CONSTRUCTION L AW
A Stitch in Time
Saves Nine
A Proactive Approach
to Avoid the Cost of
Lengthy Litigation
By Ryan L. Harrison
and Jerry M. Negrete
If you are willing to spend
time and effort early on
in litigation, you may be
able to save significant
resources in the long run.
The old English proverb “a stitch in time saves nine”
literally means that sewing up a small hole in a piece of
material will save the need for more stitching at a later
date when the hole has become larger. Today, the phrase
is used figuratively to mean that it is better to deal with a problem at an early stage
rather than waiting until later when the
problem will be worse. This proverb provides an important lesson for attorneys
handling construction cases: If you are
willing to spend the time and effort early
in litigation conducting a focused investigation, engaging in settlement discussions, and filing the appropriate motions,
you may be able to save your client or its
insurance carrier significant resources in
the long run.
This article will address various defense
tactics that you should consider using at
the outset of a construction dispute. For the
purposes of this article, our proposed strategies are based on the following hypothetical. Your client worked as a subcontractor
on a now completed project. Sometime
after the project was completed but before
the limitations period has ended, the owner
sues the general contractor alleging defects
in various parts of the project. The general
contractor files a third-party petition adding multiple subcontractors to the lawsuit,
including your client. How can you protect
your client from spending unnecessary
time and resources in this case? The various approaches we discuss below may help
you resolve the dispute without the necessity of lengthy litigation.
Fact Investigation
Get a handle on your case—quickly. If you
have an in-depth understanding of your client’s scope of work and the damages alleged
in the lawsuit, you will be better prepared
for settlement discussions, motions practice, and, if necessary, a trial. Below are a
few suggestions that will help you develop
a thorough understanding of your case.
Meet with Your Client
Memories fade quickly. Meet with your client as soon as possible after you are hired.
Ryan L. Harrison is a partner and Jerry M. Negrete is an associate in the Austin, Texas office of
Paine, Tarwater, and Bickers, LLP. Licensed in California and Texas, Mr. Harrison’s practice is focused
on construction disputes and other complex tort litigation. He has represented general contractors and
subcontractors in matters involving a wide variety of structures, including commercial and residential
buildings. Ms. Negrete is licensed in Texas and practices civil litigation in a variety of areas. Both authors are
members of the DRI Construction Law Committee.
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Although it is not always practical or possible, an in-­person meeting may help jog
your client’s memory and enable him or
her to provide you with vital information
regarding the project. Before you conduct
this interview, whether it is in-­person or
on the phone, be sure you understand your
state’s work product privilege. In some
states, verbatim notes from the meeting
may not be protected by this privilege. E.g.,
Tex. R. Civ. P. 192.5(c)(1); Ind. R. Trial P. 26;
La. Code Civ. Proc. art. 1424.
When you talk to your client, determine if there were any problems during
construction and whether those problems
were resolved. Find out if the general contractor was organized. Did your client use
requests for information (RFIs) and change
orders (COs), or were the changes implemented informally? This information will
help you focus on the documents that are
most likely to contain relevant information. If changes were implemented informally, for example, e-mails may contain
more relevant information than RFIs or
COs. Finally, determine which documents
your client has pertaining to the project
and obtain a complete set of those documents. Make sure your client understands
that “all documents” includes bids, purchase orders, contracts, drawings, COs,
RFIs, meeting notes, letters, e-mails, photographs, and any other documents relating to the project.
Review and Analyze the Documents
Once you receive documents from your client, analyze them to determine the scope of
work that your client contracted to perform
on the project. Closely analyze the petition
and third-­party petition and evaluate the
claims made in each. Does either petition
allege sufficient facts to keep your client in
the lawsuit?
Also, review the contracts to determine
if a dispute resolution clause exists in the
contracts between the owner and the general contractor, or between the general contractor and the subcontractors. As will be
discussed in more detail below, a binding
dispute resolution clause may speed up the
discovery process and force the owner and
the general contractor to pay attention to
the case sooner rather than later. Even a
nonbinding dispute resolution clause can
shape the course of litigation. This is espe-
cially true if some form of dispute resolution is required before the case can go to
trial. Bring any dispute resolution clause
to the attention of the parties early in litigation and be the catalyst that sets the parties on the path to resolution.
