At least two problem areas immediately come to mind when the private mediator transitions to the role of arbitrator

as per the request of the parties (whether at the same or a subsequent session), or intercedes at the point of reaching a mediation agreement and either drafts or contributes to the drafting of the settlement document. In the first case, while it seems that a lay private mediator would be prohibited from becoming the arbitrator (because of the Rule 2.30 definition of the unauthorized practice of law) what occurs when the private attorney-mediator who is on inactive status does so? And in the second situation, what is the interpretation when the private mediator (attorney on inactive status or non-lawyer) becomes part of the settlement agreement drafting process? In the first case, the State Bar has determined that when the private 6 attorney- mediator on inactive status assumes the role of arbitrator in transition from that of a mediator, he or she must be back on active sta-

State Bar, will be determined by the extent of the mediators participation in the agreement drafting stage. At this point of the mediation process, while not actually engaging in drafting, is the careful and efficient mediator required to make sure that the lawyers for the parties fully ensure inclusion of wording that provides for a complete, binding and enforceable agreement, or should the mediator be able to rely on the lawyers to achieve this since they are the practitioners of the law under these circumstances? There is a difference of opinion among private mediators. Some say that by the very wording of Rule 2.30 the private mediators sole responsibility is to facilitate the parties coming to their agreement and once accomplished the obligation to ensure later enforceability of the settlement through appropriate legal drafting is the responsibility of the lawyers and not the mediator. The conclusion is that the effective mediator has accomplished what he or she was retained to do once the lawyers commence the agreement drafting process and has no responsibility for what follows. Anything more would violate Rule 2.30. Others argue that a competent mediator must be ready to coach the lawyers

by the parties is accurate, binding and capable of subsequent enforcement if that is what the parties desire. This would require that the mediator, while not actually engaging in the agreement drafting process, nevertheless review the document prior to execution to make sure that the lawyers for the parties have fully and accurately represented their clients. So that when the lawyers for the parties, after having drafted the settlement agreement in the presence of the mediator, inquire whether the mediator would like to take a look at it before execution to make sure that it is fully inclusive and representative of the parties agreement, the mediator is obligated to do so. And further, this obligation is present whether or not the lawyers request the intervention of the mediator at this stage. It would seem that the best solution is for the mediator (lawyer or lay) to have a prepared checklist of items that the lawyers might want to consider in drafting the agreement. The checklist would be distributed in advance of the mediation so that counsel and parties could consider if they want to include any of those in the drafting process, exoneratTUESDAY, DECEMBER 1, 2009 ing the mediator from entering the area of unauthorized practice of law under Rule 2.30

Is Mediation the Practice Trail Spousal Support: Blazing a New of Law?

