Many of my clients believe that they will be able to run all over their spouse and make things go faster in their divorce case if their spouse is not represented by an attorney.  While my client certainly has the benefit of experience and legal knowledge on their side, the lack of an attorney on the other side does not necessarily mean that everything will go my client's way.  For example, my experience has been that many unrepresented parties (also called pro se parties) are unwilling to negotiate in good faith.  Often times, this is because they do not understand the law or the merits of the position they have taken in the litigation.  Because I do not represent them, there is also a built-in mistrust and reluctance to accept any settlement offer I propose.  Furthermore, I am ethically barred from providing legal advice to the other side.  More than once I have been told by an unrepresented party that they are not interested in negotiating and prefer to simply have the Judge make a decision.  This can be frustrating for my client, because it increases their attorney's fees, while their spouse does not "feel the pain" associated with ongoing litigation.

For these reasons, in most cases, I prefer to have the opposing party represented by an attorney.   It is helpful for the other side to hear from their own advocate the reasonableness of my client's proposal.  When a party has the benefit of having their own lawyer explain the law to them, the chances of reaching a settlement increase greatly.   An unrepresented party will almost never believe me when I tell them that the proposal I am making on behalf of my client is fair.  If, however, they hear it from their own lawyer, they are much more likely to believe it.

        

I was at a continuing legal education luncheon this week when I was approached by a colleague who was exhorting the unbelievable success of the Minnesota Court of Appeals Family Law Appellate Mediation Pilot Program.  She explained how some of the “well-known” and “best respected” family law attorneys in town were claiming that the program had a ninety percent success rate.  She said that even some of the “good family law appellate lawyers” were resolving cases with the help of a court-appointed mediator.  Appeals, it would seem, at least in the family law context, will soon be a thing of the past, or so the program’s proponents would have us believe.

For the program’s advocates, any success is a tremendous success.  How could a program that encourages settlement and decreases the cost of litigation be bad?  Well, it could be bad if it promotes settlement over the interests of justice.  It could be bad if it represents yet another barrier to entry to the legal system for middle class families, and it could be bad if it increases the cost of litigation, while conferring only marginal benefits on employees of the judicial branch – by decreasing their caseload.

Make no mistake, I am strongly in favor of voluntary settlement programs that increase settlement rates and decrease the cancerous nature of family law proceedings.  As a trial attorney, I know all too well the real world damage done to families engaged in prolonged legal battles.  But, the purpose of alternative dispute resolution is to prevent trial.  Its benefit is in providing litigants with a measure of control over what is an otherwise uncontrollable situation.  It increases litigant satisfaction by having the parties “buy-in” to the terms of the settlement agreement.  All of these goals are legitimate.  And all of them are prejudgment in scope.  The landscape looks very, very different after the Court issues its ruling.

Why?  Well, for one thing, the case has been decided.  We have an answer.  We know the outcome.  In many counties, getting a case decided on the merits is not an easy thing to do.  Judges often resist setting family law cases for trial.  Some Judges set, reset, and reset again Pretrial Conferences in an effort to avoid contested litigation.  Other times, Judges order additional ADR even after the Pretrial Conferences in order to avoid trial.  Getting a decision can cost litigants lots of money.

What’s more, once we have a decision, what incentive does the prevailing party have to settle the case, apart from the opposing party’s blackmail-like threat of additional attorney fees?  The trial judge, who heard all the evidence and weighed the creditability of all the witnesses, has decided the case in their favor.  Are we to simply dismiss the trial judge’s ruling as unfounded or untrustworthy?  If so, this undercuts the very essence of our system of appellate review – deference to decisions of the trial court.  Or, alternatively, are we to conclude that the court-appointed mediator, who has just been assigned to the file, has a better grasp on the facts and the law than the trial judge?  How does this promote a just and equitable outcome? 

