Ethics, Effective Dialogue & Maximizing Potential for Resolution

Civil Code section 5915 gives community associations and their members a default procedure for conducting informal dispute resolution (IDR).  Legislation effective January 1, 2015, revised both this default procedure and the specific minimum criteria required for separately adopted, association-specific IDR procedures.  (Civil Code section 5910)  These criteria include the requirement that IDR agreements must be in writing and signed by both parties, and the provision that a member and an association may be be assisted by an attorney or another person in explaining their position at their own cost.

The default IDR procedure of section 5915 can be useful for some associations and their members.  However, others may find that by instead adopting association-specific, reasonable and legally compliant IDR procedures, several important objectives can be accomplished.  For example, such procedures can remind participants represented by counsel of their attorneys’ existing ethical responsibilities and minimize rescheduling headaches (and their resultant costs) due to the presence of counsel, as well as facilitate more open dialogue with greater potential for prompt and amicable resolution.

Attorney Ethics & Rule 2-100

Rule 2-100 of the Rules of Professional Conduct applicable to California attorneys prohibits attorney communication with a represented party, stating in relevant part that

(A) While representing a client, a member [of the State Bar of California] shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.

(B) For purposes of this rule, a “party” includes:

( 1) An officer, director, or managing agent of a corporation or association, and a partner or managing agent of a partnership; or

(2) An association member or an employee of an association, corporation, or partnership, if the subject of the communication is any act or omission of such person in connection with the matter which may be binding upon or imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization.

Although attorneys are prohibited from communicating with represented parties, non-attorneys may not be familiar with this prohibition.  As such, non-attorneys—whether community association members, directors, managers or other IDR participants—may not realize the consequences of arriving to an IDR meeting accompanied by an attorney, without having informed the other party in advance of their intent to do so.

Consider this example.  Suppose one of the parties arrives at an IDR meeting with an attorney.  Now suppose the other party has counsel, but didn’t ask him or her to attend.  The attorney who arrives at the IDR is now prohibited by Rule 2-100 from communicating with the represented party whose attorney is not present, unless the absent attorney’s consent is obtained.  Obtaining that consent would, in most cases, be unlikely.  Now, after the parties arranged to attend the IDR meeting at the scheduled time and place (which may be a rented facility, resulting in cost to the association), an attorney did the same (resulting in cost to that attorney’s client), the meeting has to be rescheduled.  The ensuing delay is likely to cause the parties greater frustration and get the dispute resolution process off to a poor start.

Based upon the above example alone, a reasonable provision for a community association to include in its separate IDR policy would be a requirement for advance notice if a party plans to bring an attorney, so the other party can also have an attorney present if desired.  Such a requirement would, as noted above, remind participants of the ethical responsibilities of attorneys and also minimize the headaches of rescheduling, not to mention the accompanying costs—both monetary and non-monetary (e.g., getting what is meant to be a problem-solving process started down a negative, obstructive path).  In the same vein, for those associations relying upon the statutory default procedure, it would still be reasonable for a party to request advance notice of the expected presence of counsel and to reschedule the meeting if counsel arrives without notice having been given.  It would also be helpful for association correspondence confirming the date, time and location of an IDR meeting to include a copy of the IDR policy for easy reference.

Effective Dialogue: Comfort of Confidentiality

Another provision which associations might consider including in their own IDR procedures is a confidentiality clause ensuring that statements made by a party during an IDR meeting may not be used against that party.  This type of confidentiality clause is akin to the “mediation privilege” afforded to participants in the more formal process of alternative dispute resolution.  The purpose of mediation is to provide a neutral and confidential forum for each side to openly discuss their respective positions, and have those discussions/communications protected by the mediation privilege.  (Evidence Code section 1119)

Like mediation, IDR is meant to provide a fair and reasonable and expeditious procedure for resolving disputes, with the Legislature even contemplating that associations might involve neutral third parties, including low-cost mediation programs.  (Civil Code section 5905(a) and (b))  It follows that extension of the “mediation privilege” afforded to participants in actual “mediation” would be a reasonable and legally supported addition to an association’s own IDR policy, even if not a part of the statutory default procedure.  The default procedure is just that—a default—and is subject to reasonable modification as an operating rule consistent with an association’s governing documents and California law.

Maximizing Potential for Resolution

The statutory default IDR procedure provides that “[t]he board shall designate a director to meet and confer.”  (Civil Code section 5915(b)(3), emphasis added)  The default procedure now also provides that “[t]he parties may be assisted by an attorney or another person at their own cost when conferring,” so “another person” could well be the community association manager.  (Civil Code section 5915(b)(4), emphasis added)  Associations may nevertheless wish to consider having their separate IDR policy specify that one or more directors, as well as the community association manager (if any), are entitled to participate—in addition to “another person” that might be helpful to explaining the association’s position.

By allowing for attendance by more than one director, the likelihood of speedy resolution may increase, particularly if potentially successful ideas for compromise generated at the IDR meeting were not contemplated by the board when it originally outlined the scope of authority for a sole director participant.  While such comprises may subsequently be ratified by the board—so long as they are not in conflict with law or the association’s governing documents—an individual director might be less inclined to seek resolution by means of a compromise which was not within his or her outlined scope of authority and which would require going back to the board for approval.  By allowing for community association manager attendance in addition to “another person,” the parties have the opportunity to engage the key people who are most informed of the circumstances at an early stage of dispute resolution.  By doing so, more fruitful discussion may occur, thereby maximizing the potential for a result that is agreeable to all parties.

Conclusion

While the default IDR procedure of section 5915 can provide useful structure for those associations who choose to rely upon it, the adoption of separate association-specific, reasonable and legally compliant IDR procedures, has the potential to help associations—and their members—effectuate speedy, less costly resolution of disputes.  If an association wishes to adopt its own IDR procedure rather than rely upon the statutory default, it may only do so in accordance with the operating rule adoption procedures of Civil Code section 4360, including providing a 28-day member notice and comment period prior to adoption.