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Divorce Mediation Blog

Arbitration Where Life Imitates Sport: Part 4

Friday, September 28, 2012

In our last 3 entries we described baseball arbitration, how it may apply to probate and family law property matters, and some drawbacks in property and probate settings. We conclude here pitfalls of baseball arbitration in family law support matters.

All Massachusetts family law support statutes have pockets of discretion reserved to the court. In our new alimony statutes, there are many areas where the court may make discretionary decisions and deviate from statutory presumptions and guides, including: the type of alimony, the length of alimony, the amount of alimony, the retirement age cessation of alimony, the impact of cohabitation, the allocation between alimony and child support for tax purposes and income imputation. When applying the child support guidelines, despite their formulaic nature, a judge can exclude income source form consideration, impute income and determine allocation of the costs for “extras”.

As with property, an arbitrator may have a very different “take” on how to allocate income between the parties. A level of creativity may be applied to analyzing support matters, especially in the area of taxation and creation of incentives. Baseball arbitration, where the decision-maker loses the discretion to make an award that has not been proposed by one of the parties, may cost the parties the benefit of a truly objective look at their situation, and a surprising and maybe mutually beneficial result..

Baseball arbitration is not for every probate or family law case, but it bears careful consideration in many.

 

Arbitration Where Life Imitates Sport: Part 3

Friday, September 21, 2012

In our last entry we described baseball arbitration and how it may apply to probate and family law property matters, in encouraging settlement or less extreme forms of bargaining. In Parts 1, we briefly described baseball arbitration and it origins. Now, we begin to consider some drawbacks of this process in the family law and probate law context.

Baseball arbitration was created to address a unique situation: what salary would a player earn for the coming year. The arbitrator is required to compare the player to other players’ pay level and performance. Discretion is limited to deciding whose presentation is more compelling in those comparisons, team’s or player’s. Fairness is not a part of the equation.

Probate cases may closely approximate the baseball context. Both sides feel that they are right, and their outcomes hinge on an assessment of a fact: what did the testator intend? Or, what is the value of the asset at issue? Baseball arbitration may cause contestants to hedge preservation of principle in the name of principal retention, and make offers that are more conducive to settlement or practicality.

Family law cases may fit more uneasily. Property division in most states, including Massachusetts, is based on “equitable” principles. That means that a judge or arbitrator shall do that which he or she thinks if fair, after determination and then consideration of enumerated facts. Those facts are dictated by the legislature, as shaped by the appellate courts. But, what the trial judge or the arbitrator does with those facts is broadly discretionary, so long as function is not abused.

Through discretion, property divisions may deviate substantially from that which either side has offered, because of the human element that is embodied in discretion. In anything so complex as a marriage, there may be many views of that which is fair. The law itself maybe fit uneasily into the facts of a given case, and the judge or arbitrator my be in the advantaged position to ferret out the unique factor in a case that turns in one way or the other, because he or she is not tethered to partisan views and wishes, as lawyers and litigants must be, by definition. There is no question that baseball arbitration may eliminate the deeply human element of discretion that can prevent a miscarriage of justice from occurring. We conclude with support matters in the next entry.

 

Arbitration Where Life Imitates Sport: Part 2

Friday, September 14, 2012

In Part 1, we briefly described baseball arbitration and it origins. Now, we discuss how this methodology may apply to family and probate law cases.

In every probate and family financial case, one party is seeking something that the other party also wants, whether it be a specific piece of property or a dollar sum. Sometimes this desire is expressed as a percentage of a probate or marital estate, or income in the case of support.

When parties try cases, they tend to work from the extremities because they anticipate that the judge or arbitrator might “split the difference”, so a party reasons, “why not stretch the range in my direction? If I ask for more than I really want, I may get what I need”. When both parties do the same, settlement chances diminish and the chance of a windfall/stinging loss increase. Baseball arbitration urges both parties towards to middle, so as to cut the risk of the other side’s proposal being deemed the more reasonable.