These concerns notwithstanding, the program’s proponents continue to beat the mediation drum.  It continues to beat despite the fact that the “success” rate touted by the program’s advocates is much too high – during a recent on-line CLE webcast one of the program’s creators noted that recent data actually shows an approximately fifty percent (50%) success rate for the thirty cases completed.  The mediation drum continues to beat despite the fact that abandoning appeals does not necessarily mean that the program is working, at least not in terms of increasing litigant satisfaction.

What would be really interesting to know, and what I hope the study’s authors will tell us, is the percentage of “resolved” cases that involved pro se appellants.  How many of the alleged “success stories” weren’t really settled as much as they were dismissed?  A sizeable number of family court appeals are dismissed or otherwise summarily disposed of.  How many of the “success stories” involved pro se appellants just giving-up?  Does that level of “success” justify the financial burden placed on all other litigants by forcing them into the program?

Maybe the Program’s creators will answer some these questions for us.  Then again, maybe they won’t.

        

It is the rare case, if not the non-existent one, where divorcing couples agree on absolutely every issue.  Whether it is a disagreement about a parenting time schedule or a division of personal property, there is almost always some level of disagreement between the parties.   For purposes of completing the divorce, though, the real question is whether the disagreement is worth fighting over.  I recently had a case in which the parties could not agree on parenting time for their son over the Thanksgiving holiday.  The parties seemed to lose sight of the fact that their son was already 15 years old, and that there was only three more Thanksgivings to divide.  When viewed in this context, it hardly seemed worthwhile to pay lawyers to argue over three days.

The same type of analysis can present itself when dealing with financial issues.  Many times clients cannot agree on how to divide an income tax refund, for example.  If neither side is willing to give in, they will have to pay their lawyers to draft letters and perhaps even a court motion to resolve the issue.  By the time this happens, the clients could have paid more to their attorneys than the refund was even worth!  For this reason, I often counsel clients to engage in a cost-benefit analysis to determine how much it will cost to pursue an issue that remains disputed, and whether that cost is worth the potential benefit if successful.  When both parties understand the cost-benefit type of analysis, the chances of reaching a compromised settlement in a divorce increase greatly. 

        

By law, a divorce case commences with service of the Summons and Petition upon the Respondent.  Service is to be personally made.  That is, by physically handing the documents to the Respondent.  It is not sufficient to mail the Summons and Petition to the Respondent.  Service must be made by a third party.  (In limited circumstances, and with court approval, the law allows service by publication in a newspaper or by alternate means, i.e., mailing).

There are, of course, some other exceptions to these general rules.  Often times, the party initiating the divorce (the Petitioner) may not want to put the Respondent through the embarressment and trauma associated with personal service.  Instead, they prefer to "soften the blow" by personally delivering the documents to the Respondent themselves.  This is permitted, provided that the Respondent is willing to sign an Admission of Service.  In this document, the Respondent admits to receiving the documents in lieu of personal service.  This option also saves the Petitioner the cost of paying a process server.

The Admission of Service route requires some cooperation of the part of the Respondent, as he/she must have the Admission of Service notarized.  If the Respondent is unwilling to do this, then the Petitioner will have to  have the Respondent personally served.

As lawyers, we explain these options to our clients, and let them decide how they want to proceed.  Our advice usually depends upon how comfortable the Petitioner feels with asking the Respondent to sign an Admission of Service.  Sometimes, the Petitioner cannot safely approach the Respondent and sometimes the Petitioner does not feel that the Respondent would return an Admission of Service if mailed, in which case we recommend personal service.

Contact a Gadtke & Beyer attorney at www.gadtke.com if you have questions.

        

Dear Family Law Attorney:  My husband and I have amicably agreed to get a divorce.  We have discussed all of the potential issues, and we agree on everything.  Do we both have to get attorneys?  Does either of us have to get an attorney? Debra from Minneapolis.

