Today almost every contractor and subcontractor I come in contact with is in survival mode. Many have the cash to survive the lean times in their receivables — if they can collect them. If you have uncollected receivables, your choices are to write off the debt, sue your customer in court to collect, or use mediation or arbitration to reach a settlement. While many claims are too small to take to court, mediation or arbitration may be effectively used to collect these types of claims.

If you have already thought about taking your recalcitrant customer to court, the legal fees, time and headaches may have kept you from it. Plus, nobody wants to sue a customer they might need or want to work with again. Mediation or arbitration can achieve a settlement with substantially less cost and time than going to court, and the process often results in preserving or strengthening the customer relationship.

As a mediator and arbitrator, I have seen many disputes settled in relatively short periods of time with better outcomes for the parties than might be expected from litigation. Mediation and arbitration offer cost and time savings by limiting the discovery process, which includes such items as depositions, interrogatories and document production. Further, in most cases the outcome will be determined much sooner than can be achieved through the courts because the parties determine the schedule rather than a court’s crowded docket. However, the biggest advantage is that a professional who is experienced and knowledgeable about the subject matter hears the facts, rather than a judge with limited technical knowledge and very little time to fully understand the issues.

Mediation and Arbitration

First, it might help to better understand your choices.

• Mediation — Mediation uses a neutral third party with special training to help the parties achieve a negotiated agreement. Mediation is voluntary, non-binding, and confidential. The mediator works with you and the other parties in joint and individual sessions to discuss alternatives, make suggestions, and focus the parties on achievable solutions. Mediation brings quick solutions and can occur early in the process before the high costs of discovery are incurred. The parties mutually agree on the selection of the mediator and can select someone who has specialized expertise in the type of dispute under consideration. Mediation should always be your first choice to try and resolve the dispute.

• Arbitration — If your contract contains an arbitration clause (most AIA and AGC documents do) or if the parties agree, then arbitration provides a cost effective and faster alternative to litigation. In arbitration, the parties present their case to an impartial third party called an arbitrator. The arbitrator may be a lawyer, retired judge or industry professional who is trained in the arbitration process. The arbitrator essentially functions as a judge for the arbitration process. The arbitrator will, with the parties’ participation and input, establish the schedule, determine the scope of the discovery process, establish the amount and type of testimony from witnesses, and determine the location and schedule for a hearing. After completion of the hearing, the arbitrator formulates an award that establishes the respective liability of each party, determines damages and assesses costs. Arbitration can often be completed in a matter of months. The award carries the weight of a court decision and is final and binding. While the arbitration process sounds like a court trial, and in many ways it is very similar, costs at completion of the arbitration are significantly less than if the case goes to court.

• Fast-Track Arbitration — If your claim is less than $75,000, the American Arbitration Association has a fast-track process in which a one-day hearing is held within 60 days of filing the request for arbitration and an award is delivered 14 days after the hearing. There is no discovery and the parties pay a relatively small flat fee that includes the administrative filing and arbitrator’s fees. This option is often overlooked and is a very effective way to pursue a claim that otherwise would be too small to justify other means of resolution.

The First Step

The first step is to sit down with your attorney and discuss all your collection alternatives. Ask your attorney if mediation or arbitration might be used to achieve a settlement in your cases. In today’s times, you must consider every available option to collect each dollar owed to you. Call today.