The applications of baseball arbitration in the probate and family law contexts may include a dispute over a percentage share of the estate. In divorce, a case that is not a clear cut case for 50-50, parties may be more inclined to stay within a more modest range of disparity such as 60-40, to avoid the risk of losing at a more extreme percentage, if the arbitrator concludes that the spouse has over- reached. In business or other property valuation, wild highs and lows are discouraged. The same principles will apply to probate estates.

In a support matters, the support payor may well offer more to avoid the chance of the baseball arbitrator picking the over-the-top request of the payee, but since the same forces are at work, the support recipient is likely to curb his or her demands for the same reason.

The results: the parties are closer together before trial, so the chances of settlement are enhanced; and the arbitrator is more likely to choose a result that is closer to the range with which both parties can live, and reducing the potential for windfalls/calamitous results. But, there are drawbacks, and we will discuss them in our next entry.

 

Baseball Arbitration - Where Life Imitates Sport: Part 1

Friday, September 07, 2012

A recent article in Massachusetts Lawyers Weekly advanced the benefits of “baseball arbitration” in civil matters generally. It can apply in family law and probate law matters quite effectively. First, what is it?

Baseball arbitration, which literally arose from an MLB labor agreement, exists to resolve disputes about player salaries, but in a way that is meant to encourage settlement before the arbitrator’s hearing. By all reports is extraordinarily effective at doing just that.

Here is how baseball arbitration works. The sides each submit an offer, the player the higher salary, and management the lower. The arbitrator, after hearing, has limited authority: he must pick one. He may not award any other salary.

The effect of this high-risk methodology is to push the two sides as close together before the hearing starts as possible. In the player’s case, he fears that if he asks a ridiculously high salary and the team’s offer is within the mainstream of results for similar players, the arbitrator will find for the team; and the reverse is true for management. The result is smaller gaps, and except on rare occasions, settlement.

We will talk about how this may apply to family and probate law disputes in our next entry.

 

Spousal Medical Insurance After Divorce: A Priority

Wednesday, August 08, 2012

Many, many years after Massachusetts’ (pre-Romney) groundbreaking effort to provide medical insurance for non-employee former spouses beyond the rights provided by the federal COBRA laws, we remain the most advanced state in this regard; but not without our own continuing uncertainties. In the most general terms, COBRA allows a divorced heterosexual person (don’t forget the Defense of Marriage Act: it is, regrettably, still national law) to buy continuing health coverage through the other spouse’s employer plan for a period of up to three years post-divorce only, at a cost of 102% of the cost of an individual plan member. Massachusetts, by contrast, offers an indefinite period of coverage at no cost beyond that required for the employee spouse to cover himself and children under a family plan without a fixed limitation of years; and when child coverage is no longer necessary, the non-employee may still have coverage on the family plan if the employee has not remarried, without a time limit. If the employee spouse marries another person, the former spouse may still be covered at the cost of an individual employee, by use of a rider. The non-employee spouse loses these rights whenever she remarries.

Yet, when the law was enacted, it had a loophole that has not, to this day, been closed:  self-insurance.  The law is an insurance statute and not a generic healthcare provision, so employers who choose not to buy an insurance product for their employees, but instead pay defined medical costs themselves, are exempt for the law, even if the hire an insurance company to provide administrative services to help run their internal plan.  It is likely that self-insurance employers become “insured” for the law’s purposes if they buy “stop loss” insurance (that is, if costs go above a certain amount, an insurance company steps in to cover the excess – think catastrophic coverage for the employer), but this information difficult to ascertain, uncertain and costly for the consumer to enforce.

There also remains a lack of clarity about what is a Massachusetts employer for purposes of the law. Many companies who do business here, but are based elsewhere, continue to contend that their obligations are covered by the (lack of) law to trump or augment COBRA in their home state. There is also uncertainty about what happens to the non-employee former spouse’s coverage if the employee changes jobs or moves out of state. To make matters more difficult, many company human resource departments appear, genuinely or not, to be hearing about our laws for the first time when counsel or client inquires.

