Part Two — Contingent Fee or Success Fee For Mediators: Why Not?

By Donald L. Swanson

Paul McCartney, “Let it be”

Some time ago, I published an article titled, “Contingent Fee or Success Fee for Mediators: Why Not?”  The punchline of the article was, in the words of Paul McCartney, “Let it be.”

Responses to the fees issue in that article were strong and largely negative, as expected.

So, I’d like to take another crack at the fees issue—this time with an appeal to authority.

Appeal to Authority

The authority is Prof. Elayne Greenberg of St. John’s University School of Law in New York City.  Prof. Greenberg has been a champion—over many years—of mediation in bankruptcy: that fact, alone, makes her one of my heroes of the professional world.

In 2012, Prof. Greenberg published this article: “Monetizing the ‘Value Added’ of Attorneys Who Serve as Mediators and Arbitrators [see page 10 of the link and see Fn. 1 below].

Some Realities

Prof. Greenberg’s article acknowledges the traditional measure of compensation for mediators (hourly and daily billings) and that mediators avoid contingency and success fee arrangements to protect their impartiality.

Then she adds this “reality”:

“whatever billing regime is used,” the mediator “has an economic interest in settling the case that may potentially influence,” either explicitly or implicitly, a mediator’s “impartiality toward settlement.”

[Editorial Note: I would add, here, that a professional can always game the system—any and every system—for the professional’s own benefit. However, a true professional recognizes this reality and uses best efforts to tamp-down those baser instincts and to pursue, with professional zeal, the best interests of those being served.]

Contrasting Examples

The Professor then cites a “renowned” mediator who “spearheaded” mediation of the “September 11 Fund.” This mediator “boasts that he is indeed biased in favor of settlement” and explains that such bias is one of the reasons he is “retained by sophisticated clients.” And he “seeks alternatives to hourly billing” with sophisticated clients, such as success fees, “as a business decision.”

She cites another mediator, for contrast, who is paid by trusted clients on this basis: “whatever you thought I was worth.” This mediator exchanges “less fees for a glowing review on LinkedIn.”

The Professor then goes on to discuss “Ethical Parameters for Fee Paradigms” and starts by acknowledging that “alternative fee paradigms” are often prohibited by law.

The Professor’s Conclusions

Prof. Greenberg concludes her article with these observations:

We should have courage to “re-examine” our stated reality and “see things as they are”;

“How fortunate” we are “to be part of such a dynamic profession that has matured to the point that it is ready to have this needed conversation about innovative billing regimes”;

“I am advocating for a more reality-based working definition of impartiality” that will “allow our dispute resolution field to advance” and to “prudently consider ethical ways to incorporate fee regimes that consider the ‘value added’ that . . . mediators bring to parties”;

“I, like many of you, have concerns about the misuse of ‘contingent fee’ billing and am against its wholesale adoption”;

In select circumstances, however “‘contingency fee’ billing could be a welcome option”; and

“As with many of my columns, I hope this conversation is just a beginning.”

My Conclusion

I’ve attempted, in this “Part Two” article, to identify Prof. Greenberg’s article and to highlight parts of it.  Lest the foregoing does an injustice to Prof. Greenberg’s article, I encourage everyone to read it and to consider the points she is raising—in their entirety.

Footnote 1: Prof. Greenberg’s article was published in the Fall 2012 issue of the New York Dispute Resolution Lawyer, a publication of the New York State Bar Association.

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