Published on: October 22, 2008
It is not hard to understand why military veterans who have seen action in war are likely to be among the strongest advocates of diplomacy. For similar reasons, also easy to understand, the Community Associations Institute (CAI), which has seen decades of litigation involving homeowner associations and owners, encourages the use of alternative dispute resolution “whenever possible and wherever appropriate.”
The advantages of avoiding litigation are obvious, even to litigators. Non-judicial solutions can be achieved faster, at lower cost, and usually without the bitter aftertaste that can cloud the atmosphere in communities and strain relationships among and between owners and boards for years after a court battle has ended.
Alternative dispute resolution (ADR) is a large umbrella covering a range of options, from settlements reached by parties able to resolve their disputes without any help, arbitration of claims by agreement or contract, to mediation ordered by judges who make it clear that the parties will probably be better off with an agreement they hammer out themselves than with any decision the court is inclined to render. But the best-known and most widely used ADR tools, by far, are mediation and arbitration.
Mediation vs. Arbitration
Although the terms are sometimes used interchangeably, they are not synonymous. An article in “Conflict Resolution News” described the difference this way: Mediation is “like riding in a chauffeur-driven car.” You decide where you want to go, and if you don’t like the route or the speed, you can get out and walk. With arbitration, the article explained, “a black limousine with dark-tinted windows pulls up; the door opens and you have no choice; you have to get in and you go wherever the car takes you.”
Parties who agree to mediate a dispute don’t have to reach an agreement, although it’s obviously better if they do. A mediator facilitates the discussion and encourages the parties to find points on which they can compromise. If the mediation fails, as is sometimes the case, the parties can fight their battle in court.
Arbitration is a more structured process – less formal than a trial but more formal than mediation, with the arbitrator acting more like a judge than a facilitator. Unlike judges, arbitrators aren’t necessarily bound by the rules of evidence or other courtroom and procedural formalities– they may reject some arguments judges would accept, while accepting others that would not be admissible in court. Unlike mediators, who help the parties craft an agreement, arbitrators hand down a decision, which the parties may accept or not (if the arbitration is non-binding), and have no choice but to accept if the arbitration is binding. However, we have found that , unlike judges, s, arbitrators often try, Solomon-like, to give something to each side, without any basis for the decision, which can have the effect of leaving everyone frustrated. The advantage of a binding arbitration is the process is streamlined and the decision is final. When the arbitration is over, it’s over. That is also the disadvantage of binding arbitration – there is no real avenue of appeal (save for rare instances when a fraud occurred in the process). In the interests of cost and expediency, he parties give up the option of having their dispute decided by a judge or a jury and appealing a decision they don’t like. In non-binding arbitration, the parties do preserve their option of going to court. But if court is the ultimate destination, it’s hard to see the benefit of stopping for arbitration along the way. There is some advantage in getting a sense as how your case is viewed by a third party, butyou save money and time by arbitrating a dispute only if you don’t end up litigating it as well.
An Honest Evaluation
While the bulk of our community association clients prefer the courts over arbitration, we frequently suggest that they consider mediating their disputes. In fact, attorneys should undertake a form of mediation before filing any suit, asking their clients to define their goals and to explain what they want to achieve and what they are willing to accept as a result. Attorneys should also provide an honest assessment of the client’s position, being willing to tell them, “There’s a good chance you’re going to lose,” if that’s the case, and making sure they understand the likely costs, even if they prevail. As part of this discussion, attorneys should suggest mediation as an alternative their clients should consider in cases where it is appropriate.
Mediation is not appropriate for all disputes. We would not recommend pre-suit mediation, for example, for association collection issues or any dispute in which a law suit must be filed or other legal steps taken in a timely fashion in order to protect the interests of the association or individual owners. On the other hand, money issues (other than association collections) are among those best suited for mediation, because they offer the most opportunities for each side to give a little, get a little, and quantify the gains and losses. Matters of principle or perceived principle – “it’s my home and I’ll do what I like,” “It’s an association rule and the board is going to enforce it no matter what” — are much more difficult to resolve.
Mediation is usually undertaken early and, we believe, the earlier the better – if not before a suit has been filed then shortly after – before positions have hardened and the parties have too much time and money invested in “winning.” But the passage of time and expenditure of funds can also encourage mediation. We were involved in a case that had been fought for two years, costing the parties $100,000 each and leaving both sides tired, frustrated, and ultimately willing to make concessions in mediation they would not have considered at the outset.
