous amount of money in legal fees, secured enough settlement money to perform all of the “must do” repair work, and was able to reinvigorate the flow of mortgage money and sales.