It Might Be a Big-League Move to Consider Baseball Arbitration in Construction Contract Disputes

It is a rare construction project that does not give rise to a dispute. Transactional lawyers who support their clients through contract formation increasingly and properly look for fair, expeditious, efficient and economic ways to set the scene for resolution of disputes. In international arrangements, consideration is given to the arbitration rules of the International Chamber of Commerce, the United Nations Commission on International Trade Law (“UNCITRAL”), and of other major and lesser-known arbitral organizations; in the United States, many disputes are addressed under the construction rules of the American Arbitration Association. Thoughtful consideration is given to requiring mediation before arbitration, to requiring three or one arbitrator being on panel, to progressive or “laddered” dispute resolution (raising resolution of issues progressively from project management, to regional management, to the disputing parties’ key executives), to venue considerations, and to considerations of requiring a reasoned decision or having an adjudication procedure in place.

Often not drafted is a baseball arbitration clause. In the right situation, it should be called into play.

Many times, in seeking an alternative to litigation with the goal of finding a dispute resolution mechanism that is fast, fair and focused, parties will contractually opt for arbitration. Arbitration usually involves resolution by one or more knowledgeable, experienced experts in the industry, and there is something to be said for that in multi-party, multi-issue matters. However, arbitration often entails discovery, hearings, witness testimony, and similar trappings of litigation, and may not result in a speedy determination or one that is economical to obtain.

In baseball arbitration – usually used to resolve salary disputes between a player and a team – both parties submit their evidence, arguments and proposed resolutions to one qualified neutral. After a set period of time, each can rebut to proposal of the other, revise their own position and, at times, press their points in a relatively short hearing. The arbitrator then must select one of the competing proposals as the result. Nothing in the middle, nothing outside of the two proposals presented. The intended effect is that each party will pare its position down to the essentials and leave out the “fluff” of superfluous arguments that inflate their demand; the end result being that the positions of the parties are more focused and realistic and, likely, closer to one another than if other dispute resolution techniques are used.

Two-party construction disputes, whether related to a single issue related to payment due or extent of damage caused, and possibly regardless of size, may be more appropriate for baseball arbitration than traditional arbitration or litigation – both sides agree that something is due but disagree on how much. Where relief sought is other than monetary, or where a dispute involves multiple parties, questions of allocation of fault, or multiple, varied claims are likely not situations where baseball arbitration can be pitched.

The technique has a built-in incentive to be honest and reasonable in what is claimed, as the arbitrator, faced with a choice between only two alternate results, is more likely to select the one with the more reasonable demand and the better-substantiated support. The technique may not only force the parties to be honest with the arbitrator about the evidence and their claims, but may also assist attorneys and parties to reflect on the deficiencies in their presentation, review their position more analytically, and submit a more realistic position. The conversation between lawyer and client may be hard, however, the end-result many not only be less-expensively obtained but may arrive more quickly at the same result as obtained in a traditional arbitration after the arbitrator figures out what really is at issue; if the gap between the parties’ real number is narrowed enough, settlement of a claim may even be obtained before a decision has to be rendered by the arbitrator.

A variation of baseball arbitration is “night baseball” arbitration. The set-up is the same, and the pitches are the same. The difference is that the arbitrator renders his or her call before the parties show their numbers; the party with the proposal closest to that of the arbitrator prevailing.

Whether baseball arbitration or night baseball arbitration is called upon to get the parties out of a jam, the techniques merit consideration for forcing the parties to play ball within the rules.

For any further analysis of how various arbitration techniques may work with your transactions and affect your interests, or if you have any questions on this article, please feel free to contact William F. Bresee of Leech Tishman Fuscaldo & Lampl at 626.796.4000.

William F. Bresee is a partner in Leech Tishman Fuscaldo & Lampl, LLC, and chairs its Construction and Energy Practice Groups. Bill can be reached at 626.796.4000 x 325 or 412.261.1600 or wbresee@leechtishman.com. Please feel free to contact Bill with any questions you may have on this and other design and construction matters. For more information on Leech Tishman’s legal services, please visit www.leechtishman.com. 

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