Articles Posted in Conflict Resolution

When a divorce involves a business of one or both spouses that is community property, issues of valuation arise, including how and when the business is valued. California’s Second District Court of Appeals recently considered the question of when a business is valued.

business-card-1525590Husband and Wife divorced in April 2012, after entering into a written settlement agreement related to the division of their community property and the payment of spousal support. They weren’t able to agree on one issue, however:  what to do with the small heating and air-conditioning company that the former spouses owned and operated together. Husband managed the company’s day to day work, while Wife was in charge of the business’s marketing and finances.

According to the Court, Husband “frustrated” Wife’s attempts to get information about the business by ousting her from her job, filing for bankruptcy, and refusing to produce financial records or to be deposed about the company’s financial health. He also transferred assets from the business to another business owned by a former employee and managed by Husband. Because of these actions, the trial court eventually decided to value the business based on what it was worth in May 2012 instead of setting the value at the time of a trial on the issue nearly two years later. The court accepted a valuation prepared by business broker and accountant Rodd Feingold, who set the value at about $470,000. Although a separate appraiser – Phillip Sabol – said the company was only worth $47,000, the Court rejected that valuation because it didn’t take into account the business’ goodwill and tangible assets. The court awarded the business to Husband and ordered him to pay Wife half of its value.

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An annulment is a legal procedure in which a court rules that a marriage is legally invalid. Unlike a divorce, in which parties agree to legally end their marriage, an annulment treats that marriage as if it were invalid from the start. There are limited grounds on which an annulment can be granted, including when the marriage was obtained by fraud or physical force. A recent case out of California’s Fourth District Court of Appeals shows that an annulment can itself be wielded as some sort of threat. It also shows that a person who uses an annulment to try to make life more difficult for his or her spouse is likely to have a hefty bill to pay.

us-passport-1239581Husband and Wife – a Chinese citizen – separated in June 2012, following roughly two years of marriage. Husband filed for an annulment soon thereafter, claiming that Wife had defrauded him in order to obtain citizenship in the U.S. He also notified federal immigration authorities about the litigation, according to the Court, in order to interfere with Wife’s petition for permanent residency in the U.S. The Court said he later told Wife that he would withdraw the annulment petition if she agreed to “walk away from the marriage with her car and nothing more.”

Husband repeatedly declined to dismiss the annulment petition, the Court recalled, and made various moves to stall the discovery process in the case. During the discovery process, parties to a lawsuit have the opportunity to seek information, documents, and other evidence from one another. Husband “failed to cooperate and engaged in actions preventing his deposition and precluding Wang from obtaining relevant information,” the Court said.

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If you’ve read this blog before, you may already know that we prefer to help clients resolve divorce and other family law matters through alternatives to litigation that help them work collaboratively with a former spouse to reach a positive solution. One of the many drawbacks of the traditional litigation route is the dizzying array of procedural requirements that can end up costing a person his or her case. A recent decision out of California’s Second District Court of Appeals is a good example of one of the primary procedural hurdles:  time limits and filing deadlines.

time-is-going-1415573-mHusband filed for divorce from Wife in May 2009, roughly 10 years after the couple was married. Following a six-day trial, the court ordered Husband to prepare a draft judgment reflecting both the trial court’s decision and a partial settlement agreement that the couple had reached. Wife refused to sign the draft judgment, however, and the court entered it as a final judgment in March 2013. The judgment divided the couple’s assets and set monthly spousal support to be paid by Husband to Wife. The court modified the judgment – with a few handwritten changes to the 12th paragraph – one week later. The court granted Wife’s request to further modify the judgment in May 2013, making clear that Husband was required to make an equalizing payment to Wife covering her share of his Individual Retirement Account (IRA).

Wife filed a notice of appeal two days later. The Second District dismissed the appeal, however, ruling that it was untimely. The applicable rules, the Court noted, require a person seeking to appeal a family court ruling to file an appeal within 60 days of the ruling. Although the lower court had just modified the ruling two days earlier, the Second District said the 60 days started to run when the trial court issued its original ruling in March 2013. That’s because the Court said the modifications made after that time were not “substantial.”

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In a new commercial in India for Tanishq jewellery, a woman preparing for her wedding puts on a Tanishq necklace. At the ceremony, her daughter calls her asking if she can participate in the pheras, an Indian ceremony where the couple walk around a fire seven times while saying their vows. The groom is moved by the girl and picks her up, filling his bride with emotion.

A non-Indian would likely miss this point, but it is clear in the ad that this is a second marriage for both bride and groom, and since historically in India, divorced or widowed women are outcasts, the ad is contrary to Indian tradition. The ad is apparently causing quite a stir in India with viewers talking about the cultural taboos and also about the bride’s relatively dark complexion, a turn away from the country’s mainstream obsession with light-skinned lead actresses.

The ad has sparked conversations on Twitter, with celebrities and politicians also weighing in. Parliament member and industrialist Naveen Jindal praised the bride’s darker skin tone and the non-traditional marriage. Apparently, the team that created the ad chose the actors to ensure the couple would look like one of respectable equals, because otherwise traditional-minded Indians might otherwise have assumed that the man was marrying the divorced or widowed woman out of pity.

