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Divorce Mediation Blog

Why we need a family law arbitration law statute in Massachusetts

Thursday, March 08, 2012

Family law arbitration is a concept whose time is way, way overdue. Arbitration is the private, consensual submission of a dispute to a person whom the parties select and regulate by contract; and that person’s job is almost always to make a final and binding decision for the parties, instead of a judge after a public court trial. The parties pick their decision-maker, accounting for skill, integrity, convenience, cost and subject matter expertise. They choose their place. They set the timing. They define their own rules of procedure – or they may choose to apply traditional courtroom-type rules. They receive their decisions within the time that they direct in their agreement to arbitrate. And, it is all private. So, why isn’t every one doing it?

For one, most people simply do not know that this alternative exists. Its history is mostly in the commercial area of law, and only occasionally have family law attorneys tried arbitration. When they do, they love it. Second, it is not obvious that it makes sense to pay for a decision maker, when taxpayer dollars pay for judges to do that job. At one level this makes sense, but anyone who has spent any significant amount of time in the courts knows that the increased costs of representation by lawyers due to the inevitable inefficiencies of the public system can outweigh the costs of an arbitrator many times, and sometimes many times over.

Third, many lawyers are uncomfortable with the prospect of the process (most have not tried it) because most available arbitrators whom they know well and trust are competing litigators, and selecting a direct business competitor to arbitrate a case when you might be in court against the arbitrator that morning or the next day in another case can be uncomfortable for lawyers and clients alike. Finally, lawyers are leery of the fact that under existing law, all binding arbitration is truly final, and therefore, not subject to appeal, as is a judge-made decision. So, it feels risky to lawyers, as it is the last stop for the client without further litigation recourse.

To address some of the impediments to family law arbitration, several other states have enacting Family Law focused arbitration laws. The American Academy of Matrimonial Lawyers (AAML), of which Bill and Chouteau Levine are both longtime fellows, has created a model act (that is, a format that individual states may modify to meet their local needs and practices) for matrimonial arbitration. In turn, the Massachusetts Chapter of AAML has adapted that model act to Massachusetts’ needs, and is in the process of seeking support for its eventual submission to the Massachusetts legislature. Bill Levine of LDRC is leading that effort on behalf of AAML-MA. You can see the Proposed Family Law Arbitration Act here.

What questions or thoughts do you have about Family Law Arbitration?

 

What Is a Business Worth in Divorce When the Owner Plans to Keep It?

Tuesday, March 06, 2012

When dividing assets at divorce, one of the more challenging jobs is how to divide the value of a business that one or both of the parties owns. Usually, the business is the source of the family’s income, and after divorce, it will become the source of alimony and/or child support. Usually, also, the business owner-spouse does not plan to sell the business, at least not for a long while, because it is the best way for this person to generate income and, therefore, support. Often, this business owner doesn’t think that he or she will ever sell it, and may not even realize that the business is a “marital asset.”

Yet, the law defines the business as a piece of property to be factored into property division, so it has to be considered. How, then, do we figure out the value to be assigned? This generally done by use of what are called “experts”, most often accountants with special training in business valuation. In simplest terms, the expert (s) (either one hired by each spouse separately, or often in mediation for example, one jointly hired person) decide (in very simplified terms) to value the company by estimating the kind of income that the company may generate for the business owner in the future and how much another person or entity would pay for that expected income.

Then, historically, valuation experts would reduce the estimate just described by factors known as “discounts”. These were used to account for such factors as the lack of a large number of others prepared or desiring to buy a small company (called “marketability”), or in situations where the business owner does not own a large enough share of the company to control the company him or herself (called “lack of control”) or the belief that the business owner is personally critical to the success of the business (called “key man”). These discounts often reduced the value of the business owner’s property interest by 15 – 30 per cent.

This all began to change in 2007, when the Massachusetts Supreme Judicial Court (SJC) decided a case that involved a man who owned two grocery stores on Martha’s Vineyard, called Bernier v. Bernier. On appeal from a trial decision, the SJC learned that the business owner-husband had no intention of selling the business. Because of this, the court concluded that it was not fair to the wife to reduce the value by factors related to a sale, when a sale was not expected to occur. The SJC believed the real value that was relevant to the case was the value of the expected income to the husband himself in the future (since he was keeping the stores), and the value to a hypothetical buyer.

Many experts called this change in focus a shift from “fair market value” (what a buyer would pay) – the traditional value in divorce cases -- to “fair value” (what the future income is worth to the spouse keeping the business). Because fair value implies that no discounts should apply, the result is usually a higher value and results in the non-owner spouse receiving more of other property to offset this higher business value.

