While there are many different types of construction dispute, including those generated as a result of regulatory, environmental and personal injury issues, fundamental disputes pertaining to design, performance and/or contract issues are particularly complex, stemming from the abnormally large number of participants, information systems and documents associated with a typical project.
Construction disputes also bring a unique array of document types into the fray. While an ordered world of paper blueprints and signed contracts springs easily to mind, even a partial list of the types of electronic data generated by a major construction project can be astonishing, and may include “job site emails, computer document control systems, critical path updates, schedule data, bid materials, change order processing, job cost reports and estimates, contract control databases, financial statements, payrolls and project correspondence”4 as well as the more mundane, but sometimes critical, “transmittal letters…shop drawings...daily reports, proceed orders, field memoranda.”5 As projects increase in size and scope, ever more sophisticated software and systems come into play, including three-dimensional design and multi-faceted project management programs, many of which cannot be adequately represented in two-dimensional ‘hard copy’.
On the people side, the wide range of players that come together over a long span of time in each major construction project means that custodianship of this information lies with many different individuals and organizations. Ashcraft and Hurtado estimate that the “management of information from an IT control standpoint on a project site is typically held 15% by the lead designer, 40% by the construction manager or general contractor, 15% by multiple prime contractors or subcontractors, 15% by outside consultants, and 25% by the project owners”6 (totalling 110% to account for overlap).
With all of the complexities discussed above, litigating a major construction dispute can be a tremendously difficult undertaking. It is no wonder that, in the words of W. Alexander Mosely, “one of the fondest goals of the construction industry is to avoid litigation (and, it sometimes seems, lawyers, if at all possible).”7 This predisposition has led to the pioneering development and adoption of a wide array of alternative dispute resolution (ADR) methodologies. In fact, the industry currently favours many different methodologies over litigation, from pre-emptive partnering and dispute review board approaches to after-the fact negotiation, mediation and, to a decreasing extent, arbitration processes.
The choice of dispute resolution method drives the requirement for, or scope of, eDiscovery, although the reverse could also be argued: the potential magnitude of discovery, and eDiscovery in particular, may actually impact the choice of resolution methodology. Even in our current Canadian litigation environment of proportionality, most trials will require significant investments in time and money to address the required eDiscovery document identification, preservation, collection, processing, review and production processes. Conversely, a dispute resolved through negotiation or mediation may eliminate the requirement for eDiscovery altogether.
eDiscovery in Common Dispute Resolution Methodologies
Here’s a quick look at some of the more common forms of dispute resolution and their associated eDiscovery requirements and/or best practices:
As discussed previously, litigation is the least preferred and most costly method of construction dispute resolution, although many authors have identified the intangible desire for justice that still sometimes drives opposing parties down the ‘my day in court’ road. On the other hand, when the stakes are extremely high and the parties’ positions are far apart, litigation may be the only way to resolve a dispute. Moreover, there are several distinct advantages to the trial approach: litigation encompasses a set of rules and legal precedents that can result in a more predictable outcome than may be the case with, for instance, arbitration, and also provides clearly defined avenues for appeal.
eDiscovery in Construction Litigation – One of the major challenges of construction litigation in Canada is the requirement for proportionality in eDiscovery, since it is often difficult to get at the heart of a matter without significant up-front discovery. Nevertheless, in complex Ontario ‘eDiscovery cases,’ opposing counsel will be required to agree on the scope and parameters of proposed eDiscovery in a detailed Discovery Plan prior to the initiation of data collection.
A common alternative form of construction litigation, Construction Lien actions are essentially the same as any other civil trial, but with one important distinction: eDiscovery (“interlocutory actions")8 in these matters must be approved by the court before it is undertaken. If approved, eDiscovery must then also follow the Rules of Civil Procedure(29.1) and be prefaced by a mutually acceptable Discovery Plan.
Long a preferred approach to construction dispute resolution, and one still regularly mandated in project contracts, arbitration is losing ground to other forms of resolution as it evolves to closely resemble litigation. In at least some U.S. jurisdictions, “arbitrators now are charged with ethical and procedural duties much like judges(;) they must make more pre-trial...disclosures, allow more discovery, hold more procedural preliminary hearings, and increasingly conduct hearings under rules of procedure and evidence and write reasoned and detailed opinions.”9
The ability to choose a specialized, expert construction arbitrator, instead of having to bring a court up to speed on the intricacies of a particular construction dispute, is perceived as a major advantage for arbitration over litigation. In addition, many stakeholders prefer the binding resolution that results from arbitration versus mediation. However, the limitations (in Ontario) to appeal an arbitrator’s decision10, the need to religiously meet the contractual arbitration requirements that were laid out well before a project began, and the potentially limited cost differential versus litigation have all served to cap the growth of arbitration as a resolution process.
eDiscovery in Arbitration – eDiscovery is not mandatory in Canadian arbitrations, although “the parties may submit with their statements all documents they consider relevant.”11 In light of the finality of the typical arbitration process, and dependant on the nature of the dispute, it may be prudent in a high stakes dispute for each party to undertake some level of eDiscovery to ensure that relevant data is at least preserved and that enough evidence is on hand to support the party’s position.
