Part Two: Now What? Three Simple Principals To Mind When Your Involved with a Costly Dispute.

The construction industry is riddled with risk and disagreements, and some say it’s only a matter of time before a construction organization finds itself in litigation. Regardless of its certainty, litigation is a fact of business and has the potential of costing your organization thousands, hundreds of thousands or millions.

Accordingly, your business wants to weather the litigation storm as painlessly and quickly as possible. Here are three principals to mind if your construction company is facing litigation.

1) Settlement Should Always Be An Option
If the dispute is in litigation, there were likely settlement attempts before formal filings. Simply because these pre-litigation settlement efforts have failed, however, does not mean post-litigation settlement efforts are without utility. To the contrary, the reality of litigation often hits parties only after filing and can be a powerful influence to settle.

Attorneys oftentimes are scorned by the public for their desire to settle cases rather than litigation. The practice, however, is not the result of laziness or a fear of the courtroom. To the contrary, attorneys are usually looking out for the best interests of their clients – and in most cases, it’s in all parties’ best interest to settle the case.

Litigation of all types is expensive. The associated legal fees, expert fees and court costs associated with taking a case to trial is going to be a minimum of $10,000 – $15,000.00, regardless of the amount in dispute. The more complex a case, the more expensive the litigation – oftentimes costing parties hundreds of thousands or millions of dollars.

As such, parties should make objective reviews of their legal positions and consult with attorneys to discuss the challenges of their case, its possible exposure, and estimated legal costs.

Judges and mediators often say, “a good settlement is when both parties leave unhappy.” While unhappiness is not the most pleasant end to your legal dispute (in which you may be emotionally and personally invested), it may be the best. Depending on the associated risk of the case and your company’s exposure, full-blown litigation may result in a much worse scenario than a mediocre settlement.

2) Explore Alternative Dispute Resolution
It’s never, ever too late to explore alternative dispute resolution options. In the past, parties have chosen to mediate or arbitrate their differences even on the eve of trial – and successfully so.

In the event of litigation or arbitration, however, you shouldn’t wait that long to explore the possibility to resolving the parties’ differences through mediation or some other less expensive resolution program.

Mediation may be a great alternative to litigation since it is entirely driven by the will of the parties, voluntary and less expensive than a formal dispute. However, mediation is not free (depending on complexity of your case and length of mediation, it may cost between $2,500 and $25,000, or more). Accordingly, you want to agree to participate only if both parties come to the table in good faith to settle the case. Both parties, in other words, should be prepared to have a flexible settlement discussion.

Settlement discussions within mediation are confidential, allowing the parties to discuss details of the case frankly and to exposure each other’s weaknesses. Furthermore, in the event mediation is not successful, it is a great way to prepare your for trial and to gain a stronger understanding of your opponent’s position.

See: ADR Articles on Construction Law Monitor

3) Good Counsel is Priceless
The type of attorney you’ll need to most effectively and least expensively litigate your claims will depend on your desires and circumstances. And unfortunately, there are so many shades of desire and types of circumstances that your company may face in the event of litigation.

A good counselor will review your claims, defenses and financial health to determine the best course of action for your company. While it’s always important for an attorney to be a qualified litigator, “being right” or “litigating your claim” might not be best for your business. There are a number of factors to consider before setting forth on your litigation course.

Counsel should review the risk associated with your claim, your company’s financial exposure and your ability or desire to go through to trial to properly advise an organization on its options to proceed.

Perhaps it is in your company’s best interest to push the matter towards trial as rapidly as possible….but that it not always the case. Mediation may be a better option, or some other sort of settlement procedure.

In short, it’s important to have a counselor to give solid and objective advice about your company’s legal position and options. Your selection of legal counsel is perhaps the most important component of your claim. As such, be careful to choose wisely.

See: Is Your Counsel Helping or Hurting?

An Apple A Day… Proactive Steps Your Company Should Take to Weather the Economical Storm

We’ve all heard the adage “an apple a day keeps the doctor away,” but we rarely hear any similar quips regarding lawyers. However, the same principal is absolutely true. Taking proactive measures to insulate your company from liability can prevent future costly (and possibly fatal) lawsuits or legal disputes.

In the construction industry where litigation is frequent and costly, legal preparations are especially important. And while you can never completely isolate your organization from legal exposure, it will benefit from a conscious effort to place it in the best possible situation in the event of a dispute or injury.

Here are some ways your organization can be legally proactive to avoid costly and unnecessary legal expenses in 2008 and 2009:

1) Have a great written contract. Entering into a construction project of any size without a written contract is a recipe for disaster.

Your organization should have a “form contract” that meets your business’ requirements, and addresses certain legal hot topics such as the scope of work, the indemnity requirements, the obligations of each party in the project, dispute resolution mechanics and procedures, etc. Written contracts should be a way of life for your organization, with contracts executed between contractor and owner, contractor and subcontractor, contractor and supplier, owner and architect, etc.

An attorney should be consulted to help make changes and insert provisions as required project-by-project, as each project has different needs. Even AIA or ConsensusDOCS form contracts are frequently edited by the parties to accommodate the needs of a particular project or agreement.

In the event of a dispute, a well-drafted written agreement can save your organizations thousands, and even hundreds of thousands or millions depending on the project’s size.

2) Never Sign A Bad Contract. This is particularly a problem with subcontractors who enter into written contracts with subs or GCs who are larger and better funded then themselves. In these situations, it is common for the larger party to present the smaller party with a very one-sided contract.