Propound Discovery
If the claims asserted in the petitions do
not implicate your client’s work, your client should not be in the lawsuit! Propound
discovery requests to the owner, and if warranted, the general contractor, specifically
requesting information related to your client’s scope of work. Request all photos that
purport to show defects in your client’s
work. If your early fact investigation was
accurate, the discovery responses should
show there is no evidence that your client’s
work was defective. This, in turn, should
convince the owner or the general contractor to dismiss your client, settle the
claims against your client for a reasonable
amount, or, alternatively, set the stage for
a successful summary judgment motion.
However, if your client’s work is implicated
in the petition or third-­party petition, propound discovery requests regarding your
client’s work and all other defective work
on the project. This information will help
you prepare affirmative defenses against
the general contractor’s claims. Whether
or not your client’s work is implicated in
the pleadings, you should also propound
interrogatories to the owner and the general contractor specifically requesting the
actual amount of damages they allege
occurred as a result of your client’s work.
Knowing this amount will almost certainly
facilitate settlement discussions.
Most likely, the owner’s and the general contractor’s discovery responses will
be vague or nonresponsive. It is imperative
that you meet and confer with opposing
counsel and request substantive responses.
If counsel refuses to supplement the discovery responses, you have little choice but to
file a motion to compel. Do not allow parties to maintain vague or nonresponsive
discovery responses. This evasive tactic
creates another “hole” that will undoubtedly grow larger if not addressed promptly.
Conduct a Site Inspection
Conduct a site inspection to determine
whether your client actually performed the
work according to the plans and specifications. Often, scheduling a site inspection
is easier said than done. However, all parties to a lawsuit are entitled to full, fair discovery within a reasonable period of time.
Work with the general contractor and other
subcontractors to determine dates for a site
inspection and offer specific dates to the
owner. Make your requests in writing, and
Do not allowparties
to maintain vague or
nonresponsive discovery
responses. This evasive
tactic creates another
“hole” that will undoubtedly
grow larger if not
addressed promptly.
set a specific and final date by which the
owner must respond with available dates.
If the owner does not respond within the
time allotted, file a motion to compel. Do
not let a nonresponsive owner prevent you
from determining your client’s potential
liability early in the case.
If your client’s work is relatively straightforward, you may be able to conduct the
inspection without an expert. But, if your
client’s work is hyper-­technical or requires
removal of another subcontractor’s work
to view it, you would be well-­advised to
take an expert with you. The information
gleaned from a site visit with an expert
makes the cost worth the added expense.
Settlement Discussions
In general, defendants incur fewer costs
in lawsuits when they retain control over
the outcome of a case than when a third
party such as a judge or arbitrator controls
the outcome of the litigation. G. Edward
Gibson & Richard J. Gebken II, Decision
Making, Transaction Costs and Dispute Resolution: Is There a Better Way? 6 (2006). For
example, the median transactional cost per
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CONSTRUCTION L AW
party for cases resolved through informal
negotiation is $51,000; the median transactional cost per party for cases resolved
through mediation is $106,000; and the
median transaction cost per party for cases
resolved through arbitration is $271,000.
Id. at 13. Based on these statistics, it is well
worth the time and effort to attempt an
informal negotiation or early mediation.
It is up to youto serve
your client’s best interest,
which, in some cases,
may mean showing your
client how it will benefit
from an early settlement.
The tripartite relationship between you,
your client, and the insurance carrier may
present certain challenges throughout the
case. Early in the litigation your client
may deny all liability and refuse to pay
any money to settle the claims. At the
same time, your client’s insurance carrier may believe that paying some money
to settle early before significant defense
costs are incurred is a good business decision. It is up to you to serve your client’s
best interest, which, in some cases, may
mean showing your client how it will benefit from an early settlement. Below are a
few suggestions that may help get the case
settled before significant defense costs
are incurred.
