As we continue to look at Dick and Jane and the topic of divorce, we have moved through a temporary hearing, looked at their discovery issues and we are now headed for a showdown.  Prior to a final trial in the case, the parties will be required to attend mediation in an effort to resolve the case.
Mediation is not the same as arbitration, though the two are frequently confused.  Arbitration is where the parties agree to submit the case (or parts of the case) to a binding decision by a third party that they have chosen or whom has been appointed.  Arbitration is an option for resolving a divorce, particularly in instances where the parties wish to maintain privacy and/or would like someone with unique experience or expertise to consider all or part of the case.  Mediation, on the other hand, is a settlement conference that may or may not result in an agreement.  Either party is free to terminate mediation at any time and for any reason.  Neither party can be compelled or forced to agree to anything at mediation.

Despite being non-binding, mediation is overwhelmingly successful at getting cases resolved.  Cobb County’s Office of Dispute Resolution generally reports an annual settlement rate of 60 – 75% in domestic relations cases.  The actual settlement rate attributable to mediation is likely higher as a number of cases settle in the days leading up to mediation or settle after mediation due to the progress made in that setting.
Mediation begins with the selection or appointment of a “neutral” or mediator who will facilitate the process.  Mediators in domestic cases are usually, but are not required to be, lawyers.  Many mediators are retired Judges from the Superior Court who bring with them years of experience in trying and deciding domestic cases.  Mediators receive initial training through the Georgia Office of Dispute Resolution and also have to maintain annual continuing education requirements.
The selection of a mediator is essential to the mediation process.  Dick and Jane won’t likely know anything about the mediator and his/her mediation style.  The lawyers for each will have a memory bank upon which to draw and will likely have conversations about possible mediators.  Some mediators have a laid back, facilitative style whereby they are able to pass settlement offers between parties and massage each party toward the other party’s viewpoint.  Other mediators respond well to emotional outbursts and have a “counselor” type approach and are able to listen and provide sympathetic ear toward the hurt, anger or frustration being displayed, while also encouraging the party to let that emotion drop and keep the process moving.  Lastly, some mediators are the more forceful “suck it up and get over yourself” type, who can provide each party with an effective dose of what the unsympathetic reaction of a Judge is likely to be.

Mediation will generally start in a group session.  The mediator will review the mediation process, the rules and the role of the mediator.  The parties and lawyers are all asked to sign an agreement indicating that they have read and understand the rules of mediation.  Most important among the mediation rules is confidentiality.  In order for settlement conferences to be productive, both sides must be comfortable making compromises.  If a party felt that a compromise could be admitted in Court, the process would break down quickly.  For that reason, any admission or compromise or settlement proposal made in mediation is confidential and not available for use in Court.

Some mediators allow for each side to make a general statement in the group session of the issues to be resolved.  However, this process can be detrimental to the mediation atmosphere.  Often times, the lawyer or the party will become accusatory and argumentative regarding their position on the issue.  For this reason, many mediators and lawyers prefer to skip the overview portion of the joint session and move immediately to the caucus portion.

During caucus, the mediator meets with each party and his/her lawyer privately.  In that meeting, the mediator wants to know three pieces of critical information:
1) What are the issues to be decided? (i.e. alimony, custody, child support, specific property division)
2) What is that party’s position on each of the foregoing?
3) What are going to be the stickiest issues or possible barriers to getting a deal done today?

Of the foregoing, the third item is critical to success.  There are some barriers and issues which will torpedo a mediation faster than others.  Some issues cannot, by their nature, be compromised.  For example, if the issue being determined is related to custody and the Mother truly believes that the Father is abusing the child and wants no visitation or strictly supervised visitation, but the Father adamantly denies the abuse and wishes to have extended visitation, it will be difficult to compromise the relative positions.  Alternatively, the parties may not have values on property or business interests completed.  The parties may be unwilling or unable to approximate values and cannot productively mediate the case.
It is essential that each party arrive to mediation prepared to settle, but also prepared in general.  Mediation, even if unsuccessful, can be treated as a dry run for trial and used to gain insight into the positions of the other party and to glean a reaction from a neutral third party.

Next month, we will move Dick and Jane on to a final trial?  The question to consider will be – judge or jury?

