Are divorce cases settled during mediation considered final?
The following article was originally featured in the Winter 2014 edition of the ACFLS journal. In the article I present my thoughts regarding a controversial case in California (IN RE: the MARRIAGE OF Anna and Clark WOOLSEY) which concluded that a case settled during mediation can be considered final, preventing either party from later claiming that any undue influence or lack of financial disclosure came into play. In short – the agreement during mediation is final.
The basics of this particular marriage dissolution case are that Clark Woolsey encouraged his spouse Anna Woolsey to attend church sponsored counseling with a view to reconciling their differences. However, this soon became a mediation to determine the agreement of their divorce during which decisions were made regarding division of property, child custody and spousal support. However, when Anna attempted to make these agreements legal under Code of Civil Procedure section 664.6 her estranged husband changed his mind about the agreement and a trial was held during which judgements were made on the aforementioned matters. Clark then went on to appeal the judgements citing a number of points most notably that undue influence had been placed on him during mediation and that a lack of timely financial disclosures meant the agreement was unenforceable. However, the court ruled that the judgements would be upheld and that the private mediation was sufficient to agree to the marital settlement and that financial disclosures as part of private mediation do not need to adhere to the usual requirements.
My Take On IN RE: MARRIAGE OF WOOLSEY
In reading my article in its entirety, you will see that I have noted how the ruling that the court ‘must accept the parties’ written agreement’ because both parties had signed the agreement assumes that this means there has been no undue influence placed on either parties regardless of whether or not the agreement seems to favor one over the other. This then places a great deal of responsibility with mediators and it becomes important for attorneys to know the mediators they are dealing with well enough to be able to trust in their skill. It seems that there is a need for mediators to include a clause in their paperwork that states neither party is waiving their right to appeal. However, I also note how this type of waiver may result in a lack of trust in the mediator thus hampering the type of honest conversations that are essential in family law. You can read a full reproduction of the article below.
In re Marriage of Woolsey, Does it Go too Far?
At the recent CEB Conference of Family Law, the hot topic of the day was whether our clients could avoid providing full disclosures and also avoid their fiduciary duties with impunity in light of In Re Marriage of Woolsey (2013) 220 Cal.App.4th 881, 163 Cal.Rptr.3d 551. Perhaps you thought this case was of interest only to mediators – after all, it was about mediation. However, it may provide a road map to a safe haven for a spouse who is seeking an iron clad agreement without all the disclosure formalities we are routinely requiring under the guise of fiduciary responsibilities. Even lopsided mediated agreements will now be upheld with fewer, if any, avenues left to challenge them, because mediated agreements can no longer be challenged on the grounds of undue influence.
Taking a closer look at Woolsey, we find some far reaching holdings, including 1) parties who settle their cases in mediation do not need to meet the technical and procedural requirements of Family Code Sections 2104 and 2105; 2) The court must enter even lopsided agreements as long as they are in writing signed by both parties and comply with Family Code 2550; and 3) because of the mediation confidentiality of Evidence Code section 1119, there is no presumption of undue influence in a Marital Settlement Agreement reached as a result of mediation. In fact, your client cannot succeed if you move to set aside the Agreement based on undue influence no matter how unfair or one-sided, because the Court cannot consider or admit any evidence of what was said or presented in the mediation. Is this a safe haven?
In Woolsey, the parties undertook a four-day mediation in a religious setting with the original purpose to attempt a reconciliation. When that failed, they negotiated a settlement of their property, custody and future communications. The Judgment, including the Marital Settlement Agreement (“the Agreement”), was entered over Husband’s objections upon a motion by Wife under Code of Civil Procedure 664.6. Husband claimed the Agreement must be set aside because the parties failed to make financial disclosures in compliance with sections 2104 and 2105 of the Family Code. The Woolsey court relied on Elden v Superior Court (1997) 53 Cal.App. 4th 1497, 1507-1508 for the proposition that parties may opt out of litigation by agreeing to an “alternative dispute resolution mechanism that does not involve all of the formalities required of an adversarial system of justice.” Elden involved a non-judicial arbitration of family law issues where the court excused the disclosure requirements of Family Code 2104 and 2105.
The Woolsey court reasoned that “[R]equiring technical compliance with disclosure rules designed for adversarial litigation would undermine the strong public policy of allowing parties to choose speedy and less costly avenues for resolving their disputes.” Woolsey, at 892. It specified that parties in a mediation may agree to make financial disclosures that do not meet the technical and procedural requirements of sections 2104 and 2015.
