Consider Mediating Fee Disputes Gracefully

Malcolm Sher, Mediator

Sometimes clients will fail to pay or dispute your bill because they are disappointed at the outcome of litigation, or, whilst your work was properly performed, your billing methods lack transparency, leaving the client unable to understand the bill, frustrated and legitimately asking questions. In the worst situations, the work actually may have fallen below the client’s reasonable expectations or the standard of care and the fee was undeserved.

When a fee dispute arises, your response is critical to the outcome. First, fee disputes can be expensive, especially if you need to report the dispute to your professional liability insurer because the client has alleged malpractice, something that will happen in almost every fee dispute situation. That can increase your premiums or impact coverage, even if the fees are ultimately adjudged fair. Second, the dispute may interfere with your actual practice, does not generate income, and instead, generates stress. Moreover, successful law practices depend on relationship building. An unhappy client is a pipeline to other clients, can damage relationships, and no longer is a source of income.

If a fee dispute arises, first offer to meet with the client in your offices, making clear that there will be no charge for the meeting. Try to resolve the dispute. If this proves unsuccessful, offer mediation, either with a private mediator, experienced in mediating fee disputes, or through BASF’s Mandatory Fee Arbitration program, recognizing that if mediation fails, mandatory arbitration is available through that program without an additional filing fee.

Before mediation, counsel yourself as you would any client. At mediation, listen and respond to the client’s concerns, even if you disagree. Let the client get it all out. Hear the client politely…without a patronizing half-smile! For clients, “perception is reality.” Ask yourself if someone else might see the dispute differently. Did you or an associate, learning at a lower rate, take an unusually long time on a given task? Can you justify a “learning curve”? Clients don’t want to pay for training! Small write-downs or write-offs may really not be “lost money” to you, but show good faith to a client. Don’t necessarily capitulate; just use common sense and business judgment, courtesy, always appreciating the risk of an adverse outcome to you and your firm.

For more information about BASF’s Fee Dispute program, email fdp@sfbar.org.

About the author:

m-sherMalcolm Sher is a full-time commercial mediator in the Bay Area. He is Vice Chair of the State Bar Executive Committee on Mandatory Fee Arbitration, Chair of the Contra Costa Bar Association MFA and Client Relations Committees and mediates fee disputes. He has been a member of BASF’s Mediation Services panel since 2006.