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Arbitration and the lack of reliable court guidance

A few years ago, the New Indian Express delivered a jolt of legal cynicism — or realism? — when it reported on a speech by Prashant Bhushan, an anti-corruption campaigner and “noted Supreme Court lawyer.” Bhushan decried India’s “dysfunctional judiciary” and lamented that judges had no interest in reform. When asked why not, he said, “Arbitration has become a flourishing industry… and the main beneficiaries are retired judges. Arbitration functions as long as regular judiciary does not deliver.” The promise of big money after retirement, he asserted in a subsequent interview, makes sitting judges “complacent about what’s happening.”

Senior Lawyer Prashant Bhushan speaks to the journalists outside the Supreme Court in New Delhi in this file photo. He is known for decrying too much arbitration in lieu of the courts doing their job. (Associated Press)

I don’t believe Bhushan’s attribution of motives applies in the United States, and rather hope it’s not true of India, either. Still, it’s hard to argue with his broader point. Arbitration, mediation and other forms of alternative dispute resolution (ADR) are valuable only insofar as they provide something the judicial system doesn’t.

New Mexico’s Rules of Civil Procedure state that they are intended “to secure the just, speedy and inexpensive determination of every action.” If the legal system governed by those rules lived up to their statement of good intentions, ADR would be a niche service, of value only to those with an overriding desire to keep their affairs out of the public record. Instead, in New Mexico as in Hyderabad, ADR is a thriving industry. Do an internet search for “New Mexico ADR” and you’ll see what I mean.

The amount of money pouring into ADR is an objective measure of the shortcomings of our civil justice system. We have a parallel private system of justice because it succeeds where the public system funded by our tax dollars fails.

Some of the best arguments in favor of ADR were put on display in the case involving our old friends, the competing railroad contractors GandyDancer and Rock House CGM. Their epic legal battle was the subject of two columns a year ago, after the Court of Appeals decided their case. Now the Supreme Court has reversed the Court of Appeals.

GandyDancer v. Rock House was one of just five civil cases decided by the New Mexico Supreme Court during the first 11 months of 2019. One of the five concerned the Secretary of State’s authority to reinstate straight-ticket voting and merely explained a decision rendered before the 2018 election. Two others involved the Public Regulation Commission. The fourth was a workers’ compensation case. Only the GandyDancer case addressed a dispute between two commercial enterprises.

One knock on ADR is that it doesn’t provide a body of precedent to guide the resolution of future disputes involving the same topic. Deciding the particular case benefits the individual parties (or at least the winner) but not the broader business community. But then, business litigation in New Mexico doesn’t provide much of a body of precedent, either.

The lack of reliable guidance from our courts is a chronic problem for lawyers seeking to advise their business clients in New Mexico. The unstable nature of the law is another. The issue raised by the GandyDancer case was whether one business can sue its competitor under the New Mexico Unfair Practices Act, which is generally considered a consumer protection law. There’s no doubt that a purchaser of goods of services can sue a dishonest seller under the statute. But can one seller sue a competing seller for the value of a lost sale?

It’s a yes/no question, but our courts found three different ways to answer it. The trial court said, “Yes.” The Court of Appeals disagreed with the trial court’s definitive answer. It said, “Sometimes.” Last month, our Supreme Court finally settled the question with a firm: “No,” although it took the court 42 paragraphs to deliver itself of that single syllable.

While the text of the statute didn’t change, its legal meaning did, repeatedly. But then, it’s hardly fair to blame the courts alone, when the Legislature could so easily have resolved the uncertainty. No extensive revision was necessary, just a clarifying word or two inserted into the statute’s existing text. The issue had been helpfully flagged for the Legislature in a published opinion from federal district court back in 2013, but the Legislature didn’t respond to the prompt. My guess is that our part-time legislators and their overworked staff didn’t even notice.

GandyDancer filed its complaint in December, 2015. Twenty-five days short of four years later, the New Mexico civil justice system determined that it had been subject to summary dismissal all along. That result can be defended as just. But speedy? Inexpensive? Unfortunately, there’s no shortage of reasons why ADR is a flourishing industry in New Mexico.

Joel Jacobsen is an author who recently retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com

 

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