The Chartered Institute of Arbitrators (CIArB) in the UK has published an excellent “Protocol for E-Disclosure in Arbitration”12 which they recommend for use “in those cases (not all) in which the time and cost for giving disclosure may be an issue.”13 The “Early consideration” section of this protocol focuses on reaching early agreement on whether or not e-disclosure (e-discovery) is likely to be required in the dispute and, if so, the associated requirements for identification, preservation and scope.14
Mediation continues to grow in popularity throughout Canada and the U.S., and is further propelled in Ontario by the mandatory requirement for a mediation session in most civil litigations (both Rule 24.1 and Rule 76 Simplified Rules cases, although Construction Lien Act actions and class proceedings are exempt from this requirement). Like arbitration, one of the most attractive aspects of mediation is the ability for both parties to select a mediator with specific industry expertise. Unlike arbitration, participants in mediation retain control over the outcome of the mediation. While the attributes of cost savings and speed are routinely mentioned as key elements in the decision to mediate (though not all agree with these grounds), other attributes may have more value. Mediation can take whatever form best suits the given dispute. In many instances, the opposing parties may have to work together on concurrent, or even future, projects, and wish, therefore, to maintain a positive relationship; in this light, mediation is viewed as less adversarial or confrontational than arbitration or litigation. Mediation also has the benefit of confidentiality, whereas litigation does not.
eDiscovery in Mediation – Since mediation has no set format or rules, discovery is not required before any mediation. However, Gregory S. Martin argues that mediation is the best “opportunity to resolve the dispute without the risk associated with a trial and often on terms more favourable to the client when all factors are considered.”15 Mr. Martin believes that far too many lawyers approach mediation in a casual, unconstructive fashion instead of preparing to reach resolution in these sessions by truly appreciating and understanding both the other side’s position and the risk of loss.16 Depending on the nature (and value) of the dispute, this appreciation and understanding may come only after some preliminary eDiscovery (so-called ‘Early Case Assessment’) has been conducted.
Under Ontario’s (Toronto, Ottawa and Essex) 2001 Rule 24.1 mandatory mediation program, the original 90 day window for mediation once the statement of defence was issued made it very difficult to conduct discovery before mediation. However, the 2010 amendments to the Rules of Civil Procedure extended this period to 180 days, with provisions for further extension if the “mediation will be more likely to succeed if the...period is extended to allow the parties to obtain evidence under (i) Rule 30 (Discovery of Documents),”17 among others. Ellyn and Youssoufian suggest that “this flexibility enables counsel to delay the mediation until enough documentary and oral discovery has taken place to enable parties to better understand each other’s positions and what evidence will be adduced at trial.”18
Negotiation is a time-honoured dispute mechanism. While negotiation routinely takes place outside of the legal system, and is almost always the first step in attempting to resolve a dispute, our focus in this paper is on the negotiation that occurs at varying stages of the litigation process. This type of negotiation can either be structured or informal, and take the form of meetings, telephone calls or even simple correspondence between two parties or multiple parties without a mediator.
A recent major study of a sample of over 1100 construction cases that were filed with several courts in the UK in the 2006 to 2008 period identified that 60% of these disputes were resolved through negotiation, 35% by mediation and only 5% by other forms of dispute resolution, including litigation.19 These percentages may skew slightly in favour of mediation in Ontario’s mandatory mediation regime, but it’s clear that negotiation before trial is an extremely common approach to dispute resolution. Similar to mediation with respect to control of the process, low risk level, confidentiality and the potential maintenance of relationships between parties, negotiation has the added advantage of not requiring formal scheduling and can take place at any point before (or even after) the parties enter the courtroom.
eDiscovery in Negotiation - The aforementioned flexibility of timing is also one of the key issues with negotiation: the point in the litigation process at which negotiations are finalized may come too late to pre-empt the time, effort and costs of eDiscovery.