As a divorce lawyer and mediator, I often encounter people struggling with the decision of whether or not to divorce. Since I have no idea what is the right decision for anyone else, I often say that a decision to divorce will be made when the pain of staying is greater than the fear of leaving. That’s how it was for me anyway. It is always a good idea to keep working on a marriage if both are committed and invested and hopefully the effort will lead to a more joyful union. But sometimes it does not and divorce is the right choice. And the pain of leaving will pass. The pain of staying will not.

Here are a few reasons why, in some cases, divorce might be the right choice:

  1. Staying married is usually not better for the kids.

Anyone who has been through a divorce probably already knows that it can be a stressful, complicated, and emotionally and financially draining experience. The legal issues involved may be even more complex in situations where the couple work together running a business. In In re Marriage of Greaux and Mermin, California’s First District Court of Appeals explains that the spouse who is ultimately awarded the business has the right to protect it from being devalued by the other spouse. In some cases, that may include seeking a court order to stop the spouse from starting a competing business.

stapling-machine-1440644-m.jpgIn this case Wife filed for divorce in 2009. During the six-day trial that occurred two years later, one of the few remaining disputed and unresolved issues was what to do with the beverage company they owned and jointly operated during the marriage. The company distributed and sold a type of rum.

The business was community property and the judge determined that both spouses brought “unique talents to it.” Husband had little education, training, or experience running a business, but the judge said his considerable effort and determination were “crucial” to the business’ success. Husband also developed relationships with others in the industry whose experience and personal relationships were very helpful to the business. Wife, on the other hand, had marketing and sales skills also crucial to the business, and her family history in the Caribbean served as the “brand story.” The trial judge also noted that Wife had a deep understanding of the rum, its ingredients, and the process for making it, and had qualified as an official industry “taster.” She was designated in company investment materials as the “face of the brand.”

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My practice has been limited primarily to Collaborative Practice and Mediation for many years, since I learned long ago that divorce is a problem to be solved not a battle to be won, and the court system only exacerbates the problem and most often leaves couples worse off, financially and emotionally. Collaborative Practice and Mediation allow a couple to divorce in a structured and facilitated process that enables them to stay out of court, gather and review all of their financial information together, brainstorm options for property division, co-parenting and support, and craft an agreement that works for all. This process reduces the fear and anxiety because every step in the process is taken together and both understand that nothing will happen and no agreements will be signed or filed until both agree.

These processes are not without difficulty and conflict. The couples are divorcing after all so there is most always conflict. But unlike the court system with uncaring judges and litigious attorneys, Collaborative Divorce and mediation endeavor to help parties communicate more effectively, understand each other’s needs and interests, and help them find common ground and shared goals. This most always leads to agreement.

Another reason I value out of court processes is that I believe in personal empowerment and the right and ability of most everyone to make their own decisions in such matters. With very rare exceptions, I can’t think of any good reasons divorcing spouses would want a judge (ie government official) to make decisions about how they divide marital property or co-parent and support their children and each other. In most all cases, the best people to make these important and personal decisions, are the parties themselves.

A segment of This American Life with Ira Glass on NPR, entitled Breakup, addresses divorce from several different perspectives and is well worth a listen.

In Act Two, an eight-year-old girl embarks on a campaign to understand her parents’ divorce, a campaign that takes her to school guidance counselors, children’s book authors, and the mayor of New York City. The segment re-plays her 1986 interview on All Things Considered as a young child and how she struggled to understand why the divorce happened. In this interview 20 years later, she praises her mother for putting her daughter’s interest first by encouraging and supporting her relationship with her father, never blaming her father, and never saying anything about her father’s affair.

In Act Three, Ira speaks with a Collaborative Divorce attorney and Mediator about why it is so bad when the justice system gets involved in a divorce and the many benefits for families who can resolve the issues outside of court. The attorney speaks to the value of a process that focuses on listening to the other and seeking to understand.

Even for happily married and intact families, the holidays can be fraught with conflict and compromise. But for divorced or separated parents and for blended families – the potential for conflict is significantly higher. Negotiating co-parenting agreements and sharing time with kids is rarely easy, but this is a time of year when it can be most difficult to let go because of the tradition and ritual around how the holidays are managed.

But for the sake of the kids you have to share it. And here are tips to
help your holiday season be filled with merriment – not resentment.

Make a plan

Conflict in the context of divorce can be emotionally and financially debilitating. Family court judges commonly make decisions and orders based on how the law applies to what has already transpired between the parties, to the past. And this approach keeps the spouses in a conflict trap where they are focused on the past and the grievances, hurts and betrayals; rather than on the future, and how they can best solve the problems in order to move forward.

Collaborative Divorce and Mediation on the other hand, enable the parties to focus on what is important for them now and in the future. By focusing on problem solving and real listening, there tends to unfold an understanding that can help couples let go of the conflict and the past and move forward in a productive way, solve the problems and help heal the pain, grief, and anger.

A forward looking focus, however, doesn’t preclude talking about the past because sometimes it is important, essential even, for spouses to be able to express and have heard by the other, their understandings of what went wrong with the relationship. This mutual expression of the hurt and anger, if entered into with an open heart and deep listening can be profoundly instructive and helpful to the process. This is especially important if there will be a continuing relationship, for example, co-parents.