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Episode 6 Transcript: Settlement Negotiation in Divorce

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Hi, everyone, and thank you so much for tuning in to the Divorce Field Guide. My name is Ani Mason, and I’m a divorce attorney and mediator, and I’m also the creator of this podcast.

INTRO

Today, we are in Episode 6 and we are going to be talking about a divorce negotiation process called settlement negotiation. Just by way of a quick intro, as I like to do at the outset of every episode, from the very beginning of the podcast, we’ve been talking about how the divorce process is, in essence, a very important negotiation between you and your spouse. Because it covers such important topics, it really pays to try to structure and set up the negotiation process of your divorce in the most ideal way possible, and in the way that is most likely to result in the best settlement possible for you and your spouse going forward.

One of the things that I think is really important to think about at the outset, at the very beginning of your divorce, before you start figuring out the substantive issues of your divorce, is (a) to be aware that there are different ways to go through a divorce negotiation process and (b) to give some thought to those different ways, and think about what is going to be the best fit for you, and what’s going to help you get to the best ultimate result.

In the last three episodes, we have covered the DIY or Do-It-Yourself Divorce process – it also used to be called the “kitchen table divorce – but, basically, where you and your spouse handle your divorce completely on your own.

We’ve talked about mediation, a negotiation process that is primarily led in collaboration between you, your spouse, and a neutral third-party called the mediator.

Then, in just the last episode, we talked about a process called Collaborative Law or Collaborative Practice. That’s a process in which you and your spouse are represented each by your own Collaborative Attorney, and together, the four of you, along (sometimes) with additional financial professionals or clinical professionals, will work toward a settlement.

SETTLEMENT NEGOTIATION: OVERVIEW

Today, we’re going to talk about, as I said, settlement negotiation. That is, basically, you and your spouse going through your divorce process assisted by two attorneys who are either not trained in Collaborative Law or who, at a minimum, let’s say, they’re not practicing Collaborative Law in your case.

So, this is more of a traditional set up. You go out, you hire an attorney, your spouse does the same, and there are no special, added rules about those attorneys committing contractually to only help you work toward settlement.

They, most likely, start out by trying to settle your case. However, the big difference between a settlement negotiation and a Collaborative Law case, which also involves you and your spouse having your own attorneys who assist you in your negotiation, is that if you and your spouse are not able to settle your case, your attorneys, in a settlement negotiation, may very well take your case to court to litigate and have it resolved by a judge (even though, statistically, even those cases that go to court are highly unlikely to ultimately be settled by a judge). They may go to court, and you may litigate for some time – six months, a year, eighteen months, whatever – and then settle your case. That’s not uncommon. You start out trying to settle, you’re at loggerheads you can’t get anywhere, you go to court, you spend some varying length of time in court, and, at that point, you reach a settlement.

So, that’s a little overview of settlement negotiation. It’s, basically, attorney-assisted negotiation in a more traditional structure.

SETTLEMENT NEGOTIATION: WHO’S INVOLVED

In terms of who would be involved in the process, it’s almost always your two attorneys. I would say that settlement negotiation, coming from a more traditional place, tends to less frequently involve neutral professionals in the role of financial expert, child specialist, divorce coach, in the same way that a Collaborative process might. So, it’s a little bit more lawyer-focused. There’s a little bit less attention to the non-legal aspects of the case.

That’s not to say that non-legal professionals are not included in or do not participate in a settlement negotiation. They absolutely might.

For instance, if you have a piece of real estate that needs to be valued, you could retain a neutral real estate appraiser, if you are in an amicable settlement negotiation. You might agree, actually, even in a more traditional settlement negotiation, both you and your spouse might agree that you’d really like your child to have the opportunity to see a therapist for a few sessions, and then you’d like to meet with that therapist to get some guidance on how to handle particular issues that are coming up with your child. That, too, could happen in a settlement negotiation.

So, I want to be clear that a settlement negotiation is not limited, in any official way, to just involving your two attorneys. It’s just more common practice that it just involves your two attorneys.

I’ll also add this: a settlement negotiation may involve each of you retaining your own individual financial professional, for instance. So, rather than hiring a neutral financial professional, one or both of you may retain your own CPA, or business valuator, or wealth manager, financial planner on your own, to work with you individually. That is more common than not in a settlement negotiation context, whereas that’s very uncommon in a Collaborative case.

In a Collaborative case, outside of the legal professionals, you are almost always hiring neutral other professionals: neutral financial, neutral child specialist, maybe neutral divorce coach, maybe a divorce coach for just one of the spouses, depending on what the spouses feel that they need. But, that’s a little bit more of the set-up for the settlement negotiation – if you need professionals other than attorneys – hiring your own as opposed to hiring a neutral. Though it’s totally possible that you could hire a neutral professional, as well, in a settlement negotiation.

