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Cost of mediating business disputes vs. small claims litigation

If you’re involved in a business dispute concerning $10,000 the cost of resolving the dispute is crucial. Both sides need to keep those costs low.

Your case probably qualifies for small claims court. Here in Pennsylvania, business disputes of $12,000 or less do, as is the case in most states. Mediation of business disputes is growing more popular, but which is less expensive?

You can compare the actual costs relatively easily with a little legwork -- but you should also take into account the very real cost of your time. Also, since small claims judgments are part of the public record, a judgment against you could affect your credit.

Let’s break down the expected cost of each process in Pennsylvania, which should be relatively comparable to those in other states:

Basic costs of filing a small claims case

Court costs: basic filing fees range from around $50 to $125, depending on case complexity and the number of parties. Additional fees of around $5 to $10 may be assessed for some services. You may need to reimburse any witnesses for their costs.

Legal fees: consultation with or representation by a lawyer is optional, but recommended. Fees vary, but assume around $250 an hour.

Collection costs: if you win, you may still need to hire a collection agency.

Your costs will go up if the case is rescheduled, if the defendant files a counterclaim or appeals. However, courts often order defendants to reimburse plaintiffs for court costs.

Basic costs of mediating the dispute

These fall into three categories:

  1. The mediator’s fees and expenses.
  2. Fees charged by the institution or company providing the mediator, if any.
  3. Your out-of-pocket costs for things like travel and photocopying, etc.

Some mediation institutions charge filing fees just as courts do. These can range from $30 to several hundred dollars. A mediator’s hourly fee could be as low as $75 or as high as $500, depending on the complexity of the case and the mediator’s experience and education. The parties must agree on the mediator.

The typical number of mediation hours is hard to estimate because it depends on the complexity of the case, among other factors. A rough estimate is least two and no more than 10 hours.

To determine the most cost-effective method to resolve your business dispute, make some calls and then compare. Then, choose the one you think is best for you.

Source: Mediate.com, "Cost of Small Claims Court vs. Mediation," Lance Soskin, March 8, 2013

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