Distressed that arbitration is not a viable alternative to spouses who cannot afford to pay an arbitrator and holding that the approval of the arbitration process by a family court constitutes an improper delegation of its constitutional responsibility, the Kentucky Court of Appeals recently barred arbitration in divorce cases.
Until then, family law arbitration had been available in Kentucky as a voluntary, alternative resolution process for divorcing spouses wishing to employ a private individual as their neutral decision-maker to determine how their assets should be valued and divided.Spouses opt in to the arbitration process for many reasons.Some have a complex valuation matter best resolved by someone with the specialized expertise of a particular arbitrator; some want a quicker resolution process than the court system can provide; some desire a less formal process than the traditional adjudicatory one; some hope to reduce the trauma and anxiety of marital litigation; and some hope to resolve sensitive matters in a private forum.
Controversy should not accompany the availability of arbitration, a process that allows husbands and wives to resolve disputes which will have significant, long-term and possibly deleterious effects on their lives by choosing the person to resolve those disputes.
In the most worrisome aspect of the decision, the Court concluded that arbitration creates a class system where affluent individuals can pay for a private judge while persons of lesser means must have their case heard by elected judges, in perhaps a less speedy manner.This ignores the benefit of arbitration on the court system itself— if complex cases are removed from the court dockets, more time is available for other persons needing access to the court.While our elected judges are highly competent, their case loads are backbreaking and the wait for resolution of discovery disputes and a final trial of a case can be long.The judicial system is under unconscionable budgetary constraints that limit the court’s resources.When parties find a path to resolution of their issues without the use of the courts, other parties and the system overall benefit.
Although not explicitly stated in the opinion, the Court revealed its concern over the state’s parens patriae power by references to the impropriety of arbitration of child-related matters.This may be a legitimate concern, but the wholesale elimination of arbitration even in matters that are strictly financial “throws out the baby with the bathwater.”Even if legislation or case law does not carve out appropriate, specific exceptions for arbitration processes so that the state’s parens patriae power over children is left intact, there still remains the parties’ ability to enter arbitration agreements only as to financial issues.
The Court also expressed concern that referring cases for arbitration impermissibly allowed elected judges to delegate their adjudicatory responsibilities.This conclusion impliedly suggests that family court judges have some control over whether a case is arbitrated.They do not.Spouses go to arbitration because they agree to do so and ask the court for permission.I know of no judge in this Commonwealth who has ever abrogated responsibility to decide a case by ordering arbitration.
This state made great progress by amending our Constitution so that we now havefamily courts providing “one family, one judge.”Families returning to court now have a judge who is, ideally, familiar with them and with their issues.But the Family Court system and the availability of arbitration can co-exist.By approving arbitrated decisions, judges are not shirking their responsibility to decide disputes before them.They are instead granting the parties’ desire to resolve their disputes outside of the court system.
Banning family law arbitration is a sad, regressive step for this Commonwealth.
Were circumstances different, I would patiently wait for one of the parties to move the Kentucky Supreme Court to grant discretionary review of this case, for neither of the parties had contested the validity of their arbitration agreement or the arbitration process in their appeal, and their arbitration contract permitted appeal of the arbitrator’s decision.The Supreme Court would likely grant discretionary review in a case that will impact so many parties and even the family court system.Sadly, however, one of the spouses died a few days before the decision was issued.As it is now unlikely that any disputed personal issues remain to be resolved, a motion to seek discretionary review by the Kentucky Supreme Court may not be forthcoming.The Kentucky Supreme Court may have within its power, without motion of either party, to order the Court of Appeals decision to be unpublished or to order this appellate case transferred to the Kentucky Supreme Court.Because the Court of Appeals decision is of such great import, such action is encouraged if it is possible.
Ex-Husband and Ex-Wife appealed and cross-appealed, on substantive grounds, Findings of Fact, Conclusions of Law and Judgment prepared by Arbitrator and signed and entered by family court (FC).CA, holding that family law disputes are not arbitratable, reversed and remanded to FC for trial.
After the parties commenced divorce proceedings and entered a limited decree of dissolution, they entered an Arbitration Agreement vesting the arbitrator with absolute authority to resolve all remaining issues between the parties. The arbitrator held a hearing on those issues and rendered written findings of fact, conclusions of law, and judgment adjudicating same. Per the terms of the agreed order, the FC entered the arbitrator’s judgment as a judgment of the court without independent judicial review or without an opportunity of either party to submit “objections” to the court. The arbitration agreement provided for appellate review upon the same ground as if decided by the FC.
