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