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Mediation: Companion ABA Ethics Opinion Tackles the Ethics of Neutrals' Business Practices (Web)

In the second of two companion opinions released on the same day earlier this fall, the American Bar Association Section of Dispute Resolution’s Committee on Mediator Ethical Guidance used a broad mediation hypothetical to reinforce a variety of points about how neutrals can ensure parties’ confidence in the process, and keep themselves impartial.

SODR-2008-4 discusses the ramifications of a longtime attorney’s move to an ADR practice, and the issues the attorney faces in being paid by only one of the parties, and in soliciting future business.

The opinion was released by the committee on Sept. 23, the same day that SODR-2008-3 emerged. The latter opinion addressed mediators’ responsibilities in facing court orders that implicate confidentiality responsibilities. For more information on the confidentiality opinion, go here.

The Committee on Mediator Ethical Guidance was established by the ABA Section of Dispute Resolution to provide advisory responses to requests for ethical guidance on the 2005 ABA/American Arbitration Association/Association for Conflict Resolution Model Standards of Conduct for Mediators.

The practice hypothetical sent to the committee that launches Opinion SPDR-2008-4--which can be found in full text here–addresses how a mediator can remain neutral when one of the parties pays the full amount of mediation fees. It sets out important mediator conduct standards related to fees that included issues of (i) party self determination, (ii) disclosure, (iii) impartiality, and (iv) solicitation.

The opinion provides the practitioner’s inquiry, where a 27-year legal practitioner writes about struggling to establish an ADR business. The mediator is concerned about ethical conflicts that arise where one of the parties agrees to pay the mediation’s full cost.

The hypothetical involves a company that wants to mediate regularly in its customer disputes, and whose customers normally can’t afford to pay half the mediator’s hour rate, or refuse mediation if they have to pay at all.

The inquirer provides the company with the tripartite disclosure that would be given to customers before each mediation: (a) the mediator has an agreement with the company for the company to pay the mediation fees; (b) the mediator acts as a neutral even though [the company is paying the neutral’s fee, and (c) the neutral “has maintained in the past and will in the future continue to maintain an ongoing relationship with [the company] in providing mediation services.”

The committee uses parts of five of the nine model mediator conduct standards (available here) to answer whether the retainer agreement, despite the disclosure and customer waiver, avoids the appearance of impropriety.

The bottom line: The Model Standards of Conduct for Mediators do not create an ethical prohibition when a mediation fee shifts from one party to the other.

But there are distinct limits.

The committee establishes that a mediator paid in full by one party is acting ethically if the mediator (i) has disclosed the information about the arrangement as early as possible, “[t]o the extent the mediator is aware of the arrangement,” (ii) has obtained the parties’ agreement and comfort with the mediator continuing with the mediation, (iii) is confident that he or she can proceed in an impartial manner, (iv) knows the duty to self-evaluate his or her impartiality is an ongoing one and, (v) considers the potential conflict of interest and lack of impartiality that may arise if the mediator solicits a relationship with the party who will pay the fees, particularly if the arrangement involves substantial revenues for the mediator.

The committee's interpretation of the Model Standards emphasizes that mediation should be held on a basis of self determination–“that all parties are able to voluntarily, without coercion,” select a mediator. The opinion states that under the facts, the committee “believes that, with the proper disclosures and party agreement, the payment arrangement does not affect a party's ability to exercise self-determination in selecting a mediator.”

But the opinion advises mediators to consider (i) whether the party not paying for the mediation is represented by counsel, and (ii) whether the nonpaying party is required to participate in the mediation by contract or (iii) whether the party may decline participating in the mediation. “These factors may undermine a party’s exercise of self determination in selecting a mediator and in agreeing to an unequal fee arrangement,” the opinion notes.

The committee views impartiality as a continuing obligation throughout the process. Citing Model Standard II, the opinion obligates neutrals to evaluate themselves throughout the mediation process to ensure that they are operating without favoritism, bias, or prejudice. If the mediator recognizes “some level of favoritism to the party responsible for paying the fee or the largest portion of the fee, the mediator should withdraw.”

The opinion also discusses what a mediator should do if his or her relationship with the fee-paying party, or the party paying the larger portion of the fees, reaches a point where the mediator handles several mediations involving that party–“such that a substantial portion of the mediator's professional time or a substantial portion of his or her income” emanates comes from the party.

The committee concluded that this fact would create questions concerning the mediator's impartiality. If the situation arises, the arrangement’s “character and frequency” must be disclosed to all parties. Consent must be obtained to continue with the process. According to the Model Standards, a mediator “shall not solicit in a manner” that gives the appearance of partiality for or against a party, or otherwise undermines the process integrity.

The opinion also notes that in the context of the hypothetical, the possibility that the mediator solicited the engagement with the party. Such solicitation, according to the committee, could create the appearance of partiality and additional potential conflict of interest. But it is not necessarily unethical, provided that the mediator discloses the relationship with the party and conducts the mediation in a neutral impartial manner.

Finally, the other party must have the ability to refuse to participate in the mediation process.

–By Russ Bleemer & Adriana Collazos

Bleemer edits Alternatives for the CPR Institute. Collazos is a New York attorney focusing on alternative dispute resolution issues.