Litigating and arbitrating construction cases is extremely expensive. By the time the procedural rules are complied with and the discovery process is done, even the smallest of construction cases with the most cost-conscious legal counsel will run $300,000. Larger construction cases are vastly more costly. For example, the 2012 King County Bright Water Tunneling dispute (VPFK v. King County) cost taxpayers over $10 million in attorneys’ fees alone. For more information, read our blog article, King County Scores a $155.8 Million Victory Against Contractor on Brightwater Tunneling Project.
The cost of the dispute resolution process often forces contractors and owners to settle meritorious claims not on the basis of entitlement, but because of attorneys’ fees. The expense of arbitration and litigation is largely a function of the preparation done in advance. However, even strong proponents of preparation question whether the training we receive as lawyers (i.e. to get at “the whole truth”) is at odds with our client’s desire to simply present that amount of evidence necessary to get the dispute resolved. The question becomes whether the cost of ferreting out the ever elusive truth (i.e. getting it done right) is justified, or whether we can live with fewer “procedural safeguards” and nevertheless “get it done” in a commercially reasonably manner and at an affordable cost? Do clients prefer to have a “Rolls-Royce” type of process with full discovery and depositions, or to compromise (arguably improve) on the process in the interest of efficiency and lower cost? The time may have come in resolving construction disputes when finality and efficiency trumps pursuing the veracity and exactitude of each and every fact in a dispute.
We are not suggesting that we do away with a fair hearing on the merits. However, in our experience, the cost of the hearing in most cases is merely 20% or less of the attorneys’ fees. Most of the money spent in arbitration and litigation is in discovery. Discovery involves document exchanges, answering interrogatories (written questions), answering requests for admission, and conducting depositions.
Depositions are the most costly aspect of discovery. Depositions are proceedings in which the lawyer asks a witness questions under oath in front of a court reporter. The lawyer’s questions and witness’ answers are transcribed. In our experience, properly preparing for a deposition, questioning the witness, paying the court reporter fee, reviewing the transcript, and preparing for cross examination will run at least $20,000 per witness, even if the deposition only takes a single day. It is not uncommon for attorneys to conduct 10 depositions in a typical case or, in bigger cases, as many as 25 depositions. At $20,000 each, the cost of the deposition process quickly escalates the overall expense.
The reason why lawyers take depositions varies from lawyer to lawyer. Generally, depositions are an opportunity for the lawyer to meet the witness before the trial, take the witness’ measure, tie the witness down to a particular version of events, and perhaps obtain some admissions that are helpful to the case. At the hearing, the deposition transcript can be used to impeach the witness if he or she strays from their testimony during the deposition. Even those lawyers who know how to take effective depositions and know how to successfully use a deposition on cross-examination (a skill not possessed by all lawyers) have to admit that in most instances the cost of the deposition is not outweighed by its utility at the hearing. Effective cross-examination is quick and targeted. Even if the deposition lasts seven hours and results in a transcript of hundreds of pages, oftentimes only a few short excerpts from the transcript are used at the hearing. Thus, the benefit of a deposition (if there is one) can be outweighed by the cost of conducting the examination.
It is very feasible to cross-examine witnesses without having taken a deposition first. This alternative makes the process of cross-examination a little more difficult, but that extra difficulty does not generally justify a $20,000 deposition. Many times we hear that lawyers feel they need to pursue the deposition and discovery process because not to do so amounts to “malpractice.” This is a poor excuse for taking depositions. The client should decide whether to take a particular deposition after being informed what the potential cost, utility, and chances of finding that “smoking gun.” If construction dispute resolution is to become less costly, the place to start is to cut back on unnecessary depositions and not pursuing the quixotic quest of finding “the whole truth.” For more on this subject, read our blog articles, Ways to Make the Construction Dispute Resolution Process More Efficient and Less Expensive – Part 1 and Arbitration Should Not Be “Warmed-Over” Litigation.