SETTLEMENT NEGOTIATION: WHO TALKS TO WHOM

So, you’ve got your team of professionals, most commonly just the two spouses and your two attorneys, then who talks to whom? How are the negotiation conversations had?

This is where there is definitely a difference between a more traditional settlement negotiation and a Collaborative case. As I mentioned in the last episode, in a Collaborative case, you’re generally meeting in person for negotiation sessions, and you and your spouse talk to each other, you each talk to your own attorney, and you each talk to the other attorney as part of the session.

In a settlement negotiation, it is less common that you’re meeting in person. It’s more common that you are talking with your individual attorneys and that your attorneys are then, in turn, talking with each other. It’s less a part of the process that you and your spouse are in conversation. It’s not forbidden, and it really depends on the couple, but the attorneys take more of a central role in relaying the messages between their clients in negotiation. Not necessarily, though. In a low conflict case or a more informal case, that may well not be the case. What’s unlikely to happen in a settlement negotiation, a more, sort of, traditional structure, is for the four of you (you, your spouse, and your two attorneys) to have most of the negotiation carried out in in-person meetings in which you all four are freely talking to each other, as you might expect in a more Collaborative process. So, that’s definitely a difference.

Certainly, in terms of the other professionals who could be involved, if you hire a neutral appraiser, if they’re neutral, it may be that they will only speak to your two attorneys and not speak to one client or one attorney separate from the other. Not necessarily. That’s something that would be more strictly adhered to in a court, in a litigation setting, but if someone’s hired as a neutral, your attorneys and, in general, the process would be more cautious about them having separate conversations with either of the spouses or either of the attorneys.

If you hired an independent CPA to look through your spouse’s business tax returns, and that person was just your advocate and they were not a neutral, they will likely only be speaking with you and your attorney. It’s less common, potentially unlikely, that they would be speaking with your spouse, that your individual financial expert would be speaking with your spouse. Maybe with your spouse’s attorney, maybe to coordinate some sharing of documents, but the lines of communication are a little bit less fluid. So, that’s a slight difference from the Collaborative process. However, it’s less formal than it would be if you were in a full-on litigation.

SETTLEMENT NEGOTIATION: WHERE THINGS TAKE PLACE

In terms of where the negotiation takes place, where do the conversations happen if you are in a settlement negotiation process, where you’ve just hired two traditional attorneys to help you negotiate, generally speaking, they’re not taking place in person anywhere. More often than not, they’re taking place in writing, in letters, memos between your attorneys, emails, phone calls. They’re not so much taking place in one attorney’s office or the other, though they may. That sometimes happens, and it’s not a never-happens, but it’s less common, certainly, far less common than it is in a mediation or a Collaborative Law, where the bulk of your negotiation is taking place in person, not in writings between your attorneys or between you and your spouse.

SETTLEMENT NEGOTIATION: WHAT HAPPENS WHEN YOU AGREE

Once you have gone through the settlement negotiation process and negotiated the different terms that are relevant in your divorce to your satisfaction, what happens then?

Well, as in the other processes, similar to mediation, similar to Collaborative Law, you’re working toward drafting a contract that reduces your agreements to formal commitments in writing. I would say that, in a settlement negotiation process, some people may use term sheets, maybe less common than it is in Collaborative Law, but it’s very common that one of the attorneys would draft an agreement at that point. If they think that they and their clients are on the same page about the different issues that need to be resolved, one of the attorneys might just go ahead and draft something.

In fact, something that you would not see happen in a Collaborative case or a mediation, but certainly happens in settlement negotiation cases, is that one of the attorneys, and it’s usually the attorney of the spouse initiating the divorce, one of the attorneys may have already drafted something from the very beginning of the case before there was even a conversation between the two attorneys.

Usually, they’ll have drafted something along the lines of what their own client is proposing or would like. Then, through the course of negotiation, some of those terms would certainly change or at least, typically, would change, and so they might just be bringing their initial draft up to speed and adapting it to the different agreements that have made throughout the settlement negotiation process.

Then, similar to Collaborative Law and to mediation, there will be revisions to the draft, almost without exception, and the degree of revisions varies from case to case. I would say that it also varies depending on how certain the clients and the attorneys are of their comprehensive agreement, of the terms of it, before a draft is drafted. So, if you think you roughly know what the agreements are, but there are still some spots that are open, and you go ahead and draft, there will likely be more revision to that draft than if you really lock down the term sheet in plain language and, then, once you’re agreed on that, you go ahead and draft off of it. There’s usually less revision of a draft that’s based on an agreed upon term sheet.