It Shouldn’t Be Mandatory
Some common interest ownership communities include provisions in their bylaws requiring owners to arbitrate or mediate all disputes with the board, but we don’t think that’s a good idea. An arbitration requirement might actually have the perverse effect of encouraging disputes, because owners who are intimidated by the litigation process might pursue arguments they would otherwise abandon if they can demand mandatory arbitration or mediation instead. Mandatory ADR can also embolden parties to submit to a simple adversarial process instead of picking up the phone or meeting to try to resolve a dispute.
Making arbitration, mediation, or any other form of ADR mandatory also limits the association’s options – forcing the board to negotiate disputes it might be better off litigating. Associations should certainly offer ADR – mediation particularly —as an option and encourage it, where appropriate. But for mediation to have any chance of success, both sides must be equally committed to the process. Owners who enter mediation only because they are required to do so will simply go through the motions, with no intention of reaching a settlement and every intention of pursuing their battle in court.
The most difficult part of most mediations is persuading clients to participate in the process. This is not to say that mediation sessions are easy; many are very difficult indeed. But once the parties to a dispute agree to work on resolving it, the question is no longer whether they can reach an agreement but the terms on which an agreement will be possible.
All mediations are not successful, of course. Industry experts estimate that 65 percent to 90 percent of mediation sessions produce settlements that avoid litigation. Our experience suggests that successful mediations have two essential components: Willing participants (the importance of which we’ve discussed already), and a skillful mediator, the importance of which can’t be overstated. The mediator must be even-handed and perceived as such by both sides, able to identify the strengths and weaknesses of their positions, explain the worst-case scenarios they face, and help them recognize points on which they should be willing to bend.
We’ve seen extraordinary mediators able to forge complicated settlements with parties whose positions seemed completely irreconcilable, and we’ve seen not-so-effective mediators who seemed interested only in collecting their fee and eating the lunch they have ordered at the expense of the parties.
Style and Substance
Mediation participants are not entirely subject to the luck of the draw. Both sides must agree on the selection of the mediator, and the attorneys typically make those recommendations. As much as possible, attorneys try to select mediators they know to be competent, whose styles and personalities are a good match for the parties involved. The mediator’s style is important. Some people respond well to a low-key approach that concentrates on how everyone is feeling; others are more receptive to a hard-nosed, “this is how it’s going to be” strategy.
Knowledge of association law is also an important consideration in selecting a mediator, but admittedly, this can cut both ways. If a client’s legal case is relatively weak, an attorney might well prefer a mediator who is less well-versed in the area over one who is known to be an expert in the field. In most cases, however, both sides in a community association dispute benefit if the mediator understands the legal and practical issues involved.
Anyone who undertakes mediation usually wants it to succeed, but even unsuccessful mediations have some benefits:
- They clarify the issues.
- They may make all parties more realistic about the outcome they can expect from the litigation.
- They reduce discovery costs for both sides.
Those lower discovery costs result because much of the information that would be collected through the pre-trial discovery process is exchanged in the mediation. This can be something of a double-edged sword, because the rules prohibit participants from using in court any information they obtain through the mediation process. While some see this as a disadvantage of mediation, we don’t think it’s a serious concern, because the discovery process will almost certainly produce the excluded information. However, attorneys should take care not to divulge in mediation any legal strategies they might want to use in court.
Eye on the Prize
Attorneys and the clients they represent should enter mediation with a common goal – to resolve the dispute. If the goal is victory or vindication, mediation isn’t the right venue. The right attitude won’t guarantee a successful mediation, but the wrong mind set will assure a failed one. A few additional suggestions for anyone contemplating mediation:
- Analyze the issues with your attorney first. Understand your goals and the limitations on what you are willing to concede or accept.
- Make the mediation vs. litigation choice a business decision, based on costs, benefits and risks; not an emotional decision, based on anger.
- Have supporting documentation for the arguments you make and the positions you take. This can influence the mediator’s view of the dispute.
- Enter the mediation with an open mind. Don’t get so stuck in a position you are unwilling to consider creative solutions and unable to recognize viable proposals when they are presented.
- Listen – really listen—to the arguments on the other side. Don’t reject differing views out-of-hand. Try to understand them.
- Don’t expect to feel victorious at the end. A good mediation is one in which all parties walk away equally unhappy. The real measure of success will come three or four months later, when you look back on the mediation and say, “That was the right thing to do.”