It should be noted that financial disclosures are still required – they just do not need to fit exactly into the statutory scheme. The Woolseys did serve Preliminary Declarations of Disclosure on each other prior to trial, although the opinion is not clear whether they were served prior to the signing of the Agreement, which this author believes is the better practice. The Wife also filed a Final Declaration of Disclosure. Importantly, the body of the Agreement said: “Clark and Anna agreed they have fully disclosed all financial matters.” The court looked at the detail in which the financial matters were handled in the Agreement, as well as the catch-all phrase for missing items that any remaining unwanted items were to be disposed of at Husband’s discretion.
Our Agreements typically contain clauses about full disclosure. Be aware that those clauses will now be interpreted to mean what they say. It will be the task of reviewing attorneys when there are engaged to verify the disclosures have been made, and for mediators to undertake this task if there are no reviewing attorneys.
Turning to the more troubling aspects of the case, the Woolsey court had no problem upholding a lopsided agreement because it was signed by both parties. Also, the panel overturned the local rule that Agreements need to be notarized as that went beyond the statutory requirements. Citing Family Code 2550, the court held that parties can agree to a lopsided division of the community property so long as it is evidenced by a written agreement or an oral stipulation in open court. The court “must accept the parties’ written agreement.” Woolsey, at 897. One mechanism favored by the court for entering the agreement is Code of Civil Procedure 664.6, so long as the settlement agreement has been reduced to writing and signed by both parties.
In the broadest of its holdings with possibly the widest consequences, the Woolsey court held that there can be no assertions of undue influence because such an argument is precluded by the confidentiality of mediation under Evidence Code 1119. “No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to mediation…is subject to discovery, and disclosure of the evidence shall not be compelled”…. Evidence Code 1119. In Foxgate Homeowners’ Association vs. Bramalea, 26 Ca.4th 1 (2001), the California Supreme Court concluded there are no exceptions to the confidentiality of mediation. Furthermore, even if the marital settlement agreement produces a one sided agreement and under In re Marriage of Haines (1995) 33 Cal.App.4th 277, 293, the presumption of undue influence would have shifted the burden to the spouse that got the better deal to prove there was no undue influence, that is not the standard that will be applied to mediated agreements. Instead, as in In re Marriage of Kieturakis (2006) 138 Cal.App.4th 56, 84, the Woolsey court held that “marital settlement agreements produced as a result of mediation cannot be presumed to be the product of undue influence.” Woolsey, at 902.
Both the Woolsey and Kieturakis courts discuss how mediators act to keep the balance of power in check. They assume mediators can assist the parties to reach a more balanced settlement, and in fact, this is something many mediators attempt to do. Mediators do work to balance the negotiating power between the parties and if they are successful, this does produce the “fair and voluntary” agreements the courts believe will result from mediation. This does, however, put a lot of faith in the skill of the mediator – many of whom can and do rise to this task. Perhaps the wisest take-away an attorney can have is, “know thy mediator,” especially when the outcome depends upon the mediator’s skills.
Some attorneys have suggested they can and will request that mediators change their written mediation “consent” forms to specifically state that the parties are not waiving their right to later claim undue influence, and that the confidentiality of the mediation does not prevent a later argument of undue influence should one party wish to set aside the agreement. While this may solve the problem from the representing or consulting attorney’s point of view, I suspect mediators will not jump at the chance to bring up yet another dicey element of negotiations prior to the mediation beginning. When clients come in to mediation they are often afraid – afraid about the process, afraid of the outcome, and afraid because they have lost the only life they have known for many years. To undertake a discussion at that point about how any agreement reached might be set aside anyway and that the confidentiality provisions of mediation do not really mean what was just discussed about confidentiality could sabotage the mediation before it begins and direct attention to the distrust between the parties instead of finding ground upon which to build trust. Such discussion could shut down the open and frank discussions needed to resolve a family law mediation, discussions which are now sheltered by the confidentiality provisions.
When I raised that possibility with attorneys, they reply that this kind of waiver would not be a problem if the party did not plan to have a lopsided agreement, and anyone who wanted a fair outcome would be OK with sign a waiver of the confidentiality for this purpose. Maybe some parties would agree with and understand this waiver, but for many this discussion about the waiver of confidentiality will cause an unnecessary complication and could damage the trust needed for a successful mediation. Without the waiver of confidentiality, the outcome of the mediation will fall under the Woolsey provisions.
What do you think? Please leave a comment below to share your thoughts on this decision.