Collaborative divorce: A step that could save your business

A contentious divorce can bankrupt a person both financially and emotionally. Under the traditional litigation approach to divorce, each spouse would retain his and her own attorney and financial expert. Each spouse would appear in court before the judge prepared to argue his or her position to the absolute extreme. And then, each would place their relationship, children, assets (including business interests) and futures in the judge’s hands to decide what happens next. In most cases the judge’s decision is equitable and neither party feels as if they have “won.”

Litigation is a slow, time-consuming process. One spouse files a Complaint for Divorce. The other has 20 days to respond. Approximately three months later the couple appears before the court (likely each accompanied with an attorney) for an initial hearing, called a Case Management Conference. This is when the court issues temporary orders while the divorce is pending. For example, the court may require a party to pay temporary child support or temporary spousal support.

The court may enter a Temporary Mutual Restraining Order, preventing either party from transferring, encumbering, concealing or in any way disposing of any property until further order of the court. Such an order could be problematic for a business owner. The court will then hold a Settlement Conference, approximately two to three months after the Case Management Conference. If a settlement is not reached, the court will hold a divorce trial three to six months after the Settlement Conference. Therefore, a divorce that reaches trial could take one year or more.

You’re an informed, savvy, businessperson accustomed to working with people and working through disputes. Why would you refuse to work with the person you once pledged to share a life with? Instead of communicating and dissolving the romantic partnership together as a team, couples frequently retreat to their respective sides of the ring to fight and then allow a judge to make the tough decisions. Both spouses incur substantial fees and spend months of their life involved in an emotional, stressful, and expensive legal battle with their spouse.

If the couple’s assets include business interests (e.g. a family run business or a sole proprietorship) the future of the business is also in the judge’s hands. Will the judge order the business to be sold to provide a source of funds for an equitable distribution of property? Will the judge render a decision that leaves both parties in joint control of the business? Will the judge require one party to pay substantial alimony to the other to account for that party retaining the business, an income-producing asset? For business owners a divorce proceeding that leaves key decisions to be made by the judge could result in substantial uncertainty for the business.

For couples seeking an alternative approach, there’s a relatively new method that has been successful in California: collaborative divorce. This begins with two spouses making the commitment to resolve their divorce outside of court. Each is represented by an attorney whose goal is not to file motions and appear at hearings, but to work with jointly selected professionals to reach a fair, amicable resolution. If properly executed, a collaborative divorce could provide certainty for a couple’s business interests producing better and, more importantly, certain results for both parties.

The collaborative process is also more efficient. Instead of the experts taking sides and spending time and money finding and exposing the weaknesses of the other party’s experts, the attorneys and the experts — such as accountants and mental health professionals ­— work together to obtain results with which each party can live. There are no court deadlines or notice requirements. Rather, couples can decide how fast or slow to move through the process.

Perhaps the most compelling reason collaborative divorce makes sense for a business owner is privacy. Divorce is public record. In Washoe County, all divorce dockets are available for public viewing on the court’s website. Even if your divorce case has been sealed, the parties’ names and the fact that it is a divorce case is still accessible on the Internet. This could lead to financial uncertainty and potentially impact customer relations, management relations and financing prospects with local banks. Collaborative divorce would allow couples to privately decide as to the terms of their divorce. One of the attorneys involved would prepare the necessary court forms. The couple would then submit to the court only the necessary forms for divorce. No complaints or motions will be filed and no hearings will be set. If the couple wanted even more privacy, they may consider filing in another county, like Carson City. Carson City does not have electronic dockets so the divorce docket is not available for viewing on the Internet.

The collaborative process is not right for every divorce. It requires spouses to have a mutual respect for each other, the life they have created and the partnership they now seek to divide. It requires a commitment to resolution, rather than a desire to demonize and punish each other for perceived (or actual) wrongdoing.

A collaborative divorce may be even more beneficial if the couple’s assets include business interests, especially if the business is the sole or primary source of one or both of the spouses’ regular income. Even if a business was started prior to marriage, there is a community interest that accrues during the marriage that must be dealt with and resolved in the divorce process — whether it be by way of the traditional litigation process or the new on the horizon collaborative process.

A group of professionals — attorneys, accountants, and mental health professionals in Reno — have formed a group within the Nevada Dispute Resolution Coalition with the goal of bringing the collaborative process to Northern Nevada. If you want more information about NDRC, you may contact the author of this article.

Lauren D. Berkich is an associate attorney with Woodburn and Wedge and works extensively in family law.