Engage in Early Negotiation
Approach the owner and the general contractor early regarding a settlement. Use
the evidence gathered during your investigation to convince the owner that your client’s scope of work is completely unrelated
to the alleged damages. Once the owner
understands that your client’s work did
not cause the damages at issue, the owner
should readily agree that your client does
not belong in the lawsuit. At that point,
the general contractor’s hands will be tied
and a dismissal should follow shortly after-
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ward. Also, remember that an owner in a
multiple prime project delivery system may
directly sue subcontractors with which it
contracted. In this situation, you can negotiate directly with the owner and avoid the
additional layer of interests that exist in a
traditional design-­bid-build project delivery system.
Negotiating early with the general contractor may not succeed if the owner is not
willing to sign a release for your client’s
scope of work. A scope of work release from
the owner releases the general contractor
and the subcontractor from any and all
claims arising from the scope of work performed by the subcontractor. Securing a
scope release will take extra effort on your
part—but, if you can obtain a release, it is
certainly worth the trouble.
Propose an Early Mediation
If a mediation dispute resolution clause
exists in the relevant contracts, propose
an early mediation to all parties. If someone refuses, request an order from the
court compelling the parties to engage in
the mediation. Early mediation will bring
all parties to the table to discuss a settlement before substantial defense costs are
incurred. Consider using an experienced
mediator who can convince the parties that
resolving the dispute early is in everyone’s
favor. If mediation does not occur until the
eve of a trial, each party will have spent so
much in litigation costs and become so entrenched in their respective positions that
settling will be difficult, if not impossible.
Request a Hearing with the
Dispute Review Board
A dispute review board (DRB) is a panel
made up of three neutral experts that are
chosen by an owner and a general contractor before a construction project begins.
Studies show that DRBs are “by far the
single most effective approach that has yet
been developed for early resolution of disputes.” James P. Groton, The Standing Neutral: A ‘Real Time’ Resolution Procedure
that also Can Prevent Disputes, 27 Int’l.
Inst. for Conflict Prevention & Resol. 177,
182 (2009). Notably, the Dispute Resolution
Board Foundation (DRBF) has found that
of the disputes submitted to a DRB hearing
in the United States and Canada, 98.7 percent resulted in settlement of the dispute
with no subsequent litigation or arbitration. The Dispute Resolution Board Foundation, Practices and Procedures, Sec. 1,
Ch. 3, at 3 (2007), available at http://www.drb.
org/manual_access.htm.
If the owner and the general contractor
selected a DRB before construction began,
consider your client lucky and take advantage immediately. Work with other subcontractors to determine dates for a DRB
hearing and offer specific dates to the general contractor and the owner. The DRB
will be familiar with the project and should
be able to produce a prompt and well-­
reasoned, albeit nonbinding, recommendation to the parties regarding the claims
at issue.
Suggest an Early Neutral Evaluation
If the parties did not select a DRB, review
the relevant contracts carefully to determine if having an early neutral evaluation
is an option. If the contracts do not have
provisions for this, consider suggesting a
mutual agreement between the parties to
engage in an early neutral evaluation. It
is a very cost-­effective dispute resolution
method: the American Arbitration Association charges $525 per party plus the
neutral evaluator’s rate. American Arbitration Association, Early Neutral Evaluation:
Getting An Expert’s Assessment, available at http://www.adr.org/aaa/faces/services/
disputeavoidanceservices/earlyneutralevaluation.
The early neutral evaluation process is
an informal hybrid of mediation and arbitration. Before the hearing begins, each
party submits initial position statements
to the third-­party neutral. Each party
then presents its case at the hearing and
describes the evidence on which it bases its
claims and defenses. The neutral will evaluate all the claims and defenses and issue
a report approximately two weeks after
the hearing.
Furthermore, parties can agree to make
the evaluation binding or nonbinding. If
the decision is binding, the parties comply and the dispute ends. If the decision is
nonbinding, once the report is issued the
parties can begin settlement negotiations,
head to mediation or arbitration, or prepare for a trial. Even if an outcome is nonbinding, a neutral’s evaluation is especially
helpful to convince owners or general contractors that they have unrealistic expec-
tations regarding damages or have overly
optimistic positions regarding liability.
This process can go a long way to help your
client settle the dispute early.