n a case of first impression, In re Marriage of Blazer, 176 Cal. App. he State Bar of California has taken the position that under 4th 1438 (2009), held that under Family Code Section 4320 it was its Rule 2.30 an attorney (which would include those retired within the trial courts discretion to calculate a husbands income judges still holding Bar membership) serving as a private without regard to all income received from the business where there arbitrator is engaged in the practice of law and therefore must existed a valid reason for funds to be reinvested in the business. be on active rather than inactive status. This is because under In Blazer, Scott Blazer and Karen Blazer divorced after 20 years of Rule 2.30 the Bar has determined that an inactive attorney serving as a marriage. During their marriage, Scott and a business partner started a private arbitrator would be engaged in the unauthorized practice of law brokerage company called Blazer-Wilkinson LLC (BW), which bought and since that rule prohibits an inactive member from occupying a position sold fruit and produce. In the divorce, Scott was awarded the community wherein he or she is called upon in any capacity to give legal advice or interest in BW, which the family law court valued at $5.6 million. Part of counsel or examine the law or pass upon the legal effect of any act, the courts valuation of BW was for the goodwill of the business, which document or law. the court based on BWs income stream. On the other hand, using the same line of reasoning, the State Bar During the divorce, a temporary spousal support order was made, has concluded that while acting as a private arbitrator requires acwhich required Scott to pay Karen $57,000 per month. In January 2006, tive status, the private practice of mediation is not the practice of law. the court made a permanent spousal support order that reduced spouAccording to the Bar, this is because it does not consider mediation sal support to $20,000 per month. At the trial on permanent spousal as the practice of law since mediation does not include giving legal support, the parties disagreed on whether all of Scotts business earncounsel or passing on the legal effect of any law. This permits the attorings should be considered in determining spousal support. Karen argued ney engaged in the private practice of mediation to continue on inactive that all of Scotts income should be used whereas Scott argued that his status, and allows lay practitioners of this art to compete with them. income should first be reduced by his new business-related investments. Scott contended that some of his income needed to be reinvested in the company in order to properly capitalize the company. Scott presented testimony from a forensic accountant that BW was very thinly capiA. MARCO TURK is professor and talized for a business, with such highthe Negotiation, that theResolution director of gross revenue Conflict company was endangered by the level of capital. Program at California State & Peacebuilding Scott also contended that some of Dominguez Hills, needed to vertiUniversity his income was a regularly cally integrate the company. Scott explained that the California Court of assigned mediator for BW was a seller of or middleman for fruit and produce; that itAppellate District),took a member Appeal (2nd neither grew nor and possesof the Alternative the parties separated, sion of the product. Scott testified that afterResolution Centers panel of mediators and arbitrators. He can be reached it became clear that BWs business as a buying broker needed to be changed because the retailat amt4adr@gmail.com. out the middleman side was looking to cut to lower costs. Scott testified that BW expanded by transforming from At least two problem areas immediately come to mind when the private mediator transitions to the role of arbitrator as per the request of the parties (whether at the same or a subsequent session), or intercedes at the point of reaching a mediation agreement and either drafts or contributes to the drafting of the settlement document. In the Gerald L. Salzman first case, Charles T. Munger a lay private mediator would be prohibited while it seems that Chairman of the Board Publisher / Editor-in-Chief from becoming the arbitrator (because of the Rule 2.30 definition of the J.P. Guerin Robert E. Work unauthorized practicethe Boardwhat occurs when the private attorney-meVice Chairman of of law) Publisher (1950-1986) diator who is on inactive status does so? And in the second situation, what is the interpretation whenDavid private mediator (attorney on inactive the Houston Editor status or non-lawyer) becomes part of the settlement agreement draftAlexia Garamfalvi Sharon Liang ing process? San Francisco Editor Legal Editor In the first case, the State Bar has determined that when the private Liz Enochs Pia Sarkar attorney- mediator on inactive status Christian Berthelsen of arbitrator in assumes the role Evelyn Larrubia Associate Editor Associate Editor Associate Editor Associate Editor transition Francisco of a mediator, he or she must be back on active staSan from that San Francisco Los Angeles Los Angeles
Aris Davoudian, Designer Los Angeles Staff Writers Pat Alston, Rebecca U. Cho, Gabe Friedman, Evan George, Sandra Hernandez, Catherine Ho, Greg Katz, Joanna Lin, Ciaran McEvoy, Susan McRae, Jean-Luc Renault

