Why haven’t there been more green building lawsuits? (Hint: Mandatory Arbitration)

Stuart Kaplow is still, in my humble opinion, one of the true thought leaders on the topic of green building legal issues. A recent post of his at Green Building Law Update sets out to answer the question of why there is so little litigation in green building.

In essence, Kaplow opines that the reason so few green building projects result in litigation is due to mandatory arbitration clauses that show up at multiple layers of the contracts required to bring a project together. AIA’s contracts have their default arbitration language, as does the standard agreements from GBCI (the organization closely related to USGBC that provides the actual certification of both projects and professionals). Likewise, similar language appears in the boiler plate contracts used by many green building material suppliers.

Here is an excerpt:

Arbitration can be useful in some matters of green building for a variety of reasons including that experienced green building construction arbitrators may be better suited to rule on complex construction disputes rather than layperson judges and juries, and that arbitration is a faster and more cost effective dispute resolution process.

In absolute numbers there are more green building construction claims this year than last and more last year than the year before. And the dollar amount of those claims is increasing. The vast majority of those claims that this law firm is involved in are resolved through mediation or arbitration and it is the rare case that ends up in judicial redress. But make no mistake claims are being paid including profits being disgorged by designers, construction companies and materialmen.

The take away from all of this should be in an effort to manage your risk, pay particular attention to and negotiate the dispute resolution provisions in your contracts. And always consult your attorney before signing.

The reality is that hardly any projects, green or otherwise, make their way to the courtroom. The overwhelming majority of design and construction claims and disputes are resolved through mediation and arbitration.

Why do so few projects go all the way to trial? There are lots of reasons, many unique to each dispute, but my experience has been that taking any complex technical matter before a jury of 12 lay people is always risky. In a mediation or arbitration setting, the trier of fact is not a lay person, but someone with advanced knowledge from usually decades of law practice. Out here in California, we even have a dozen or more mediators that have direct experience in construction law specifically.

So when you have a choice of airing your grievances in front of a sophisticated (and, it should be noted, extremely well compensated) practitioner of law versus a random assortment of people from off the street, which option would you go with?


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Image courtesy Quartz