By Daniel M. Eggleston, Esq. and Curtis A. Orshoski, Esq.
Lee/Shoemaker PLLC

At the outset of each project, the last thing most design professionals are thinking about is a dispute. If you’ve been in the business long enough, however, you’ve almost certainly had the unfortunate distinction of being involved in a project-related dispute that morphed into a claim. Too often, design professionals overlook the dispute resolution process in their project contracts which can have significant implications on the trajectory of the dispute, including the absence of potential off-ramps to avoid the cost and headache associated with either litigation or binding arbitration. When contracting, the prudent design professional should include pre-litigation dispute resolution options as part of their contract to present opportunities to avoid prolonged, stressful, and costly binding dispute resolution.

Whatever binding dispute resolution tool your contract calls for—either litigation or arbitration—pre-litigation dispute resolution options can be valuable to avoiding escalation of disputes. Some pre-litigation dispute resolution options include: 1) project level negotiations; 2) senior executive level negotiations; and 3) mediation as a condition precedent to litigation and/or arbitration.  In addition, design professionals should consider including a certificate of merit requirement in their contracts as a condition precedent to litigation or arbitration. (At a high-level, a certificate merit is designed to limit frivolous lawsuits against the design professional by requiring a professional licensed in the same discipline who opines that there are reasonable and meritorious grounds for filing the claim.)

In short, providing opportunities for negotiation/resolution before the parties run to the courthouse can be essential. Pre-litigation dispute resolution can offer significant advantages over traditional litigation, including saving time, reducing costs, maintaining relationships, and giving parties more control over the outcome.

Time Efficiency
One of the most significant benefits of pre-litigation dispute resolution is the potential time savings that may be realized. Court and/or arbitration proceedings can take years to conclude, depending on the complexity of the case, court schedule, etc. While design professionals are often mindful of their professional liability deductible obligations when a claim is made, they do not always appreciate the amount of time demands required of their personnel when defending a claim, responding to discovery, and preparing for depositions and trial. These costs are not generally reimbursable under standard professional liability policies, and can directly (and adversely) impact a design firm’s bottom line. By resolving disputes early, parties avoid the time-consuming process of discovery, court filings, depositions, and hearings.

The efficiencies associated with pre-litigation disputes resolution provides opportunities for both parties to return their focus to their underlying businesses. Moreover, many professional liability policies offer deductible credits for early resolution of claims which potentially reduces your out-of-pocket costs associated with claim resolution. 

Cost Reduction
Without question, litigation is an expensive endeavor. Legal fees, court costs, expert witnesses, and the time spent by both parties preparing and attending related proceedings can add up quickly. In many cases, even the early stages of litigation can involve significant costs and cause further entrenchment of the parties, which can be an impediment to resolution.  Even when a dispute is complex, pre-litigation dispute resolution can result in a more efficient and focused resolution, which translates into considerable savings for all parties.

Relationship Preservation
Many design professionals have a significant rolodex of long-term repeat clients. In a dispute with an important client, resolving a dispute quickly and fairly to preserve the relationship can be essential. Litigation is adversarial, pitting parties against each other in a win-lose scenario.

Litigation can exacerbate tensions, create hostility, and often lead to the complete breakdown of what was once a strong relationship. Pre-litigation dispute resolution, on the other hand, fosters a more collaborative and less confrontational environment. Mediation emphasizes information sharing and communication, allowing parties to express their concerns in a confidential and non-binding setting to work towards a mutually acceptable solution. By encouraging dialogue and understanding, mediation can help de-escalate conflicts and preserve relationships that might otherwise be irretrievably broken by the adversarial nature of litigation. Additionally, pre-litigation methods provide the parties with the opportunity to find creative, flexible solutions that address their unique needs, rather than being bound by the rigid judgments of a court or arbitrator(s).

Outcome Control
When a dispute goes to trial, the outcome is out of the parties’ control. A judge or jury will ultimately decide the case. Pre-litigation dispute resolution gives both parties greater control over the outcome of their dispute. Disputes resolved short of litigation ultimately require both parties to agree. Neither party is forced to do anything. While the resolution may ultimately be unpalatable for both parties, it is a compromise both sides can accept. On the other hand, judges, juries, and arbitrators can be unpredictable, and the parties lack control over the outcome.

Conclusion
Pre-litigation dispute resolution provides numerous potential advantages over litigation, including time savings, reduced costs, relationship preservation, greater outcome control, and confidentiality. For design professionals who find themselves in the midst of a project related dispute, pre-litigation dispute resolution offers a powerful and effective alternative. In your next contract, consider including pre-litigation dispute resolution provisions and create a critical off-ramp to the time, expense, and headache associated with litigation.

Daniel M. Eggleston and Curtis A. Orshoski are lawyers at Lee/Shoemaker PLLC, a law firm devoted to the representation of design professionals, in DC, Maryland, and Virginia. The content of this article was prepared to educate related to potential risks, but is not intended to be a substitute for professional legal advice.