As we continue to look at Dick and Jane and the topic of divorce, recall that the process is underway and we have moved past the temporary hearing into the discovery phase. This month and next, we will look into the discovery process and determine the information that each side will need to have to move the case into a posture for settlement or a final trial.

From Jane’s standpoint, the discovery process will center on two areas, the first of which will be personal to her but ultimately of little long term benefit to the Court and the second of which will be critical to resolution of the case by settlement or trial. Unfortunately, too many litigants become obsessed with the former and minimize efforts on the latter.

First, Jane is undoubtedly going to want information on the subject matter of Dick’s affair. There is no issue that this subject is relevant to the issue of divorce, but not to the extent that Jane might think. One’s emotion side drives this quest for information and it is not uncommon for someone in Jane’s position to seek answers to these questions:

1. Who is she?
2. When did it start?
3. How long as it been going on?
4. Is Dick intending to stay in a relationship with this person or was it a “fling?”
5. Why did this happen?

While many of these questions are critical for Jane to resolve in order to move past the emotional issue of the affair, many of these answers will have little relevance in Court. Judges are very accustomed to hearing about misconduct and tend to try keep focused on the incomes of the parties and assets to be divided. The Court will want to be aware that an affair occurred, but usually only needs to know:

1. When did the affair start?

   If the affair is post-separation, it did not cause the divorce unless it can be shown that the affair or relationship was contemplated or “in the works” prior to the separation. If the affair was 5 years before the separation and ended as quickly as it happened, it probably is not the cause of separation either.

2. Has Dick used marital funds in furtherance of the relationship?
3. Is the relationship ongoing and does it have the potential to impact the children?

It is not uncommon for one spouse to ask the Court for an order prohibiting Dick from keeping the children away from individuals with whom he was romantically involved. For many years, the Court would enter these prohibitions as a matter of course, particularly in cases where an affair had occurred. However, a series of appellate decisions in Georgia have consistently held that a blanket restriction on contact with members of the opposite sex or individuals with whom a party is in a romantic relationship is overly broad and unenforceable unless there is a specific finding that the situation or introduction would have a harmful effect on the children. Some appellate examples include:

• Ward v. Ward, 289 Ga. 250, 250–51(1), 710 S.E.2d 555 (2011) (holding that trial court abused its discretion in amending visitation provision in final decree to provide that mother “ ‘shall not have any overnight male guests while the minor children are present’ ” because the provision would prohibit the mother “from having visitors with whom she has no romantic relationship”);
• Arnold v. Arnold, 275 Ga. 354, 354, 566 S.E.2d 679 (2002) (holding that trial court abused its discretion in prohibiting children “from any contact with a certain named friend of Wife” when there was “no evidence that the relationship between Wife and her friend was or will be harmful to the children, or that they ever engaged in any inappropriate conduct in the presence of the children”);
• Brandenburg v. Brandenburg, 274 Ga. 183, 184(1), 551 S.E.2d 721 (2001) (holding that trial court abused its discretion in prohibiting father from exercising visitation with children in the presence of his girlfriend, even if the two should marry, when there was no “evidence that such relationship had or likely would have a deleterious effect on the children beyond that normally associated with divorce or a parent’s remarriage”);
• Mongerson v. Mongerson, 285 Ga. 554, 556(2), 678 S.E.2d 891 (2009) (holding that trial court erred in prohibiting husband “from exposing the children to his homosexual partners and their friends,” which was “an arbitrary classification based on sexual orientation” but holding that trial court’s decision to prohibit children’s exposure to paternal grandparents was not an abuse of discretion when evidence showed that grandparents “had been physically and emotionally abusive of the children”), overruled on other grounds by Simmons v. Simmons, 288 Ga. 670, 706 S.E.2d 456 (2011).

The second area of discovery which is far more critical to the case and is often minimized by the party is the financial aspects of valuing Dick’s company. In an upcoming blog, we will devote an entire discussion to the process of valuing a marital business. In the context of this discussion and the initial discovery requests, Jane needs to be highly focused on the operation of the business more than the financial outputs. Most often, a party will request information about the numbers, for example:

1. Profit and loss statements;
2. Financial statements;
3. Tax returns;
4. Bank records; and
5. Balance sheets.

This information is certainly sufficient for generating a value of the company. In fact, if limited to this information there would be little point in Dick and Jane hiring opposing financial valuation experts. On this information alone, the generally accepted standards of the valuation industry would cause most valuation experts to generate a result that is not substantially different from one another. However, the financial records only tell a portion of the story. For reasons we will discuss in greater detail, it is far more important that Jane gain an accurate picture of the following:

1. Largest customer and percent of revenue;
2. Market share data, including industry competitors;
3. Covenants not to compete among key employees;
4. Previous value statements of enterprise v. personal goodwill;
5. Executive compensation packages; and
6. Recurring v. Non-recurring revenue items.

