Arbitration and Mediation for Cooperatives and Condominiums

Co-Op, Condo & Real Estate Advisor

PUBLISHED ON: November 10, 2020

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Years ago, the president of a co-op client complained to my former boss about a lawsuit the client was
engaged in, especially the length of time involved, the expense, and the stress felt by board members. My boss advised that the client should get used to litigation, as it had become part of doing business
as a co-op.
While it is still part of doing business, co-op disputes need not be determined by litigation alone.
(While referring only to co-ops, this article also applies to condos.) Arbitration and mediation are
useful tools that can resolve disputes and reduce the time involved, the cost and the stress.

I’ve represented parties in arbitrations and mediations, and have been an arbitrator in approximately 30 fee dispute arbitration hearings as part of the New York State Fee Dispute Resolution Program. It’s undisputed that the ultimate decision in a dispute is reached much more quickly through arbitration than through litigation. Also, mediation is a useful tool for resolving a dispute as long as the parties treat it as a settlement tool and not a means to simply air their grievances. 

Arbitration is in effect “litigation light.” Both litigation and arbitration entail a neutral third party (the judge or arbitrator) reviewing and evaluating evidence presented by the disputants for the purpose of determining which party is right and which is wrong, and thus who is the winner and who is the loser. Arbitration, however, is a more streamlined and user friendly process. Mediation, on the other hand, is an entirely different dispute resolution mechanism. In mediation the neutral third party (mediator) reviews and evaluates evidence presented by the disputants, not for the purpose of determining who is right and wrong and hence who is the winner and loser, but rather to discern areas of common ground between them that might comprise for a negotiated resolution. The mediator their special training to forge a consensus the disputants around the common perceived in the course of evaluating and have that consensus reduced to agreement, whose terms are strictly According to numerous surveys about attempts at mediation result in such agreement between the disputants.

Mediation is a relatively speedy process, oftencomprising only one or two days of hearings. The parties agree beforehand on who the mediator will be, and typically provide party statements to them prior to the mediation. The statements should state all relevant facts and state the parties’ positions. The parties understand that they are not obligated to settle merely because they’ve selected a mediator, submitted party statements, and appeared for the mediation, often with counsel. Nevertheless, the parties should make a good faith effort at the mediation to try to settle the dispute. Mediation is not appropriate for every dispute. Where, prior to the mediation, one party offered $25,000 and the other party demanded $500,000, the parties shouldn’t engage in mediation if there is no willingness to increase the offer and reduce the demand. Showing up simply to rigidly adhere to prior positions and attack the other party renders mediation pointless. The mediator normally begins the mediation by speaking with both parties in one room, then splits the parties up into separate rooms and shuttles between them, passing on comments from the opposing parties. The mediator can conduct the mediation in one of two ways: either passively advising the parties of changing offers and demands, or by being proactive and suggesting monetary sums that they believe will result in a settlement. Even if unsuccessful, the mediation fleshes out the issues should the parties later pursue arbitration or litigation.

When chosen appropriately and executed well, arbitration offers these advantages over litigation.

Speedy Determination
A determination is more speedily attained through arbitration than through litigation. A litigation typically involves the drafting of pleadings, multiple court conferences, written discovery (interrogatories, document demands, notice to admit), depositions, preparing witnesses for depositions, discovery motions, a dispositive motion, and, possibly, a trial. If there is a trial, the parties may choose a jury trial, and additional time must be spent picking a jury and preparing jury instructions. A judgment is often appealed. A state court case may take two to four years. In an arbitration, after the forum and arbitrator are agreed upon, the arbitrator will usually request party statements and discuss the scope of the arbitration. Although the parties may request discovery, the arbitrator will encourage the parties to limit or refrain from discovery. The hearing is less formal than a trial. The arbitrator’s decision is usually the conclusion of the dispute, as it is difficult to overturn such a decision. The entire process can take less than a year.

Reduced Expense
As most of the steps taken in litigation are absent from arbitration, arbitration is less costly than litigation. Litigation costs, high even in the best case, can escalate due to discovery disputes, as such disputes often result in motions to compel, and such motions often result in additional discovery. In an action involving a cooperative, the cooperative’s adversary may not be satisfied with a deposition of a board representative, and may demand the deposition of each board member. This may lead to numerous depositions or a motion for a protective order. Arbitration avoids this. Board members, concerned when the legal fees have reached $20,000, may become downright alarmed when the fees have reached $50,000 and the lawsuit is nowhere near completion. The cost of the arbitration is a lot easier on the nerves.

Reduced Stress
Board members engaged in litigation may also endure stress from having to commit much time to the case. A board member may have to confer with counsel in preparing the pleadings, in responding to written discovery, in preparing for and testifying at a deposition, in deciding on a settlement amount for a conference, in hiring an engineer as an expert witness, and in preparing for and testifying at trial. Although the board may have discussed the lawsuit for months, it may seem that nothing substantial has happened in the case. Arbitration demands less of the board members’ time, and they can see the light at the end of the tunnel as far as concluding the dispute.

In a lawsuit, the parties are generally stuck with the judge that the court assigned to the case, and parties are prohibited from “judge shopping.” In an arbitration, however, the parties can select the arbitrator, albeit by agreement. Not only can they select someone with expertise in the area at issue, but they can also select someone whose personality they feel comfortable with. No such freedom of selection exists in a court action.

Arbitration is a streamlined alternative to litigation, with less of an emotional and monetary cost and less of a time commitment. Mediation is a conciliation process that in the vast majority of cases results in a legally binding settlement agreement. By opting for either of these modes of dispute resolution where appropriate, board members can reasonably hope to quickly put the dispute behind them and instead focus on building and financial matters that deserve their full attention.