SETTLEMENT NEGOTIATION: LEVEL OF ATTORNEY INVOLVEMENT

Getting back to, as we’ve talked about in previous episodes, the level of attorney involvement, just, sort of, measuring that in each process against the other, and the likelihood that you will spend time in court. Level of attorney involvement in settlement negotiation – very high.

Number of total attorney hours invested in a settlement negotiation process varies wildly from case to case. Some cases may take very little attorney involvement because there are very few issues, and the spouses are in agreement on all of the issues, so there’s really not a lot for the attorneys to do. Other cases can take years to negotiate a final settlement and, there, the amount of attorney time will be substantial.

SETTLEMENT NEGOTIATION: LIKELIHOOD OF TIME IN COURT

Likelihood of being in court… Well, it, kind of, depends. You may go to work with an attorney who’s not a Collaborative Attorney, but they still only negotiate settlements outside the court. I would say that’s less common. If you’re going to retain an attorney who’s not a Collaborative Attorney, generally speaking, they have a litigation practice and when you retain them, they will try to resolve your case and to settle it, but if they can’t, they will almost certainly take your case to court if need be.

So, your likelihood of going to court, well, it depends on how your settlement negotiation goes, but it’s moderate. You won’t definitely go there, but it’s very, very possible that you will. Much more likely, I would say, than if you are in a Collaborative case or in a mediation case.

I think that’s for two reasons. One, because of a, sort of, self-selection component to these cases. So, oftentimes, the couples who opt for a mediation process are couples who, I wouldn’t even say have a lesser complexity of issues, but there may be a slightly lower degree of conflict or, even in very high conflict cases, there is still enough of a functioning ability to negotiate and compromise with each other that each spouse believes that mediation is reasonably likely to work.

I think the same goes for Collaborative Law because, if you think about it, when you retain Collaborative attorneys, you’re establishing a relationship with somebody who, if you can’t settle, is not going to be able to continue working with you and you have to start over with a new attorney, which would be a drag after you’ve invested a lot of time and energy in to your relationship with your Collaborative Attorney.

So, I think, in some ways as well, people who opt for a Collaborative Law process, it’s not that they have less complex issues or even a lower level of conflict, but despite the complexity of their issues, despite the level of their conflict, there’s still an underlying foundation there that leaves them with some confidence or faith that they will be able to work through the issues, enough to invest themselves in a process such as Collaborative or mediation that can only work if they settle.

Whereas, with settlement negotiation, I do think that when both spouses retain more traditional attorneys, in some way, they’re keeping their options open. That’s not a bad thing at all, but this is all speaking to what’s the level of likelihood that you’ll end up in court. I do think it’s moderate and, I think, that’s because, in some ways, cases where, for whatever reason, be it the dynamic between the spouses, or complexity of particular issues that the spouses are confronting, or how far apart they are on issues, the spouses themselves have some concern that they may not be able to resolve their differences, at least, at this time, and that concern may lead them to assess that, all things considered, it makes sense to them to hire somebody who could litigate if they needed to. They’d try to settle, but if they can’t, they could litigate.

I think the second component is that there are some process barriers. If you are in mediation or if you’re in Collaborative Law, your mediator is not going to take you to court if you decide you want to go to litigation, your Collaborative Lawyers aren’t going to take you to court if you decide to go to litigation. You’re going to have to expend some energy in retaining new attorneys and starting a new process by litigating. Whereas, if you have retained more traditional attorneys who have the ability to litigate, it’s not so hard to make the decision.

I mean, I don’t want to be dismissive of it because I think it is a hard decision to make, whether or not to go to court at a particular time in a negotiation, but there’s not the same barrier to entry to drop into the litigation process when you already have attorneys in place who could help you with that, as there is when you are in a mediation process, and your mediator can’t help you with it, and, depending who you have hired as a consulting attorney or not, they may or may not be able to help you with litigation. And then, in Collaborative, your attorneys can’t help you with litigation.

So, all that is to say that, I think, there’s a higher likelihood that you end up spending some time in court if you are in a settlement negotiation process than if you’re in a mediation or Collaborative Law, but it’s not a guarantee. It’s not a definite, and many settlement negotiations that go all the way to completion do not involve the parties going to court at all. It’s middle of the road in terms of, less likely than if you’re in litigation, which by definition, you are in court, and more likely than if you are in mediation or Collaborative Law that you will or could end up in court.

SETTLEMENT NEGOTIATION: PROS + CONS

Let’s talk a little bit about pros and cons. I think, in some ways, this may already be apparent to you in the discussion of the settlement negotiation process thus far.