A very recent case, Caveney v. Caveney, supported this view. A trial judge applied discounts to reduce the value of the business owner-wife’s 24.75 per cent interest in a business run by her father. The husband appealed these discounts and convinced the Massachusetts Appeals Court (an intermediate court that hears many more divorce appeals than the SJC) that because “the sale of the business is not imminent” that the discounts were wrong. The Appeals Court reversed the trial judge’s decision. The Caveney Appeals Court actually referred to the use of the “fair value” approach, confirming in the minds of many that this is actually the value premise to be used in all cases in the future where a sale is not contemplated.

This blog entry is a very simplified discussion of these issues, which tend to be very complex and full of individual judgment. In mediation we discuss these concepts and others that are difficult and important. We also encourage clients to have independent counsel to help them understand and know how apply and respond to these issues. People’s sense of “fairness” is certainly affected by the side of the question the person finds him or herself. What do you think?

 

What is Arb/Med?

Wednesday, February 22, 2012

Mediation is the facilitated negotiation of agreements between parties to a dispute. In divorce, for example, a mediator sits with the spouses, or the spouses and their lawyers, and works through the issues that are necessary to “settle” the case, and lead to a written and signed agreement. In a will contest or a damages case, the mediator may help the parties come to agreement on a “number” to be paid by one party to another. The parties themselves are the final decision-makers. The lawyers advise. The mediator supplies the environment in which the parties have an enhanced opportunity to speak, listen directly to each other; and the mediator intervenes as appropriate to inquire, to support, to inform, to provide focus and to generate ideas.

Arbitration, by contrast, is a process that is used when the parties cannot reach agreement themselves. They ask the arbitrator to make the decision for them after a “hearing” at which the parties and/or their lawyers give the arbitrator information that is generally called “evidence”. This includes the oral or written statements of witnesses by formal or informal means, and relevant documents. The arbitrator then writes and issues what is known as an “award”. The award is then usually brought to court for confirmation and a concluding court order, generally called a “judgment” or a “decree”.

Both mediation and arbitration are out-of-court processes that Levine Dispute Resolution Center LLC (LDRC) provides.

So, what is “med/arb”? It is a solution that people choose when they really want to try to achieve a negotiated settlement, but are determined to obtain finality in a timely and efficient way, even if their facilitated negotiated does not result in an agreement. People agree at the beginning that the same person will work as a mediator first to attempt to resolve matters by agreement, but if it fails, the mediator will “change hats”, and make a decision. Sometimes, the mediator turned arbitrator simply makes a decision with the information gained in preparation for and during the mediation phase; and at other times, after a follow up hearing.

Two common examples that are similar to this are called “parent coordination” and “discovery master” proceedings. In the former, the PC’s job is to try to stimulate agreement, but will make an ultimate decision, subject to court review, if the disputing parents cannot agree. In the latter, the master tries to get lawyers to settle on how information will be exchanged in litigation, but makes a “recommendation” for a solution if they do not ultimately agree. Then a judge enters an “order” if he or she agrees with the master’s recommendation. Med/arb is broader and is intended to be final (see our earlier blog post about arbitration of child custody and child support matters regarding some limitations.) It can apply to any kind of dispute, large or small. A judge cannot order it without the parties’ consent. It can be quite efficient, though some people worry about the arbitrator’s judgment being swayed by what he or she heard from the parties during the mediation phase, from information that was given less formally and maybe less reliably in the mediation stage than might be required in arbitration. The parties need to consider this and plan their rules and process to provide the protections that they feel they need. Remember, the parties make the rules in these private, consensual forms of dispute resolution.

An interesting variant of med/arb is called “arb/med”. We will talk about this in a subsequent blog post.

 

What is Family Law Arbitration?

Wednesday, February 15, 2012

Family law arbitration is a concept whose time is way, way overdue. But, what is it?

Arbitration is the private, consensual submission of a dispute to a person (the arbitrator) whom the parties select and regulate by contract. The arbitrator’s job is to make a decision (called an “award”) that is usually final, instead of a judge in a public trial in court trial. Arbitration generally is regulated by a state statute called the Massachusetts Uniform Arbitration Act (“MUAA”). The MUAA was created for business. It encourages companies and the people and other companies with whom they do business, to look outside of the courts for cost-efficient, expeditious, private and final resolution of disputes. The business world embraced this approach, and business arbitration is very common.