This information will be critical in “moving the needle” up or down and will generate the adjustments made by a valuation expert. This is where some subjectivity can enter the process and Jane’s attorney will need to be armed with information to bolster her expert and attack the expert retained by Dick.

Next month, we will look at the discovery process from Dick’s standpoint. Dick’s major concern should be balancing the provision of information against his own self-interest.

As we continue to look at Dick and Jane and the topic of divorce, recall that the process is underway. As we move through the process, we are going to examine each phase from the perspective of Dick and from the perspective of Jane. Last month, we looked at the temporary hearing from Jane’s perspective. This month, we approach the same hearing from Dick’s standpoint.

Dick’s primary concerns moving forward are as follows:

1. Maintaining contact and a relationship with his children;
2. Making sure that the funds he earns support Jane and the children but don’t prohibit him from providing for them either;
3. Minimizing the financial impact of the divorce and avoiding funding a “war chest” for the attorneys;
4. Shielding his marital indiscretions from the case.

Just as Jane should view all of her goals at the temporary hearing through the lens of family stability, Dick should have the same approach.

On a temporary basis, he may be willing to concede that Jane is the primary physical custodian but he should ensure joint legal custody. Dick may have some subject areas of legal custody over which he would like to have final decision making authority. For example, he may feel strongly about public v. private school, certain medical treatments of the children or their religious upbringing. The Court may not decide final legal custody on a temporary basis, but if Dick does not make these areas known at this phase, he will lose out on his ability to do so later.

The parenting time and visitation schedule will be an important opportunity for Dick to demonstrate his role as a parent and Father. If he bites off too much time and cannot keep it up due to work conflicts, he will play right into Jane’s arguments. If he takes too little time, he runs the risk of becoming a “Disneyland Dad” or guy that just sees his kids every other weekend, but is not really involved in their lives. The best outcome would be for Dick to try and obtain visitation time that blends weekends and weekdays so as to give him quality time and involvement with the children. Schedules like Thursday after school until returning to school on Monday morning one weekend and Thursday after school until returning to school on Friday morning the next weekend are becoming increasingly popular with the Courts. The schedule is predictable and structured and minimizes back and forth for the children. In addition, the children are exchanged through the school, rather than in a parents driveway (which can be tense and lead to disputes).

Financially, Dick needs to step up at the temporary hearing and support the family, but he must be prudent in doing so. The temporary order should be structured so that it is just that, temporary. Most Judges and Courts are going to expect Jane to seek some level of employment. If she is receiving all of the funds that she needs or wants on a monthly basis, she may not be inclined to push for work. From Dick’s standpoint, he would be best to volunteer to pay certain monthly expenses (mortgage, utilities, car note and insurance, etc…) directly rather than just giving the money to Jane. On a temporary basis, all of the foregoing is commonplace. This creates a feeling that this structure is not permanent and will be revised on a final basis. On the contrary, if Dick were just to pay over a sum of money each month in gross support, a precedent could be created for a final order.

Attorney’s fees and the payment of Jane’s attorneys will be a major struggle for Dick. If he cuts off funds to Jane completely, she cannot obtain adequate representation and the case will bog down. On the other end of the spectrum, if she has or receives a large amount of funds, she may be inclined to start a major battle.   Dick should concede that some fees may be appropriate (particularly in light of his misconduct problem) so as to appear reasonable, but should push that additional attorney’s fees be borne by the parties individually or be paid equally utilizing marital assets as the source. Some Judges will state that it is very necessary that both spouses (regardless of fault) need to “feel the pain” of the divorce process if they choose to keep fighting. The goal of every Judge is for the parties to settle the case themselves. If one side is paying 100% of the costs on both sides of the fight, the non-paying side has no incentive to ever end it.

Next month, we will look at the discovery process from Dick and from Jane. We will focus on what each side needs to gain by way of information, particularly as it relates to the valuation of the marital business.