Going Through a Divorce? To Litigate or Not: That is the Question

by Darlene R. Dahl, CPA/PFS, AEP®, CDFA®

Once the difficult decision to divorce has been made, the parties must consider whether or not to litigate or use Alternative Dispute Resolution (ADR). Deciding whether a family’s unique circumstances are best suited for litigation or ADR will determine the time expended, emotional toll taken, and financial cost of a divorce. Other factors to consider in the decision include the ability to retain more control over the process, privacy, finality, and the impact on preserving relationships.

Alternative Dispute Resolution includes: mediation, arbitration, negotiation, collaborative law, and various other hybrid forms. In contrast to litigation, ADR moves from the court room to the conference room and from a more confrontational approach to a more collaborative approach. With ADR, the parties can tailor a process that works best for them, become active participants, and retain greater control. They can be the ultimate decision makers and need not rely on the judge to get it right after hearing their side of the story. If the parties choose, they can agree to a settlement that differs from what a judge might order. The parties can mutually select the neutrals (i.e., mediators, financial professionals, etc.) that they will be working with rather than being assigned a judge if litigating. Instead of dealing with the backlog of pending cases and potentially taking years to settle in court, the parties meet based on their needs and availability. Negotiating in an office setting instead of litigating in an open court room, ADR provides private resolution without public access to documents, pleadings, and testimony.

Litigation

Litigation is the traditional adversarial approach. Under this rights-based model of dispute resolution, the litigating attorneys focus on the law and getting the most for their respective client. Each attorney builds and presents legal arguments to the courts. They work towards hearing dates and file court pleadings as a first step to stake out a position. Local experienced attorneys specializing in divorce or family law know what to expect of the judges in their jurisdiction. Unresolved conflict is relinquished to a judge or an arbitrator to decide.

Litigation is best suited for individuals dealing with domestic violence, bullying, deception such as hidden assets, and emergency financial or child-related issues that one party is unwilling to negotiate on. Traditional litigation is appropriate if parties may have difficulties negotiating, if one or more parties need or want an attorney to advocate for them, if one party may take advantage of another, or if one party would only be motivated by the threat of going to court. A party may want to use depositions and formal discovery to help them gather documentation and information to strengthen their case. Others may prefer the protection of formal rules of evidence imposed by the courts along with the right to appeal.

Mediation

Mediation is a private, voluntary process providing “confidentiality” protection if there is a written agreement to mediate and the mediator qualifies by training and experience.

Mediation is most effective when individuals are committed to timely, honest, and open communication; information sharing; and finding solutions that best meet both parties’ needs.

Instead of a rights-based model, mediation fosters an interest-based, problem solving approach. This client-centered approach focuses on the future well-being of all family members by exploring the underlying needs and interests of both parties. Instead of the courts resolving issues, the parties work to resolve their disputes themselves generally at a lower financial and emotional cost.

Besides the mediator, members of the interdisciplinary team can include a divorce coach, a financial neutral, and an attorney for each party. Mediators are neutral experts in the process of settling disputes. After facilitating communications between parties, the mediator may raise settlement suggestions. A divorce coach can be instrumental in screening for an imbalance of emotional power, intimidation, or fear. A financial neutral, often a CERTIFIED DIVORCE FINANCIAL ANALYST® professional or a CERTIFIED FINANCIAL PLANNER professional, provides an unbiased assessment of the family’s financial situation and guides the team discussions on financial matters. They help level the financial power of the spouses by identifying tax consequences, assisting in developing budgets and cash flow analyses, and illustrating the long-term financial impact of various settlement options. If attorneys do not participate throughout the mediation process, the parties are strongly encouraged to secure the advice of counsel before signing their divorce agreement.

Arbitration

In arbitration the parties select a third-party neutral who issues a decision—either binding or nonbinding after evidence is presented and arguments are made at a hearing. While the process most closely resembles a trial, the rules of evidence are relaxed. The parties themselves have the advantage and opportunity to define the scope of discovery in their arbitration agreement. Parties can represent themselves or can be represented by their attorneys. Decisions can be rendered in days of the hearing compared to litigation which can take months or years. Arbitration is sometimes used after mediation fails and is generally not subject to appeal. Retired judges or experienced attorneys provide arbitration and mediation sessions in private instead of an open court room.

Unassisted Negotiation

Parties often attempt to first resolve their issues by meeting together before using other means of settling disputes outside of the courtroom such as mediation or arbitration.

Unassisted negotiation may be appropriate if there is a low risk that either spouse will take advantage of the other. Parties should be well prepared, able to put their emotions aside, motivated to act reasonably, and able to effectively assert their individual interests. While they may be reluctant to hire or let attorneys take the lead in early negotiations, they are best served by hiring counsel or other professionals if negotiations stall. After the parties agree on a resolution of the issues, a separation agreement must be presented to the court for approval.

Collaborative Law

In collaborative law cases, all negotiations take place in meetings in which the clients, collaborative law attorneys, a coach/facilitator, and a financial neutral can actively participate in a team based process. All of the discussions are private and the professionals agree that they will no longer work with either party if an out-of-court settlement is not reached. The collaborative professionals are trained to help move the parties through the process of making their own difficult decisions.

Similar to the mediation process, candidates for collaborative law include parties that communicate effectively, are flexible negotiating with each other, and are successful in making joint decisions and managing co-parenting.

As you can see, there are many options available to divorcing parties. While divorce can be a troubling and stressful time, it is in the best interest of all parties to fully explore whether litigation or one of the ADR processes is most appropriate for their unique family’s circumstances. Don’t hesitate to reach out for professional help. Making the decision on how to proceed through the divorce process is the first step to creating the most expeditious process possible.

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Posted: July 7, 2017 | In: Articles