In re the Marriage of: Elizabeth Mary Ferguson v. Bradley Alan Ferguson

• Court: Court of Appeals of Minnesota
• Decided: August 1, 2016
• Docket: A15-1249
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A15-1249

In re the Marriage of: Elizabeth Mary Ferguson, petitioner, Appellant,

vs.

Bradley Alan Ferguson, Respondent.

Filed August 1, 2016 Affirmed in part, reversed in part, and remanded Peterson, Judge

Carver County District Court File No. 10-FA-13-383

Susan M. Lach, John M. Jerabek, Tuft & Lach, PLLC, Maplewood, Minnesota (for appellant)

Jane Van Valkenburg, Dove Fretland & Van Valkenburg PLLP, Minneapolis, Minnesota (for respondent)

Considered and decided by Bjorkman, Presiding Judge; Peterson, Judge; and

Rodenberg, Judge.

UNPUBLISHED OPINION

PETERSON, Judge

In this marriage-dissolution proceeding, appellant wife argues that the district court

erred when it (1) admitted into evidence agreements reached during an Early Neutral

Evaluation process, (2) ordered a spousal-maintenance award that divests the district court of jurisdiction to modify the award, and (3) included terms in the judgment and decree that

were not included in the parties’ stipulations. Wife also argues that the district court’s

findings are insufficient to support its attorney-fee award. We affirm in part, reverse in part,

and remand.

FACTS

Appellant-wife Elizabeth Mary Ferguson and respondent-husband Bradley Alan

Ferguson were married in 1993 and are the parents of two minor children. Wife began this

marriage-dissolution action in 2013. The parties agreed to participate in Financial Early

Neutral Evaluation (FENE). Each party was represented by an attorney.

Between November 15, 2013, and April 10, 2014, the parties participated in several

FENE sessions with an evaluator. During a session on January 27, 2014, the parties

reached an agreement and signed a document. Above the parties’ signature lines, the

document states: “I AGREE TO BE BOUND BY THIS AGREEMENT. I HAVE HAD

AN ADEQUATE OPPORTUNITY TO CONSULT WITH MY ATTORNEY.” The

document also states that an “attached spreadsheet represents the just and equitable division

of the parties’ marital estate.”

During an FENE session on April 10, 2014, the parties signed a hand-written

document that addresses the award of proceeds upon a future sale of their homestead, child

support, spousal maintenance, and other issues. In part, the document states:

$3000 x 5 yrs sm1 Start May 1, 2014

1 We understand that “sm” is an abbreviation for “spousal maintenance.”

2 GLCS[2] ≈ $1635, modified upon emancipation (estimated only)

W[ife] awarded 100% of house proceeds ...

W[ife] pays all home expenses pending sale. ... Karon Waiver – no modification of sm for amount or duration during 5 yr period, except death or W[ife] remarriage

Wife hired a new attorney, and, on June 4, 2014, the new attorney sent husband’s

attorney a letter requesting documentation tracing $1,054,747 in proceeds from a 2010 sale

of Cypress Semiconductor3 stock, a release signed by husband allowing wife to obtain

documentation of all stock and stock options received and exercised by husband since his

date of employment, all attachments to the 2009-2012 tax returns, probate documents

showing the values of rental properties when husband inherited the properties,

documentation regarding work done on and improvements to the rental properties during

the marriage, profit-and-loss statements for the rental properties for the preceding three

years, passwords for protected computer files, and copies of retirement statements.

Husband’s attorney provided some of the requested information, noting that it had already

been provided to wife’s previous attorney. Husband’s attorney declined wife’s attorney’s

request for additional information, noting that the issues wife was raising had been

addressed and agreed on during the FENE process.

On July 23, 2014, husband filed a motion to enforce the January 27 and April 10,

2 Wife’s attorney testified that “GLCS” is an abbreviation for “guideline child support.” 3 Cypress Semiconductor was husband’s employer.

3 2014 agreements and attached to his motion a proposed judgment and decree. On July

24, 2014, wife filed a motion containing several requests for relief. Following a motion

hearing, the district court scheduled an evidentiary hearing for September 11 and 12,

2014. The court identified the issues to be addressed as

1) alleged misrepresentation, fraud, duress, and violations of confidentiality prior to the execution of the two (2) mediated and signed agreements; 2) competency of counsel and whether extensive and meaningful negotiations occurred prior to the execution of the (2) mediated and signed agreements; 3) whether the proposed Judgment and Decree comports with the two (2) mediated and signed agreements; and 4) whether the proposed Judgment and Decree is substantially fair under the circumstances of this case.

