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TO THE HIGH COSTS OF LITIGATION

COMMENTARY ....................... Page 65 U.S. Magistrate Judge Wayne D. Brazil of Oakland, Calif., believes that providing alternative dispute resolution is an essential function of the nation’s courts. In his article, Brazil describes how ADR enhances the U.S. legal system.

ENMRONMENTAL ADR ........... Page 65 Mediation works for compliance, remediation, penalty and regulatory cases, according to Chief Adminis- trative Law Judge Daniel E. Louis of the New York Department of Environmental Conservation’s hearings and mediation unit. He describes how mediating complex cases involving state agencies can avoid protracted proceedings.

ADR TECHNIQUES.................. Page 66 In the second of two parts, Thomas HR Denver, of San Jose, Calif.’s Hoge, Fenton, Jones & Appel Inc., discusses the steps to take during negotiations and ADR sessions to ensure a comprehensive settlement.

INTERNATIONAL ADR ............ Page 67 Experts from the Washington, D.C., law firm Russian-Ukrainian Legal Group P.A., and the Center for Dispute Settlement are studying the prospects for mediation in Russian and Ukraine. Ethan 5. Burger, Irina Paliashvili, and Michael Lewis describe current practices and where opportunities may lie.

GOVERNMENT ADR ................ Page 70 A $30 million federal ADR services contract goes up for bids this month. Also in ADR Briefs are details about a new ADR guide for accountants.

DEPARTMENTS ADR Briefs .......................... Page 70 Cartoon by Chase ................ Page 70 CPR News ........................... Page 71 Letter to the Editor ............. Page 72

CPR I N S T I T U T E FOR DISPUTE RESOLUTION WWW.CPRADR.ORG VOL. 16, NO. 5 MAY 1 9 9 8

Why Should Courts Offer Nonbinding ADR Services? By Wayne D. Brazil It is important, at the outset, to dispel the

fear that to advocate that public courts play a panel ofspeakers considered the role ofADR in Providing ADR is to

advocate that government oc- in the federal courts. addressing-

the A B ~ ~ annual meeting last A ~ ~ ~ ~ ~ , a

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the questions “Where Are We? And Where Do We Go From Here?” While preparing for this panel, I realized that before we could think reliably about ADR’s future in federal courts, we needed to have a clearer idea about why courts should offer

cupy this field-that the hid- den agenda is to have the courts monopolize or at least domi- nate the provision of ADR ser- vices. Any such fear is entirely misplaced.

There is no chance that the government will occupy

’ this field, which is way too for big government- The number

ADR services at all. Toward that ’ end, I developed the thoughts that follow- not as anything approaching a definitive state- ment on the subject, but more in the nature of a first foray into a topic that deserves ex- tensive and thoughtful debate.

of disputes for which ADR services could be useful always the limited resources of public agencies, es-

(continued on page 73)

exceed, by huge

How ADR Can Enhance Environmental Negotiations By Daniel E. Louis This article, presented from a me spective, is written for environ- mental practitioners who negotiate environmental compli- ance, remediation, penalty and regulatory issues. It offers several suggestions to enhance tradi- tional environmental negotia- tions that are routinely conducted by a regulatory agency staff.

outcomes if negotiations fail, (2) mediated negotiations can increase the chances for agree- iation Der-

Department of Environmental Or DEC.

Alternative dispute resolution continues to gain a foothold in government as adminis- trators and other leaders learn its benefits.

(continued on page 77)

Mediators can facilitate environmental ne- gotiations that traditionally involve only the disputants. The key points here, in the con- text of a flexible environmental mediation model, are that (1) disputants want certainty in the items being negotiated and certainty of

How ADR Can Enhance Environmental Negotiations (continued from front page)

But benefits such as reducing time or costs, or promoting a less contentious environment, are secondary to disputants who strive for certainty or predictability in and outside of the negotiations. Like prudent business judg- ments that must be based upon predictable outcomes, mutual settlement ofenvironmen- tal disputes often turns on degrees of risk that would occur if negotiations fail.

Careful evaluation of risks and certainties therefore is critical in a negotiation. These assessments often are better completed with the assistance of expert analysts, attorneys, corporate officers, key agency personnel- and a mediator. The evaluation of certainty will also help negotiators realistically assess their best alternative to a negotiated agree- ment.

