Mediation Costs: Fees and “Flat Rates” and “Per Diem Caps,” Oh My!

On a recent call, a potential customer asked about costs of mediation.  It is a question that comes up all of the time.  I began to feel a bit like a cell-phone sales person, though.

Like most mediation firms, One Mediation’s mediators have different hourly rates that reflect their experience.  On the other hand, One Mediation also has mediators who offer a “per diem” cap on their mediation fees which is somewhat unusual.  Another mediator associated with One Mediation also offers a “flat rate” for her mediation services based upon the value of the dispute. 

All these “pricing programs” can be like sorting through the cell phone plans with unlimited minutes, additional lines, etc.   Don’t panic!

The short story of mediation expenses is pretty simple – there is “Traditional” billing and “Alternate” billing.  Traditional billing involves the parties paying their portion of the mediator’s hourly fee for the time the mediator spends providing them services.  In other words, if the mediation takes three hours and the mediator’s hourly fee is $200, the total bill for all parties will be $600.00 which is evenly split between the parties. 

Sometimes the mediator’s fee is split up differently because the parties have agreed to a different formula.  Additionally, in many settings, one party may agree to pay the entire mediation fee as part of the resolution.  A starting point, however, for mediation costs is to plan on splitting the fees evenly across the parties.

Alternate billing involves things such as “flat rates” and “per diem” caps.  A “flat rate” is a set fee that is paid to a mediator for any and all services rendered in facilitating the mediation of a particular dispute.  A “flat rate” has no correlation to the mediator’s time spent on the dispute.  As such, the parties could mediate for one hour or ten hours, and the rate will be the same.  Generally, flat rate billing is fairly rare.

Another alternate billing format involves “per diem” caps.  In this scenario, a mediator may offer his or her services on an hourly basis up to a certain amount per day.  After that point, any mediation services will not be billed at the hourly rate.  For example, if a mediator’s hourly rate is $200 and his per diem cap is $1,000.00, then a mediation that lasts over five hours will not increase the cost of services provided on that day.  Some mediators are willing to provide such caps, and parties should inquire about them.

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Mediation: Step-By-Step

Step 1: What to Expect
Prior to most mediation sessions, the neutral may hold a telephone conference with each party. This call is an opportunity for the neutral to give the party an overview of the process and to receive a brief summary of the dispute. Dates, times and location of the mediation will be confirmed. It is part of preparation for the session.

Step 2: How to Prepare
Before the session, parties should evaluate the strengths and weaknesses of their cases. Consideration should be given to providing information unknown to the other side beforehand or at the session if it would impact the other side’s own assessment of the case. Logistically, parties should clear their schedules to minimize distractions to the session.

Step 3: Joint Sessions and Caucuses
Usually the parties begin mediation together in a joint session led by the mediator. After an introduction by the mediator, each party often provides an opening statement about the dispute. Frequently, mediators then will move parties into separate rooms, and the mediator will “caucus” with each party. These caucuses facilitate the flow of information and offers between the parties to facilitate agreement.

Step 4: If Resolution Is Reached
If an agreement is reached, a document will be drafted that captures the facets of it prior to the parties’ departure from the mediation session. When parties have legal counsel, this document may include an agreement for the attorneys to prepare a more formal document that incorporates the mediation document.