Standing Committee Symposium on The Role of Private Institutions in Public Environmental Decisionmaking: The Special Master as Environmental Mediator

Lawrence Susskind

Lawrence Susskind is Executive Director of the Program on Negotiation at Harvard Law School in Cambridge, Massachusetts and Professor of Urban Studies and Planning at MIT.

[17 ELR 10239]

LAWRENCE SUSSKIND: I would like to present a framework that may help to answer the question, "What is going on out there?" It may also help to gather together some of these disparate stories, like the Environmental Protection Agency's (EPA's) negotiated rulemaking, Clean Sites's coalescing efforts at Superfund¹ sites, efforts to mediate land use and facility siting disputes, and statewide policy dialogues.

Imagine you were drawing a chart. Across the top put three columns: legislative, administrative and judicial. Down the side put three rows: local, state and national. What is going on, in my view, is an effort to fill in those nine boxes with experimental test results. Through various demonstrations and pilot projects we are attempting to determine whether it is possible to supplement (not replace) conventional dispute resolution procedures with more consensual approaches to dealing with differences. These experiments focus on public disputes over the allocation of fixed resources, the setting of standards, and the setting of policy priorities.

I am going to talk a little bit about the results that go in the box in the middle, at the far end: state/judicial. Before I do, though, it may be worth noting that there is, in fact, evidence to put in all nine boxes suggesting that we can indeed supplement our conventional legislative, administrative and judicial dispute resolution processes effectively. The key to success is face-to-face, ad hoc negotiation. The experimental results available thus far indicate that consensual settlements can enhance the fairness, efficiency, stability and wisdom of the outcomes achieved.

The story that I am going to tell you is about serving as a special master. Unlike some of my colleagues who have served in similar roles, I did not agree to function as an arbitrator, fact finder, or advisor to the court.

I was asked by the Superior Court to help mediate a dispute that had been in litigation for almost fourteen years.

The case arose in Camden County, New Jersey. Camden County has 37 communities. One of them is the city of Camden, and the other 36 range from well-to-do suburban communities, like Cherry Hill, to blue collar working class communities (the favorite word of the demographers is "lunch bucket" communities), all the way to tiny rural communities. Indeed, there is one community in Camden County, called Tavistock, that has only nine residents. It is basically a golf course. The people wanted certain municipal rights, so they incorporated.

Some time back, the U.S. EPA and the State Department of Environmental Policy declared that waste treatment facilities in this county were inadequate. Clean it up, was the order. The state legislature created a regional authority and declared Camden County to be a regional sewerage district. The Camden County Municipal Utility Authority (CCMUA), under New Jersey law, was the agency responsible for implementing the cleanup.

A number of the small communities in Camden County said: "We don't want to be part of a regional district and pay for an expensive regional system. We don't have sewage problems, we have septic systems that work fine. Don't put us in a big system."

The city of Camden said: "You can put us in a regional system if you want, but we're broke. We can't pay for anything, so whatever you want to do, go ahead. Don't expect any money, though, from the city of Camden."

At this point, a well-to-do suburban community said: "We see what's happening. You're making this into a regional problem because the City of Camden is too poor to pay its bills and the little communities say it's not their problem. Well, no way, we're not accepting that kind of disproportionate financial burden, it's not fair."

Thereupon, everybody sued everybody else. The communities got angrier and angrier at the regional authority, the CCMUA, because the first thing it did, before it had signed service agreements, was to build itself a very nice building. In Camden County, they call it the Taj Mahal. It created substantial borrowing because the CCMUA had no income (since no fees were being paid). Before they had a regional cleanup plan, they had an expensive building.

The city of Camden is in tough shape financially. It is one of the poorest cities in the eastern part of the United States. If you have ever been to the South Bronx, you may think that section of New York City has difficulties. Camden is a whole city, with similar economic and abandonment problems.

There is one big employer in Camden — Campbell's Soup Company. The Campbell's Soup Company has threatened to leave many times. Campbell's Soup pumps its effluent directly into the sewer system with no pre-treatment at all. That creates a problem for Camden. But Campbell's Soup says, "If you make us pre-treat, we'll leave." So the city of Camden says: "Okay."

Parenthetically, you may wonder how such a poor city could sustain 14 years of high-priced litigation. The answer, it seems, is that the city of Camden had financial help from Campbell's Soup.

It is interesting to note that had the CCMUA put together a regional plan fifteen years ago, and obtained the EPA and state matching money that was then available, the very system they are discussing now would have been built for an amount equal to the current debt accumulated by the regional authority. They could have built the system for $75 million. Right now they have a debt of $77 million.

Judge Paul Lowengrub is a thoughtful and extremely intelligent person. He decided to impose a county-wide moratorium on all future sewer hookups, in essence, halting all development in the county until the parties agreed on a detailed cleanup plan.

The Homebuilders Association was extremely upset. They showed up at his door and said: "You can't impose a moratorium. There is phenomenal growth going on here. Sure, we have to do something about this sewage cleanup problem, but you can't just stop all development."

The Judge stood firm.

Every time Judge Lowengrub sends out any information about this case, he turns to a service list with the names of 105 attorneys on it. The list includes attorneys for each of the 37 communities, the homebuilders, the state, EPA, and others.

