Babcock Scott Babcock July 2009 Newsletter

Decline in Commercial Construction Anticipated in 2009

January 2009

According to forecasts by the American Institute of Architects, commercial construction spending is projected to decline by 11 percent in 2009.

Office buildings, hotels, and retail establishments will experience the largest declines in spending.

• Hotel construction -20.2 percent
• Retail building -19.2 percent
• Office building -17.5 percent

The decline is expected to slow somewhat in 2010, with retail seeing the most significant recovery (-6.6 percent in 2010).

One positive indicator has been a reduction in prices for key construction materials. Prices for steel, oil, gypsum products, lumber and cement have all come down which encourages developers and banks to build new projects.

Construction of institutional projects is also expected to see a drop in construction spending in 2009.

• Religious facilities -9.4 percent
• Educational facilities -7.4 percent)

• Health Care facilities -3.6 percent

The AIA Consensus Construction Forecast Panel is conducted twice a year with research data from McGraw Hill Construction, Global Insight, Moody's Economy.com, Reed Business Information, and FMI.

The Construction Attorney's Toolbox - Building Solutions Through Mediation

Kent B. Scott
Babcock Scott & Babcock

Introduction to Article on "Prepare for Mediation"

INTRODUCTION

If you are involved in a legal dispute, you may be able to settle it without going to court. One way to do this is to work out a solution with the help of a mediator - a neutral third person. This article addresses some of the many basics in preparing the client for mediation.

For now, mediation is going to be used with increased frequency by parties involved with a construction dispute. Attorneys will end up spending more time in mediation than court. The following represent a few fundamental questions lawyers should expect from their clients who are involved in a dispute.

WHAT IS MEDIATION?

Mediation is an alternative to the traditional litigation process. Mediation is an informal process in which a trained neutral third party, the mediator, assists the parties in reaching a negotiated resolution to a dispute.

WHAT IS THE RECIPE FOR A SUCCESSFUL MEDIATION?

The success of a particular mediation is mainly controlled by the parties. The critical components of a successful mediation involve:

• The right mediator.
• The level of information exchanged.
• Whether a trial or arbitration has been scheduled
• The commitment of the parties and their attorneys to prepare for and participate in the mediation.

IS MEDIATION CONFIDENTIAL?

Yes. All mediation proceedings are confidential. Documents created for the mediation are also confidential and may not be introduced during a subsequent trial if the dispute is not settled. Likewise, the mediator should not testify or be compelled to testify at a subsequent trial.

IS THE MEDIATOR LIKE A JUDGE?

No. The mediator does not decide who is right or wrong, neither does the mediator make findings of fact, or rules on issues of law. The mediator has no authority to impose a settlement on the parties. Instead, the mediator helps the parties to jointly explore and reconcile their differences. If mediation does not generate an agreement, the parties do not lose their right to trial, and either side is free to sue or propose binding arbitration.

WHO DO I BRING TO THE MEDIATION?

The following is a brief summary of those who would be expected to attend the mediation:

• Legal counsel: Yes, if represented.

• Client: The person with authority to settle and others with knowledge of the facts.

• Experts: Avoid having experts involved.

• Documents: Less is better. Summaries, graphs and charts are useful.

WHAT HAPPENS IN MEDIATION?

Every mediation is different and unique. Experienced mediators will use a format that is best suited for the particular dispute. Generally, the process of mediation falls into six stages:

• Mediator's Opening Statement. After the parties are seated, the mediator will introduce the parties, explain the goals and rules of the mediation and likely encourage each party to work jointly toward a settlement.
• Parties' Opening Statements. Both parties are allowed time to explain, in his or her own words, what the dispute is about, how they have been affected by it, and to present a few ideas for resolving the dispute.
• Private Caucuses. This is the guts of every mediation. The private caucus is a chance for both parties to meet privately with the mediator to discuss the strengths and weaknesses of his or her position, and brainstorm ideas for settlement. The mediator may "caucus" with each party once or several times if needed.
• Wrapping it Up. This is the end of the mediation. If the parties have reached an agreement, the mediator will likely summarize the main provisions, verbally, while the parties listen. The parties will them memorialize their settlement by drafting and signing a summary of the settlement which cover all material settlement points. This document is legally binding and enforceable by the courts.

HOW DO YOU PREPARE OFFERS AND COUNTER-OFFERS?

There comes a point when the mediation shifts from information gathering to negotiation, and the exchange of offers and counter-offers. Rapport and timing are crucial. Negotiation is a back and forth process that should not be short circuited or rushed. Begin with the end in mind. Be goal oriented, not advocacy minded. Remember your objective: to achieve a better alternative to a litigated result.

Stay flexible. Avoid taking the "line in the sand" approach. Work with the mediator in breakout or side caucuses with opposing counsel or with the parties outside of counsel's presence. Remember, the mediator is the only one who knows what is going on in all of the rooms. Trust in the mediator.

Always keep something in reserve to "sweeten the pot" and to complete the deal. Agree to pay for settlement document preparation, to write letters of support or apology, to do future work, trade something for something, or even pay a portion of the mediator's fee (last resort).

WHAT HAPPENS WHEN YOU SETTLE?

Congratulations! You are the owner of a brand new settlement. Keep the client in the room. Sit down with opposing counsel and craft a settlement agreement that covers all major points. Spend some time and don't rush. State in the agreement that there will be more formal documents to follow consistent with the terms of your settlement agreement.

WHAT HAPPENS IF A PARTY FAILS TO COMPLY WITH THE AGREEMENT REACHED AT MEDIATION?

When the agreement is signed and approved by the appropriate parties or authorities for all parties, it will be binding. An agreement reached during mediation is enforceable in court just like any other settlement agreement.

News of the Firm

• D. Scott DeGraffenried, our newest associate attorney and a member of the Arizona Bar, recently passed the Utah Bar and will be admitted to practice law in Utah. Scott, his wife Kathy and their three children recently moved from Phoenix, Arizona where he practiced law with a construction firm.
  

• Robert F. Babcock and Kent B Scott were selected to be named in the SuperLawyers' publication under the categories of "Construction Litigation" and "Construction/Surety." Justin E. Scott was also named as one of the Rising Stars in the Construction Industry. Selection for this listing is limited to the top five percent of all construction attorneys in the Intermountain States. Candidates for this list are evaluated on twelve indicators of peer recognition and professional achievement.

• Adam Mow was a presenter at the AIA's National Convention in San Francisco, CA. The topic of his presentation: "The Top 5 Lergal Issues of Building Information Modeling." Adam is currently serving as an adjunct professor of law at the University of Utah's S. J. Quinney College of Law. During the summer semester, he will be co-teaching a class entitled "Decision Making for Deals and Disputes."

• Robert F. Babcock spoke at the Utah Society of Professional Engineers Annual Conference on May 2, 2009.

• Brian Babcock, Jason Robinson and Cody Wilson presented programs for the Associated General Contractors of America, Utah Chapter, on mechanic's liens, payment bond claims, price escalation and construction contract record keeping.