The certainty provided by an agreement one can live with can outweigh the uncer- tainty associated with the continuing cost of litigation resources, potentially unfavorable court decisions, bad press, or other unwel- come outcomes that are not in a party's best interests. While the negotiated result may not

mediators are agents of reality, they can help negotiators focus and harness their motiva- tions based upon each party's risk assessment. The mediator can help explore areas of mu- tual gain. The result might just be a better deal than all disputants thought possible. Why is this so? Because mediators can create a structure and process that encourages prob- lem solving.

COMPLEXITY AND POLICY Environmental cases often are complex and not easily resolved without continuing liti- gation or consensual agreement. These cases may involve resource allocation issues such as cost allocation matters in hazardous sub- stance clean up, and pollutant allocation.

Such cases are technically and legally corn- plex, have serious environmental concerns and contain public policy considerations. Not co- incidentally, these projects involve a panoply ofcompetitive factors such as significant costs, either for remediation, mitigation, or pollu- tion control retrofits; facility operations and process issues; regulatory reporting mecha- nisms and protocol requirements; quality as-

surance issues; land-use dis-

Company and regulatory negotiators can agree on a

putes; and a host of others. These may not

be strictly en- forcement cases comfortable process to address where the regu- latory agency seeks to penalize an alleged

and business problems. wrongdoer. Such

yet unknown environmental

be one that a party likes, it will be the best one available under the circumstances and issues in contention. The agreement also can establish communication pathways to con- struct or continue long-term relationships between the parties.

In the context of a process striving for mutual certainty, rational parties will choose more certainty over less certainty to reduce risk. The degrees of risk can therefore be highly motivational to the negotiators. Since

Daniel E. Louis is chief administrative Law judge i n the New York State Department of Environmental Conservation's Office of Hearings and Mediation Ser- vices. The opinions expressed are based on the author's experience and study.

complex cases might be initial

permit (developmental) actions, renewals or modifications. New York's emphasis on busi- ness expansion and development encourages negotiators to arrive amicably at relative as- surances of certainty and common ground. At the core ofthe negotiation strategy are op- portunities for the government to acquire greater environmental (and economic) gains than through existing regulatory processes that reflect permit application submittal, agency review and defend strategies. The gain for business and others is greater certainty and predictability in outcomes and flexibil- ity that can influence business and regula- tory judgments. These overshadow negotiations that focus on simpler environ-

mental disputes that extract penalties and site remediation.

An effective environmental mediation will contain relative degrees of mutual trust. This is necessary in all mediations but may be more critical in a mutual gains negotiations model. Participants must be willing to risk revealing weaknesses that can be exploited by another party. Disputants need to avoid exploitation to garner support and trust to reach and agree on tough problems. Bargaining by exploita- tion usually results in an impasse or aban- donment of negotiations as parties feel they were abused.

The regulatory arm of government is a powerful player in negotiations because it has the power to create value, in addition to its already omnipotent systemic authority. While the creation of value can be constrained by regulatory and statutory limits or by agency policy or guidance, a great deal of agency flex- ibility can exist depending on the issue. Such governmental flexibility in environmental matters, for example, may be in the form of judgments and opinions by agency experts. Where the facts of the case do not fall into a black or white regulatory standard, opinions and judgments provide maneuvering room for agreements that can be explored by all parties.

Mediators help the disputants' ability to create value. The sum of this exercise is to add a larger dimension to the negotiation. By adding things of value, one can bargain for potentially greater environmental gains. At the same time, private concerns associated with business flexibility, such as establishing protocols, testing and reporting cycles, etc., may be accommodated. In addition, business ventures can avoid delay through better fore- casting and assurance building. Thoughtfully constructed, these integrated connections tie the negotiation together and create an inter- dependency between the parties that forges cooperative long-term relationships.

Moreover, mediators help establish a corn- fortable framework within which to address such problems. In this comfort zone, corn- pany perceptions about a monolithic or in- flexible agency can be dispelled. Company and regulatory negotiators can agree on a comfortable management process to address yet unknown environmental and business problems or project specific technical issues. The cost benefit or value engineering aspects

(continued on following page)

How ADR Can Enhance Environmental Negotiations (continued from previous page) can be explored and developed more easily within the management process. The mutu- ally agreed-upon management process helps loosen the confining regulatory and company culture that can bind negotiators and stymie negotiations. The process itself brings more certainty and predictability to the negotia- tions.

A NATURAL OUTGROWTH Most mediator-assisted negotiations have met with success in DEC since 1996, when the Office of Hearings and Mediation Services, or OHMS, initiated its program. Mediators are OHMS administrative law judges, but selected DEC staff also are trained in mediation. OHMS is not part ofthe DEC st& and serves an independent and impartial judging function.