I T

Spousal Support: Blazing a New Trail

within the trial courts discretion to calculate a husbands income Robert Levins, S. Todd Rogers, Photographers without regard to all income received from the business where there Lisa Kestenbaum, Editorial Assistant existed a valid reason for funds to be reinvested in the business. Rulings Service In Blazer, Scott Blazer and Karen Blazer divorced after 20 years of Seena Nikravan, Rulings Editor Kenneth Hsu, Verdicts and Settlements Editor marriage. During their marriage, Scott and a business partner started a Meryl Chambers, Edward Chang Legal Writers brokerage company called Blazer-Wilkinson LLC (BW), which bought and Advertising sold fruit and produce. In the Corporate Display Advertising Director the community Audrey L. Miller, divorce, Scott was awarded interest in BW, which the family Los Angeles Account Manager million. Part of Monica Smith, law court valued at $5.6 Joel Hale, Michelle Kenyon, San goodwill of the business, which the courts valuation of BW was for the Francisco Account Managers Jesse Rios, Display Advertising Coordinator the court based on Delucchi, San Francisco Administrative Coordinator Nikki BWs income stream. During the divorce, a temporaryDepartmentsupport order was made, Art spousal Kathy Cullen, Art Director which required Scott to pay Karen $57,000 per month. In January 2006, the court made Daily Journal is a member of the Newspaper Associationthat reduced spouThe a permanent spousal support order of America, sal California Newspaper Publishersper month. At the trial on permanent spousal support to $20,000 Association, National Newspaper Association and Associated Press support, the parties disagreed on whether all of Scotts business earnings should be considered in determining spousal support. Karen argued that all of Scotts income should be used whereas Scott argued that his income should first be reduced by his new business-related investments. Scott contended that some of his income needed to be reinvested in the company in order to properly capitalize the company. Scott presented testimony from a forensic accountant that BW was very thinly capitalized for a business, with such high gross revenue that the company was endangered by the level of capital. Scott also contended that some of his income was needed to vertically integrate the company. Scott explained that BW was a seller of or middleman for fruit and produce; that it neither grew nor took possession of the product. Scott testified that after the parties separated,

San Francisco Staff Writers Rebecca Beyer, Laura Ernde, Dhyana Levey, Sara Randazzo, Jill Redhage, John Roemer, Fiona Smith, Amy Yarbrough Bureau Staff Writers n a case of first impression, InJason W. Armstrong, Riverside, Cal. App. Craig Anderson, San Jose, re Marriage of Blazer, 176 Matthew 4thPat Broderick, Pordum, Sacramento, DonFamily Code Section 4320 it was 1438 (2009), Diego, Lawrence Hurley,DeBenedictis, Santa Ana, D.C. held that under J. Robert Iafolla, Washington San

