How to Avoid Construction Litigation

Conflict is the dark side of contracting. Many builders and subcontractors in the pool industry say they view conflict, and the legal action it sometimes fuels, as all but inevitable — that it’s just part of doing business. Some boast of their ability to stay out of legal entanglements, while others have embittered stories of legal battles and ominous warnings for their fellow builders of what can happen, seemingly out of nowhere. Everyone agrees that resolving conflicts before they fester into expensive legal action is preferable to fighting it out in court, where all bets are off.

While legal conflicts may not be entirely avoidable, there are things designers and contractors can do to limit their exposure. There’s no guarantee you can shield yourself from legal action, but it’s possible to skew the odds in favor of conflict avoidance and favorable resolutions when conflicts do arise. It is a matter of due diligence, common sense and, above all, communication.

NATURE OF THE LEGAL BEAST

Scott Cohen, owner of Green Scene Landscape and Swimming Pools in Los Angeles, has been doing expert witness work since 2006, largely on behalf of the California State Contractors License Board. As such, he has been involved in numerous actions on the part of both plaintiffs and defendants, almost all in construction defect cases.

He is among those who believe that conflict is hardwired into the business of building pools and landscapes, and that it’s naïve to think that truth and fairness (i.e. justice), has anything to do with due process.

“Just because you have truth on your side does not make it a win,” he says. “It’s easy to be naïve about it if you haven’t ever been in a lawsuit. You may have this belief it won’t happen to you because you always do the job right, and you don’t let things get to the point where people are mad at you. You address problems head-on and negotiate, and you make things right, you fix things, take responsibility for your mistakes and you stand behind your work. Your standard of excellence and integrity are how you avoid going being sued.”

While all of those practices are honorable and reputable, he says, the mistake people make when it comes to legal action is thinking in black and white.

“The harsh reality you have to face is that in our legal system there is no right or wrong. If you build, it can happen to you, and odds are, it will happen to you because there is no clean distinction, it’s always about legal maneuvering. We may wish that we live in a world where truth, and right and wrong matter, but the truth is, it just doesn’t work that way.”

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Matt Reynolds is principal engineer and partner for Rowley and Reynolds Forensic Engineering, a firm providing forensic engineering and expert witness services for the swimming pool and broader aquatics industries. Reynolds, who is involved in both construction defect and safety cases, also sees lawsuits as part of the business of designing and building pools. He believes the likelihood of prevailing in a legal action can depend on regional culture and even political leanings.

“It varies tremendously across the country. Law is practiced differently state to state. It’s very provincial, that’s especially true when you get into civil litigation,” he says. “It’s a broad generalization, but we’ve found that in liberal counties, or liberal states, there tends to be more favorable outcomes for plaintiffs and the exact opposite is true in more conservative areas that tend to favor defendants.”

In addition, the nature of your work can have an impact on your likelihood of being sued. “It’s fair to say that the more detailed your projects become, the more opportunities there are for things to go wrong,” Cohen says. “We see a lot of problems with vanishing edge pools, rim flows, glass-tile surfaces, surge tanks and caisson/pile construction. Those are the more complex projects and they come with bigger price tags, so they are more prone to lawsuits than simpler projects. The clients themselves may already have lawyers on retainer and may have past experiences or even success suing people. Also, in many situations where you’re working under a general contractor, if that GC gets sued, everyone underneath them gets sued.”

All of that said, both Cohen and Reynolds acknowledge that being good at what you do is a big part of avoiding legal conflict. “The exposure and level of risk is really dependent on your due diligence and your skill level as a designer or contractor,” Reynolds says. “We’ve seen it several times in states where you’re not required to have a swimming pool contractor’s license, where the owner tries to save money by having the general contractor build the pool. They figure that it’s a structure and they know enough to do it, but it’s not just any structure, it’s a specialty structure that exists in the ground and is designed to hold water. You can get into a tremendous amount of trouble by making assumptions without the benefit of experience in these types of projects.

“What doesn’t change,” he adds, “is how the majority of cases are settled ahead of a trial, whether that’s after a complaint is filed, pre-deposition, or after discovery deposition. It’s probably more than 90%.”

BEFORE THE COURTROOM

If all of that sounds gloomy, take heart. According to the 2018 Global Construction Disputes Reports, party-to-party negotiations remain the most common means of resolving conflicts, meaning that most disputes are settled long before they get to the discovery phase of a legal action — or before a complaint is filed at all. And according to the American Arbitration Association, 75% of all complaints filed in 2017 were settled using some form of alternative dispute resolution, meaning mediation or arbitration, when the parties involved enter into the process voluntarily.

“Arbitration is becoming more common, but how effective it is depends on how far apart the sides are,” Reynolds says. “If you’re in some form of mediation or arbitration and the two sides are far apart and haven’t made any moves toward any kind of concessions, then it won’t be effective and you’ll probably be just wasting time and money. If there is a willingness to come to some sort of agreement, then you do have a chance of coming to some kind of positive outcome.”

