Is Mediation the Best Answer?

The question is not whether mediation is the best answer. The question is whether mediation is the best answer for you with the facts that exist in your case. The answer is complicated and relates to your objectives, the facts of the case and in large part the mentality of your spouse. This article explores those issues.

The objective of this article is not to convince a person not to mediate their divorce. This objective is to help a person in making the right decision as to how best to resolve the issues that exist with a person’s spouse and to provide guidance to assist in the analysis. If you elect to mediate your divorce this article will help you maximize the chances of a successful mediation.

Under the right circumstances, mediation can be successful in resolving family law issues. The success of a mediation depends on a large number of important factors. The main determinants are the attitudes and approaches of the parties and the nature and complexity of the issues. There are many potential traps in mediation and thus parties opting for mediation need to go into it with their eyes wide open. A divorce can be an extremely complex matter even when it appears to be rather straightforward. A divorce is a financial transaction. It is the division of a partnership. A mistake made in the transaction can have long term irrevocable consequences that are irrevocable.

Thinking that mediation makes the divorce simple and treating it like a casual event is a huge error with potentially serious consequences. Some people opt for mediation based simply on the belief that it is the fastest and easiest way to end a marriage, without really thinking through the issues and without understanding his/her spouse might be seeing mediation very differently. He or she may be very strategic and may be using mediation, not as the fastest and easiest solution, but rather as the best way to take serious advantage of the other party.

Good Candidates For Mediation

For mediation to be successful, both parties should be good “candidates” for the mediation process. This means that the parties:

1. 1. Trust each other;
   2. Are not hostile personality types;
   3. Are both ready to end the relationship;
   4. Are both ready to resolve the issues;
   5. ARE BOTH WILLING TO LET THE OTHER SIDE HAVE 51% & NEITHER IS OBSESSED WITH WINNING;
   6. Have not been victims of abuse or domestic violence in the relationship;
   7. Have essentially equal power & CONTROL in the relationship; and
   8. Have essentially equal access to and knowledge of the finances.

The list above is a wish list. It would be somewhat shocking if two people who are divorcing qualified in all eight categories. Obviously, mediation can be successful in cases where both people only partially fit this profile. However, the further parties are away from fitting this profile, the less chance there is of successful mediation.

Another major issue, related to the odds of a successful mediation is the way the parties view the concept of “fairness.” For mediation to be successful, the parties must define “fair” in a similar way. Everyone claims to want to be fair. However, many people differ on what is fair. In fact, the definitions can be and usually are extraordinarily different – at least in the beginning.

Challenging Scenarios

If the estate involves a business, complex tax issues, complicated trust or life insurance issues, separate property issues, tracing issues or other complex financial issues, mediation may be particularly problematic:

1. 1. How is the business valued without a forensic family law valuation?
   2. Is the family CPA “loyal” to a particular party, or will he or she fairly assess tax and other issues?
   3. Do both parties have access to the same financial records?
   4. Do both parties have similar levels of financial sophistication?

Preparation for Mediation – Hire a Mediation Consultant

There are steps that can be taken to maximize the chances of success in mediation:

Meet with an experienced divorce lawyer  who can serve as a mediation consultant BEFORE THE MEDIATION COMMENCES:

1. 1. Discuss in detail and understand any sophisticated financial issues before commencing mediation.
   2. Make certain that the mediation consultant has sufficient facts to be able to advise as to the range of reasonable settlement positions for each issue. For example:
      1. Child support payable at $1,000 to $1,200 per month.
      2. Spousal support payable at $5,000 to $6,500 per month for four to five years.
      3. Vehicles valued at mid-price Kelley Blue Book.
      4. Household furniture and furnishings valued at garage sale prices.
      5. House – sell or appraise by experienced appraiser.
      6. Collections – equally divided or appraise.
      7. Prepare a basic financial balance sheet before first mediation session listing all assets and debts; and
      8. Custody– understand the parenting plan alternatives.

Prior to having the first mediation appointment, a party should have a complete understanding of the issues, a proposal relative to a settlement of each contested issue and a final position as to where to draw a line in the sand for each contested issue. Most parties do not enter into mediation with a real plan. In fact, most people spend far more time planning the purchase of their next car than they spend planning a mediation.

The mediation consultant should be told what assets were owned by each party on the date of marriage and whether either party received any gifts or inheritances during the marriage.  These types of assets may be separate property.  If either party has commingled separate property with community property, a forensic accountant may be needed to trace the separate property for a party to be awarded the asset as his or her separate property.  Community property is divided equally whereas separate property is confirmed to one party.

