Mar 082018

Law schools have increasingly been offering courses in alternative dispute resolution.  I had the privilege of taking such a course during my semester abroad in Germany, in a class with students from all over the world.

The reason law schools have been including such courses in their curriculum is because in certain circumstances an alternative form of dispute resolution can be more effective than a traditional courtroom action.  The question, though, is which circumstances,

I wrote the following for my ADR class during that semester abroad in an attempt to answer that question.

In thinking about the merits of alternative dispute resolution, I’m reminded of my own experience with it, an experience which exemplified some of the plusses and minuses of these extra-judicial conflict resolution techniques.

I used to have an apartment in a rent-controlled jurisdiction. To administer it the city had created a local rent board that set the maximum rent and enforced a few other related housing rules. Its enforcement mechanism was a quasi-judicial system of petitions and hearings. However the board could only adjudicate a narrow set of issues, and its enforcement powers were weak. For instance, even though perjury was illegal during the proceedings, the rent board had no ability to punish those who committed it.

At some point I found myself embroiled in some proceedings before it. My landlord had been collecting much more than the maximum allowable rent, and the building was out of compliance with the city’s habitability laws. When he petitioned the city rent board to raise my rent, I counter-petitioned for a refund of the overcharged amount and compensation for the other defects.

Initially I lost the case. The hearing examiner had ignored several issues that were raised and incorrectly dismissed several others. So I appealed her original determination and won a re-hearing. But before the rehearing began, before our testimony and arguments would be placed on the record, the hearing examiner suggested we begin with a settlement conference.

While I think it is normal rent board procedure to attempt a settlement conference before beginning formal proceedings, the practice is not a panacea. Rather, it demonstrates some of the reasons why over-reliance on alternative dispute resolution techniques may not always have the desired positive effects its advocates might intend.

For one thing, the incentive to remove disputes from ordinary judicial fora may blind those who would order such removal from fairly evaluating whether these other mechanisms are really appropriate for the matter at hand. For instance, a judge who orders some sort of ADR may really be motivated by the desire to clear his docket more than he is by his interest in the just resolution of the case. While perhaps this suspicion may seem cynical, it certainly seemed warranted in my rent board case. The hearing examiner, having already been rebuked for her poor handling of the case earlier, was visibly eager to get it out of her hands as soon as possible. And if she didn’t have to take testimony or render a decision, all the better, which made ADR a perfect solution.

But instances where it is not a perfect solution are cases just like these: when there are bad actors in the dispute. I mentioned before the perjury problem: my landlord committed it several times during the course of the matter. And that’s just one tangible example of his bad behavior. The very fact that I had any claim against him in the first place was due to his deliberate indifference to my rights as a tenant and his obligations as a landlord. Yet the recommendation that we undertake a settlement process seemed to incorporate the belief that he would somehow change his spots and suddenly begin to deal with me fairly, just because we were in the context of an ADR settlement proceeding. Given the circumstances, such a belief hardly seemed plausible.

None of this goes to say that there is never a call for some sort of ADR. But it’s not a one-size-fits-all solution. It seems most appropriate when there’s actually an issue in dispute and the settlement would be of the issue, as opposed to the adjudication of a claim of injury.

The issue-claim distinction may seem like a small semantic difference, and indeed in some cases it may be hard to identify a dispute as either issue-based or claim-based. What I mean generally is that with an issue-based case there is a problem to solve — like the division of property — and divergent interests about how best to go about it. In those instances ADR may be appropriate because it can accommodate both parties’ interests without forcing them to compete against each other in the winner-take-all environment litigation would be. However, in a claim-based case like mine, where one party has been wronged by the other and suffered an actual injury, ADR is not appropriate.

There are a few big reasons why it’s inappropriate: one, because while ADR can permit compensation, it cannot facilitate punishment. It would be illegitimate for ADR to even try to do so, as punishment can only be meted out by the societal organs (e.g., the court system) empowered to dole them out. Private mediators should not be able to impose fines or jail terms, nor should we want them to. And even when arbitrators and mediators can award damages, they should be compensatory, rather than punitive.

