Contingent Fees or Success Fees for Mediators: Why Not?

By: Donald L. Swanson

I have a new LinkedIn friend, Mark Winters from the U.K., who’s developed a mediation practice within an unusual context. And he’s making it work.

Since the practice arose from his own creativity and out of unusual circumstances, he’s unbounded by common norms and can do creative things.

One creativity is this: he contracts with mediating parties for a “success fee.”

Here’s how he describes it: “no settlement, no success fee.” And, he says, “we have yet to not settle a matter.”

Why Not?

So . . . that started me thinking, “Why not allow success fees or contingent fees?”

Attorneys get contingent fees all the time and in a wide variety of cases: it’s usually where the client can’t afford to pay monthly invoices on an hourly fee; and

Attorneys get success fees in a wide variety of cases: often, its on top of their hourly fee.

In both circumstances, parties and their attorneys find the contingent fee or success fee arrangement to be advantageous. So, they contract for that advantage.

Why shouldn’t mediating parties and their attorneys be free to contract for a contingent fee or success fee with their mediator?

–If they find such arrangements to be advantageous, why not?

Perhaps we should follow Paul McCartney’s advice and “let it be”?

Prohibitions?!

And why would any governing authority prohibit a contingent fee or success fee for mediators?

Some do.  Here is an example of such a rule in one of these United States:

“(f) Contingency Fees Prohibited. A mediator shall not charge a contingent fee or base a fee on the outcome of the process.”

The concern, of course, is that mediators will have improper motivations (e.g., to push harder for a settlement) and become something other than neutral and impartial.  Or they might finagle a higher fee.

But fee-incentive issues exist in hourly and flat fees too:  mediators might try to prolong a session to maximize hourly fees, or might hurry toward the finish to heighten a flat fee return, or might push for an extra session to increase fees.

A Voluntary Process

So, why shouldn’t parties and their attorneys be allowed to pick their own poison on fee arrangements?

In a personal injury case, for example, why not allow something like this:

(i) the insurance company pays 50% of the hourly fee, no matter what, and (ii) the plaintiff pays a heightened fee amount, but only if the case settles?

What could be unethical or improper about that?  Isn’t mediation supposed to be founded on choices of the disputing parties?

–An Inconsistency

And how’s this for an inconsistency:

 1. Some people are opposed to mandating mediation because, they say, mediation should be an entirely-voluntary process; yet

 2.  Opposition to the use of contingent fees or success fees in mediation exists—even when that’s what the parties believe would be best for them and is what they would choose.

–Here’s Why

Here’s suggesting that both of these inconsistent positions are based on the same type of generalized ideal of what a mediation “ought” to be, rather than on what’s actually best for disputing parties and for our system of justice.

Conclusion

Contingent fees and success fees should be allowed in mediation—and utilized. If someone, like my new LinkedIn friend, has the creativity and initiative to make it work, why not?

In the words of Paul McCartney, “Let it be.”

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