In April, the matter of Simkin v. Blank, 19 N.Y.3d 46 (2012), was decided by the Court of Appeals, unleashing polarized reactions throughout the matrimonial law community. The case, much debated as it wended its way through the courts, involved a request by a husband, Steven Simkin, to set aside a settlement agreement post-divorce. The parties’ counsel had negotiated the divorce agreement over a period of two years, each client having received substantial marital assets. A large portion of the assets Simkin received as and for equitable distribution was contained in an account held by Bernard L. Madoff Investment Securities. Thus, two years post-judgment, when the now infamous Madoff Ponzi scheme had collapsed, Simkin found himself with a worthless investment account. In seeking to set aside or reform the divorce settlement, he argued that the initial agreement was based on a mutual mistake of fact, i.e., the existence and value of the Madoff fund.
The Court of Appeals held, inter alia, that the investment fund did, in fact, have value at the time of the divorce. Specifically, the court referred to the fact that Simkin had withdrawn monies from the fund. Indeed, the court determined that the Simkins’ lost millions ultimately amounted to a very bad investment, reasoning that, had the value increased, the wife, Laura Blank, would not have had legal standing to request redistribution of enhanced value. Underlying the court’s reasoning, at least in part, was a public policy of honoring the finality of settled negotiations. Allowing a re-negotiation upon every change of financial circumstances would simply send our legal system into a tailspin.
Of particular interest to mediators in the Court of Appeals decision is the repeated explanation by the court that the parties did not state an intended goal of an equal division of the marital assets. Each party retained a wide range of accounts and assets of varying value, and the parties acknowledged the settlement to be fair and reasonable. With the exception of retirement assets, nowhere did the agreement state a 50-50 distribution was intended.
Starting Negotiation Sessions
In mediation, we begin negotiation sessions by eliciting from each party the goals, concerns and values they bring to the process and, specifically, to their view of each issue. After these perspectives are in the room, and, importantly, are understood by the parties and by the mediator, then the parties can begin to brainstorm ideas as to how they may resolve any given issue in the conflict (trade asset A for asset B; buyout over time; etc.).
The full discussion of the values, priorities, needs and goals provides the foundation for decision-making. Ultimately, the ideas generated are cross-referenced with the needs and interests so that the parties can choose a “best” result, one that meets as many mutual goals as possible. All of this creates a foundation of understanding: why parties are making the decisions they are and what is behind the willingness to compromise.
Moreover, when mediators seek to understand the values and concerns of their clients, the emotions underlying a given goal are also a priority and given voice in the decision-making. For example, behind the “stability of remaining in a marital residence” may be a need to stay connected to the community, stability for children, etc., and it may be important to discuss those priorities in the context of financial stability and each party’s ability to tolerate risk. So, if the Simkin case had been mediated with this methodology, the parties presumably would have articulated a shared goal of equal distribution of assets. Their ages, roles in the marriage, needs for financial security, investing and spending styles, etc., would have been considered and perhaps even articulated to some extent in the final settlement agreement, thus providing the court potential basis for reformation.
If, in mediation, parties strongly voice a desire to divide their assets 50-50, then that might well affect the redistribution of assets post judgment if it turned out to be far afield from an equal division, as in Simkin. In fact, the Court of Appeals distinguished the Simkin case from a precedent on which Simkin relied, stating that “the settlement agreement here, on its face, does not mention the Madoff account, much less evince an intent to divide the account in equal or other proportionate shares” (Simkin at 54).
In most mediated agreements, the general values underpinning the agreement are articulated as a means of demonstrating the parties’ intent. Mediators draft this way because there is often a spirit to the agreement that is apart from, or enhances, what a legal result might look like: the parties’ values beyond the legal framework such as parity of time with children, their view of their roles as parents, a desire to be flexible and fair with each other. And, months or even years hence, should the parties have a dispute about the terms of the mediated agreement, they stipulate that they will return to mediation prior to seeking intervention of the court.
When Volatility Is the Norm
Investments with Bernard Madoff may seem an extreme example; however, reflecting upon events from 9/11/01 to the financial and housing crisis of 2008, to extreme weather and the effects thereof, there is a case to be made that volatility has become the norm rather than the exception. In family mediation cases, parties more than ever are grappling with the effects of unemployment, home devaluation, sky-rocketing educational expenses, and adult children who are still financially dependent, to name just a few repercussions of the broader instabilities. Therefore, as mediators discussing underlying values and concerns, goals and hopes for the future with our clients, now, more than ever, we should encourage our clients to reflect on a broad range of life changing events.
Where contractual clauses regarding relocation of a parent seemed, in a previous era, typically to provide for a restrictive geographic clause such that a parenting schedule would not be interfered with, now they entail a broader conversation of where a parent may find reasonable employment. Today’s negotiations involve the balancing of values between parental time and income for the family. Generally, investment and legal decisions are no longer couched solely in historic models; instead, professionals must help clients to consider the instability of the times as they negotiate a lasting agreement.
While mediators are accustomed to eliciting values and goals, and often reflecting those in the final settlement agreement, the motivation to do so may have a broader implication going forward. In other words, given the likelihood of “unlikely” events unfolding at some future point in time, language explaining the values and goals at the time of negotiation can clear the path to re-negotiating at a later date in order to achieve the same end by different means. It behooves the neutral drafter (i.e., the mediator), as well as the parties’ consulting lawyers (those providing advice and counsel to parties in mediation) to incorporate specific language into agreements reflecting such goals. It may also help frame the issues for the parties should they return to mediation in the face of renewed conflict. Finally, as was laid bare in Simkin, such language can also guide a court to an equitable result, one that takes into account the societal need for predictability and stability of contracts while also reflecting on the specifics of the facts before the court.
In business contracts, a force majeure clause is standard and accounts for acts of God such as natural disasters. Under such circumstances, the parties’ obligations may be null and void, or subject to change. Given the societal and personal volatility that has become increasingly common, mediators and other practitioners may wish to offer their clients parameters for renegotiation. It is now almost routine, to discuss how changes in income may impact maintenance and child support1; how unemployment and thereafter, self-employment, may affect the family’s access to affordable health insurance, for example. With each client, practitioners may wish to craft individually tailored standards for what constitutes grounds for reformation.
In “Learning to Love Volatility,” The Wall Street Journal, Nov. 17, 2012, page C1, Nassim Taleb wrote that our societal goal, rather than seeking to build sturdier institutions, ought to be to strive for ones that thrive in times of uncertainty. So, by addressing the issues head on, the hope is to avoid “explosions” at a later time. Analogously, the goal of mediation by getting behind people’s positions to their interests and needs, is not necessarily simply to create sturdier agreements, but also, ones that allow the parties to thrive even while experiencing difficult circumstances. In its ideal iteration, the process of mediation—negotiating through difficult and often emotional issues—can lay the groundwork for, not only cooperation in the future, but also resilience and competency, if not exactly a love of volatility.
Abby Tolchinsky and Ellie Wertheim are partners at Family Mediation.
1. See, DRL§236B(9)(b)(2)(ii), providing for modifications in child support every three years or if either party’s gross income has changed by 15 percent.