CA first found that if the arbitration statute of KRS 417.160(1) applied, CA would be required to affirm both appeals as the requirements of that statute, providing only limited grounds for appeal, none of which are substantive, had not been met.CA disagreed with parties’ contention that the case could be reviewed as a “hybrid” proceeding in which the requirements of KRS 417.160 could be ignored.
Improper Delegation of Judicial Duties and Powers to the Arbitrator
CA held that by following terms of the Arbitration Agreement, FC improperly delegated its constitutional duties, including its decision making authority to an arbitrator in contravention of Section 109 of the Kentucky Constitution and in circumvention of the legislative intent regarding the duties of family court judges.An improper delegation of the court’s powers has occurred if the decision-making process is not under the control of the FC or if the judgment is not a product of the deliberations of the trial judge’s mind. Further, the authority to issue sanctions by awarding attorney’s fees or to sanction a party for contempt are exclusively reserved to the discretion of the FC.Lastly, since domestic relations commissioners in counties establishing family courts have been abolished, there is no authority that allows FC judges to delegate cases to third parties, including an arbitrator.
Arbitration Not Within Purview of Local Rules of Court
The delegation of judicial duties to the arbitrator is in direct violation of the JFRP and JFRP 711 which requires cases not otherwise settled to be heard by trial before a judge.Arbitration is not a viable alternative to parties with lower incomes who can not afford to pay an arbitrator a high hourly rate, effectively creating a class system within Jefferson Family Court proceedings where more affluent individuals have the opportunity to pay for a “private judge” to conduct their proceedings – while parties of lesser means and income must have their case heard by FC judges in perhaps a less expeditious time frame. Such a system that permits affluent individuals the opportunity to expedite the disposition of their domestic relations cases in FC that is cost prohibitive to persons of lesser incomes is both unconscionable and unconstitutional on its face.
Kentucky Uniform Arbitration Act Does Not Apply to Family Law Cases
A dissolution proceeding is not an arbitratable controversy within the meaning of KRS 417.050, which defines those cases that may be arbitrated. KRS 417.050 provides that “any existing controversy” may be subject to arbitration by written agreement of the parties. Because of the state’s compelling interests in the area of domestic relations and the court’s unique protective role in such area of the law, a domestic relations proceeding is not an arbitratable controversy within the meaning of KRS 417.050. These types of domestic disputes are not amenable to binding arbitration absent independent and meaningful judicial oversight.
Furthermore, the Arbitration Act clearly requires that a party be given the opportunity to challenge the arbitration award in court and requires the court to consider such challenge before confirming the arbitration award. In this case, there was no confirmation process.FC endorsed the arbitration award without any independent judicial review and without the opportunity of either party to challenge the award before the court. Such arbitration procedure is clearly contrary to the express provisions of the Arbitration Act, thus rendering the judgment unenforceable on this ground as well.
Under both the constitution and applicable law in Kentucky, the Findings of Fact, Conclusions of Law and Judgment entered by FC are neither enforceable nor legally valid. Under JFRP 702 and under CR 52.01, FC is required to conduct a hearing or trial upon the pending dissolution action and to make independent findings of fact and conclusions of law. This is a case of first impression in Kentucky. Accordingly, this opinion is limited to the cases now on appeal and has prospective application only as to any pending or future arbitration proceedings in the Jefferson FC or any other FC in Kentucky.
In response to an October 22, 2006 Los Angeles Times article, Is Justice Served, Victoria Pynchon is posting a series of arbitration articles. The first is Does Arbitration Disserve Justice? It is followed by Arbitration v. Litigation. For those who have picked up a whet for arbitration information on this blog, stay tuned to her blog by subscribing to its feed or checking often.
HOW TO FIND A DIVORCE ARBITRATOR?
Easy. Click here for AAML certified arbitrators across the United States. Once you have a name, you can then check out a possible arbitrator's bio and website by going here.
As to outcome, an arbitrator makes the decision and is responsible for the quality of the decision. By contrast, a mediator facilitates parties reaching their own decision and is neutral regarding the outcome. In mediation, parties are responsible for the quality of the decision.
The arbitrator is the enforcer of the process, limits exchange between principals, limits scope of information and communication and assesses facts. A mediator facilitates and encourages exchanges between principals, broadens the scope of information and communication, and helps parties assess facts for themselves.
