
By Brian Clifford
Sooner or later, most systems integrators will have a project issue with a customer that reaches an impasse.
Perhaps it is an issue arising from some ambiguity in the scope of services – with each party having some legitimate basis for their position.
Or perhaps it is an issue arising from external factors unanticipated by either party in their agreement – such as distress of the project lender.
Or maybe the other side is just refusing to be anything but an unreasonable jerk.
Dispute Options
Regardless of the cause of a dispute, the contract terms you decide upon will control the method used to resolve the impasse – and you have several options to consider, including these three most common processes:
- Litigation: This is the default. If you don’t have a contrary agreement, either party may file a lawsuit against the other – likely in their “home court” jurisdiction.
Litigation has some potential advantages, such as the ability to directly enforce a judgement without the need to commence a separate enforcement action, and “joinder” rules that may help bring all the relevant parties into the same case. But it may also be expensive and time-consuming, and the judge or jury may not have any familiarity with the automation industry.
- Arbitration: This dispute resolution method is commonly used in the system integration industry by way of contractual requirements. Parties can also agree after a dispute arises to resolve it through binding arbitration (in lieu of the “default” of litigation).
Arbitrators can be selected based on their subject-matter expertise relevant to the type of project or services involved in the dispute, and arbitration proceedings usually (but not always) move faster than court proceedings. However, you may have to “fight in multiple forums” – e.g., if you have an arbitration requirement in your contract with your customer, but your relevant “downstream” supply agreement does not and “defaults” to litigation. And an award in your favor may have to be enforced through supplemental legal proceedings in court, adding a step to the dispute resolution process.
- Mediation: Mediation is often a preliminary step before litigation or arbitration. It can be contractually required, or it can be ordered by the judge in a pending lawsuit or ordered by the administrator of the arbitration under its rules, as applicable.
A mediator helps the parties reach a mutual settlement of a dispute, often through “shuttle diplomacy.” And a mediator can help point out – confidentiality – the strengths and weaknesses of each party’s position. But the mediator is not empowered to force the parties into a settlement or to make any binding determinations related to the dispute.
The Faegre Drinker industrial automation, system integration and robotics team (which provides all CSIA members the benefits of the CSIA Legal Plan) is available to help you decide upon the right dispute resolution forum for your projects and negotiate contract terms to implement such decisions.
Brian Clifford is a partner in the industrial automation, system integration and robotics practice at Faegre Drinker Biddle & Reath LLP. He can be reached at CSIALegal@faegredrinker.com.