Following the evidentiary hearing, by order filed December 16, 2014, the district

court found that the mediated agreements signed by the parties on January 27 and April 10

are enforceable and binding on the parties. Because the proposed judgment and decree that

husband attached to his motion took into consideration events that occurred after the

January 27 and April 10 agreements were signed, the district court directed counsel to

provide a document that detailed only the agreements that the parties signed during the

FENE process and any additional provisions that the parties agreed upon. The district court

also granted husband $7,500 in conduct-based attorney fees.

On March 13, 2015, the district court filed a partial stipulated findings of fact,

conclusions of law, and order that incorporated the agreements reached by the parties on

January 27 and April 10. On June 1, 2015, the district court filed a supplemental findings

of fact, conclusions of law, and order that incorporated the March 13 order and addressed

4 the remaining issues in the dissolution. A final judgment was entered on July 14, 2015.

Wife appeals.

DECISION

I.

Citing Minn. R. Gen. Pract. 114.08(a), wife argues that the district court erred during

the hearing on husband’s motion to enforce the stipulations when the court admitted into

evidence the January 27 and April 10 agreements that resulted from the FENE process.

“We review the construction and application of procedural rules de novo.” Contractors

Edge, Inc. v. City of Mankato, 863 N.W.2d 765, 768 (Minn. 2015).

Minn. R. Gen. Pract. 114.08(a) states:

Without the consent of all parties and an order of the court, or except as provided in Rule 114.09(e)(4),[4] no evidence that there has been an ADR proceeding or any fact concerning the proceeding may be admitted in a trial de novo or in any subsequent proceeding involving any of the issues or parties to the proceeding.

(Emphasis added.) We conclude that the district court did not err in admitting the

stipulations because the hearing on husband’s motion was not a trial de novo and

“subsequent proceeding” cannot be interpreted to include the hearing on husband’s motion.

With limited exceptions that do not apply to this case, “[a]ll family law matters in

district court are subject to Alternative Dispute Resolution (ADR) processes as established

4 Rule 114.09(e)(4) applies when a party seeks to vacate a judgment entered pursuant to an arbitration award. 5 in [Minn. R. Gen. Pract.] 114.” Minn. R. Gen. Pract. 310.01(a). ADR processes5 include

Early Neutral Evaluation (ENE), which is defined in rule 114 as

[a] forum in which attorneys present the core of the dispute to a neutral evaluator in the presence of the parties. This occurs after the case is filed but before discovery is conducted. The neutral then gives an assessment of the strengths and weak- nesses of the case. If settlement does not result, the neutral helps narrow the dispute and suggests guidelines for managing discovery.

Minn. R. Gen. Pract. 114.02(a)(4) (emphasis added).

During the parties’ FENE sessions, several issues, including child support,

maintenance, and division of property, were presented to the evaluator, and the parties

signed documents that addressed some of the issues that were presented. Husband

considered these documents to be stipulations regarding the issues they addressed, and he

brought a motion to enforce the stipulations.

The hearing on husband’s motion was not a trial de novo. A trial de novo is “[a]

new trial on the entire case – that is, on both questions of fact and issues of law – conducted

as if there had been no trial in the first instance.” Black’s Law Dictionary 1737 (10th ed.

2014) (defining trial de novo). At the hearing on husband’s motion, the issues presented

to the district court were whether the parties entered into stipulations and, if they did, what

were the terms of the stipulations; the district court was not asked to make decisions

regarding the underlying issues that were presented to the evaluator. Furthermore, the

5 We note that the definitions in Minn. R. Gen. Pract. 114.02(a) include a definition for “ADR Processes,” but Minn. R. Gen. Pract. 114.08(a) refers to an “ADR proceeding.”

6 FENE process was not a trial. The evaluator did not decide questions of fact or issues of

law. Instead, under rule 114.02(a)(4), the evaluator’s role was to “give[] an assessment of

the strengths and weaknesses of the case.”