Family Law Attorney:  There is no legal requirement that either or both of you get attorneys.  There are resources available that can provide you with forms to fill out and file with the court.  This is what I refer to as a "fill-in-the-blank" divorce.  Chances are, though, that you will not understand or appreciate all of the implications of how you fill out the forms.  If you have children, the law is very particular about the necessary "findings" with respect to child support.  Unless you understand the ins-and-outs of the child support law (keep in mind that many attorneys do not), there is a good chance that the forms will not be completed properly.  Parties also often do not understand the implications of waiving or not waiving spousal maintenance.  This often frustrates judges, because they cannot provide legal advice.

We recognize that legal fees can be expensive, and that you should not have to spend your kids' college tuition money on your divorce, particularly when you agree on everything.  So, we have created what we refer to as the Low-Cost-Divorce program.  You simply fill out a questionnaire and tell us all the terms of the agreement, and we put all the paperwork together, at an affordable, flat fee price.  The program is not for everyone, though, because it requires absolute agreement on all issues, and no negotiation or contested court appearances. 

Check out www.low-cost-divorce.com for more information.

        

On March 10, 2009, the Minnesota Court of Appeals gave new hope to non-custodial parents seeking to prohibit former spouses from changing the residence of a minor child to a new location within the State of Minnesota.  It had previously been believed that as long as the custodial parent moved the child’s residence to a new location within the State, courts were largely without power to restrict the move.  A sharp distinction had been drawn between interstate moves (i.e., moves from Minnesota to another state) which were often prohibited on account of the negative consequences to the child, and intrastate moves (i.e., moves from one location in Minnesota to another location in Minnesota), which often were not.  A common fear amongst many non-custodial parents was that the custodial parent would decide, unilaterally, to move the child’s residence to a distant and far-away corner of the State of Minnesota, making the current parenting time schedule unworkable.

In Schisel v. Schisel, the Court of Appeals confronted the question of whether a trial court has the authority to restrict the location of a parent’s in-state residence when the parties are awarded joint physical custody of the minor children.  In rejecting the mother’s arguments that it did not, the Court of Appeals explained that Minnesota Statutes Section 518.17 (the “best interests standard”) requires trial courts to make orders that are just and proper concerning the minor children’s “physical custody and residence.”  Because the term “residence” is commonly understood to mean “place” or “geography” (not just the person “with whom” a child resides), the Court held that trial courts have authority to restrict a parent’s in-state residence as long as the restriction is necessary to serve the child’s best interests.

What does this mean for you?  It means that the best interests of the child continue to serve as the guiding light for all court decisions involving children.  It means that courts can prevent parents from moving from Edina to Ely if the move harms the children.  And, it means that the decision-making authority is back in the trial courts, where judges can examine the parties and assess their motives.

        

Dear Family Law Attorney: I am in the middle of a divorce.  My husband was granted stock options by his employer three (3) years ago, but they will not vest until two (2) years after the divorce is final.  Am I entitled to anything from the eventual exercise of these stock options?  Elizabeth from Golden Valley, MN

Family Law Attorney: Yes.  The general rule is that any property acquired during the marriage, and up to the valuation date, is deemed marital property.  Any property acquired by your husband post-valuation date would be deemed his nonmarital property.  In your case, a portion of the stock options were earned during the marriage, and a portion will be earned after the marriage.  Your husband’s stock options therefore will have both marital and nonmarital components.

When your husband exercises his stock options, he will in effect receive extra compensation for five years of working for his employer.  You and your husband were married for three of the years which entitled your husband to the stock option proceeds.  In total, your husband worked (or will work) for five years.  The court applies a formula for determining your respective interests in the stock option proceeds.  The marital interest is a fraction of the total payment.  The numerator in the fraction represents the number of years of marriage during which benefits accumulated, and the denominator represents the total number of years during which benefits were accumulated.  So, in your case, the marital interest in the stock option proceeds is 60% (3/5’s).  The remaining amount is your husband’s nonmarital property.  Generally speaking, you would be entitled to 50% of the marital portion of the proceeds.

In establishing this formula, the court recognizes that even though the proceeds are not paid until well after the divorce is final, marital effort was largely responsible for the husband’s right to receive the payment.  See our website at www.gadtke.com or contact a Gadtke & Beyer attorney if you have questions.

