Published in the ECHO Journal, July 2012
Filing a lawsuit is a declaration of war! If you are a peace-loving individual, an open minded-board, and/or don’t have the resources to fund a war, then you certainly ought to consider all options before issuing your proclamation. It is very difficult to turn back the processes once a lawsuit is filed. You need to know that if you find out sometime during the process that you are done, you don’t want to spend any more money, you find out that your case is not strong, you find out the attorney overestimated your chances of success, or anything else happens that makes you sorry you jumped into court, dismissing the lawsuit may lead to a request from the other side to reimburse their attorney fees. There is case law that says that dismissal of a lawsuit before it plays out can be considered in the same category as losing the case (not being the prevailing party). This can give the opposition the right to go into court and ask to recover fees and costs, even without a trial!
This article is about choosing a process that often proves far superior to suing a party – and that is ADR (alternative dispute resolution). ADR processes include mediation and arbitration. And more emphasis is put on mediation than the other ADR processes – because it can be the best forum for any HOA disputes between board members or the board and owners, or owners vs. owners. There are several avenues to ADR: contractual, voluntary, statutory and court-ordered (which occurs after a lawsuit is filed). ADR means exploring alternatives to litigation for resolving disputes. ADR can be a way to avoid war. Yes, Virginia … there is a way to resolve disputes without suing someone.
Condominiums, Townhouses, Common Interest Developments, and Neighborhood Disputes in California
A little history: in 1996 ADR legislation was first drafted and offered to the legislature by James P. Lingl, an attorney active in drafting legislation to solve serious problems in HOAs. The bill passed both the legislative houses that year but was vetoed by the Governor the first time, and many believed the problem was simply “politics”. Then, in 1997, the bill was re-introduced and the California Legislature approved it (with strong encouragement from the industry groups in California including ECHO). This time the Governor signed it. The resulting law does not require, but strongly encourages homeowners associations and homeowners in them to seek resolution of their disputes outside of the courts. You can “Just Say No” to ADR, but you run the risk of having your lawsuit dismissed or having a judge punish you – hitting where it hurts (in the area of attorneys’ fees awarded to the prevailing party) if you refuse to participate.
Speaking from experience, (I used to do litigation) homeowner association cases are not always well-received by judges. I saw situations where it seemed like the judge was punishing the parties by delay after delay. One time I sat through proceedings all afternoon with a full board of working people who took the afternoon off to seek an injunction relating to a threatening dog, only to have the judge send word out (she never appeared) at 4:30pm that she did not hear requests for injunctions related to dogs because she was on the board of the SPCA! What a waste of time for everyone, not to mention the money aspects.
And even besides that kind of risk, the legal mandate to offer ADR is simply a good idea. California law (Civil Code Section 1369.510 etc.) requires homeowner associations and homeowners in them, who have a dispute with each other or their neighbor, to first attempt to engage the other side in ADR before filing a lawsuit by making an offer. The statute says that the homeowner or association that wants to bring a complaint for injunctive relief or declaratory relief, coupled with damages of less than $5,000.00, has to serve the other party with a “Request for Resolution” prior to filing a lawsuit asking them to participate in an ADR proceeding. There are exceptions if there is a statute of limitations that may expire or a need for immediate relief, but the intent of the statute is to get associations and/or homeowners to try ADR in CC&R disputes, before filing a lawsuit. (CC&Rs is the common name given to the Declarations of Covenants, Conditions and Restrictions that regulate a common interest development). The Request for Resolution should name the parties, state the dispute in simple terms, and request that the other side engage in ADR. The opposing party has 30 days to respond to this Request for Resolution, or the offer is deemed rejected and a lawsuit may be filed. If the Request is accepted by the other party, the parties together have 90 days to resolve the dispute, or they can agree to extend the time.
If it is not resolved in 90 days, then the party wishing to file a lawsuit is entitled to do so, having satisfied the statute. If a party with a claim as described does not send a Request for Resolution to the other party, but files a lawsuit instead, the judge has various options. He or she may dismiss the lawsuit without prejudice to going through the steps again and then filing, or allow it to go forward taking into account the parties’ compliance with the statute (or noncompliance) when it comes time to consider an award of attorney fees.