But what about enforcement of external rules and laws, like rules about perjury, which help protect the dispute resolution process? These private arbiters are not endowed with the power to uphold them, but if they don’t, then who will?

Which leads to another big reason why ADR tends to be inappropriate in these claim-based situations: because the disparate power that caused the injury will likely remain similarly disparate throughout the ADR process. Now, perhaps certain types of ADR, like where the arbiter retains a pseudo-judicial role, with binding judgments and procedural authority, can temper those problems. But then even assuming the victimized party’s interests can be sufficiently protected — which is a big “if,” since it might take a big stick, bigger than most arbiters have, to keep a powerful party in check — the public’s interest may not be. In my case, the landlord owned many buildings in the city, each building had many tenants, and it was clear that someday there would be different tenants in my apartment too. It was very likely that there were or would be many other people with an interest in a public record of the dispute. But the off-the-record nature of the settlement conference kept much of it from ever really becoming public knowledge.

Which can be a problem. I’d heard, for instance, allegations that my landlord had a pattern of evicting people under false pretenses. If each of these cases for wrongful eviction brought by each of these tenants were settled privately, there would be no record for any subsequently wronged tenants to see in order to discover that there had been a pattern of misbehavior, which could then help buttress their own cases. Their cases would therefore suffer, and the lack of any public awareness of the larger problem would also preclude a more systemic, institutional response to the illegality.

Meanwhile, especially in ADR processes where the mediator is more passive — or potentially not present at all, as in the case of negotiation — the power-vacuum can leave one party very vulnerable. In my case the hearing examiner-turned-mediator herself appeared extremely intimidated by the landlord. The distinct aura she exuded of wanting to have this over with as soon as possible added a particular pressure to the situation — and left me to fend for myself. Clearly, a successful dispute resolution process would require an able and unbiased mediator, but even so, there still might remain too great an unchecked imbalance of power between the parties to be able to achieve a just resolution overall.

A judge-led court proceeding, on the other hand, would mitigate all these problems by providing additional procedural protections, like evidentiary rules. Certainly such rules can become cumbersome at times — particularly in situations where the court is trying to resolve an issue-based dispute and not a claim-based one — but they do generally serve the purpose of making sure that there is fairness and transparency in the adjudication process. Granted in my situation, since the official hearing was only quasi-judicial, I didn’t necessarily have all these protections available to me anyway (remember that perjury was unpunishable by the rent board, and there were no rules about the admissibility of evidence) but at least within the context of the formal hearing I did have an avenue for appeal, and, failing that, access to the courts themselves if the rent board was unable to render a just result. With ADR these procedural protections may often not be available, which is particularly problematic when there are bad actors and power disparities present.

Because you’d have to wonder why a party with the upper hand and no compunction about causing injury would have any incentive to settle at all. Or at least settle fairly. Unless, of course, there’s the prospect that, failing settlement, the conventional dispute resolution process would still remain available to the weaker party.

And I think that’s what happened in my case, because the landlord suddenly offered me a sizeable cash settlement on the spot. Given that it represented an amount to close to what I’d be lucky to ever see, and not until potentially months later when the examiner finally made her decision (hopefully correctly this time), it was a good deal. I accepted it, along with a few stipulations I was able to insist upon, including those bearing on how our settlement would benefit subsequent tenants, by threatening not to accept any settlement at all and instead demand a full hearing. Conversely, the landlord conditioned the settlement on full waiver of my claim. Which was fine with me, because what I sought was not only the money but closure on the matter.

But because I’d hung on so long, through a bad decision and an appeal, and was clearly willing to keep going, I think the landlord decided it was in his interest to get this taken care of too. Still, I don’t believe he would have reached that conclusion had I not had the official process to fall back on.

So maybe it’s true that ADR worked in this situation, but it did not work in a vacuum.

Originally written 12/2/2005, edited slightly twice since.  Also a footnote to history: the landlord eventually went to federal prison.

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