Over the years, as the Probate and Family Courts have become more difficult, less efficient and more costly to navigate to conclusion, individuals and their divorce lawyers have occasionally looked to arbitration as an alternative to court. As a result of people doing this, a small body of law has developed here. The appellate courts have generally looked favorably on this remedy, which after all, helps to divert cases from an overburdened public court system. The MUAA, which is called a “commercial” law, has been applied to family law in ways that are somewhat oblique. We will discuss this in a later blog entry, when we take up “Why We Need a Family Law Arbitration Statute”.

Here’s how Family Law Arbitration works. The parties pick their arbitrator. Arbitrators are usually experienced lawyers, including retired judges. The parties choose someone whom they and/or their lawyers believe has skills, reputation for integrity and expertise. The ability to pick an arbitrator based on his or her skill sets is unique to arbitration as compared to court, where judges are assigned to cases at random. Every judge has to be a “generalist” because he or she needs to hear every kind of case that finds its way into court.

After selecting the arbitrator, the parties and the lawyers themselves decide what part of their case will go to the arbitrator, which can be any part or all of it. They choose the time of the hearing. They decide the rules and information that will be used. The procedures can be as formal as court, or decidedly more relaxed. The parties direct the arbitrator when they want a decision to be made. They define the scope and kind of decision that the arbitrator will make. Finally, they agree on where the hearing will take place.

When the hearing occurs, the parties have the arbitrator’s sole attention: no emergencies intrude as happens in the courtroom. Even the length of the lunch break is determined by the parties themselves. If the parties want to have a long day, they do; if they prefer a shorter day, that is their decision, too. When the decision comes, it is within the time demanded by the parties.

Why doesn’t everyone who cannot settle by lawyer –to – lawyer negotiation, or mediation, use arbitration instead of public court trial? We will examine that question in a later blog entry.

 

What is good about mediating with lawyers present?

Tuesday, February 07, 2012

In a previous blog entry, we addressed the converse question to this one. Mediating with lawyers present is the predominant model outside of family law; and for family law outside of Massachusetts, it is far more common than the opposite. Despite the fact that most domestic relations mediation in this state proceeds without lawyers present, there are a number of good reasons why lawyers “in the room” can be advantageous. Inside or out, we always encourage a relationship with counsel throughout the mediation process.

The positive aspects of direct, present legal representation during mediation sessions that we will discuss here are that mediation with lawyers presents offers a quicker process, provides immediate opportunity for input on technical and strategic questions and one in which some clients feel more “supported”.

The reason that lawyer-attended mediation may be speedier than the alternative is that sessions tend to be scheduled for longer durations, such as half or whole day of time (as compared to roughly two-hour sessions spaced a week or more apart). The process is more intensive, intently focused and dependent as much or more on communications of counsel than on those of the parties themselves. Many cases that otherwise might involve several events resolve in one or two sessions, when lawyers participate directly.

The lawyers’ presence at mediation often occurs in a “caucus” style format. Clients have significant time alone with their lawyers to discuss questions about law, potential outcomes in court and strategy. Even when the mediation proceeds with everyone in the same room, there is time allotted for “breakout” sessions with counsel. That is one reason why we have multiple conference rooms. For some clients, this is ready access is preferable to consultation with counsel between sessions.

Finally, for some clients who do not wish to litigate, but do not feel entirely comfortable advocating for themselves, there is comfort in having a lawyer attend the mediation and speak principally for the client. Such a party might find mediation without counsel present to feel too personally confrontational; and other clients simply feel that the process is not “protective” enough without the active involvement of lawyers. Confidence in the capacity for effective communication is important.

For those people for whom the foregoing benefits outweigh those that we discussed in the earlier posting might want to consider a lawyer-attended mediation.

 

What's Good About Mediating Without Lawyers Present?

Tuesday, January 31, 2012

For many people, mediation with lawyers present is a contradiction in terms, as in "if we have a mediator, why do we need lawyers?"  In fact, mediation without lawyers present is the dominant form in Massachusetts family law practice, though not in commercial mediation generally here, or even in family law elsewhere.  While clients who choose to mediate without lawyers in "the room"  (in quotes, because much mediation with lawyers "present" involves "caucus-style" mediation, wherein the mediator shuttles between the parties, who are in separate spaces), many do, and all should, have lawyers with whom to consult between sessions.

But one of the attractions to mediation for clients is the desire to avoid the distortions in their own desired messages and the potential for exacerbation of tensions that comes with what otherwise be perfectly effective and well-intentioned advocacy by lawyers.  Some people would rather just speak for themselves.  Another motivation for non-lawyered mediation is that people perceive that they will more truly "own" their agreements if they are organically involved in the negotiations to close them.  Finally, many clients fear that the cost savings of mediation will be negated, or at least undermined, by having lawyers present.  (While true that lawyers add cost, they also add value in ways that many clients cannot anticipate in advance, when poised to enter into the sometimes mystifying word of family law.)

