ADR: What it is and why it Matters (Oregon Law)

ADR: What it is and why it Matters (Oregon Law)

February 25th, 2012

Author:  Ryan D. Harris
It’s inevitable... If you are board member, at some point during your tenure your association will be embroiled in a heated conflict with someone. Why is it inevitable?—Associations are designed to tell people what they can and cannot do. They’re inherently bossy, but to a good end, promoting the peace and aesthetics of your community, and hopefully—in the process—protecting the property values within your community as well.

Unfortunately, each association has at least one owner that doesn’t see eye to eye with the board, or who did not read the declaration and bylaws before purchasing their home. As board members, you are charged with resolving any conflicts with owners in a way that is in the best interests of the association and all owners at large. Sometimes, in a sit-down meeting, with open dialogue, the board and the opposite side will discover their disagreements are actually quite narrow, and the conflict can be easily smoothed over.  On other occasions, however, the conflict leads to drawn-out and expensive litigation, where the attorney fees alone can greatly exceed the dollar value of the dispute.

There is a third way to resolve disputes, known as “alternative dispute resolution” (commonly abbreviated “ADR”). ADR provides for the resolution of a dispute by a disinterested third party in a manner short of going to trial before a judge or jury. Parties usually prefer ADR to a jury trial, because it is informal and usually cheaper. ADR is so common that some jurists are concerned that jury trials are disappearing.

Part of the reason ADR is becoming so routine is [though in some cases it is voluntary], for many association disputes, it is actually mandatory. Frequently, the association’s declaration requires the party wishing to initiate litigation offer to use ADR before filing a lawsuit. Similarly, the Oregon Condominium Act and the Oregon Planned Community Act both require that—when an owner and association have an adversarial relationship—the party wishing to initiate litigation must first offer to use a dispute resolution program. If 10 days after the offer is made, the adverse party has not responded to the offer, the initiating party is free to file the lawsuit (ORS 100.405(11); ORS 94.630(4)). If the filing party fails to offer this option when it is required, the non-filing party can request that the lawsuit be dismissed or abated until the parties have gone through the ADR process.

There are two common types of alternative dispute resolution: Mediation and Arbitration. While they are easy to confuse because they have similar names, in substance, they are actually quite different. Mediation is an opportunity to negotiate a settlement for a dispute. Usually the parties to the dispute gather in separate rooms in one building, and a neutral attorney (the mediator) moves between the rooms to try and settle the case. The mediator attempts to broker a deal between the parties, giving the parties a realistic evaluation of what a disinterested judge or jury will do with the case. However, at the end of the day, if the parties cannot agree to a resolution of the dispute, they can walk away; mediation is not binding.

Arbitration, in contrast, is like an informal trial to a lawyer. Lawyers for both sides will usually have the opportunity to make opening and closing statements, call witnesses to testify, and conduct cross-examination. The arbitrator acts as both the judge and jury, deciding all issues of law and fact. At the end of the presentation of evidence, the arbitrator issues a decision to resolve the dispute. Usually that decision is binding. While arbitration is usually less formal than a trial, while saving some time and expenses associated with selecting a jury, it can still be quite expensive depending on the complexity of the issues, the extent of discovery required, and the amount of money at stake. Usually arbitration is the final word in a dispute, so it should be taken seriously.

What should you, as a board member, remember about ADR? First, you should be familiar with your association’s governing documents and know what those documents require with regards to ADR. Those documents vary greatly from requiring no ADR, to requiring several different types of ADR before the association can file a lawsuit. Second, you should be familiar with the requirements of the Oregon Planned Community Act or Oregon Condominium Act (whichever applies to your association) or hire legal counsel familiar with those requirements before filing a lawsuit. Third, you should be aware of ADR programs within your community. Some cities and counties offer free ADR in hopes that small disputes can be resolved without extensive fighting or litigation. An association an owner can use these programs—usually a mediation type program—to resolve their disputes short of litigation. In some instances, the association and owners may be able to participate in these programs without hiring a lawyer. In short, your board can use ADR as a tool to protect your association’s interests and resolve disputes in a manner that is hopefully more efficient and less expensive for all parties involved.