The hearing on husband’s motion was also not a “subsequent proceeding.” The

language emphasized above in the rule 114.02(a)(4) definition of “Early Neutral

Evaluation” demonstrates that settlement may be the result of an ENE. It would undermine

the ENE process if no evidence of any settlement reached in an ENE process could be

admitted into evidence at a later hearing in a dissolution proceeding. A stipulation

produced in an ENE could not be enforced if the stipulation could not be presented to the

district court.

II.

Wife argues that the district court erred in ordering a spousal-maintenance award

that divests the court of jurisdiction to modify the award when the agreement reached

during the FENE process did not contain (1) an express divestiture of jurisdiction, (2) an

acknowledgment that there was a full disclosure of assets, and (3) an expression of the

consideration for the divestiture. “[T]he interpretation of statutes and stipulations in

dissolution judgments are questions of law, which we review de novo.” Gracheck v.

Gracheck, 750 N.W.2d 328, 331 (Minn. App. 2008), review denied (Minn. Aug. 19,

2008).

In a marriage dissolution,

[t]he parties may expressly preclude or limit modification of maintenance through a stipulation, if the court makes specific findings that the stipulation is fair and equitable, is supported 7 by consideration described in the findings, and that full disclosure of each party’s financial circumstances has occurred. The stipulation must be made a part of the judgment and decree.

Minn. Stat. § 518.552, subd. 5 (2014).

The courts are without authority to modify spousal maintenance when parties

execute what is commonly called a Karon waiver.6 Gossman v. Gossman, 847 N.W.2d

718, 722 (Minn. App. 2014).7 A Karon waiver is more than an agreement between the

parties. Id. at 724. It divests the court of jurisdiction8 over spousal maintenance when

the following requirements are met:

1) the stipulation must include a contractual waiver of the parties’ rights to modify maintenance; 2) the stipulation must expressly divest the district court of jurisdiction over maintenance; 3) the stipulation must be incorporated into the final judgment and decree; and 4) the court must make specific findings that the stipulation is fair and equitable, is supported by consideration described in the findings, and that full disclosure of each party’s financial circumstances has occurred.

Butt v. Schmidt, 747 N.W.2d 566, 573 (Minn. 2008) (quotation and citations omitted);

see Minn. Stat. § 518.552, subd. 5 (addressing statutorily required elements for a Karon

6 Karon v. Karon, 435 N.W.2d 501 (Minn. 1989). 7 We note that after this court filed its opinion in Gossman, the legislature amended Minn. Stat. § 518.552, subd. 5 – the statutory provision that codified the Karon waiver – to include, among other things, language stating: “The parties may restore the court’s authority or jurisdiction to award or modify maintenance through a binding stipulation.” 2015 Minn. Laws ch. 30, art. 1, § 8. 8 The majority in Karon referred to the district court divesting itself of jurisdiction. 435 N.W.2d at 503. A dissenting justice described the question as “whether the parties can agree, between themselves, to waive their right to have the court modify agreed-upon maintenance.” Id. at 508 (Simonett, dissenting). We will use the characterization of the Karon majority and refer to the district court divesting itself of jurisdiction. 8 waiver). Simply labeling a waiver as a Karon waiver does not mean that the waiver is,

in fact, a Karon waiver. Gracheck, 750 N.W.2d at 333.

Wife argues that the waiver in this case was insufficient to divest the district court

of jurisdiction over maintenance. The hand-written document signed on April 10 states,

“Karon Waiver – no modification of sm for amount or duration during 5 yr period except

death or W remarriage.” In Loo v. Loo, the supreme court concluded that the following

waiver provision did not contain express divestiture language:

That the Petitioner shall pay to the Respondent . . . spousal maintenance . . . for a total period of payment of nine years. After the last of the payments required above, the obligation for spousal maintenance shall terminate irrevocably. Thereafter neither of the parties shall be entitled to [maintenance] then or in the future.

520 N.W.2d 740, 745 (Minn. 1994). The Loo court noted that courts “should not assume

that parties specifically bargained to supplant the statutory [maintenance] modification

procedure without a clear or express statement divesting the court of jurisdiction” and

that “the better approach is to require both a contractual waiver and express language

divesting the court of jurisdiction.” Id. at 745 & n.5 (emphasis added). Under Loo, the

mere statement “Karon Waiver” in the parties’ agreement is not sufficient to divest the

district court of jurisdiction over maintenance. We conclude, therefore, that the district

court erred when it ordered a spousal-maintenance award that divests the court of

jurisdiction to modify the award.