        

Dear Family Law Lawyer:  My wife and I are getting divorced.  Late last year, I was laid-off from my job as a construction contractor.  It was our only source of income.  Once I was laid-off, we couldn’t afford to make our mortgage payment.  Our house is now in foreclosure.  It is also “underwater” – we owe more on it than it is actually worth.  Someone told me that if we don’t pay the difference between the amount of the loan and the fair market value of the home, we could end up owing taxes on the difference.  Is that right?  We can’t afford to owe money to the IRS. Tom in St. Michael, Minnesota.

Dear Tom:  You need to talk to an accountant.  It may be possible to avoid potential tax liability, depending upon your circumstances.  While I am not an accountant or a tax lawyer, I can give you some basic information about the law.

Generally, if a creditor discharges or agrees not to collect money from someone who owes it to them, the money that has been discharged or written-off is considered income to the person who benefits from the transaction.  For example, if you owe a credit card company $30,000 and the company agrees to take $20,000 in full satisfaction of the debt, you are deemed to have income (and thereby potential tax liability) on the $10,000 that was forgiven.  There are, of course, exceptions to this rule, the most common being debt discharged in connection with a bankruptcy.  See 26 U.S.C. § 108.

Until recently, a similar analysis was applied in the home foreclosure context.  If you had debt forgiven through a foreclosure – which usually occurred when a lender decided not to pursue a deficiency judgment against a borrower who owed more than their house was worth – you might have added income for tax purposes.  But, effective December 11, 2008, Congress changed the law.  In the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers are now allowed to exclude income from the discharge of debt on their principal residence, subject to certain qualifications.  It can be a completed issue.  Please be sure to check with your accountant.

        

Dear Family Law Attorney:  About two months ago, I moved to Minnesota from Wisconsin.  Can I file for divorce in Minnesota?  Laura from Woodbury, MN

Family Law Attorney:  No.  The law requires that you reside within the State of Minnesota for at least 180 days (approximately 6 months) before you may file for divorce here.  The principal reason for this is to avoid what lawyers refer to as "forum shopping."  That is, non-residents who are merely "passing through" the state deciding to get divorced here in order to invoke the court system.  Only those people who have lived in Minnesota continuously for 180 days immediately prior to filing may do so.  There is some case law with respect to temporary absences from the state, but the general rule is that you must live here for 180 days.  See our website at www.gadtke.com or contact one of our attorneys for more information.  

        

Dear Family Law Lawyer:  My ex-girlfriend and I have one child together.  For the most part, we get along fairly well.  Last month, however, she told me that her parents are pressuring her to go to Court to formalize our custody arrangement so that she can get more child support.  I don’t have an objection to paying her whatever amount the law requires, but I would like to claim our son as a dependent for tax purposes.  Her lawyer tells me that we can’t negotiate that provision because the IRS Rules award the income tax exemption to the parent with primary custody.  Is that right?  I have friends who claim their children on their tax returns.  How can that be possible?  Jason in Mora, Minnesota.

Dear Jason:  You are right to be skeptical.  I too know many people (most of them are former clients) who have the right to claim their child as a dependent for income tax purposes.  What your ex-girlfriend’s lawyer is actually saying is, “We won’t negotiate the income tax provision.”  It is a subtle but important difference.

Technically, the lawyer is right when she says that the IRS Rules award the income tax exemption to the parent with primary physical custody.  See I.R.S. Publication 504.  The federal government takes the position that the exemption should be awarded to the parent with whom the child has resided for more than one-half of the year.  There is an exception for cases where the Court orders (or the parties otherwise agree) to alternate the exemption.  In those cases, the Court order or parties’ agreement effectively overrides the IRS presumption in favor of the custodial parent.

Beginning with divorce decrees or separation agreements made after 2008, there has been an important change in the law.  A non-custodial parent may only claim the exemption if the custodial parent executes IRS Form 8332.  Simply providing a copy of the Judgment and Decree is insufficient.

For more information, please contact one of our attorneys.