Seek a Court Ordered
Settlement Conference
If the parties did not contract to mediate
or will not agree to participate in an early
mediation or neutral evaluation, consider
asking the court to order a settlement
conference. Courts encourage resolution
of construction disputes before trial due
to the sheer number of parties and issues
involved in the disputes. Kathleen M.J.
Harmon, Resolution of Construction Disputes: A Review of Current Methodologies,
Leadership and Management Engineering 189 (2003). Although your client may
have incurred substantial defense costs
by this time, a settlement conference will
bring all the parties to the table and provide one last opportunity to present your
arguments to the owner and the general
contractor. Hopefully, this opportunity
will allow you to resolve the case before
your client incurs significant costs preparing for a trial.
File a Statutory Offer of Judgment
Most states have some mechanism allowing a statutory offer of judgment. Under
these statutes, a party makes a settlement
offer which, if refused, requires the plaintiff
to pay some or all of the defendant’s costs.
The definition of “costs” varies from state
to state. In most jurisdictions, the definition includes court costs, deposition costs,
and minimal witness costs. Other states,
including Alaska, Georgia, New Jersey,
Oklahoma, and Texas, also include reasonable attorney’s fees in the definition.
Alaska R. Civ. P. 68; O.C.G.A. §9-11-68;
Neb. R. Pldg. §4:58-1(b); 12 O.S. §940; Tex.
R. Civ. P. 167.4. A number of other states,
including Arizona, California, Colorado,
and Hawaii, also allow for the recovery of
expert fees. Ariz. R. Civ. P. 68(g); Cal. Civ.
Proc. Code §998(c)(1); Colo. Rev. Stat. Ann.
§13-17-202(b); Haw. R. Civ. P. 68. No matter what your state’s definition of “costs”
includes, the statutory offer of judgment
will force the owner and the general contractor to consider the possible financial
consequences that it could face if it does
not accept the settlement offer.
Motions Practice
If early settlement attempts are unsuccessful, consider filing motions with the
court pointing out deficiencies in the pleadings. When used in the appropriate situation, a well-­reasoned motion will force
the general contractor to amend its pleading to specify further facts related to your
client, to state the maximum damages
sought against your client, or to bring
forth evidence showing why your client
should remain in the lawsuit. Better yet,
the motion may result in the dismissal of a
portion of the suit.
These motions may “sew up” some of
your client’s problems. However, before you
start filing motions, you should first consider how your judge will react. Does your
judge view these motions as a smart strategic move? Are these motions ever granted
in your jurisdiction? If you answered “no”
to either question, think twice before filing a motion pointing out deficiencies in
the pleadings. Instead, consider sending a
letter to opposing counsel pointing out the
weaknesses in the case and attaching the
motion to the letter in lieu of actually filing
it with the court. [Please note, you should
never threaten to take any action unless
you have a good-faith basis for doing so.]
No matter which route you choose, below
are a few motions that you should consider
using in the appropriate circumstances.
Point Out Defects in the Pleadings
You have reviewed your client’s contracts,
plans, and specifications, but the pleadings are so vague that you cannot determine whether any alleged damages are
related to your client’s work. The pleading requirements in your state will affect
which defects, if any, exist in the owner’s and the general contractor’s pleadings. Even though the pleadings may be so
vague that you cannot discern what your
client did wrong, in a “fair notice” state, a
court may find the pleadings gave your client fair notice of a potential claim against
it. See Webb v. Nashville Area Habitat for
Humanity, Inc., 346 S.W.3d 422, 430–31
(Tenn. 2011). On the other hand, a state
that has adopted the federal “plausibility”
pleading standard may require the owner
and the general contractor to include facts,
which, if accepted as true, would “state a
claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Depending on the rules in your state, you
may want to file a motion pointing out the
defects in the pleadings. This motion has
various names depending on your jurisdiction: a special exception, e.g., Tex. R.
Civ. Proc. 91; a bill of particular, e.g., 735
Ill. Comp. Stat. 5/2-607; or a motion for a
more definite statement, e.g., Wash. Super.
If the partiesdid not
contract to mediate or will
not agree to participate
in an early mediation or
neutral evaluation, consider
asking the court to order
a settlement conference.
Ct. Civ. R. 12(e).