Wife also argues that the waiver did not divest the district court of jurisdiction

because “[t]he parties did not expressly agree that a full disclosure occurred as part of

9 any alleged stipulation” and the document that the parties signed during the April 10

FENE session “does not specify any consideration for the Karon waiver.” But, under

the plain language of Minn. Stat. § 518.552, subd. 5, and as required by the supreme

court in Butt, the district court must make findings “that full disclosure of each party’s

financial circumstances has occurred” and that the parties’ stipulation “is supported by

consideration described in the findings.” There is no requirement that these matters be

expressly addressed in the parties’ stipulation.

III.

Wife argues that the district court improperly adopted husband’s proposed findings

and that some terms in the dissolution judgment are inconsistent with the parties’

stipulations. But, because we have concluded that the district court erred when it ordered

a spousal-maintenance award that divests the court of jurisdiction to modify the award, we

will not address whether the judgment is otherwise consistent with the parties’ stipulations.

As the supreme court recognized in Karon:

Normally, stipulations are carefully drawn compromises which affect property distribution, real and personal, as well as future income. One may, for example, give or take certain items in order to have another reduced or eliminated. Setting aside one portion of the stipulation may totally warp the effect of other portions of the document.

Karon, 435 N.W.2d at 504.

If the parties intended to waive their statutory rights to seek modification of the

maintenance award, our decision to set aside this waiver may totally warp the effect of

other portions of the parties’ agreement. See Toughill v. Toughill, 609 N.W.2d 634, 638

10 n.1 (Minn. App. 2000) (stating that district court may reject all or part of stipulation, but

“to the extent that the district court does not accept the stipulation, the parties should not,

absent unusual circumstances, be precluded from litigating their claims”). Therefore, we

will not consider other portions of the agreement. Instead, we reverse the judgment and

remand for further proceedings.

IV.

In the December 16 order filed following the hearing on husband’s motion to

enforce the January 27 and April 10 agreements, the district court awarded husband $7,500

in conduct-based attorney fees. Wife argues that the district court’s findings are

insufficient to support the fee award and there was no determination regarding either

party’s ability to pay fees.

A district court may award attorney fees against a party “who unreasonably

contributes to the length or expense of the proceeding.” Minn. Stat. § 518.14, subd. 1

(2014). The party moving for conduct-based fees has the burden to establish that the

adverse party’s conduct during the litigation process justifies an award. Geske v.

Marcolina, 624 N.W.2d 813, 818 (Minn. App. 2001). An award of conduct-based attorney

fees is reviewed for an abuse of discretion. Brodsky v. Brodsky, 733 N.W.2d 471, 476

(Minn. App. 2007). The district court must make findings to explain an award of conduct-

based attorney fees. Id. at 477.

The district court found:

There is no basis for an award of need-based fees. The Court will grant $7,500.00 in conduct-based attorney’s fees. The Court is not granting the full $25,000.00 because that would 11 unduly punish [wife] for asserting her rights in this matter. The Court feels assessing approximately 1/3 of [husband’s] total attorney’s fees incurred is appropriate, however, given the fact [wife] freely went through the FENE process, was adequately represented throughout that process by competent counsel, there is no showing of any fraud, misrepresentation or duress, and [wife] willingly entered into a fully executed stipulation following five FENE sessions with a qualified FENE neutral. [Wife] may genuinely believe that the stipulation she signed off on was unfair in some capacity; however, there is no credible evidence before the Court that would support that belief.

We reject wife’s argument that the district court’s findings are insufficient because

there was no determination regarding either party’s ability to pay fees. No finding

regarding ability to pay was needed because the district court awarded only conduct-based

fees, which may be awarded regardless of the recipient’s need for fees and regardless of

the payor’s ability to pay. Geske, 624 N.W.2d at 818.

The district court’s findings are otherwise sufficient to explain the basis for the fee

award. The findings indicate that wife properly asserted her right to oppose husband’s

motion because she believed that the agreements were unfair due to fraud,

misrepresentation, and duress in the FENE process. But wife failed to produce any credible

evidence to support her belief. The failure to produce evidence to support her claims during

the hearing was the basis for the attorney-fee award. We, therefore, affirm the conduct-

based attorney-fee award.

Affirmed in part, reversed in part, and remanded.