Collaborative law is our newest dispute resolution model. It is not limited to any area of practice but is clearly rooted in family law. It is midway between mediation and litigation in the dispute resolution continuum.
The most essential of collaborative family law is that the divorcing parties and their respective counsel enter into a four-way agreement to use their energies to settle the case without court intervention. If an agreement cannot be reached, the lawyers are mandated to withdraw and the litigants retain new counsel to pursue their claims in court.
This model was first conceived in 1990 by Minneapolis family law practitioner Stewart G. Webb. After 17 years of practicing divorce law, Webb found himself close to burn-out and hating to go to work in the morning. He seriously considered closing down his office but decided instead to limit his practice to what he enjoyed. He realized his dissatisfaction was with his professional role as a litigator and that he, in fact, derived high energy and good feelings from his work as a mediator. He unilaterally declared disarmament and decided that he would no longer fight the other side. If he and his client couldn’t negotiate an out-of-court settlement, then he would withdraw. To fit this end, and not without some setbacks, he conceptualized a model that would deliberately create a settlement climate and remove the aspect of trial from consideration, at least initially.
He reports that in his first two years of employing this collaborative approach, he handled 99 cases and all but four reached full settlement. His success led to the formation of an organization which consists of many Minneapolis-area family lawyers who have committed to use this model whenever possible. Similar collaborative law groups are now being formed in Illinois and many other states including Arizona, California, Florida, Texas, Utah, Washington and Wisconsin.
Groups are necessary to ensure that all collaborative lawyers have proper training and that they all operate with the same guidelines and procedures. In the adversarial system, the Supreme Court Rules provide the structure. In collaborative law, the rules and protocol are mandated and enforced by the group.
The collaborative model is still the practice of law and its practitioners still provide the degree of advocacy required of all lawyers, but they now employ non-adversarial tools and techniques. The lawyers receive training in managing conflict and in the use of cooperative and non-confrontational strategies. These new skills require the lawyers to change how they think, speak, and behave. Most attorney-converts express their surprise at the actual extent of changes they had to make in order to collaborate effectively.
The collaborative process moves forward with carefully managed four-way settlement meetings that are preceded by prior ground-work between the lawyer and client, and between the lawyer and lawyer. It is believed that these differ from our present four-ways because we now have two lawyers (with transformed thinking) in the same room pulling in the same direction with both clients to solve the same list of problems. Information and discovery are exchanged quickly, openly, and freely. If that doesn’t happen, the parties are summarily sent on to the very legal system they sought to avoid.
While a collaborative case is pending, the parties have full access to the court for the entry of agreed Orders. In addition, the parties may agree to utilize the court’s power (i.e., subpoenas, perjury, etc.) to protect against potential shortcoming and discovery. It is nor uncommon for collaborative marital settlement agreements to require future financial reporting and to award 100 percent of a secreted asset (plus interest and appreciation) to the unenlightened spouse.
The collaborative model attempts to create a dynamic for settlement. Because the court won’t be involved, resolution isn’t going to happen until the other party says “Yes,” and that will not happen if he or she is being insulted, disrespected or otherwise treated negatively. Sales people know that they have to be nice to the customer if they hope to make a sale. Somehow, it seems that many litigants overlook this fundamental fact of successful negotiation during traditional four-way conferences. If you need the other side’s agreement to get what you want, and he or she wants what you want, and neither of you are allowed to go to court to get it, then creativity and diplomacy may be what is needed. Collaborative lawyers maintain that the early implementation of these tools help to keep spouses of “good will” from becoming derailed by our “high noon” cultural mindset.
Collaborative law isn’t for every client and it isn’t for every lawyer. It is a profoundly new concept for a profession that is anchored to tradition yet has always adapted to the needs of an ever-changing society.
The Richman Report: Similar facts, different result
Not too long ago, an IRS Field Service Report dated July 29, 1999 made us stop and think carefully before transferring nonqualified stock options in a divorce situation. While the ruling in the report is not binding on IRS examinations or appeals, is not a final case determination, and is not to be cited as precedent, it is something a divorce practitioner should consider. In this ruling, the IRS took the position that under Internal Revenue Code section 83, the transfer of nonqualified stock options pursuant to a divorce settlement should be treated as a disposition of those options and thus a taxable event. In essence, the IRS argued that it should be treated as a compensatory transaction, claiming that the transaction was at arm’s length and that section 1041 of the Internal Revenue Code did not nullify this type of transaction. The IRS believed that upon the transfer of money or other property received by the husband in exchange for the transfer of the options in connection with the divorce settlement, the husband received compensation income. The compensation income was defined as the difference between the amounts realized from the transfer to the ex-wife pursuant to the divorce decree. The basis for the IRS’ position was United States v Davis, 370 U.S. 65 (1962). In Davis, the Court found that the property the husband received in exchange for the options was presumed to be equal in value to the options at the time they were transferred to the ex-wife. Thus, the husband received compensation income equal to the fair market value of the options when they were transferred to the ex-wife pursuant to the divorce decree.
By Richard Kularski, Oak Brook Illinois
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