Finally, an arbitrator is blind with respect to the parties and their backgrounds, has high expertise in rules and high power over the principals. A mediator has high expertise in social process, low power over the principals and may have moderate knowledge of the parties and background.
I cannot imagine arbitrating a case that has not first been mediated. Arbitrators do not replace mediators; they are a substitute for judicial decision-making when mediation has failed.
A blue ribbon faculty led by Lynn P. Burleson of Raleigh, NC and Hanley M. Gurwin, Bloomfield Hills, MI, and assisted by Joan F. Kessler, Milwaukee, WI, Allen R. Koritzinsky, Madison, WI, Barbara K. Runge, Houston, TX and Stephen Schlissel, Mineola, NY, taught their annual arbitration course for the American Academy of Matrimonial Lawyers in Louisville, Kentucky in 2004.
In conjunction with the AAML Annual Meeting in Chicago, there will be an arbitrators’ reunion on Wednesday, November 8, 2006, at 4:00 p.m.
While it is not necessary to have a family law arbitration statute to arbitrate divorce cases, the AAML Board of Govenors approved in 2005 a Model Family Law Arbitration Act. Learning from North Carolina, as we do more divorce arbitration, such tailor-made legislation will be helpful. We are hoping that bi-partisan leaders will embrace the model Family Law Arbitration Act. In these times of budgetary crises, it requires no state funds and as divorce arbitration takes hold, it could lighten the load on our judiciary.
I’ll post more about divorce arbitration soon.
The following Kentucky AAML Fellows were certified as arbitrators: Mitchell Charney
101 S. Fifth Street, Ste. 3000
Louisville, KY 40202
firstname.lastname@example.org William L. Hoge III
200 South Seventh Street, Ste. 506
Louisville, KY 40202
email@example.com Bonnie Brown
401 West Main Street, Ste. 1000
Louisville, KY 40202
firstname.lastname@example.org Steven J. Kriegshaber
325 West Main Street
2000 Waterfront Plaza
Louisville, KY 40202
email@example.com Diana L. Skaggs
Diana L. Skaggs + Associates
623 West Main Street
Louisville, KY 40202
Skaggs@LouisvilleDivorce.com Wynter Reneaux Collins
200 South Fifth Street, Ste. 600N
Louisville, KY 40202
reneauxCollins@aol.com Sandra Dawahare
Dawahare & Kershaw LLP
106 West Vine Street,Ste. 304
Lexington, KY 40507
Besides the AAML Fellows certified as arbitrators listed above, the following divorce lawyers and mediators also attended this training:
Advantages of divorce law arbitration include:
Ability of participants to decide who will be their judge. Parties can select an arbitrator with particular expertise, such as business valuation, retirement plans, tax, nonmarital tracing issues, mental health, etc.
Quicker trial dates and pre-arbitration conferences, which also may result in less expense and tension.
Swiftness of decision making.
The arbitrator has all the time you need to put on your case.
Disadvantages voiced by some include:
Perception that there cannot be binding child custody decision. (Maybe but not necessarily true; usually are subject to trial de novo if the court concludes the award is contrary to a child’s best interest.)
Beliefs that parties are not protected by rules permitting discovery and required financial disclosure. Under the Uniform Arbitration Act mechanisms for disclosure are provided and in the arbitration agreements parties may have the arbitrator supervise the discovery, or the parties may complete discovery and then arbitrate.
Fears that the arbitrator will be able to ignore the law. While an arbitrator’s mistake of law does not generally provide a basis for refusing to confirm an award, the parties can agree that the arbitrator will be bound by the substantive law of the state.
Inability of the arbitrator to enforce an award. Awards are tendered to the court and after confirming the award, all remedies for enforcement are available in court as with any other judgment.
The parties must pay for the arbitrator’s time.
HOW DIVORCE ARBITRATION WORKS is the first in a series of family law arbitration posts.
An agreement to arbitrate fixes the power of the arbitrator, the degree of trial court and appellate review, compensation of the arbitrator, and the discovery process. The arbitration hearing is generally more informal than a court trial, but the proceedings are recorded and result in a written order tendered by the arbitrator to the trial court judge along with findings of fact and conclusions of law. As with motions to alter, amend or vacate, parties to the arbitration may move for amendment within the time set out in the arbitration agreement.
Arbitration awards may be more difficult to appeal, except for child related matters, than trial court judgments, depending upon the agreement of the parties within the arbitration agreement.
Stay tuned for more.