The ALJs’ neutral mediation function is a natural outgrowth of

diation, facilitation, and other ADR meth- ods to the ALJs and selected DEC staff. New ways of approaching negotiations, for ex- ample, such as neutral evaluation of facts and liabilities, have resulted in greater opportu- nities for parties to reconsider their best al- ternative to a negotiated agreement or consider a greater range of options to ease into settlement. While the OHMS track record in mediating environmental matters is impressive, the most difficult negotiations to be mediated, with a few exceptions, have yet to be docketed before OHMS.

One notion encouraging mediation is the goal of actively improving environmen- tal compliance and quality in a way that does not divert resources into litigation.

Litigation costs can b e

In environmental permit contexts there is a broader range of parties and considerations. As DEC experience and ADR success grow, the office expects more disputes being con- sidered for a mediator-assisted negotiation.

PARTY CONTROL OHMS counsels disputants about various case intake restrictions once a case is brought to the office’s attention. OHMS advises the parties, for example, that mediation is con- sensual; that is, all disputants must agree to its use. They are informed that they create the terms of the agreement, not the media- tor. Disputants may seek mediation on small, discrete areas of a larger dispute. Since the parties and not the mediator decide out-

comes, the parties do not give up but retain the power to decide the important issues themselves.

A prompt mediation response almost always is one of the parties’ - top goal. In enforcement cases, me- diation can take place within days better s p e n t o n opportunit ies their independent role. To advance

mediated negotiation opportuni-

ment and are prepared simply for the purpose of evaluating process.

One mediation not reported but of recent vintage was the mediated negotiation between New York state and all New York power gen- erators, to reduce emissions of smog-causing pollutants fairly and equitably, improve air quality and protect residents’ health. The me- diation allocated oxides of nitrogen between 27 New York electrical generating companies. In the mediation, OHMS was reflecting Gov. George Pataki’s Executive Order 20, which encourages parties to state regulatory processes to settle disputes through negotiation, not ex- pensive and time-consuming confrontation. This is one of many cases that have resulted in litigation cost savings.

Before 1996, any DECADRaccomplish- ments were attributable to ALJs’ efforts and the willingness of the disputing parties. ALJs sometimes found a need to assist in defining permit conditions or otherwise help the par- ties narrow or resolve disputes.

The current DEC ADR program builds upon this institutional expertise and expands the notion of using non-litigious techniques to settle environmental conflicts. The DEC provides training in new skills such as me-

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ties, the ofice has reported generic or weeks of a request. A similarly

lar mediation efforts. These do not permit condition negotiations. In contravene any confidential agree- environmental protection. environmental permits that trigger

process statements about particu- t h a t more directly promote quick response also can occur in

a public hearing, the timing of me-

The argument is that litigation costs could be better spent on opportunities that more directly promote environmental protec- tion. Private gains could be in the form of transactional cost avoidance, reporting and protocol flexibility, greater certainty on delay or timeliness issues, and greater pre- dictability.

Not all environmental disputes are suit- able for mediation, however. At DEC, “unmediatable” disputes occurred in cases that involve precedent, novel issues of fact or law, and matters that, for policy reasons should be adjudicated or litigated rather than negotiated. These were cases, for example, where deterrent value is at a premium or the issues are unsettled.

Selecting the appropriate case involves the judgment of key DEC staff. In the enforce- ment context, the DEC regional directors or attorneys decide which enforcement cases are best suited for ADR given the above consid- erations. They act as gatekeepers to ensure, from their regional perspective, that the right case is forwarded for ADR.

diation is necessarily longer, invok- ing elements of multiparty negotiations.

Through this intake process the parties are better able to define exactly what it is they seek and what ADR method is best suited to the dispute. All of this is done in consulta- tion with the Chief ALJ, the author of this article.

ADR has a definite place in environmen- tal matters that frequently arise before the DEC. Depending on the disputants’ inter- ests, motivations, and policy questions that may need consideration, ADR should be con- sidered, in particular when traditional unas- sisted negotiations would not likely produce an agreement. Complex environmental dis- putes may be mediated to give flexibility to the negotiation strategy. In the right environ- mental case, both the public interest and the private interest can be accommodated through mediator-assisted negotiations. u A

Further infirmation about the DEC me- diation program is availablt at the DEC web site <http://www.dec.state. ny. us/ ohms> or by calling (518) 457-3468.