When Judge Lowengrub imposed the moratorium, he offered the parties some extra help. "Here is this Daniel I am [17 ELR 10240] throwing into your lion's den. He is a special master/mediator. He will help you work something out."

There is a total of one line in the New Jersey Code about the role and responsibilities of special masters. It states that special masters must be appointed with the approval of the Chief Justice and they must report on a regular basis to the Judge for whom they work. That's it.

Over the decades, there has not been much reliance on special masters or deputy judges in New Jersey. This is true in large part because it was a device in earlier times that allowed judges to channel lots of work to their friends. Masters did not have to meet the same standards as judges or go through the same review process. There remains a residual skittishness about using special masters, whatever the reason, because historically it has been a somewhat suspect practice.

Despite the sparse treatment of special masters in the code, and despite the lack of recent experience with them, Judge Lowengrub thought I might help.

When the Judge asked me to try to get an agreement, I reminded myself of the first thing a mediator should do in any kind of complex dispute. I asked to meet privately with all the parties to hear their concerns.

I met with all the municipalities as well as others in a total of sixty separate meetings.

A number of things were revealed during the course of these meetings. One point of agreement was that nobody trusted the CCMUA — the regional authority. They were distressed by the fact that the CCMUA had not succeeded in producing a detailed waste treatment plan. While draft plans existed and EPA had committed certain matching funds along with the state, the CCMUA had never been able to get the communities to sign service agreements.

Camden County is a Democratic stronghold. The State of New Jersey currently has a Republican governor. Who is the Congressman from Camden County? Representative Florio. Representative Florio lost to Governor Keane in the last gubernatorial election. So the State (executive branch) was not inclined to do any special favors for Camden County. Camden County, for its part, even with a Congressman as well placed as Representative Florio, is not able to get a grant to cover two-thirds of the cost of a system which is now estimated to cost not $75 million, but $600 million.

I met with the parties. I learned their interests. Now what was I to do?

The parties had very different expectations about what it was going to cost them if the system were built. When I asked them to estimate their costs, some guessed a thousand dollars per household per year for the next 30 years. Others estimated the cost at half that. They needed a reliable forecast of costs under various sets of assumptions. They were not, however, prepared to trust estimates from the CCMUA.

I decided to bring in an independent source of technical assistance to produce these forecasts. It would have been a mistake for me to call on my colleagues at MIT to do the necessary computer modeling. I went instead to the New Jersey Institute of Technology. They have staff who know New Jersey, know the data, know how things are done in Camden County, but who have not played a role in the dispute.

We put together a forecasting model — a big spreadsheet for laying out different costs under different sets of assumptions including what would be built, how it would be priced, how long it would take, and how much it would cost to borrow money. We came up with a set of figures for each community. At last, there was forecast work in which the communities had some confidence.

The first lesson, then, is that one must talk to the participants directly and find out what their concerns are.

The second lesson is that the parties need credible technical data.

The next problem was to prevent any specific forecast from getting out until after the parties had agreed on a fair allocation formula. We needed an agreement in principle, independent of the numbers, on what was fair. On the other hand, we did not want to ask people to commit to a principle without seeing what it would mean financially.

Based on my discussions with all the parties, I drafted a set of principles that everyone might accept. To those little towns that wanted out, I said: Look, the judge has told me to assume that everybody is in for the purposes of this conversation. So even though you do not want to be in the region, if you do end up being in, what do you feel a fair principle for allocating costs would be? And they played that game.

What did I do with my draft of the principles? I used it as the basis for another set of private meetings with all the parties. I asked how each participant might improve the draft to suit their needs. In general, the response I got was: "I like these principles, but I am not committing to anything until I see the numbers those principles represent. I can't live with a fee of more than $1,000 per household [or $500 or $300, depending on who was speaking]."

Basically, the parties wanted us to do what every other regional authority in New Jersey had done, which was to take flow (the volume of waste pumped into the system) and divide by equivalent households (i.e., industrial and commercial activities are figured as a number of households). This would yield each community's percentage of the total cost.

Calculating the total cost of the system, however, was a problem. Every one had a different view about what should be built, what would be cost-effective, and the like.

With the help of the New Jersey Office of Dispute Settlement (a division of the Public Advocate's Office) I convened all of the parties again and presented a revised version of the draft principles. There were 100 people in the room. I sat in the front and tried to keep tabs on the consensus expressed. Representatives from the little towns got up and said: Regardless of the principles, we once again want to tell you that we do not want to be in the system. I said: "Yes, I understand that, but that's not what we're here to talk about. What about these principles?" After a time, a consensus emerged: "We can live with the principles, but tell us what the numbers are."

We ran the numbers, using different sets of assumptions. Nobody, not even Camden (which generated 50 percent of the flow in the region) came out with a burden of more than $500 per equivalent household per year for 25 years.

Most of the participants were surprised and pleased. Camden, however, said: "Yes, but if we multiply your number times our households, we come out with $18 million a year as Camden's share. That is still too much."

