My experience is that the fees of mediators are generally paid without any problem. On those occasions when they are not paid, what process does a mediator have to follow? Mediators are not always attorneys, but in many cases they are. The question is whether a mediator who is an attorney must serve the parties to the mediation with what is commonly known as a "fee arbitration letter" before the mediator can file a lawsuit to collect a fee.
When an attorney represents a client in the usual attorney client relationship, there is no question, at least in the State of New Jersey, that the attorney must serve a "fee arbitration letter" before filing a lawsuit to collect a fee.
As an alternative to Court action, the Supreme Court of New Jersey created seventeen district fee arbitration committees to resolve fee disputes between attorneys and clients through binding arbitration, at a client’s request.
According to NJ Court Rule 1:20A-1 et seq., a lawyer must send a formal notice of a client’s right to utilize fee arbitration before the lawyer may institute legal action to recover a fee. The notice must advise the client of their right to choose the fee arbitration process; list the name, address and phone number of the fee arbitration secretary and must advise the client that they have thirty days to choose to proceed with fee arbitration. The attorney must then wait thirty days from the date of notice before starting the suit. In most cases, if the client chooses to take the dispute to arbitration, the lawyer must arbitrate. If the client does not file a Request for Fee Arbitration form within 30 days of receiving notice from the lawyer, they will lose their right to utilize the fee arbitration system.
Since 1979, fee arbitration committees have been composed of both lawyers and public members. Most fee arbitration cases are heard before panels of three members, composed of either two lawyers and one public member or three lawyers. However, if the total amount of the fee charged is less than $3,000, the hearing may be held before a single lawyer member of the fee committee. The amount of the fee as determined by the fee committee is binding and final. There is a right of appeal to the statewide Disciplinary Review Board but the grounds for an appeal are very limited.
The fee arbitration system is one that moves quickly and provides an informal and inexpensive way to resolve fee disputes. While there is no question that an attorney representing a client in the classic sense must offer the client fee arbitration, there is no definitive rule as to whether an attorney acting as a mediator must offer the parties to the mediation an opportunity to participate in fee arbitration or whether a fee arbitration committee will hear such a dispute even if the parties agree to proceed with arbitration.
While not specifically addressed by any Court Rule, it appears that
an attorney who acts in the capacity of mediator and sues a mediation party for fees is not required to first serve the party with a Fee Arbitration Notice consistent with R. 1:20A-1 et seq. The rationale is that the attorney does not provide any legal services to any party to the mediation. Instead, the attorney’s role is solely limited to impartially facilitating a solution to a legal dispute. Since there is no attorney client relationship between the parties there is no jurisdictional basis for participation in the fee arbitration program.
While many mediators and parties to a mediation may prefer the fee arbitration process, as of this date, at least two District Fee Arbitration Committee have declined to hear such disputes.
Lewis J. Pepperman is Co-Managing Director of Stark & Stark and the Chair of the Litigation Group in Stark & Stark’s Lawrenceville, New Jersey office. For questions, or additional information, please contact Mr. Pepperman.