“Arbitration is much better than a trial,” Cohen says. “But it’s very important that you have an arbitration agreement in place with the client and that is properly written by an attorney and in complete compliance with the laws of the state, and that everybody signs it. An arbitration agreement needs to be part of your contracts, scope changes and everything that you do.”

He adds, “I’ve been an expert witness for 15 years and I’ve only been in court four times. There’s a tremendous amount of gamesmanship involved. It’s all about finding a way to win, and again, that may or may not have anything to do with what actually happened or went wrong.”

PREVENTIVE MEASURES

Even with the litigious nature of society and the seemingly unavoidable conflict inherent in building man-made bodies of water, there are things you can do to reduce exposure to legal action.

“The first one is communicate, communicate, communicate!” Cohen says. “So many problems become bigger problems because you don’t have open lines of communication with the client. The longer you leave something unresolved the greater the frustration on the part of the client. Simply ignoring problems is a sure-fire way to push clients towards considering a legal remedy.”

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The best thing builders can do, he says, is to treat every job as though it will eventually wind up in a lawsuit. “That means having your contracts clearly defined, having all changes
signed and approved and making sure you’re clearly defining the limits of what you’re doing and what you’re not doing. Have your warranties in writing. And be prepared to avoid conflict escalation at all costs. I guarantee you; it’s going to be less expensive, take less time and far less stress and aggravation if you fix things before it becomes a lawsuit. We avoid potential lawsuits all the time simply because we resolve the issue before the client feels they need to turn to the legal system.”

“The biggest thing in my opinion is coordination between the design and construction oversight,” Reynolds says. “If the contractor is not being held accountable to build per the plans, that’s where you can wind up in serious trouble. That might sound simplistic, but coordination and communication through all phases of the project are the main ingredients in avoiding litigation and subsequently being successful when you do wind up in a legal battle. Everything has to be in writing, because people are going to have selective memory that favors them. That’s human nature.”

“Get it in writing,” Cohen agrees. “People do not remember verbal agreements, even when they say that’s how they do business. A firm handshake may be reassuring in the moment, but it actually means nothing because people will remember terms differently, if at all. They may not even remember that you shook hands. Keep in mind, sometimes legal action takes place years down the line. So what was said in the moment eight years ago, in effect, does not exist.”

Also, don’t forget to have things clearly spelled out with subcontractors, Cohen adds. “It’s also very important to have agreements with your subcontracts that includes language that they are responsible for the work they perform, meaning they indemnify you for the costs of their mistakes. When they make a mistake that costs you, it’s their insurance company that needs to cover and not yours.”

TAKE WARNING

Avoiding problematic projects is another important part of the strategy, and there are early warning signs worth considering before you take on a new project/client.

“I’m very, very cautious about everything we do. I’m cautious about the clients, the job site, about remodel work, new construction,” Cohen says. As for red flags, I won’t take on a project when a client starts off saying, ‘I’m not really interested in quality. I’m going to sell the house in a couple years because I’m flipping the property.’ Or when they say, ‘I’m not really concerned about permits.’ You need to avoid those clients because later on, that will be turned around on you.”

“One of my biggest pieces of advice,” he adds, “is don’t allow the homeowner to put you on a time schedule for a party or some type of deadline. Ironically, if you make a huge effort to satisfy a deadline, later on, homeowners will assume you took shortcuts to get them there. People forget how long it takes to build something, but they will live with how well it was built.

And that leads to the ultimate way to avoid litigation, make sure you’re building the best quality product possible. Document that work, permit everything necessary and again, communicate as issues come up — and they will.”

Cohen and Reynolds both strongly advocate knowing the soils conditions you’re building in, and never making assumptions about geotechnical issues based on past experience.

“’The most dangerous phrase you will hear is, ‘I’ve been doing it for 30 years this way and never had a problem,’” Reynolds says. “That doesn’t mean you’ve been doing it right for 30 years and it doesn’t mean you won’t have a problem. All that means is it hasn’t happened yet. This is why some people stay away from the residential market where there’s the perception that geotechnical is optional; the geotechnical engineering information is extremely cheap insurance compared to what can happen.”

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“It’s also important to look at drainage, especially on slopes,” Cohen says. “Make sure you understand how water flows through the property, how it leaves the property and if there’s evidence of existing water damage. I’m also looking for any indication of slope movement. Are the trees leaning downhill or have existing structures moved?”

Finally, for the purposes of this discussion, it bears mentioning that compliance with building codes, standards and best practices is at the heart of managing conflict.

“Of course, building standards and codes, such as the ANSI standards or local building codes, those are all critical because it’s the only thing that exists in writing that determines what is and isn’t defensible work,” Cohen concludes. “If you can point to a code or standard that defends something you’ve done, and the other side can’t, that’s a huge advantage. Again, it really comes down to how well do you do things. If your work follows all standards and best practices that you can point to, you’re in a good position. If not, the opposite is true.”