In many disputes, the cost of litigation, including eDiscovery, are in theory envisioned at the outset of the action, but do not really hit home until the litigation is well under way and the meters are running. “Typically, enough discovery has been completed by this time...that the client has a sense of the overall cost if the matter were pursued through trial".20 As the dispute gets closer to trial, however, more of the budget will have already been spent and there will be less likelihood of significant savings if the matter is settled. Instead, “what drives the litigation at this point is...a heightened realization of the risk of loss at trial."21 Consequently, in litigation-driven negotiations, the initial Discovery Planning process presents the best opportunity to limit the cost of eDiscovery.
Best Practices for eDiscovery in Construction Disputes
Identification and Preservation
As is the case with any litigation, or potential litigation, preservation of all potentially relevant data is critical. Even if the goal of both parties is to reach agreement via, for instance, mediation, the possibility that talks will break down means that a legal hold should be executed no matter what method of ADR is contemplated. Compounding this issue in many construction disputes is the need to extend the preservation actions to include any number of suppliers, sub-contractors or other third parties who may control relevant data, which, in turn, necessitates an understanding of the document retention policies of each entity. Identification of this data is consequently a challenge. There are two data stores exclusive to this industry which may prove helpful in identifying potential data sources and custodians:
Project Manuals. One critical source of information is the Project Manual. Large projects will often have extensive Project Manuals to help govern all onsite activities. These manuals often list the key players and subcontractors and may include descriptions of, and protocols for the use of, information systems/project software as well as data preservation and destruction.22
Proprietary Construction Project Management Software. The construction industry has dozens of unique project management software programs, both obsolete and current, many of which are now cloud-based for ease of collaboration. Each proprietary system has its own look and feel; project participants can often be relied on to recognize data generated by a given software package from the layout of its report files and link them to their originating organization.23 Similarly, reviews of meeting notes and emails can often provide information about software system use which may lead to identification of system’s users (and document authors).24
Early Case Assessment
Since trial is one of the least likely outcomes of a construction dispute, eDiscovery requirements for mediations or arbitrations may consist of simple requests for all of the paper and electronic documents and emails related to the dispute. If these are numerous, however, it will undoubtedly be most efficient to store and review these documents in an eDiscovery review platform or electronic document management system.
On the other hand, escalation to trial is always a possibility, so having insight into the overall scope of potentially relevant data and the potential costs and timeline of eDiscovery can often be extremely helpful in negotiating an early settlement. There are many approaches to Early Case Assessment, but all focus on the identification and quantification of potentially relevant data, usually in the form of a data map. With this information, approximate collection, review and production costs can be calculated.
Web-Based Multi-Party eDiscovery Review Platform Access
Given the large number of project participants in both bilateral and multi-lateral construction cases, it is normally advantageous to use a web-based document review platform which can provide remote, confidential access to a single, consolidated document database by a number of different parties.
Project Management Document Review
As mentioned previously, a wide variety of proprietary project management software exists in the construction industry, each with unique reporting formats. It may be necessary to purchase licenses of current systems for review purposes or, in the case of obsolete software systems, to engage a computer forensics specialist to extract and transfer report data to an accessible format. The three-dimensional aspect of current design software also presents a challenge when reviewing output on a typical monitor. In all of these examples, it may prove expedient to creatively convert the data to a more user-friendly format for review purposes.
Document Scanning & Coding
There are a number of attributes of construction documentation that warrant special treatment in the scanning & coding process.25 These include:
Oversized Documents. Many drawings or diagrams are larger than 11” x 17”. These are very expensive to scan and may not ultimately be legible on a computer screen. It is often best to manually review these documents to determine if they truly need to be scanned.
Keyword Search Terms. There will likely be a number of terms or report names that are unique to certain aspects of the dispute or to the subcontracting or third-party firms involved with the project. A thorough review of key folders or documents with the goal of identifying these terms and their sources prior to sending for scanning may greatly assist the subsequent document review process.
Coding Challenges. Many construction disputes involve subcontractors; reviewers may not know the names of the employees generating documents at each subcontractor firm, and may not, therefore, be able to associate these names and documents with the appropriate party. Before the review begins, special attention should be paid to soliciting information about all who may have been associated with any of the documents. It may also make sense to create To/From coding fields for both firms and individuals.
Unique Document Types. There may be unique construction documents that need to be grouped together but are not represented in the standard doc type coding options. If so, it will be necessary to define these groups for the coding team and ask that these documents be specifically coded to reflect these groupings.
The construction industry has been described as a “laboratory and proving ground”26 for alternative dispute resolution formats. In some aspects, it is also a proving ground for new approaches to eDiscovery. At H&A eDiscovery, we have worked with many construction lawyers and their clients to find creative solutions to their eDiscovery challenges. For information on how we can assist you and your clients on construction-related computer forensics or eDiscovery projects, please contact Oleh Hrycko at 416-233-5577 or firstname.lastname@example.org.
