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Advantages of Arbitration for Resolving Construction Disputes in Light of COVID-19
By Emily Hermreck on July 31, 2020 at 10:00 AM

The COVID-19 pandemic has had significant impacts on the U.S. state and federal court systems and has delayed the progression of cases awaiting trial. While many courts have remained “open,” they have considerably modified operations and procedures to ensure the safety of court personnel, attorneys, and jurors.

Perhaps the most obvious modification has been the cancelation of in-person hearings and jury trials. For example, Missouri courts responded to COVID-19 by initially canceling all civil jury trials, with limited exceptions. Jury trials remain canceled in many Missouri circuits through at least July, while some circuit courts have announced they do not plan to resume civil jury trials until September or later. Likewise, in the U.S. District Court for the Eastern District of Missouri, a recent order extended the limitation on in-person proceedings and jury trials through Sept. 7, 2020, and has even extended the court’s Speedy Trial Act waiver in the interest of protecting the health and safety of all parties, the court, and the public (who would be called upon to serve as jurors).

All jury trials that were slated to begin before the end of the year before the Cook County Circuit Court in Illinois have been canceled, and it is unknown when the court will resume jury trials in 2021. Assuming trials will be rescheduled on a “first-come, first-served” basis, it could be years before a new case is able to be tried before a jury.

Advantages of Arbitration

Arbitration, therefore, is perhaps a more appealing option for those who wish to have their construction dispute heard and resolved sooner. Arbitrations, such as those before the American Arbitration Association (AAA), are a form of private dispute resolution separate and apart from the courts, and thus do not wait on other cases to be tried before they can be heard. Arbitrations are typically heard by one to three arbitrators selected by the parties. They do not require the seating of a jury, and they can often be heard and resolved within a year or less from the date an arbitration demand is filed. The schedule and hearing dates for arbitrations are generally “set” by the parties, giving them greater certitude as to when they can expect the dispute to be heard, as opposed to a jury trial where the trial date is more amorphous and subject to change due to outside forces such as COVID-19. Although the arbitral process has also been affected by the pandemic, arbitration naturally allows for more flexibility. In many cases, providers of arbitration services like the AAA are able to proceed, and have been proceeding, with virtual hearings via videoconference or teleconference.

In sum, because parties are allotted a fair amount of control over the timing and process of arbitration, and because arbitration is inherently more versatile, it is highly likely that even post-COVID-19 disputes will be heard and resolved sooner by arbitration than by jury trial. Therefore, contractors, owners, and design professionals seeking a quicker resolution of a dispute – and wishing to avoid the wait lines at the courthouse – may want to consider including a mandatory arbitration provision in their contracts.

When Parties May Agree to Arbitration

Although it is common to include an arbitration provision at the time a contract is executed, a mandatory arbitration provision may be added to a contract at any time during the life of the contract. To amend an existing contract to include a mandatory arbitration provision, some re-negotiation may be required, as the other parties to the contract must assent to the revised and updated contract (i.e., the contract cannot be modified unilaterally).

It should be noted that a dispute does not need to exist for this to be an option. Parties to a contract can simply recognize that although no dispute currently exists, if a dispute were to arise, it could take years to resolve in today’s protracted trial setting, and thus arbitration would be a more tenable option for all those involved. To aim for a speedier resolution of any potential disputes, parties can therefore proactively amend their existing contracts to include arbitration provisions. Even if the existing contract is never revised to include a mandatory arbitration provision, a dispute can still be arbitrated so long as all the parties agree. Contractors, owners, or design professionals may also wish to consider including a mandatory arbitration provision in all future contracts, knowing that in today’s world litigating a dispute could be a lengthy process.

Important Considerations When Drafting the Contract in Light of COVID-19

It may be advisable for parties to proactively address certain COVID-19 related issues in their arbitration agreements now, as opposed to waiting until after arbitrators have been selected. Such issues include the parties’ agreeability (or their objection) to virtual or hybrid hearings (i.e., hearings where some case participants appear in-person and others appear remotely, either via videoconference or teleconference) as well as the location, means, and methods for safely and effectively conducting said hearings.

Parties should address in their arbitration agreement their agreeability to in-person, virtual, and/or hybrid hearings, and they should state the agreed-upon “location” of the arbitration – or means and methods of conducting the arbitration, as the case may be – for each circumstance. For parties that want all efforts to be made to have an in-person hearing, for example, the AAA has arranged for alternate hearing venues that meet COVID-19 safety protocols. The parties could therefore state in their contract that any in-person hearing shall be held at a physical location with the capability for participants to be socially distanced.

For parties that are agreeable to a hybrid hearing, they can use the AAA’s alternate hearing venues in addition to the AAA’s video and audio technology intended to support hybrid hearings. Of course, parties may state in their contracts their agreeability to or preference for a completely virtual hearing, in which case it is within the parties’ discretion which videoconference platform they will use. The parties may therefore wish to state in the contract which videoconference or teleconference platform (such as Zoom, for example) will be used in the case of a virtual hearing.

There are additional important considerations the parties can address pre-hearing, either in their contracts or in a pre-hearing order, regarding the particulars of conducting a hybrid or virtual hearing (or virtual depositions, if any). For example, parties may come to agreement regarding the use of a court reporter during their virtual hearing, whether the videoconference platform will record the audio and/or video of the hearing and serve as the official record of the hearing, how witnesses shall give their virtual testimony, how exhibits will be entered and utilized during the hearing, and more. A pre-hearing order can resolve the technical details, such as whether and how the parties should test the videoconference platform before the day of the hearing, and whether a technician will be present with the parties to assist with the videoconference platform during the hearing.

If you are interested in learning more about the benefits of arbitration or drafting or revising a contract to include an arbitration provision, please contact an attorney in our Construction Industry Group.

Link to COVID-19 Resources page

Tags: COVID-19
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