The larger contractor uses its size and the allure of the project to strong-arm the smaller entity into agreement. Be very weary of this type of practice.

In the event of a dispute under one of these unilateral contracts, your organization can sustain a fatal blow. In our experience, we’ve unfortunately witnesses companies who have had to file bankruptcy or dissolve themselves not because their work was poor or they were legally wrong, but because they just couldn’t afford to fight their position under the contract.

One proactive measure your organization can take to avoid costly litigation is to avoid signing these types of agreements.

While the heavy-handed form contract might seem mandatory, in fact these corporations are usually used to making certain changes to the contract terms. Have an attorney consult with you regarding the consequences of the contract provisions, as well as suggested changes – and propose these changes to the other party.

If you cannot get the contract altered to meet your concerns, you may want to seriously consider whether the project is worth the risk in liability and exposure.

3) Create and Follow In-House Collection Procedures. The importance of your in-house collection procedures will vary depending on the type of construction business you run. Certainly if your organization enters into hundreds or thousands of smaller contracts every year, collection procedures will be very critical to your operation. Conversely, if your organization has just a few big contracts each year, collections are likely more under control.

In any event, your organization should have a clear “plan of attack” in the event of non-payment.

In today’s construction market and vulnerable economy, credit applications are often denied and cash flow can be tight. A high accounts receivables number can cause displeasure to your company.

The most effective way to prevent bad collection scenarios is not litigation (which is costly), but consistent collection practices and pre-litigation preparation.

Of course, a non-paying client can warrant litigation – and should, if payment is not tendered after collection procedures are employed. However, by taking in-house or outsourced collection measures prior to litigation your organization can limit the number of lawsuits required, and by preparing for litigation in each non-payment scenario, your organization will decrease the overall amount spent in court.

Collection procedures are most effective when they are structured, consistent, and employed early. By sending prompt demand letters you accomplish two important things: (a) you let the non-paying client know you are serious about collecting the account; and (b) you start the clock to collect attorneys fees, interests, etc. that you may be qualified for under contract or by law.

 

Your Current Counsel Helping or Hurting These Days?

The ABA Journal published an article this week about the current economy’s impact on the legal industry. Their report highlights a paradox for large law firms, where associates are apparently under pressure to “bill more at a time when work is far more scarce.”

This begs a very important question for you if you run a construction business: Is your current counsel helping you organization these days, or hurting?

Over the past few weeks, Wolfe Law Group has published articles on its website stressing that the proper and judicious use of competent legal representation can help your business on a number of fronts in tough economic times: collections, risk and liability avoidance, creative contracting, etc.

However, if your firm is worried more about helping its own economically troubled situation, it’s not likely they are concerned about the interests of you or the construction industry as a whole.

Wolfe Law Group is fanatically focused on the construction industry and its clients. Read about our firm here – and contact us today to learn how we can be of value to your company.

Credit Meltdown Squeezing Contractors – Lien To Protect Your Rights

The Associated General Contractors organization just published an article titled “Credit Meltdown Market Squeezes Contractors,” reporting how the recent economic problems in the U.S. are greatly effecting those in the construction industry.

The article discusses the upheaval on Wall Street, and how its stopping construction projects all over the country. You can read the article at the AGC website at this address: http://tinyurl.com/534o4h

Now more than ever contractors should consider the benefits of a construction or mechanics lien.

Lien rights do not last forever, and with the uncertainty of the U.S. economy and credit flow within the construction industry, its important for your construction company to protect your investment into a project.

Construction liens are available in virtually every state, and works to transform the project job site as a sort of “collateral” to the contractor for its payment.

Express Lien, Inc. is now filing liens across the country. Filing a mechanics lien costs only $295.00 – a flat fee that includes the preparation and filing of the lien, storage of the documents on our secure servers, and sending copies of the filings to all interested parties.

Express Lien also files lien cancellations, notices of intent to lien, and preliminary notices.

Ready to Get Started? Click Here.

Order your lien by phone, fax or online.

Credit Meltdown Squeezing Contractors – Lien To Protect Your Rights

The Associated General Contractors organization just published an article titled “Credit Meltdown Market Squeezes Contractors,” reporting how the recent economic problems in the U.S. are greatly effecting those in the construction industry.The article discusses the upheaval on Wall Street, and how its stopping construction projects all over the country. You can read the article at the AGC website at this address: http://tinyurl.com/534o4h

Now more than ever contractors should consider the benefits of a construction or mechanics lien.

As soon as the construction project comes to a halt or payment is late, contractors, subcontractors and suppliers should rush to file its construction / mechanics lien to protect its interest in the property. Construction liens are available in virtually every state, and works to transform the project job site as a sort of “collateral” to the contractor for its payment.

The time available to file a construction lien is not indefinite, and the legal requirements should be followed to the letter. However, when filed correctly, a construction lien can help your company recover payment for its project.

To learn more about construction liens in Washington and Louisiana, read articles here at the Construction Law Monitor.  You can also find great information over on the Construction Lien Blog.

Wolfe Law Group files construction liens in Washington and Louisiana for $675.00.

Zlien, Inc., a lien filing and document preparation service, files construction liens all across the country for $295.00 each. The service includes preparation and filing of the lien, storage of the documents on its secure servers, and sending copies of the filings to all interested parties. Zlien also files lien cancellations, notices of intent to lien, and preliminary notices.