For all of these reasons, it is a priority in any divorce action for the parties to gain and share the greatest level information possible about the employee spouse’s coverage, at the earliest time available in the divorce process. This information is all spelled out somewhere in paper or digital format; and if it is left to be treated as a last minute detail of divorce negotiation, or as one that is informed by casual representations only, disastrous and unanticipated consequences can occur. Sometimes, significant time must be invested in communicating with the employer about its state law obligations before they will be acknowledged and honored. In some cases, litigation, or the suggestion of same, may even be necessary.

As always, knowing is essential; and time is an ally.

 

Same Sex Marriage Meets Civil Union Dissolution

Wednesday, August 01, 2012

In last week’s Massachusetts Supreme Judicial Court’s (SJC) case of Elia-Warnken v. Elia, the court ruled that a civil union from another state (Vermont in the facts of this particular case) is the legal equivalent of marriage when it interacts with our laws of marriage and divorce. The question arose: when a person became part of a civil union in a state that had not yet recognized the right of same sex marriage, and had not obtained a legal dissolution of that union before marrying here, does this constitute polygamy, making the Massachusetts marriage void. The answer was a clear “yes”.

In doing this, the SJC maintained a consistent view that it will not tolerate a continuation of the national practice (that is, in most states individually who do not recognize same sex marriage, and in federal law, where the Defense of Marriage Act (DOMA) precludes it for federal purposes, and exempts the states from having to acknowledge it) of domestic discrimination against gays and lesbians. The court reasoned that to treat civil unions as anything less than a marriage for our state’s purposes would do exactly that.

So, for a civil union partner to marry in Massachusetts he or she must dissolve one legal relationship before entering into another, whether the prior one be one that is called “marriage”, or a civil union. Strike a blow for marriage equity and against one fear mongered by those who continue to champion DOMA: that somehow same sex marriage will lead a creeping acceptance of polygamous marriage.

 

Filing and Service of a Divorce Complaint During Mediation: It’s Not a Sin

Friday, July 20, 2012

We have been thinking a lot lately about what some see as mutually inconsistent behaviors: the filing and service of a divorce complaint during mediation. There are many reasons why a person may feel a need to file while mediating because of a host of rules and statutes that filing and service trigger, such as asset restraining orders, mandatory document exchanges, the running of certain waiting periods and quite recently, the fixing of “length of marriage” for application of Massachusetts’ new alimony laws.

Many mediation clients may feel that such a filing and service is hostile to the notions of good faith meditation, which objectively stated, is not always the case. Yet, meditation clients enter the process because they need to deal with each other; and that includes the attitudes that each of them may hold on this very subject. Each person needs to make cost benefit decisions throughout, and this is just one of many.

The role that the mediator plays in either introducing this topic to the parties or in addressing it when raised by one of them (or by counsel) bears more critical thinking. We believe that mediators should not handicap their clients with a doctrinaire view that assigns ill motives to the person who is considering, or should be considering, a filing. Rather, neutral professionals have an obligation to encourage transparency, solid information and informed decisions, including this one.

This subject is a complex and layered one and we are working on a longer and far more detailed treatment of this important aspect of mediation, cutting across the spectrum of family law, and we will post it here after its publication.

 

Refinancing the Mortgage After Divorce: When Can You Do It?

Thursday, July 12, 2012

One issue that comes up in every divorce in which the parties own a home is: when can the party receiving ownership of the home obtain a release of the other spouse’s obligations under the mortgage by refinancing this obligation? This is important to the spouse who is leaving the house behind for at least three (3) reasons: 1) he or she remains liable to the lender for the underlying mortgage loan note, despite the allocation of responsibility between the parties under their settlement agreement; 2) because late payments or even default by the other party can still hurt his or her credit rating; and 3) this person’s ability to buy a replacement residence may be stymied by his or her continuing liability on the joint mortgage.

As important as a release is to the spouse who needs a new home, it is equally necessary to reach a re-finance agreement that the party remaining in the home (often to provide continuity for the parties’ children) can actually accomplish. For years, divorce agreements required this to be accomplished within 3 or 4 months after divorce, on the assumption that this was enough time to apply to multiple lenders, go through underwriting and close. These rote provisions are no longer sufficient.