tus at that point because to do otherwise would permit the unauthorized practice of law. So, for example, it is particularly important to keep this in mind when in reaching agreement the parties and their counsel request that the mediator agree to act as arbitrator regarding any future dispute under or concerning the terns of the settlement. While the private lay mediator will not be able to agree to do so, the private attorney-mediator on inactive status with the State Bar must prepare to return to active membership prior to undertaking the additional neutral role. In the second of the problem areas, we encounter more difficulty because on the one hand private mediators whether attorney or non-attorney must refrain from engaging in the unauthorized practice of law as defined by Rule 2.30, but on the other they need to make sure that the mediation is successfully concluded and memorialized by an appropriate document that clearly sets forth the agreement of the parties. Whether the mediator is occupying a position wherein he or she is called a middleman to include give legal advice or upon in any capacity to growing and distribution. BW formed two new companies examine to expand into these areas. Scott invested over $1.4 counsel or in order the law or pass upon million of effect ofincome into these new ventures. the legal his BW any act, document or In and therefore required to be enrolled trial court excluded from law,making its spousal support order, the as an active member of the Scotts incomebe determined byto capitalizeof the mediators participaState Bar, will the funds used the extent and vertically integrate BW. The court found that these expenditures were reasonable expenses tion in the agreement drafting stage. that should notof the mediation process, while not actually engaginghis At this point be charged against Scotts income when assessing in reasonable income for purposes of spousalrequired to make sure that drafting, is the careful and efficient mediator support. Both parties the parties fully ensure inclusion of wording that provides the lawyers for appealed from the order. Karen argued that the court abused its discretion byand enforceable agreement,income in determinfor a complete, binding failing to use all of Scotts or should the mediaing be able to rely on thethat it was Scotts choice to they are the practor support, contending lawyers to achieve this since spend the money on vertical integration andthese circumstances? There is a difference of titioners of the law under capitalization of the company. Scott contended that the court opinion among private mediators. erred by unfairly double dipping in basing spousal support very wording of Rule business,private income Some say that by the on income from the 2.30 the which mediators stream had already been used bythe partiesin arriving at the agreement sole responsibility is to facilitate the court coming to their value of the business. The Blazerthe obligation to ensure later enforceabilitydid and once accomplished court rejected both arguments. The court of not publish its decision appropriate legal drafting dippingresponsibility of the settlement through regarding Scotts double is the argument, thus this lawyersfocuses solely on Karens challenge that thatcourt failed to the article and not the mediator. The conclusion is the the effective consider all ofaccomplished what he or she was retained to do once the mediator has Scotts business income. lawyers commence the agreement drafting process and has no responsibility forhe Blazer courtAnything more would violateexists 2.30. Others what follows. observed that while there Rule statutory and case law mediator a very expansive definition of what argue that a competentsupportingmust be ready to coach the lawyers constitutes income for child support purposes, there exists no statute or case law that defines what constitutes income for spousal support purposes. The court found inapposite the line of cases cited by Karen, which she argued required that all income of a spouse be used in determining spousal support. The first case was Marriage of Smith and Ostler (1990) 223 CA.3d 33, which held that a supporting spouse was required to pay spousal support based on a percentage of future bonuses. The second case was Marriage of Mosely (2008) 165 CA.4th 1375, which held that any bonus actually received must be counted as part of [obligors] annual gross income for purposes of spousal and child support. The final case was Marriage of Kerr (1999) 77 CA.4th 87, which held that a supporting spouse was required to pay spousal support based upon income that could include future stock options. The Blazer court distinguished these cases by observing that they all dealt with an employee spouses income in determining spousal support, whereas this case involved the issue of self-employment income. The court then addressed Karens argument that the child support definition of income should be applied to spousal support. It questioned how well the statutory and case law regarding income for child support purposes applies to spousal support, observing that child support and spousal support serve different purposes, implicate different policies, and are governed by different rules. The Blazer court observed that child support awards are highly regulated and relatively fixed orders based on strict statewide guide-

a middleman to include growing and distribution. BW formed two new companies in order to expand into these areas. Scott invested over $1.4 million of his BW income into these new ventures.

