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Contingency Mediation

In the personal injury world, the words almost seem ubiquitous, “No Recovery, No Fee.”  That is, a client that engages an attorney in a personal injury or other matter is not charged for his or her attorney’s fees if the case is not won or settled.  Perhaps, Indiana should revisit whether to allow contingency fees for mediators and mediations. 

Rule 1.5(c) of the Indiana Rules of Professional Conduct states, “[a] fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law.”  While not expressly addressed or prohibited in the Rules of Professional Conduct, Rule 7.7 of the Rules for Alternative Dispute Resolution states that “[a] neutral may not charge a contingency fee or base the fee in any manner on the outcome of the ADR process.”  That rule was adopted on December 4, 1998, and later amended on July 19, 2002.  The theory behind the prohibition seems to be that mediators are only able to assist parties if they remain neutral.  See Scott R. Peppet, Contractarian Economics and Mediation Ethics:  The Case for Customizing Neutrality Through Contingent Fee Mediation, 82 Texas Law Review 227, 229 (2003).   

Even more so than when the prohibition was established in 1998 and modified in 2002, mediation and ADR has become woven into the fabric of litigation.  Indeed, the Marion County local rules require mediation in civil jury trial cases.  See LR 49-ADR2-209.  It would seem that there are few cases that are resolved without going to some form of mediation first. 

Because it is often required, mediation has been come big business and a formidable part of the legal community.  Many mediators keep track of their ability to resolve cases and some even market and publish the percentage of cases that they are able to resolve.  At our firm, the success rate of the mediator is one factor that we often look at when deciding on a mediator.  A lawyer or a litigant using a mediator’s success rate as a factor in deciding which mediator to select makes sense as lawyers and litigants, perhaps now more so than ever, understand that mediation often leads to the conclusion of cases.  

If a mediator is able to market or publish his or her success rate as a mediator, then why shouldn’t that person be able to tie their financial stake to that success or the outcome of that mediation?  Perhaps it is time to reconsider whether allowing contingency mediation or mediation that is contingent upon a successful resolution at mediation is in the best interest of litigants and the judicial system.  We content that because mediators are inherently interested in resolution, it is possible for mediators to remain neutral while financially tied to an outcome or a contingency for that mediation.  That is, the fact that a mediator desires or takes efforts to be a successful mediator does not mean that he or she is swayed from or strays from neutrality.  After all, as mediation marketing suggests, the goal of a mediator should be to resolve cases.