I said: "How do you know it is too much?" They said: "The total property tax take last year in Camden was $15 million. We have already foreclosed on 20 percent of the housing stock. Telling us to collect another $18 million from people who don't have it only means that we will end up with a high rate of nonpayment and more foreclosures. This will drive even more people out."

I said: (thinking they would not have a number) "What would be affordable?"

They said: "$11 million. We feel that these improvements should not cost more than $100 per household, especially for people making less than average incomes."

[17 ELR 10241]

So, we discussed capping fees based on income. The State of New Jersey has several programs that are "means-tested." We thought there might be a way, administratively, to do something similar. We talked about a cap on the annual sewer charges for those making under $10,000 a year. One thing that made this plan particularly attractive was that the community with the second largest number of poor people in New Jersey was Cherry Hill, a well-to-do suburban town.

Thus, we had a set of principles, detailed forecasts, and the design of an administrative system, in a draft agreement. We took this to the judge, who then convened everyone.

At that moment, the judge made a strategic error. He held up the agreement and said; "Is there anyone who is not completely happy with this?" I put my head down and waited for the onslaught. Many of those present repeated their original arguments; "Yes, Judge, we prefer not to be in the region or, we'd like to pay less money, etc." On that note, the agreement collapsed.

The judge should have said; "Is there anyone who cannot live with this?" That is the question to ask, when testing a consensus. Once again the judge asked the parties to submit their comments on the draft agreement.

There are some attorneys who have been living off of this case for quite a while. They were pleased when the mediation did not succeed. Of course, they did not say this. We huddled with the judge. "Why," we asked, "did you phrase the question the way you did?"

"I forgot," replied the judge. "I really thought from what you said that everybody liked it and that they were all going to say yes."

Mediation does not erase the underlying causes of a conflict. Mediation creates a context in which bargaining can take place. The parties can trade across issues, change their expectations. The result is something that they can live with, not necessarily something that meets their fondest expectations.

The judge asked: "What do you think we should do?"

I said: "Give us another six weeks. After all, we did in four months what had not happened in fourteen years. So give us a little more time to see if we can put it back together."

We met with all of the parties. This time, a totally different set of principles emerged! This illustrates an important point about mediation. We were not seeking to discover the "right" solution. We were trying to get an agreement that everyone felt was better than what would otherwise emerge.

There are many solutions to most conflicts. During the second round of discussions, a number of people proposed that we take the total cost, divide by total households, and charge the same to every household in the region. They dropped the idea of an income cap. In this way, they brought the average charge down to a point where even those who were worried about low-income households felt that almost everyone would still be able to afford it. The business of capping households below $10,000 a year had begun to look like an administrative nightmare. The communities wanted something fair yet simple. We took the six weeks, put together another draft agreement, and called a meeting of the parties.

I should have stopped then. Instead, I made a foolish mistake. The judge was so pleased with our achievement, he asked if we would help negotiate the industrial service agreements with the towns. "Why don't you act as a go-between," he said, "and help the CCMUA and the 37 communities work out the details?"

We had done the impossible once, but I never should have agreed. For the last eight months, we have been struggling to get the communities to sign.

Let me recap three of the most important things about being a special master/mediator. First, there was no single solution that, because of my technical background in environmental planning, I could suggest to the court. I was there to help the parties, including all the agencies responsible for the technical adequacy of the plan, reach a voluntary agreement.

Second, there must be joint fact-finding, not adversarial technical analysis. It is crucial that people not be able to reject every projection they dislike, by saying: "Well, we don't trust it, your technical person prepared it." We tried hard to build a shared technical-scientific basis for agreement and to lay out all assumptions.

Third, it is essential to caucus separately with each of the parties. This requires an enormous investment of time and energy. In formal hearings before a judge, very little joint problem-solving takes place. People lock in on the issues and fight over who has the law on their side. In many cases, the legal fight strays from the real issue. In this case, the issue was: What is a fair formula for allocating costs, and what is a vision of the system that people can agree on? This problem was best resolved in an informal, nonadjudicatory context.

Not every case before a state court ought to be mediated. Mediation is appropriate when a decision has to be made, everyone agrees that a decision is going to be made, and the issue is how to allocate costs and benefits. Mediation is not appropriate when the definition of basic rights or constitutional guarantees is at stake.

When a decision must be made about allocating gains and losses (which is usually what happens with standard-setting, the allocation of fixed resources, or the determination of policy priorities), mediation can be a useful, supplemental step. Typically, the mediated result must still be ratified by a judicial, administrative, or legislative process.

I do not like it when people talk about "alternative" dispute resolution. The suggestion is that mediation is an alternative to the conventional system. I see it as a supplement.

This, then, is what I think is going on. We are adding this supplement, at every level, in all kinds of ways. In the area of negotiated rulemaking, for example, we have added a step in the rulemaking process. The negotiated draft rule must go through a review and comment period, and it still has to stand up to a hard look by the court.

One theory is that a higher degree of voluntary compliance will occur when disputants feel they have had a hand in fashioning the agreement. As this "add-a-step" idea catches on, questions of representation, compliance, fairness, and the technical wisdom of agreements should be borne in mind.

1. Superfund is the popular name for the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675, ELR STAT. 44001.