Think twice before filing a motion pointing out defects in the pleadings because
it could backfire. The owner or the general contractor may use your motion as a
guide to amend its pleadings and specifically include strong allegations against
your client. However, if your initial analysis was correct and there is no evidence
against your client, the owner or general
contractor will not have sufficient facts
to amend the petition, and the court may
strike that portion of the pleading related
to your client. Many courts are reluctant
to strike pleadings unless, after ample
time to cure the defects alleged has passed,
the pleading contains no trace of information related to a certain party. Otto v.
American Mut. Ins. Co., 393 A.2d 450, 451
(Penn. 1978). If you are in a notice pleading
jurisdiction, the courts will be especially
lenient. See County of Cameron v. Brown,
80 S.W.3d 549, 559 (Tex. 2002). Even if the
court does not strike the pleading, the fact
that the owner or the general contractor
could not allege strong facts against your
client will add support for future negotiations or set the stage for a summary judgment motion.
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File a Motion to Dismiss the Pleading
for Failure to State a Claim
If you want to take a more aggressive
approach, file a motion to dismiss or
a demurrer. E.g., Tex. R. Civ. Proc. 91a
(motion to dismiss); E.g., Cal. Civ. Proc.
Code §430.10(f) (demurrer).
If you filed a motion complaining of defects in the pleading and the owner or gen-
Think twicebefore filing
a motion pointing out
defects in the pleadings
because it could backfire.
eral contractor was unable to amend the
petition and add specific facts related to
your client but the court refuses to dismiss
the petition, you may want to file a motion
to dismiss alleging that the pleading does
not state sufficient facts to constitute a cause
of action against your client. However, be
sure that you understand your jurisdiction’s
procedural rules related to the motion. In
California, a demurrer must be filed before
any other pleading. See Cal. Civ. Proc. Code
§430.40. As a result, you would want to file
a demurrer before any of the motions described earlier in this article. Furthermore,
be sure that you understand the legal consequences of filing a motion to dismiss in
your jurisdiction. In Texas, the court must
award the winning party all necessary attorneys’ fees incurred with regard to the
motion to dismiss. Tex. R. Civ. Proc. 91a.7.
Because of this fee-­shifting provision and
because of Texas courts’ general reluctance
to grant any dispositive motion, Texas attorneys are hesitant to file motions to dismiss.
If you have these concerns, consider sending the motion to dismiss to the owner or
the general contractor and threaten to file
the motion if settlement negotiations do not
begin within a certain timeframe. Again,
only make this threat if you have a goodfaith basis for filing the motion.
File a Motion for Sanctions
In extreme circumstances, you should consider filing a motion for sanctions against
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an attorney who clearly has no good-faith
basis for keeping your client in the lawsuit. The Model Rules of Professional Conduct require attorneys to have a good-faith
basis to file suit. Model Rules of Prof’l Conduct R. 3.1. Almost every state has adopted
the Model Rules of Professional Conduct.
American Bar Association, State Adoption
of the ABA Model Rules of Professional
Conduct, available at http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/
alpha_list_state_adopting_model_rules.html.
If the general contractor cannot provide
the court with any adequate basis for adding your client to the lawsuit yet refuses to
dismiss your client, a motion for sanctions
is appropriate. However, do not file such a
motion until all other methods have been
exhausted. A frivolous motion for sanctions could turn the judge against you; it
could give you a bad reputation with the
bar; and it could even result in sanctions
against you and your client.
File a Motion for Summary Judgment
File a motion for summary judgment
showing there is no evidence that your
client’s work was defective. Use the project documents, site inspection report, and
owner and general contractor’s discovery responses to support your motion. No
matter where you practice, a judge will be
hard-pressed to overlook a well-­reasoned
and well-­supported summary judgment
motion. Even if the courts in your jurisdiction are hesitant to grant summary
judgments, the owner and the general contractor should realize that your client’s
scope of work is unrelated to the damages
alleged, which will strengthen your negotiating position.
Conclusion
Construction disputes are complicated
and costly matters to defend. Do not let
this reality be the “hole” that will become
increasingly complicated and more costly
by ignoring it. If you are willing to spend
time and effort early on in litigation, you
may be able to save significant resources in
the long run.