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Case Watch: For Mediators: Without Key Facts, Mediation May be the Best Bet
The
following case analysis is part of a regular series we publish to help you
broaden your knowledge of rulings of Georgia’s appellate courts that may
affect your practice. Remember: mediators should not give legal advice
or opinions. Review of Jones-Shaw v. Shaw, decided June 18, 2012, appeal to the Georgia Supreme Court of a ruling by Judge K. Dawson Jackson, Gwinnett County Superior Court. Good mediators know it is important to help bring out the facts, or lack of facts, with the parties. By helping parties take inventory of their facts in a neutral way, mediators can help parties examine their prospects if they resolve the case in mediation or if they proceed to trial. Litigation is a battle of facts, so why not help parties examine their facts first in mediation. Here’s a recent cases where a dearth of important facts was key to the outcome. In every divorce where one spouse has an interest in a corporation, the other wants to know how much money he or she is entitled to from the corporation. All parties believe they should be awarded something, but how they establish or fail to establish that “something” determines whether or not they will be successful in receiving it. Jones-Shaw v. Shaw is a case where lack of evidence resulted in no award to the Wife of interest in Husband’s company. Husband owned a non-profit known as Georgia Tarheel Sports. He had started this enterprise nine years before the parties’ marriage. As we know, a spouse’s pre-marital interest in an asset is an important factor when dividing property in divorce. The parties were married for 16 months. Length of marriage is also an important factor. Compare nine years of pre-marital interest vs. 16 months of any marital interest. The parties had no children and had kept their finances separate. No co-mingling of assets, also important.
Another
consideration: even if the parties do not share an interest in the asset
at issue, has the asset’s value appreciated due to the efforts of the
party claiming an interest? Here’s where the Supreme Court started its
analysis: “A business which was started as the result of separate pre-marital funds may be subject to equitable division if there is any appreciation in the value of the business during the years of the marriage due to the spouses’ individual or joint efforts.”
However,
court noted: “... the appreciation in value during the marriage does not render the asset a marital one subject to equitable division if the growth is solely a result of market forces. Thus the key factors are the increase in value, if any, of the asset during the course of the marriage and that any gain be the result of spousal effort, either separately or in conjunction with the other spouse. In this case, the threshold inquiry necessarily would focus upon whether there was any increase in the value [of the non-profit] during the marriage.”
It’s not
enough for the parties to just claim there was an increase in value.
Everyone will claim there was. But the facts have to support it, said the
court: “This court has held there are three principal methods utilized for determining a value for ownership in such a corporation: the income or capitalized earnings method; the market approach method; and the cost approach method.” In this case, Wife failed to prove that there was any appreciation in the corporation’s value as the result of her efforts during the 16-month marriage. The fatal flaw in Wife’s presentation was lack of evidence of the value of the asset at the time of the marriage and its value at the time of the divorce. If there is a substantial amount of money that Wife believed she was entitled to, a financial consultant could have helped support her contentions. It is doubtful that Wife was qualified, and she certainly wasn’t impartial enough, to support her own allegations. Sometimes you have to spend money before you can get money. Wife testified in generalities, but she presented no evidence from which to determine the financial condition of the company just preceding the marriage. The court held that there was simply “insufficient evidence from which any meaningful baseline valuation” could be made. Also, as Husband disputed much of the evidence asserted by Wife, the Court was left with a he said/she said argument and no way to determine which version was correct. There were no expert witnesses at trial to prove either party’s position. It is important to point out in mediation that facts that can be supported are stronger than mere allegations or assertions.
Everyone
wants attorney’s fees should they continue on to court. As mediators, you
might remind the parties that attorney’s fees are never guaranteed, and
they certainly should not be a major motivation for whether or not the
parties choose to settle. Also, abuse of the legal process – which is
usually the basis for seeking attorney’s fees – is difficult to prove,
which means the trial court has broad discretion to decide the issue.
Some judges don’t believe in attorney fees because they believe it fuels
litigation when the other side pays for it. The Supreme Court concluded
in this case: “In any event, the domestic relations financial affidavits filed by the parties do not show a disparity of financial circumstances. No abuse of the superior court’s broad discretion in awarding attorney fees in a divorce action has been shown.” All in all, mediators are not magicians. If the facts are missing, we are limited in our ability to help the parties reach their goals. But if the facts are missing from the mediation, chances are they will be missing at court as well. Our role as mediators is to help the parties make informed decisions about how to proceed with their disputes based on the facts, or lack thereof, in their arguments. And always remember, sometimes information outside of the legally admissible, legally relevant facts can be driving the dispute. Mediation is the ideal arena for the parties to discuss that information.
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