Originially from: World Arbitration and Mediation Review (WAMR)

CALIFORNIA LAW BRINGS ADR INTO LOCAL
PUBLIC WORKS CLAIMS PROCESS
By Paul F. Dauer, Parker, Milliken, Clark, O’Hara & Samuelian, Sacramento
Concerns with the delay in achieving fair and timely resolution of public
contract performance disputes in California prompted the introduction of
Assembly Bill No. 4165 in 1990. The result was a new statute which imposes on
all local public agencies a duty to include administrative claims procedures in
their public works contracts and to elect to submit claims either to the state
construction arbitration process or to a judicial process which incorporates
mandatory mediation and judicial arbitration. Public Contract Code Section 20104
et seq.
In either event, the claims are subject to a mandatory meet-and-confer
settlement process and to mandatory disclosure of documentation relating to the
claims of either the contractor or the local agency. That legislation became
effective January 1, 1991. As enacted, the obligation applies to all claims of
$375,000 or less per claim. Local court systems are beginning to develop the rules
for implementing the mediation and arbitration.
Judicial Mediation
The submission of litigation involving public works claims to obligatory
mediation and judicial arbitration is a radical re-direction of remedies for lawsuits
involving public agencies. There is no statutory precedent for mandatory
mediation of contract disputes within the judicial process, and while there is a
formal and longstanding process of judicial arbitration, the monetary limits
applicable to public works claims are substantially higher at $375,000 per claim.
(Section 20104(a)(1)).
The absence of a precedent for this type of judicial mediation is forcing the
courts to develop new rules to implement the statutory requirements. Those
requirements provide extremely restrictive time limits within which the mediation
must be commenced and conducted. Thus, the court is required to submit the
matter to mediation no earlier than 30 days following the filing of the complaint
but no later than 60 days from filing. Once submitted, the mediation must be
commenced within 30 days and pursued to conclusion within 15 more days.
Selection of a mediator by agreement must be accomplished within 15 days after
the court initially submits the matter to mediation (Section 20104.4(a)).
Under the original legislation, it was not clear what the consequence would be