Comparing Cost in Construction Arbitration & Litigation

By Zuckerman, Susan | Dispute Resolution Journal, May-July 2007 | Go to article overview

Comparing Cost in Construction Arbitration & Litigation


Zuckerman, Susan, Dispute Resolution Journal


An expert panel assesses the cost of arbitrating and litigating a hypothetical two-party construction dispute.

The key question everyone asks about arbitration is whether it is cheaper than litigation. The problem with answering this question is that rarely does one have the opportunity to arbitrate and litigate the same case. It is only possible under a statutory scheme providing for non-binding arbitration and allows a dissatisfied party in arbitration to seek a trial de novo.1 The only other basis of comparison is the rare instance in which a lawyer has the opportunity to arbitrate and litigate two similar cases.2

For this article, we asked three experienced construction litigators and arbitrators from different parts of the country-Joseph F. Canterbury, Jr., of Dallas; Christi L. Underwood of Orlando, Florida; and Howard D. Venzie Jr. of Philadelphia3-to estimate the claimant's cost of arbitrating or litigating in state court4 a hypothetical two-party construction dispute5 in order to see how they compare.

Wanting more than a cursory "bottom line" estimate, we asked our experts to first opine on how the case would be staffed by counsel and to set the attorney fee rate.

Then we asked them to identify the varied representational activities they typically see at each stage of construction arbitration and litigation, and then estimate the hours required to perform them. (We are not suggesting this is the "ideal" arbitration or litigation.) We asked them not to artificially increase the cost of litigation by adding litigation activities (e.g., a motion to join third parties).

Our experts determined that this hypothetical would likely be staffed by a mid-level partner, an associate and a paralegal. The hypothetical rates charged for their services are $300, $200 and $100 per hour, respectively.

We calculated the arbitrator's compensation using a $2,200 per diem rate, and the mediator's compensation using a $310 hourly rate. These rates represent an average of the rates charged by AAA arbitrators and mediators from different parts of the country.

Table 1, which represents the costs of the hypothetical arbitration, shows a total outlay for the owner of $94,500, while the costs of litigation, shown in Table 2, are 27% higher at $120,300. We show the estimated costs of the owner's outlay for mediation in Table 3 at $10,140, clearly the most economical choice.

Then, of course, there is the issue of appeals. An appeal as of right is an almost irresistible temptation in litigation. According to our experts, this would add another $25,000-$35,000 to the cost of resolving the dispute. By comparison, they think that the cost of preparing a motion to vacate or defending against one would cost between $5,000-$7,500.6

Although these cost estimates are undeniably speculative, our experts believe that the figures shown for arbitration are fair and reasonable. They have also pointed out that because arbitration is a flexible process, the estimated arbitration costs could be reduced by streamlining the proceedings to eliminate certain activities in Table 1. For example, the parties could agree, either in their arbitration agreement or in an early preliminary conference, that there would be no depositions or dispositive motions (which are rarely granted anyway) or post-arbitration briefs. If these steps are eliminated, the owner's costs in the hypothetical arbitration would be $81,500, while the litigation would cost 47% more ($120,300).

Another area of potential savings is attorney fees. More than half the cost of arbitration is attributable to lawyer time spent on the case. Attorney fees could be reduced by an agreement with counsel to staff the case with one attorney, with minimal delegation to associates and paralegals.

As to litigation costs, our experts believe their estimates are conservative because litigation tends to involve more activities than are listed in Table 2. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Comparing Cost in Construction Arbitration & Litigation
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.