Collection of Mediator Fees: Options Available to Mediators
By At the last quarterly Dispute Resolution Section Roundtable, held on August 20, 2024, mediators discussed an all-too-common issue: what happens when a party does not pay or delays the payment of mediation fees beyond what is reasonable? Unfortunately, delayed or nonpayment of the mediator has become a common issue, and mediators face unique challenges in collecting fees.
Mediators are in a service industry and are also in the unusual position of working for parties, through the attorneys, without a direct connection (other than the one day of work) with the party who is obligated to pay the bill. Pursuing an unpaid invoice can be difficult because of this relationship and also because attorneys who have arranged the mediation may not be the ones making the payments.
The obligations of the parties to pay the mediator are set forth in Rules 4(d) and 7 of the MSC Rules. The fee is due upon completion of the mediation, but gone are the days when the parties to Superior Court mediations would bring a check or cash to pay the mediator immediately.
What has become more common in practice is that the mediator emails, or hands out, the invoice shortly after the conclusion of the mediation, and then waits a period of time for the invoice to be paid. If not paid promptly (and what is reasonable varies from mediator to mediator) a subsequent email is sent and often another followed by a phone call and then much frustration. A few of us have faced the unfortunate situation of being ghosted by attorneys we thought we knew well.
To complicate matters, the parties paying the bill may want to make payments in unusual ways, such as a credit card, or may require the mediator to register in a system and obtain approval before being paid. Support staff handling the payments may not be attuned to the party’s obligations of paying the fees and often present hurdles instead of assistance.
So, what can mediators do? If the case is pending in North Carolina Superior Court, the mediator has the option of pursuing sanctions in the form of contempt proceedings. NC Gen. Stat. Section 7A-38.1(g). The process is not a simple one and currently requires that the motion be served on all parties.
At the Roundtable, mediators discussed the challenges of filing for contempt for nonpayment, particularly the process for serving the parties, whose addresses they may not have. Panelists did note that letting the attorney who represented the party at the mediation know that such a motion is forthcoming may speed the payment along. One attorney complained to the mediator that the mediator was putting the attorney in a conflict with his client, although ultimately this issue was resolved. Having filed such a motion against a defendant company who self-represented at the mediation, I found that filing and pursuing the motion was effective, and I was paid cash standing in the courtroom when the judge was ready to rule. However, it cost me much more to pursue the payment than I was paid.
In addition to filing a motion for sanctions, a practical checklist of options for appointed mediators trying to collect an unpaid fee may include the following: emails and phone calls to the lawyer representing the party who has not paid the fee; calls to the Trial Court Administrator (fees are listed on the Report of Mediator, and as such are a public record) asking how the judge would like to handle the motion for sanctions; sending a letter to the attorney with a copy of a draft motion for sanctions; and actually filing a motion for sanctions.
The Roundtable panel discussed how the mediator’s obligation of confidentiality relates to collection of fees. Standard 3(c) of the Standards of Professional Conduct for Mediators provides that “when seeking to collect a fee for services, the mediator may share correspondence or communications from a participant relating to the fees of the mediator.” The panel concluded that communicating with the court about nonpayment is not a violation of the mediator’s duty of confidentiality.
A mediator who is not appointed by the court, but is selected by the parties, has many more options. The mediator may ask the attorney to be responsible for the fee in the engagement letter (though there is a question about enforceability of this arrangement). The mediator may charge additional fees for time spent attempting collection or as a percentage of the unpaid fee. A selected mediator may also ask for a deposit before the mediation. However, once the mediator undertakes scheduling, it is an open question what the mediator can do if a party fails to pay the deposit. See NC DRC Advisory Opinion 19.
Other issues arise if the case is pending in a tribunal with different rules. In federal court, the local rules vary from district to district. Contact with the court or court personnel is not as streamlined, particularly where it involves mediators. Mediators should carefully review those rules before approaching the court for assistance in obtaining payment.
For a discussion on this and other issues, watch the recording of the August 20, 2024, Roundtable Mediation Hot Topics/Dispelling Mediation Myths at the NCBA YouTube channel.