Several weeks ago, I was retained to conduct a used car mediation. Two days before the mediation, I sent the Zoom link to the attorneys and asked the defense counsel if she had obtained settlement authority, as this has been an issue.

In response, the attorney advised that she had recently filed a motion for summary judgment, and in light of this, the client wanted a ruling on the motion before entertaining serious settlement discussions. As a result, the attorney had no authority to resolve the case at mediation and so suggested it be canceled.

The opposing counsel agreed but wanted to ensure she would not be charged the cancellation fee (which consisted of the entire mediation fee) since it was canceled at the last moment. I wrote and assured her that the canceling attorney would be charged the entire mediation fee as the cancellation fee.

The cancellation fee affected (if not upset!) the canceling attorney. A day later, she wrote that she was going to have a serious conversation with her client about seriously considering settling and going forward with the mediation, given that the client was being charged the full fee for the mediation for canceling at the last minute.

That conversation worked because the next email I received advised that the mediation would go forward, which surprised me.

I was even more surprised during the mediation when I learned that the canceling attorney had serious monetary authority to settle the case. I assumed that given the posture of the client wanting the motion for summary judgment to be decided before seriously considering settling, the client had given only minimal authority. I was wrong! (Lesson learned: never assume!)

Evidently, the attorney had a truly and very real serious conversation with the client about the strengths and weaknesses of the case and managed to convince the client to use the mediation as a real chance to settle the case for a lot less than the litigation costs of going forward and then possibly losing at trial.

The case settled… to the great surprise of both opposing counsel and me.

I never really considered the incentives behind charging a cancellation fee: To avoid “wasting” the money, it can spur parties to proceed with the mediation and settle! What a novel idea!

… Just something to think about.

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