As you know, Google Answers does not provide legal advice.
Based on experience of using law firms and mediation, my comment are as follows:
1. MEDIATION
Mediation is an informal process to resolve disputes. The mediator
tries to help the two parties reach a mutually acceptable deal, rather
than go to t`he trouble and expense of pursuing full-fledged
litigation or binding arbitration. Mediation (unlike arbitration or
litigation) is not binding - the parties can walk away at any time.
For mediation to succeed, both parties must be prepared to engage in
give-and-take. A party cannot expect to get 100% of what they feel
they are entitled to.
I have found that a skillful mediator can be very helpful to guide the
parties to common ground in situations where direct negotiations have
become deadlocked.
The financial outcome of mediations in a case such as yours depends
significantly on a number of factors such as (1) the perceived risk
that the other party will resort to (or seriously fight) litigation,
(2) both parties' chances of success in such litigation, and related
fees costs, (3) presence or absnce of "attorneys' fee" clause in the
underlying contract, or other rules of law allowing one party to have
the other pay part of its attorneys' fees in specific cases, (4)
impact of the dispute on each side's business reputation, (5)
distraction of management from having to attend to litigation, etc.
2. ATTORNEYS' FEES
The costs for an attorney undertaking mediation are difficult to gauge
without a detailed knowledge of the nature of the underlying dispute.
In your question, both sides are $625,000 apart. Clearly, this is a
sizeable pot for which both sides may fight quite vigorously.
Depending on how complex the underlying facts and documents are, you
should probably count on having an experienced attorney spend at least
20 hours to prepare, one day (about 8 hours if local) to attend
mediation hearings, and possibly some further time (5-10 hours) to
finalize and close any deal reached. These figures could easily be
much higher if lengthy correspondence or multiple contracts need to be
reviewed.
In states like California or New York, you should count on paying
$300-$400 per hour of attorney time, making for a total of at least
$10,000 including ancillary costs. The figure could be much more if
you go to a well-known law firm. In other states, hourly rates may be
lower.
Make sure that your attorney has practiced for at least 5 years and
has real civil litigation experience in business matters. Check that
your attorney does NOT spend most of his/her time practicing in other
areas such as family law or criminal law.
You may be able to negotiate a package deal, e.g. a flat payment of
$5,000 with a reduced hourly rate, e.g. $200 instead of $350.
Alternatively, you could work out a contingency deal - the attorney
gets part of any money recovered. This can be very energizing for an
attorney, but make sure you remain in control of the process. If the
case succeeds, the attorney would expect to make 2.5-3 times more
money than on a straight fee deal to make up for the risk that your
case may fail.
It may be wise to ensure that you have the same or another attorney
signed up beforehand to handle any resulting litigation or arbitration
(as per contract) if the mediation fails.
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