In order to provide meaningful and targeted advice, the mediation consultant must have all of the relevant facts.  Without the facts, the mediation consultant will be limited to providing only general comments which may be more detrimental than beneficial.  Parties should not have the false security of thinking they have a divorce lawyer or mediation consultant representing them while they are in mediation when the mediation consultant does not have sufficient information to protect themselves from a meditated financial disaster.  Having all the facts and being kept apprised of the events occurring during the mediation process allows the mediation consultant to assist a client throughout the mediation.

Settlements are often driven, in part, by psychological dynamics that result in inequitable settlements.  A mediation consultant can provide a buffer or sounding board that minimizes the pressure to accept an inequitable settlement based upon psychological dynamics.

Working with a mediation consultant before and during mediation is generally necessary to avoid making mistakes in negotiating the terms of a settlement. It is critical to reach an acceptable settlement in the mediation and not believe that changes in the settlement can be made later. Most terms of a divorce judgment are final and cannot be modified or changed. Attempting to renegotiate a mediated settlement is generally not successful. A party should fully understand all the terms of the settlement before signing a judgment. Often the terms of a judgment say one thing but mean something else. Often the terms of a judgment seem reasonable but are not and do not fall into the category of “fair.”  Meeting with a mediation consultant to review the terms of a judgment is critically important.

Meeting with a mediation consultant or divorce lawyer for the first time, after a person has arrived at a full settlement, is not the best course of action. The value of the mediation consultant is to help guide the process to a result that is fair and consistent with a person’s goals. After the terms are agreed to in mediation, it may be very difficult to convince the other party to renegotiate.

It is also a mistake to meet with a mediation consultant one time, prior to the mediation and then return with a fully drafted judgment containing the details of the settlement. At that point, it may also be difficult to take the consultant’s advice back to the negotiating table.  For example, after the terms are agreed to and a judgment is drafted, the consultant may suggest terms as follows:

1. 1. Life insurance as security for future child or spousal support.
   2. A disproportionate payment of child related expenses like insurance, unpaid medical bills, extra-curricular activities, private school, tutoring, college expenses, etc.
   3. A shorter period to pay an equalization payment.
   4. A higher interest rate on an equalization payment.
   5. A longer or shorter period for the payment of spousal support.
   6. Imputation of income on investable assets.
   7. A different structure of the asset division.
   8. An issue related to taxes, dependent deductions, etc.
   9. Imputation of income relative to a non-working spouse.

The possible terms and concepts that may be relevant to a case are endless.

Who Wins in Mediation

It is generally thought that the more financially savvy party or the party with more power in the relationship ends the mediation with a better result.  Generally, that is the party who is pushing hard for mediation and is the party telling their spouse:

1. 1. Don’t hire a divorce lawyer.
   2. We don’t need divorce lawyers.
   3. Divorce lawyers will just waste our money.
   4. We can come to a fair solution in a few sessions.

Other times, the party pushing for mediation threatens, expressly or impliedly, that if his or her spouse does not go to mediation there will be dire consequences regarding the children, money or relative to that party’s future relationships with friends or relatives.

Win-Win Solution or a Disaster for One Party

A party should be focused on avoiding real life mediated settlements like the following:

1. 1. The husband operated a community property manufacturing company and the community had substantial assets. The husband achieved a mediated settlement where he received 90% of the assets in exchange for paying wife slightly more than reasonable spousal support. The husband bullied the wife, as he had done during the marriage, and argued that she did not need more than the community residence and support sufficient to maintain her lifestyle. He further argued that he would leave the substantial estate to the parties’ children at his death.
   2. The husband, a CEO of a publicly traded company, agreed to pay to his wife 50% of all his salary, bonuses, stock options and any other compensation until his wife’s remarriage or the death of either party. He believed this was a normal mainstream solution and that this is what was meant by 50/50.
   3. An actor mediated his divorce and agreed to pay his wife approximately $7,000 per month in spousal support and approximately $7,000 per month in child support. He also agreed to pay 75% of all income over $750,000 per year.  His career took off and a few years later his income increased to approximately $2,000,000 per year which resulted in a him paying more support than his net after tax income.  He had a net negative income after taxes and support.
   4. The wife was awarded the majority of assets with spousal support terminating after just a few years. She received less support and for fewer years as a tradeoff for receiving more than 50% of the assets. The judgment was poorly drafted, and the divorce court later ruled that the terms of the judgment did not terminate support. The court allowed the wife to extend spousal support until her death or remarriage.
   5. The husband agreed to maintain a life insurance policy on his life, maintaining the wife as a beneficiary of the policy until his death. He did not carefully read the policy that had escalating premiums. Toward the end of the policy, the premiums were over $250,000 per year.