Pros would be that by starting with a settlement negotiation process, you’re not launching straight in to the most adversarial, most expensive process, which is litigation, sort of, full-on, actively litigated case. (I would distinguish that from just filing a case in court, and then not taking further action, and negotiating through your attorneys. I still see that as a settlement negotiation.) But, anyway, the gist is this is not the most adversarial option, and you’re trying to settle at the outset.

One pro of the settlement negotiation process is that the people you’ve chosen to work with can, if needed, take your case to court. That can be helpful in the exact kind of situations that I was describing when I talked about mediation and Collaborative Law that would be problematic for those processes. So, if you have a spouse that won’t participate in the process, won’t respond to your outreach to them, or won’t come off a certain position, and is just really locked in to not compromising on something that’s also important to you, it can be a good thing to be working with people who, if you find that, are able to take a step with you in to a different process, an obligatory process or a non-voluntary process. They can shift with you into that if needed, and that’s nice. You don’t have to get a new attorney to do that, to go to court if you need to. However, I think it does also make it a little bit easier for you to pull the trigger and say, “You know what? Enough of the negotiation, let’s go to court.”

Another pro, I think, of working in a settlement negotiation process – and to me this is true of Collaborative Law, litigation, and mediation – is that you have the presence of two divorce professionals, at least, in your two attorneys who are helping you know what are the issues you have to cover, what does the law say on them, helping you make sure that you’re dotting all your “i”s and crossing all your “t”s as you negotiate the terms of this very important contract resolving your divorce.

In terms of cons, I think we’ve spoken about them. It’s this double-edged sword of, you have two attorneys leading the negotiation who are able to litigate for you, and I think that’s a good thing. It can be a good thing and it can be a bad thing.

Litigation is not something that you want to make an easy option because once you’re in it, it is truly not an easy option. But it’s something that is critically important if you have no other options. So, it can be a pro and a con that your attorney in a settlement negotiation can easily take you into a litigation case.

The one other difference that I will point out, that is also another double-edged sword, or can be a pro and a con, is the issue of the way the negotiation is conducted. As I said, in settlement negotiation, it’s not common as it is in Collaborative Law or mediation that you’re meeting in person for your discussions. Instead, much more so, you’re talking through your attorneys rather than directly with your spouse, rather than together in the room.

I think that can be a pro, in that it’s never easy, or it’s often not easy, to be in the room with your spouse whom you’re divorcing, talking through issues that you’re in conflict on, that are complex and very meaningful to both of you. I think that’s hard. It’s a heavy lift on anybody who is engaged in the divorce negotiation process.

So, in some ways it’s nice in a settlement negotiation that you don’t have to do that. The negotiation is really done through your attorneys. However, what I have observed in my own experience with mediation and Collaborative Law, but then going further back in my career with settlement negotiation and litigation, is that when you and your spouse are really talking solely through your attorneys, and the attorneys are really stepping in, and they are leading the negotiation in your stead, the negotiation can get a lot more polarized, and, sort of, locked into positions, and more adversarial than it tends to get if you’re in the same room together.

I know that may sound counterintuitive, but think about if you have ever had to give someone news that you knew they would not be happy with, whether it be saying, “No, I won’t do something” or, you know, “You’re going to have to do… blah, blah, blah.” Would you find it easier to tell them that in person to their face, see their reaction, take in the reality of their separate subjectivity, let that impact you, or would you find it easier to, hmm, say, text them or email them, or call them on the phone and tell them? I think not being in the room together can be easier in some ways than being in the room together, but it also makes it easier to take more adversarial positions and to be more quickly rejecting of something that your spouse is proposing and vice-versa.

Maybe you’re thinking, “Well, that’s fine by me that I reject what my spouse is proposing.” But it applies to them too. So, as you propose something, and you’re not in the room, and it’s being relayed from you to your attorney, from your attorney to their attorney, from their attorney to them, it’s going to be easier for them to say, “Nope. No way,” in conversation just with their own attorney, as opposed to in a room with you explaining, in your own words, why what you’re proposing is important to you, why you think it works. Again, double-edged sword.

I think it’s really for you to, kind of, feel in your gut and just lean, really, on your instinct as to whether or not you and your spouse will be able to negotiate more effectively if you are physically in the room together, or if you are, really, talking more predominantly through attorneys as you would in a more traditional settlement negotiation process.

NEXT UP

So, that is it for Episode 6 on settlement negotiation. We did not have time to cover litigation in this episode, but we will cover it in our next episode. I’m going to go ahead and say that we will cover arbitration, as well, if we have the time, but based on prior experience, I think we probably won’t. We’ll probably cover litigation in our next episode and arbitration in the following. Thank you so much for tuning in. I will look forward to speaking with you soon.

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