Construction and business disputes often present complex issues that the mediator or arbitrator must understand to help settle the case or reach an informed arbitration decision. In order to help in this process, the neutral may elect to obtain the assistance of an independent expert or technical advisor in understanding certain issues and reaching a decision. Such an expert should take steps to address due process considerations and help all parties understand the scope of their involvement in the case.

This article will discuss best practices for neutrals retaining their own experts.

Mediator-Retained Expert

In a complex construction or business dispute, the parties often retain experts to opine on the strengths of their cases. The mediator then weighs these expert opinions. In such cases, the mediator may consider retaining a neutral expert to provide unbiased opinions on the positions raised by the parties’ experts and offer the parties an independent evaluation of the merits of their cases. For example, in a construction dispute about the scope of repair of an alleged defect or scheduling and delay issues, an independent expert may help the mediator understand the strengths and weaknesses of both sides’ positions. Similarly, in other types of business disputes, an independent expert can help the mediator facilitate compromise.

A. How to Retain and Pay for the Expert

The mediator first should seek agreement from the parties to retain an independent expert.

The selection of the expert can be handled in several ways. The mediator may suggest an expert to the parties, giving each party veto power. Alternatively, the mediator may ask the parties to recommend an expert or agree on one or more independent experts. The credibility of the retained expert is important, as the expert will provide both the mediator and the parties with their independent opinion regarding the strengths and weaknesses of each party’s case.

Payment of the expert should be shared equally by the parties who dispute the issues on which the independent expert will be offering an opinion. For example, if the expert is retained to opine on disputed plumbing issues, it would not be necessary for non-plumbing-related parties to pay for them. Before authorizing the expert to begin work, the mediator should obtain a budget from them which should then be shared and approved by the parties.

B. The Expert’s Opinions and Reports Should Be Privileged

The independent expert will provide the mediator and the parties with their opinions on the disputed issues in the case, often via a report. Before retaining the expert, the parties should agree that the independent expert’s opinions and reports are privileged mediation documents that may not be disclosed during trial or arbitration and may not be relied upon or cited by either party's retained experts. This approach may help support the independent expert in providing an impartial perspective and may help mitigate the risk of misuse of the expert’s opinion if the case does not settle. Absent agreement that the independent expert’s testimony is privileged, the parties may not agree to allow the mediator to retain an expert.

C. Joint Expert Meetings and Mediation

Before the parties engage in a meaningful settlement conference, the mediator should consider holding a joint expert meeting between the opposing experts to determine if compromise on the disputed issues is possible. The independent expert also may attend these joint expert meetings and suggest compromises or comment upon the strengths and weaknesses of each side’s position. For example, in a dispute over a structural issue, the independent expert may be able to offer alternative means to repair a building or provide opinions that the structural issues may not be as significant as advocated by one side.

The mediator also should consider the usefulness of having the independent expert attend the mediation. The independent expert may be helpful in convincing one side of the merits and credibility of a position or provide insight into how a jury or arbitrator may rule on a particular issue.

D. The Independent Expert and Final Repair Scope

An additional benefit to having an independent neutral in mediation can occur after settlement, if that expert is retained to act as the engineer or contractor of record for any necessary repairs. For example, in Millennium Tower in San Francisco, one of the parties’ structural engineers agreed to be the engineer of record for the parties’ negotiated scope of repair for that building, which helped the mediators settle the dispute.

Arbitrator-Retained Expert

The retention of an expert or neutral technical advisor by an arbitrator is a useful tool for resolving complex issues.

A. Authority to Retain the Expert

Before retaining an expert, the arbitrator should confirm the authority to do so. Such authority may be found within the arbitration agreement or in the applicable arbitration rules.[1] Otherwise, the arbitrator should obtain the consent of all parties.

If the parties have agreed that the Federal Rules of Evidence apply, then Rule 706 allows the court on either its own motion or a motion by a party to retain a court-appointed expert. This rule outlines the procedures the court must follow in the retention of a court-retained expert. This rule provides a useful guide for retaining an expert in arbitration.

B. Selection and Payment of the Expert

Absent guidance by the rules or arbitration agreement, the arbitrator may select the expert in any of the following ways:

i. Each party may nominate an expert, and each party then has the opportunity to object to the expert nominated by the opposing party. The arbitrator then selects the expert they wish to retain.
ii. The arbitrator selects the expert, subject to objection from any party.
iii. The parties jointly submit the expert to the arbitrator, who can either accept or reject the recommendation.

Payment of the expert should be allocated among all parties to the disputes the expert will address. However, the arbitrator should determine whether they are authorized to assess payment of the expert as a cost in their final award. Best practice may be for the arbitrator to address payment of the expert by order or party stipulation.

C. Role of the Arbitrator-Appointed Expert

Before retention of an expert, the arbitrator should determine whether that expert will serve as a technical advisor or provide them with an independent source of evidence and opinions as to the issues raised in the arbitration. This distinction is important and should be addressed when the expert is retained.[2]

(a) Expert as Technical Advisor

[1] JAMS AI Arbitration Rule 16.1(b) allows the retention of an expert for inspection of AI systems or related materials when jointly requested by the parties; otherwise, JAMS’ domestic arbitration rules appear to be silent on the arbitrator’s authority to retain an expert. JAMS International Arbitration Rule 26.7 allows the tribunal to appoint one or more experts after consultation with the parties.
[2] See Federal Trade Commission v. Enforma Natural Products 362 F. 3d 1204 (9th Cir. 2004) for an excellent analysis of the difference between these two expert roles.

If the arbitrator is retaining the expert as a technical advisor, then the thoughts and opinions of the expert are not discoverable, and the expert’s sole role is to assist the arbitrator in understanding the issues raised in the arbitration. In these circumstances, the arbitrator may not rely on the expert’s independent findings in the arbitration award. The court in FTC v. Enforma, supra, endorsed the following procedural steps for the retention of an expert as a technical advisor:

i. use a fair and open procedure for appointing a neutral technical advisor;
ii. address any allegations of bias, partiality, or lack of qualification;
iii. clearly define the limits of the technical advisor’s duties;
iv. make clear to the technical advisor that any advice he or she gives to the arbitrator cannot be based on any extra-record information; and
v. make explicit, either through an expert’s report or a record of ex parte communications, the nature and content of the technical advisor’s advice

(b) Expert as Separate Source of Evidence or Opinion

If the arbitrator intends to rely upon the independent expert’s opinions in reaching the arbitrator's decision, then the arbitrator should provide an opportunity for the expert to either be cross-examined or questioned by each party. Once again, Rule 706 provides guidance as to how the arbitrator may address an expert whose opinion they may rely on in reaching a decision. In such a situation, the rule requires the court to advise the parties of the expert’s findings and give the parties an opportunity to question or depose the expert.

While the arbitrator may not be bound to follow Rule 706 or federal case law, if they rely upon the independent expert’s findings or opinions in their final arbitration decision, they should consider allowing the parties to question the independent expert in some fashion. This can be accomplished by (1) allowing the parties to depose or cross-examine the independent expert, (2) allowing the parties to review and comment on the independent expert’s report or (3) allowing the parties’ experts to provide a rebuttal report or testimony to the independent expert’s findings. In this way, the arbitrator can avoid due process issues or a challenge that the award was based on evidence not presented in the arbitration.

The retention of an independent expert by either a mediator or an arbitrator is an extremely useful tool for resolving complex construction and business disputes, provided the neutral obtains consensus from the parties on the retention of the independent expert and clearly defines the expert’s role.

Disclaimer: The content is intended for general informational purposes only and should not be construed as legal advice. If you require legal or professional advice, please contact an attorney.