Had the party retained a mediation consultant or a divorce lawyer before the settlement had been finalized, these unfair and unexpected scenarios could have been avoided.

If you are the party with financial knowledge, power and control, mediation may be your best friend.

Consider the Possibility That The Mediation May Not Be Successful

We have had many cases over the years where a client consulted with us after failed mediation.  During the initial interview we learn that the client walked away from an amazingly advantageous settlement not understanding why the terms were so favorable.  We have had cases on the other side of that issue, where a client had entered a disastrous settlement that they were seeking to set aside or renegotiate.

Mediation Privilege

It is important to understand that anything said in mediation is privileged and cannot be used in future litigation. This privilege is absolute and not subject to a court’s interpretation. This privilege exists so as to allow people to negotiate with each other, without the fear that their positions will be used against them in a future trial.

Delay Tactic

Mediation can be used as a delay tactic.  The delay of the resolution of a case can be a very significant benefit to one side or the other.  During a delay, a party can make financial decisions or position assets that may impact the ultimate property settlement.  The timing of a divorce can be the most important component of a settlement.

Most Divorce Lawyers Settle The Majority of Their Cases

Frequently, one party will attempt to force mediation by pushing the theme that all divorces have to be difficult, contentious and expensive, which is simply untrue.

Often a party opts out of mediation once he or she understands that there will likely be the mediator and two divorce lawyers/mediation consultants or if they conclude that the other party is not a   good ‘candidate’ for mediation.  An alternative to mediation can be achieved by both parties retaining reasonable divorce lawyers who are proactive and solution oriented.  If the parties follow this approach, they can achieve a mediated result that is cost effective, timely and fair to both sides.  This can result in the functional equivalent of a mediation without a mediator.  Retaining a divorce lawyer does not mean you are going to trial.  If you are referred to a divorce lawyer who has the reputation of being aggressive, the odds are you will not have a peaceful and amicable settlement.  Our website (How to Find a Divorce Lawyer) is designed to help you find the type of lawyer that will protect your rights but work toward a reasonable and fair settlement

Drafting Issues

If a settlement is achieved, the terms must be documented in a judgment.  Significant skill is required to properly draft a divorce judgment.  A minor error can result in a financial disaster.  No judgment leaves our office without two lawyers reviewing it. If your mediator drafts a judgment, you should have your mediation consultant review and revise it.

Mediator’s Role

The mediator’s role is not to provide legal advice – it is to assist the parties in resolving the issues and to reach a full and complete global settlement.  If a mediator does his or her job – he or she considers any “deal” intrinsically good.  The terms are not important to the mediator.  Their job is not to protect one side from the other or to steer the terms of the deal to be the equivalent of the results that would be achieved after a trial.  Rarely does a mediation result in a 50/50 settlement unless the estate is comprised of assets easily divided and easily valued like bank accounts and credit cards. In other words, if an asset’s value is not black and white, one party or the other receives an advantage. Good candidates for mediation believe that an advantage, even if going to the other party, is acceptable.

Understand that a mediator may not raise every issue that may exist for a variety of reasons. The mediator may not spot the issue or even understand the issue. The mediator may believe it is not their role to raise issues. The role of the mediation consultant is to explore all issues with his or her client.

Potential Consequences

Often, in mediation, one party receives a disproportionate share of the assets and an unreasonably high or low support amount.  It is not the mediator’s role to protect the weaker or less informed party.  These type of results may occur due to a variety of factors:

1. 1. Intimidation of a party.
   2. Lack of understanding of financial matters.
   3. One party just wants “it over” at all costs.
   4. One party has severe guilt.
   5. One or both parties fail to understand the meaning of the terms in the settlement agreement (Judgment).
   6. One or both parties have a lack of understanding of their rights under the law.
   7. One party has better negotiation skills.

It is fair to say that often one party receives a significantly better result than would have occurred if the matter had been resolved with each side being represented by divorce lawyers.  If one side receives a significantly better result than a 50/50 deal, then the other side receives a significantly worse result than he or she would have received had a divorce lawyer been involved. Using a mediation consultant helps minimize the risk of an unfair settlement.

In a perfect world, the parties meet with a mediator and settle all issues in two or three meetings in an eight-week period.  However, there are many times when the result looks more like this:

1. 1. The mediation consumes months.
   2. The cost is triple what was projected.
   3. No deal is reached.
   4. The parties are more polarized than they were before the mediation commenced.

Summary

The decision as to how to end the relationship and resolve these issues is critical.  It is wise to consider all options, including mediation, before embarking on the path to end a marriage.  If the parties are good ‘candidates’ for meditation, a mediation consultant is retained, and the pitfalls of mediation are understood, mediation may be the best solution.