1. Nicholas Gould, Claire King & Philip Britton, “Mediating Construction Disputes: An Evaluation of Existing Practice”, Centre of Construction Law & Dispute Resolution, Kings College London (2010), 2., http://www.ciarb.org/information-and-resources/2010/02/17/KCL%20Mediating%20Construction%20Complete.pdf
2. Barkai, John, “Mediation of Construction Disputes in the United States” (2008), 1. Available at SSRN: http://ssrn.com/abstract=1435380
3. Statistics Canada website (2008 Report): http://www.statcan.gc.ca/pub/11-402-x/2009000/pdf/construction-eng.pdf.
4. Theresa C. Lopez, “E-Discovery: Implications for the Construction Industry”, Crowell & Moring’s Construction Law Alert (Oct. 19, 2006),1., http://www.crowell.com/NewsEvents/AlertsNewsletters/Construction-Law-Alert/1351064.
5. Gerald I. Katz “Risk Analysis: How Designers and Contractors Minimize Construction Litigation”, 7. Katz & Stone, L.L.P. website: www.katzandstone.com/pdf/riskanalysis.pdf.
6. Howard W. Ashcraft and Kimberley A. Hurtado, “Developing Meaningful Contract Terms for Electronic Communications on Construction Projects”, The Construction Lawyer, Volume 29, Number 2, (Spring 2009), 5.
7. W. Alexander Moseley, “Introduction”, Discovery Deskbook for Construction Disputes, Editors: B. Hinkle Jr., W.A. Moseley, R.F. Smith, American Bar Association (Chicago, IL, 2006), xi.
8. Construction Lien Act, Section 67(2)
9. Scott Atlas and Nancy Atlas, “Potential ADR Backlash: Where Have All the Trials Gone? To Mediation or Arbitration”, Dispute Resolution Magazine (Summer 2004), 14.
10. See Thomas .G. Heintzman, “Arbitration Appeal Rights: Think About Them Before Signing A Contract”, Construction Law Canada website blog (May 24, 2011). http://www.constructionlawcanada.com/arbitration-appeal-rights-think-about-them-before-signing-a-contract/.
11. The National Commercial Arbitration Act of Canada 2004, Article 23(1)
12. “Protocol for E-Disclosure in Arbitration”, Chartered Institute of Arbitrators, (London, UK: October, 2008). http://www.ciarb.org/information-and-resources/E-Discolusure%20in%20Arbitration.pdf.
13. Ibid, 1.
14. Ibid, 2-3.
15. Gregory S. Martin, “Mediating the Construction Dispute – Keys to Success (or Failure)” (2009), 1. Gregory S. Martin & Associates PA website: http://www.gsmartinlaw.com/uncategorized/mediating-the-construction-dispute-keys-to-success-or-failure/.
16. Ibid, 2.
17. Ontario Rules of Civil Procedure, s 24.1.09.
18. Igor Ellyn, and Evelyn Parez Youssoufian, “Drafting Persuasive Pleadings with Mediation and the New Rules in Mind: Litigating in the Enlightened Age of Mediation” (2009), 7. JD Supra website: http://www.jdsupra.com/documents/91973d81-f237-48ae-b2ae-ae1249c3b800.pdf
19. Gould, King & Britton, “Mediating Construction Disputes, Evaluation”, 49.
20. Gregory S. Martin, “ Mediating the Construction Dispute – Keys”, 16.
21. Ibid, 16.
22. Howard W. Ashcraft, Jr., “Deciding to Litigate: A Practical Guide to Electronic Discovery in Construction Disputes”, Chapter 8, Page 586 of Managing and Litigating the Complex Surety Case, 2nd Edition, edited by Philip L. Bruner and Tracey Lee Haley, American Bar Association (Chicago, IL: May, 2007).
25. This section draws on recommendations identified by Todd Mayo in “Helpful Tips for Electronic Document Management In Construction Litigation”, PinnacleOne Newsletter (2007). Arcadis website: http://www.arcadis-us-pmcm.com/assets/files/PinnacleOne_Helpful_Tips_Electronic_Document_Management.pdf.
26. Thomas J. Stipanowich, “Changing the Adversarial Culture of the Construction Industry, Summary of a Presentation by Thomas J. Stipanowich” in Reducing Construction Costs: Uses of Best Dispute Resolution Practices by Project Owners, Proceedings Report, Chapter 2, Page 1, Federal Facilities Council Technical Report No. 149, National Research Council (2007), http://www.nap.edu/catalog/11846.html.