Two additional advantages for clients to enter into mediation without their lawyers on site are pacing and understanding.  Agreements that are the product of direct party-to-party negotiation tend to evolve at a slower and more deliberative pace, often resulting from periodic (1- 2 hours) sessions, paced out over the course of other life events.  As any divorce lawyer would confirm, coming to grips with family law issues is usually part of a larger emotional process.  People who are immersed in the shock/anger/grief/confusion of the early days of separation (and for some, not so early) need time to process the most intense personal crisis of their lives to date, and making prompt decisions at the expense of deliberative ones can result either in buyer's remorse (making a "bad" deal to get out of the discomfort of an unsettled situation) or being blinded/hindered by the emotional moment so as to be unable to recognized a "good" deal because of the confounding influence of negative emotions.

Mediated agreements that do not involve the "crutch" of having a lawyer present to formulate and articulate "positions" and demands, may be made with greater understanding for the people who must live the deal.  Especially if these clients are consulting with their lawyers between sessions, they have the ability to discuss their own interests in their own way, while still gaining clarifications, nuances and strategic guidance that help shape the ongoing process.   Yet, they have the time to question, to ponder, to re-think and to re-shape a settlement at a pace that may increase understanding and appreciation of the stakes, the concepts and the solutions.

But,there also advantages to mediating with lawyers present.  I will consider this in another blog post.

 

Why I am here (Bill)

Sunday, January 01, 2012

Author - William M. Levine, Esq

I began the path to mediation and arbitration at Levine Dispute Resolution Center LLC in 1990. After a dozen years of litigating family law cases (two and a half years as a child abuse and neglect lawyer for the Commonwealth of Massachusetts and then as a divorce lawyer in private practice), I already knew that I would want to have a second career. Did I think it would take 21 years to get there? Maybe. It started when, I saw that the American Academy of Matrimonial Lawyers (AAML) was offering training in matrimonial arbitration and I immediately saw that there was a path to using the knowledge and skills of the law office and the courtroom in a way to simplify, streamline and apply intellectual skills and judgment to family law problems; and to thereby mitigate the impact of divorce and related disputes on families in distress. It also offered to the arbitrator the opportunity to work in a private setting, without the restrictions of the public sector, and to make a living in a way that is less tied to the extremes of the public litigation system, and its stressful impact on families – both the clients and the lawyers. I thought that I could blend this work into my litigation practice and both build a new one within, and eventually perhaps, segue to arbitration as my primary work.

What I learned, though, was that family law arbitration was a concept whose time had not yet come to Massachusetts. While some lawyers and clients understood its benefits and pursued them on occasion (and I was fortunate to have some of the find me), this was a field that was (and still is frankly) in its infancy, here, and mostly elsewhere. I never stopped believing in its benefits and potential. In 1995, AAML offered another avenue which had greater currency in the family law marketplace but to which I had had little exposure: mediation. This process had been anathema to the hard-bitten divorce litigation elite that formed the AAML in 1962, but forces within the organization had fought for the chance to introduce and teach this discipline to the formerly negotiation-or-trial-only-oriented fellowship. This training opened another personal window onto the resolution of family law disputes in a less adversarial, sometimes more effective and if successful, far less bruising process for families and practitioners alike.

From that point forward, I knew that I would have a second career. I just didn’t know when..

From 1995, while my law practice continued to grow as a traditional representation of clients in the negotiation, trial and appeal of family law case, I also pursued mediation and arbitration work. I continued (and still do) to pursue (and teach) professional trainings in both areas, and I served for many years on arbitration committees, including as national chair of the arbitration committee of AAML from 2006 to 2009, and for the state AAML chapter before and after. From all of this activity, I learned two critical things: 1) that these alternative dispute processes do work, often well and efficiently, for a broad variety of people and subject areas; and 2) that you just can’t build a sustaining and satisfying practice doing them within the structure of a litigation law firm.

So, after 30 years in the best law collaboration and partnership that any lawyer could possibly wish for, after three successful decades of negotiating, trying and appealing high end and complex family law cases – while pursing ADR as an interesting and satisfying adjunct – I find myself now jumping off the professional ledge into the world of fulltime mediation and arbitration practice. The fact that I am doing it while I am young enough to make it an energetic and, I hope, dynamic practice is a bonus, but one that pales next to the chance to do it with my life partner and wife, who is now my business partner, too!

Will we take part in pushing arbitration to the next level? Will we establish a high level mediation and arbitration firm that creates a new paradigm for such a practice? Stay tuned, and join us in pursuing this dream.!

 



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