ValueSolve ADR is bringing the flat-fee model to mediation

Patrick Burns knew his company, ValueSolve ADR, had arrived when Washington County Judge Richard C. Ilkka specifically named the company in a court order.

“He recommended that the parties use Minneapolis-based ValueSolve to work out their differences,” Burns recalled. “The bar and bench both seem to be taking notice of what we’re doing.”

What Burns and his partners are doing is offering an alternative to the sometimes congested world of alternative dispute resolution – which itself is a product of the almost always congested courts.

Launched last December, ValueSolve (ValueSolveADR.org) was conceived as a way to expedite the ADR process, relieving some strain on the system and offering a less expensive option for parties in a dispute. While the jury is still out on whether the method can consistently save money for the parties in a dispute and time for the third-party neutrals who help them resolve it, the four partners in the company believe in their pricing model.

Instead of an hourly rate, the company charges a flat fee of $1,800 for any case involving two parties and up to $250,000 in controversy. That price buys the parties up to eight hours of pre-mediation and mediation work at an average of about $225 per hour, Burns said, far less than the $400 per hour charged by standard mediation services.

“If it works out to less money per hour, great,” he said. “Either way, hopefully the parties are settling the case for about $900 each.”

Pro bono start

Burns and his partners – Leo G. Stern, David A. Allgeyer and Joseph A. Daly – are all established Twin Cities litigators with either a separate law practice or a day job teaching law.

Burns said he and his partners got the idea for ValueSolve while doing pro bono ADR work through Hennepin County’s Civil Mediation pilot program and with the Minneapolis Department of Civil Rights. They found that because they were working for free, disputes were being resolved more efficiently.

“We’re borrowing ideas from that – what was effective, what wasn’t,” he said. “We have learned a good deal from those experiences.”

The four found few affordable dispute resolution options for regular parties, be they businesses or individuals.

“A lot of times it isn’t just the price but also the process,” said Burns. “You really need parties to show up and be serious about settling the case. If the parties aren’t aware of what separates them and aware of their own claims and the other party’s claims, and they’re not talking about it with their attorneys, or maybe they don’t have attorneys, the case is very unlikely to settle at mediation.”

To expedite the process, ValueSolve requires certain things be done in advance of a session. Before the first sit-down, offers and pre-mediation letters must be exchanged so that both parties can see each other’s position in advance of the day of mediation.

“We engage counsel in a discussion of what we see as the strengths and weaknesses of their respective cases,” Burns said. “In a way, we’re starting to mediate before the mediation session. I read stuff submitted to me by the parties, and talk to them on the phone in advance. Most mediators, for better or worse, start their work the morning of the mediation, and they simply run out of time or don’t get it done because they start out flat-footed. The more time you spend beforehand trying to figure out where each party’s coming from, the less time you’re spending figuring out a settlement on the day of the mediation session.”

An appropriate option

A few third-party neutrals around the country offer a flat-fee ADR option, but the practice is relatively rare.

ADR facilitators in Minnesota were mostly positive about the concept, although some maintained that the difference in cost between the two pricing models could be minimal.

“I think this new ADR model is a good one if mediation costs are as high as they say,” said Drummond, Wis. mediator and retired Minnesota District Judge David P. Sullivan. “However, I believe there are mediators who charge little if any more than the average hourly rate this model uses even if all eight hours [of mediation time] are used.”

More important, Sullivan said, is that the service puts time limits on ADR, and he believes it’s seldom a good idea to put artificial time limits or scheduled endings on mediation.

“Flat-fee billing and hourly-fee billing are both appropriate methods of charging for ADR services,” said Minneapolis business attorney Richard R. Caldecott. “You can control costs better with a flat fee, but if a case settles quickly, [the parties] will be overpaying.”

However, Caldecott liked ValueSolve’s policy waiving of administrative fees and case filing fees, which he likens to “bank fees – just another way of collecting more money from a business relationship.”

Even though all four partners are currently moonlighting with ValueSolve, and have no intention of working for the company full time, they’re getting a handful of cases each week, enough to make the endeavor worthwhile.

“The idea was that we’d rather be busy helping to resolve disputes instead of waiting for the phone to ring once a month because we’re working at a higher hourly rate,” said Burns. “This is a way to do what we enjoy more often.”