Avoiding Bad Claims in Construction Law

I have practiced law for 40 years, the vast majority as a “construction” lawyer. I have seen excellent… and bad… construction lawyers, both when representing a party and acting more than 300 times as a mediator or arbitrator in construction disputes. To be clear, I have made some mistakes. I learned from my mistakes and was fortunate to have excellent construction lawyer mentors to lean on and learn from, so I try to be a good mentor to young construction lawyers. Become excellent Being a construction lawyer is a challenge, but the rewards are many. The following is mistake number 4 of the top 10 mistakes I have seen lawyers make in construction disputes, and yes, I have been guilty of making the same mistake.

No. 4: Do not withdraw bad claims/defenses

In law school and as young lawyers we are taught to assert every claim and defense, especially at the beginning of a trial or, in the case of most construction disputes, in arbitration. This is not an error. It is necessary because usually at that early stage of the dispute the facts are not clear. Your client may also be focused on pursuing the other party and want you to present every possible claim or defense. The mistake is to stubbornly continue down this path until you reach an arbitration hearing or a court trial. This type of mistake was set in stone by the late, great singer and philosopher Kenny Rogers, who crooned, “You gotta know when to hold ’em, know when to fold ’em.” This simple but catchy phrase is applicable to all trial lawyers, especially construction lawyers.

In the typical commercial construction dispute, there are dozens of claims and an equal number of defenses. The best examples are claims for defective work and change orders. At a recent arbitration panel I chaired, there were 38 claimed change orders, some of which were just seeking money; some time to apply; and some are looking for both money and time. But each change order had its own objective history, often quite complicated. This is one of the reasons construction disputes are so costly in terms of legal fees (and client time). As discussed in mistake number 1 in this series of “mistakes,” the four most important issues in any construction dispute are facts, facts, facts… and facts. In turn, defenses against such multiple claims can be equally complex from a factual point of view. Many times there are alternative theories: there was no timely notification of claim; there was no defective work; Although there was notice and defective work, the client did not cause it; and even if the customer caused it, the requested costs are unnecessary or unreasonable, or both.

Credibility before an arbitrator or judge (and the jury), both for you as an attorney and your client, is absolutely critical. If you have 15 claims and determine before the hearing that eight are unusually strong, four are “doubtful,” and three are extremely poor, the mistake is not “doubling down” on the poor claims. The same goes for defenses. I can’t tell young construction lawyers how many times, as an arbitrator, when bad claims/defenses are presented (through the same set of witnesses used for strong claims/defenses), I have questioned the credibility and viability of both. “doubtful” and strong statements. This consequence applies equally to a party who stubbornly refuses to concede facts or parts of uncontested claims. Any attempt to practice scorched earth “litigation” tactics simply does not work well before an arbitrator or judge. The best example in the construction context is where one party’s claims are less than the stipulated amount owed to the other party, but that party has refused to pay the undisputed amounts.

Remember, while a judge or jury may not know anything about construction, a construction referee does. The arbitrator is an expert in the construction industry, typically a very experienced construction attorney who has been through dozens of arbitrations, both as an attorney and as an arbitrator. Stubbornly remaining in losing positions, especially in arbitrations, is a serious mistake that will harm your client’s chances of obtaining a successful arbitration outcome.

Also, consider whether it is worth the time and effort to file a claim or defense. How much time do you have to dedicate to your case? I have had parties in a multi-day arbitration where the total claims exceeded $1 million spend three hours on a $1,000 claim when the total legal (and arbitrator) fees for those three hours can exceed $5,000. One client went against my strict instructions by agreeing that an image showed exactly what the other party claimed in a ridiculously small claim. Instead, he refused to do so. The other lawyer took advantage of the opportunity. The referee rolled his eyes and that destroyed the client’s credibility and negatively affected the final result. His explanation afterward was, “Oh, I’m sorry, I just wanted to try to confuse that idiot of a lawyer.”

To be clear, to withdraw a claim or bad defense you must fully educate and involve your client, and that can sometimes be difficult. The client is in charge and makes the decisions. But great amounts of credibility can be gained with the arbitrator if he makes strategic, timely and tactical concessions before and especially during a hearing. As Kenny wisely sang, “You gotta know when to hold ’em, know when to fold ’em, know when to walk away, and know when to run.”

Read Part 1, Part 2, and Part 3.

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