The Chair's Message

By Philip J. Harter
Chair - Section of Administrative
Law & Regulatory Practice

The Adolescence of Administrative ADR

Ah, adolescence. A time for exuberance; for expansion; for building on what you have seen, been taught, or even heard about; for pushing limits. A time for "good news" and "bad news," but surely overall the good far outweighs the bad. That description also seems to fit the administrative use of ADR: clearly established and growing, but in a testing phase.

First the good news. President Clinton's Executive Order on Regulatory Planning and Review (E.O. 12,866) encourages agencies to use consensual processes for developing rules and especially negotiated rulemaking. The Vice President's National Performance Review noted that the traditional model for rulemaking provides for little "buy-in" from outside the agency; encourages adversarial, uncooperative behavior on the part of private industry or others who might be affected by an agency's decisions; and routinely results in decisions leading to dissatisfaction among private parties, which frequently leads to protracted litigation. The NPR's recommendation for rectifying this problem was to "increase the use of negotiated rulemaking," and indeed, the President issued a memorandum to the heads of agencies directing that they use reg neg at least once -- probably on the theory of "try it, you'll like it." Sparked by this interest and high-level attention, a number of agencies that have not previously used reg neg have either actually used it or are at various stages of starting the process.

A reg neg committee at OSHA, for example, just reached an informal agreement (the formal agreement is to await completion of the preamble) on a new rule governing the erection of steel structures; this occupation is by far the most hazardous one OSHA regulates and this particular standard had been in controversy for virtually the entirety of OSHA's existence. Clearly reg neg demonstrated that it can be used to craft a powerful regulation even in the face of extreme polarization. Since the enactment of the Negotiated Rulemaking Act in 1990, reg neg has clearly become an accepted, mainstream way for agencies to develop rules.

There is also good news on the adjudication front. During the hearings leading up to passage of the Administrative Dispute Resolution Act, the Department of Justice argued that it would be unconstitutional for the United States Government to use binding arbitration. The general argument was that only officers of the United States can bind the United States, and an arbitrator would generally not be appointed by the requisite means. The ABA testified in support of the arbitration provisions and disagreed with Justice's theory. To reach closure, a compromise was fashioned in which an agency could agree to binding arbitration but the award would not become final for thirty days and anytime during that time the head of the agency -- a non-delegable personal duty -- could opt out of the award and thereby nullify it; in that case, the agency would pay attorney's fees, and to reduce the appearance of a trial counsel seeking two bites at the apple, separation of functions would apply to the agency head's review. As a result of the opt-out provision, private parties simply would not use the arbitration provisions of the Act, and the mere existence of the provision seemed to taint the use of ADR under that Act -- it was as if there were a hole in the ice and everyone knew you had to stay clear of the danger zone, generally far away.

But, the Act encouraged agencies to use ADR to resolve issues that would otherwise go to adjudication. The NPR likewise recommended that agencies "increase the use of alternative means of dispute resolution." Last fall, Walter Dellinger, Assistant Attorney General for the Office of Legal Counsel, issued a formal opinion upholding the constitutionality of the government's use of binding arbitration, thus removing a major impediment to the full scale use of ADR by agencies. Although the Act expired last fall, both Houses have held hearings on its permanent reauthorization, the Administration recently supported the bills, and it seems highly likely that this will happen shortly. The final version will probably authorize binding arbitration; clarify the confidentiality provision (the Act originally provided strong confidentiality for communications between a party and a mediator, but also provided that the statute should not be regarded as a (b)(3) statute under FOIA, thereby casting doubts on the ability of a mediator employed by the Federal Government to actually furnish the confidentiality required by the Act itself); and make miscellaneous other changes.

Very recently, the President issued an Executive Order on "Civil Justice Reform." [E.O. 12,988; 61 Fed. Reg. 4729 (2/7/96)] Although primarily aimed at litigation in Federal Courts, the Order also called upon agencies to use ADR when appropriate. Since, in the view of many agencies, Justice has not been particularly hospitable to the use of ADR, this would seem to add active encouragement to its use in appropriate circumstances. Time will tell, but already at least one agency is seriously considering a process in which private parties would first use private ADR to resolve their controversy with an appeal to the agency for resolution if the parties are not satisfied with the results. This would be a form of agency-annexed ADR that is similar to that employed by many courts and appears to be in keeping with the new Order. Other agencies have used ADR for a variety of issues, although it clearly has not become as mainstream as has reg neg. EPA's Superfund program has used it successfully in a variety of contexts.

Thus, there is much good news to report. Now for the not so good.

Although the Administration has clearly supported the use of reg neg in a variety of contexts, it has also decreed that agencies must cut down on the number of advisory committees, and it made no exception for those committees established to conduct reg negs. Several agencies have been turned down because the agency's quota was used up. Agencies are understandably reluctant to go though the convening process and start towards a full bore reg neg only to get rebuffed by the White House itself. Such a contradiction surely dilutes the support for the process. And, the inhibitions of having to charter an advisory committee are why the ABA testified on the reauthorization of the ADR Act that committees established under it (such as a Superfund case bringing together representatives of all the parties in interest to work out the issues; or, indeed, a reg neg itself) should not have to be chartered; they would still have to comply with the substantive requirements, but not the "mother-may-I" duty to charter.

On the agency front, some agencies have taken short cuts in convening or attempted to unduly control a consensual process as opposed to permitting the committee itself to develop its procedures and ethos. This has a major bearing on whether the committee will actually fulfill its promise. In addition, the term "consensus" has become popular but also somewhat perverted -- begging the fairly critical matter of consensus among whom as to what. In some instances, the agency will dub a process as in search of consensus, but making sure that the agency itself reserves unilateral action at the end; that is, the consensus is a recommendation to the agency, as opposed to the agency's entering into an agreement. Again, this can have a major bearing on the worth of the output.

On the adjudication side, the Department of Justice's position remains ambiguous. It testified before the Senate that whereas it now viewed arbitration as constitutionally permissible, it still preferred keeping the override provision of the original legislation. That view changed before the House and it then supported removing the opt-out provision. Other actions give rise to a similar ambiguity. Thus, it would help if Justice were to take the recent Executive Order and clearly encourage the use of ADR when it would be appropriate to use it. Once that is done, private parties and agencies alike will feel more comfortable using ADR to resolve issues that would otherwise be headed for litigation.