The 2008 banking crisis and subsequent taxpayer bailouts were caused partly by bad mortgage lending practices. Since then, mortgage underwriting has become more stringent with regard to the reliability of alimony and child support payment streams as qualifying income for the granting of a new mortgage. This is true, even where the new interest rate and monthly payment is lower than the existing one, where the applicant’s credit history is clean and even when the party has substantial assets.

While lenders vary in their requirements, one current practice seems to be that if the former spouse is relying on the anticipated alimony and/or child support stream to provide more than 30 per cent of income qualification, that cash flow will have to be a reliable, documented fact, for a full year. Banks will differ on when they “start the clock” on that year, whether a year from the divorce judgment, or perhaps earlier when there has been a formal, enforceable and collected support payments.

Of course, this delay increases the chances that the interest rate environment will be different at the time of the actual re-financing transaction, as compared to the known circumstances at the time of divorce. Delay may benefit of the re-financing party (if interest rates drop); or the opposite could occur (more likely in the current historically low rate environment).

In divorce mediation, this issue needs to be carefully discussed and considered so that the legitimate needs and concerns of both parties are addressed as fairly and as effectively as possible.

 

Counterpoint re: Alimony Reform and Cohabitation

Tuesday, July 10, 2012

By: David H. Lee Maureen McBrien’s opinion piece in Lawyers Weekly of April 30, 2012 was interesting to read as a perspective of an attorney facing a new issue in the area of family law.  It is important that the changes in the Alimony Law, which went into effect March 1, 2012 be highlighted, and that dialogue ensue with respect to the provisions of the newly enacted law.  Her opinion, however, specifically with respect to her subsection on “When is a modification warranted on cohabitation grounds?” seems in large respect to be inconsistent with the wording of H 3617, the Act Reforming Alimony in the Commonwealth, particularly where she suggests that relief under the Act would not be available if cohabitation had begun prior to March 1, 2012.  Her conclusion that the cohabitation relationship has to have begun post-March 1st in order to seek relief of modification based on cohabitation is not accepted.

The measuring focus for any modification of a divorce judgment is the change of circumstance that has occurred following the entry of that judgment.  Ms. McBrien suggests that the change of circumstance based on cohabitation would require that any such cohabitation be after the effective date of the Act; namely, March 1, 2012, to be a basis for relief.  Now, rather than a pure standard of change of circumstance, the facts supporting cohabitation after the judgment, consistent with the provisions of Section 49(d), provides the basis for relief under the Act.

While Section 4(a) of the Act indicates that Section 49 of Chapter 208 of the General Laws shall apply prospectively, alimony judgments entered prior to March 1, 2012 shall terminate on three bases: (1) only under the terms of such judgments; (2) under a subsequent modification; or (3) as otherwise provided for in this Act.  Section 4(b) of the Act indicates that the enactment into law of Sections 48 through 55 of Chapter 208 of the General Laws shall not, in and of itself, be a material change of circumstance warranting modification but for existing alimony judgments that exceed the durational limits under Section 49 of Chapter 208 of the General Laws with respect to which the Act shall be a material change of circumstance which warrants reduction.

Thus, events which have occurred subsequent to a divorce judgment entered prior to March 1, 2012 can serve as a basis for modification.  These events are not limited merely to a reduction in or increase to the income of one of the parties, but also may include events subsequent to the entry of the judgment of divorce with respect to which relief is provided for in the Act.  These specifically include cohabitation and reaching full retirement age.  The reason that the Act itself can serve as a change of circumstance with respect to which a modification shall be based is that the durational limits referred to in Section 49 are measured with reference to the length of the marriage.  The length of the marriage which has been ended cannot be extended so there is no post-divorce judgment event which could serve as a basis for change of circumstance and modification.  A specific indication that the durational limits within the Act shall be deemed a material change of circumstance provides the opportunity for relief based upon the terms of Section 49.