Since the prevailing party in an enforcement action is entitled to recover attorney fees, the implication is that the judge could base the attorney fees award on a party’s refusal to participate in ADR.
Some attorneys (including me) advise associations and homeowners – in preparation and serving the Request for Resolution – to specify the type of dispute resolution process and the entity or ADR provider that the serving party desires (preferring mediation). With this approach, there is less of an opportunity for argument over processes. Certainly, the parties could get into a dispute if the suggested process is not acceptable to the other party, and it is possible they could consume 90 days fighting over a process. However, in the majority of the cases, if the other party is amenable to ADR – or is not really but wants to satisfy the statute and pass judicial scrutiny unscathed – the strategy will work and the matter will be directed to mediation. That is the best forum in my opinion for creative resolution and long-lasting agreements among neighbors and the board.
As for choosing an ADR process, mediation involving the use of a trained neutral, a facilitator, is (in my opinion) the better forum for homeowner association, neighborhood and family disputes. It tends to better preserve ongoing relationships, gives the parties more control to formulate their own resolutions to the problems, and tends to cost substantially less money than arbitration (and certainly less than court). It provides a forum that is less threatening and allows the parties to release some of the emotional steam which tends to create the real barriers to settlement. There is much more room for blowing off steam, calming the parties, and brainstorming in the mediation setting (which equates to getting to “tell the story” which is important to individuals) than would occur in an arbitration or court setting. Since mediation is commonly “interest based” as much as or more than fact or issue based, the parties’ interests are better served. Many of the decisions of a board seem to some owners to be subjective and so understanding the interests becomes critically important – and vice versa. To be fair, there are some disputes that are better suited to arbitration or court but most would be better served in mediation with a good mediator (or at least one or more attorneys trained as a mediator who can help balance out or resolve any process issues that might arise).
For an example of some issue that might be better suited to arbitration, a board of directors might not want to make the final decision but rather submit the dispute to a hearing officer and let them decide. Many mediators, myself included, are very distrustful of arbitration as a rule, because an arbitrator can make an awful decision (for any or all of the parties) or a mistake by misunderstanding or ignoring important facts and the decision is essentially irreversible because of existing case law.
As for choosing a specific process or provider, there are many options. Parties have long been able to engage the services of arbitrators or mediators through private providers such as J.A.M.S. (Judicial Arbitration and Mediation Services) and AAA (American Arbitration Association). These services have high training standards for the mediators and arbitrators they provide (using their own training programs) but they are very expensive. And, my own experience in training for mediation years ago at Pepperdine was that the “judge mediators” tend to have trouble letting the parties participate in figuring out what the solution should be. In other words, judges are more inclined to impose a solution and that tends to not have the long term satisfaction aspect of a facilitated agreement among the parties. For less expensive processes, all local Bar Associations keep lists of low cost ADR programs or providers with identified expertise. A portion of all litigation filing fees is set aside and given to low cost mediation services because of the Dispute Resolution Program Act. There is a list of these lower cost services by County available on the California Department of Consumer Affairs webpage found at the following link: http://www.dca.ca.gov/consumer/mediation_programs.shtml. And, of course, there are independent providers. Just be sure to get someone experienced in homeowner association disputes. Real estate (or family law or probate) mediators don’t usually have the right kind of experience (in my opinion). Mediation training and association expertise comes in very handy when advocating for a “party” with multiple participants that may not be perfectly aligned in their opinions or temperaments, such as an HOA board of directors.
Mediation is evolving as a preferable choice in many types of cases. It’s the forum most likely to offer the disputants the chance to tell their story and [really] be heard and acknowledged. And again, it offers the most creative and flexible forum for the parties.
So remember – before you issue a declaration of war – you have a choice!
Article by Beth A. Grimm, CID Attorney, ECHO East Bay Resource Panel Chair, member of ECHO Legal Panel, ECHO Volunteer of the Year in 2011. See helpful and informative links to her books, blogs, resources, articles, FYIs, free E-Newsletter, and many publications at :www.californiacondoguru.com.