The particular bases for modification of cohabitation or achieving full retirement age, are ongoing circumstances beyond the entry of a judgment of divorce.  One continues to get older after the judgment of divorce. One can commence and continue on a daily basis, a period of cohabitation beyond the entry of a judgment of divorce.  One cannot, however, extend the length of the marriage.  With respect to cohabitation, in particular, each day of cohabitation is effectively a new starting point such that the three month period of time referred to in Section 49(d) runs from each day forward.  Therefore, irrespective of whether the commencement date of the cohabitation was prior to March 1, 2012 and continues beyond March 1, 2012 a Plaintiff seeking relief by reason of cohabitation would not be precluded from bringing that action for relief.  There is nothing in the Act to suggest that a cohabitation which began prior to March 1, 2012 and continue beyond March 1, 2012 is outside a class of cohabitation with respect to which relief can be provided.

Ms. McBrien’s suggestion that the use of the words “upon the cohabitation” suggests problems for alimony payors where the recipient’s cohabitation began prior to the passage of the Act is not consistent with the reading of Section 49(d). Section 49(d) indicates a mandate that alimony shall be suspended, reduced or terminated upon the cohabitation of the recipient spouse when the payor shows that the recipient spouse has maintained a common household…for a continuous period of at least three months. The word “upon” is the basis for the suspension, reduction or termination of alimony. It is not an event of time (read “based upon”). The time event is “when the payor shows”.

As with all standards of modification; namely, seeking relief from the entry of the last judgment, cohabitation now serves as a basis for seeking post March 1, 2012 relief as provided for in the Act.  The prospective nature of the Act precludes going back to an event of cohabitation during a period of time prior to the effective date of the Act and seeking relief through reimbursement of alimony, but does not prohibit relief, based on cohabitation, from an alimony order that otherwise would extend beyond March 1, 2012 merely because that cohabitation first began prior to March 1, 2012..

It should be noted, as well, that there is no restriction in time regarding when it is an action for modification based upon cohabitation can be commenced after March 1, 2012 as there is in Section 5 applicable to durational limits and Section 6 with respect to reaching full retirement age..

Conclusion

One may seek prospective relief with respect to a pre-March 1, 2012 alimony order based upon cohabitation as defined in Section 49 irrespective of whether that cohabitation commenced before March 1, 2012.

David H. Lee was a Co-Chair of the MBA/BBA Alimony Task Force and a member of the Massachusetts Legislative Alimony Reform Task Force.

Fern Frolin (a member of the Massachusetts Legislative Alimony Reform Task Force) and Denise Squillante (Co-Chair of the MBA/BBA Alimony Task Force and a member of the Massachusetts Legislative Alimony Reform Task Force) note their concurrence with this opinion.

This piece was published as a Letter to the Editor of Massachusetts Weekly, July 9, 2012 edition.  Posted with the author's permission.

 

The Defense of Marriage Act: Defending the Indefensible

Thursday, July 05, 2012

Since 2004, gays and lesbians have been legally free to marry in Massachusetts. That is now the law in six (6) states and the District of Columbia. Yet, by congressional action, signed into law by President Clinton, legally married couples here are not legally married for any federal purpose, nor is their status respected in most other states.

The Defense of Marriage Act (DOMA) (declaring a marriage as only between one man and one woman for all federal law purposes and relieving other states of any obligation to recognize a same sex marriage permissibly created in another state) denies same sex spouses more than a thousand benefits, including the right to file joint tax returns, to have tax privileged spousal medical benefits and access to many social security and veterans survivors benefits. In divorce, gays and lesbians may not transfer property without taxation at the time of divorce, cannot claim alimony tax deductions and are prohibited from transferring pension assets without triggering tax consequences, which can be sometimes catastrophic; rights that all hetero-sexual married couples take for granted.

A group of plaintiffs sued in the United States District Court for the District of Massachusetts in the case of Gill v. O.P.M. and 2 companion cases, seeking to have DOMA declared unconstitutional. After defending DOMA and losing in the trial court, the Obama Administration declined to defend it again in the appeal of Judge Joseph Tauro’s judgment wherein he declared DOMA to be unconstitutional. The Department of Justice declared the statute indefensible. The United States Court of Appeals for the First Circuit, agreed with Judge Tauro and upheld his judgment.

The next stop for this controversy is the United States Supreme Court, where others will stand in as surrogates for the federal government in seeking to reverse the First Circuit’s decision, doing what the current government refuses to do: defend the indefensible.

 



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