lines. In contrast, case law requires spousal support awards to be the product of a truly independent exercise of judicial discretion and the main spousal support statute requires the weighing of several different factors, including any factors the court determines are just and equitable. The Blazer court cited several examples of how child support and spousal support are treated differently. Under child support law, a child has a right to be maintained in a lifestyle consonant with his parents station in society whereas the spousal support statute (Family Code Section 4320) requires only a consideration of the parties standard of living in awarding spousal support. Further, whereas the parties may waive spousal support, public policy prohibits the waiver of child support. Also, the states legislative policy on child support is to make children the states top priority and the legislative policy on spousal support is for spouses to be self-supporting within a reasonable period of time. Given the conflicting policies and purposes of child and spousal support orders, the Blazer court declined to adopt a rigid rule that would require all of Scotts income to be used in making a spousal support order. Instead, it held that the trial courts determination of what represents income available for support is committed to the sound discretion of the court. The Blazer court then stated that the trial court properly exercised its discretion in attributing Scotts reinvested earnings to the business instead of to husband because substantial evidence supported that determination, to wit, Scotts testimony and the testimony of Scotts expert that BW would not exist unless it diversified . In support, the court cited Marriage of Dick (1993) 15 CA.4th 154, which held that a court may look past the apparent form of ownership even at a spouses that they held sure that the agreement reached in whichthis stage soassets aremake to determine the spouses true by the parties is accurate, binding and capable of subsequent enforceinterest in them and their availability, in assessing the spouses ability ment that is what court also desire. This would require that the to payifsupport. The the parties cited Marriage of Olson (1993) 14 CA.4th mediator, while not trial court had discretion to determine whether to 1, which held that aactually engaging in the agreement drafting process, nevertheless review the document prior to execution to make sure that consider as income available for spousal support contributions made by the lawyers for his retirement plan and accurately represented their a participant tothe parties have fullyas well as accruals or accrued earnclients. So plan which are not withdrawn. ings of thatthat when the lawyers for the parties, after having drafted Finally, the court offered dicta presence if the mediator, inquire the settlement agreement in the that even of the child support statute (Family Codemediator 4058) like to take a to the facts in Blazer, it would whether the Section would was applied look at it before execution support the trial courts decision because that statute excludes from to make sure that it is fully inclusive and representative of the parties income expenditures required for the operation of further, this obligaagreement, the mediator is obligated to do so. And a business. The Blazer courts decision is significant because it resolves for the first the tion is present whether or not the lawyers request the intervention of time the question of whether the child support definition of income mediator at this stage. applies to seem that the best solution is for the mediator (lawyer or lay) It would spousal support cases. The Blazer court answered this question with a resounding no and emphasized that the strict rules and to have a prepared checklist of items that the lawyers might want to guidelines of child support are ill suited checklist would be distributed consider in drafting the agreement. The to spousal support determinations becausethe mediation so that counsel andinvolve the independent in advance of spousal support decisions must parties could consider exercise of judicial discretion. Family Code Section 4320 and case law if they want to include any of those in the drafting process, exoneratinterpreting it require the weighing area of unauthorized practice of law ing the mediator from entering the of numerous different factors. Also significant under Rule 2.30 about the Blazer decision is the different rules that now exist between employee spouses and self-employed spouses. The Blazer court did not overturn, criticize or even question the existing line of cases regarding what constitutes an employee spouses income available for spousal support. Under those cases, any income of an employee spouse, whether it is salary, bonus income or exercise of stock options must be counted as income for the purpose of calculating spousal support. It is questionable whether this dichotomy makes sense. Why should there be greater discretion to a trial court in selfemlines. In contrast, case law requires in cases support awardsspouses? ployment cases and less discretion spousal with employee to be the Finally, the Blazer decision is important judicial discretion and the product of a truly independent exercise of to child support cases. In dicta, the Blazer court suggested that the weighing several differmain spousal support statute requiresreinvestment of self-employment income back into a business for viability purposes can are just and ent factors, including any factors the court determinesconstitute a business equitable.expense and hence, be excluded from income under the child support court cited several examples ofThis interpretation of the The Blazer statutes definition of income. how child support and child support statute expands judicial discretion in support law, a child spousal support are treated differently. Under childdetermining income available for be support by allowing courts greater flexibility in has a right tochildmaintained in a lifestyle consonant with his parents determining what whereas the business expense. This expansion station in society constitutes aspousal support statute (Family Code of judicial 4320) requires only a consideration of the parties discussion Sectiondiscretion is ironic given the Blazer courts previous standard of of child awarding spousal support. living in support rules being fixed and highly regulated. Further, whereas the parties may waive spousal support, public policy prohibits the waiver of child support. Also, the states legislative policy MITCHELL A. is to make, childrened family law specialist in Los the on child support JACOBS a certifi the states top priority and Angeles, limits his practice to marital dissolution and other family law legislative policy on spousal support is for spouses to be self-supportmatters. ROBERT BURCH, of time. ing within a reasonable period a certified family law specialist in Orange County, practices icting policiesthe area of family law. and spousal supGiven the conflexclusively in and purposes of child port orders, the Blazer court declined to adopt a rigid rule that would require all of Scotts income to be used in making a spousal support order. Instead, it held that the trial courts determination of what represents income available for support is committed to the sound discretion of the court. The Blazer court then stated that the trial court properly exercised its discretion in attributing Scotts reinvested earnings to the business instead of to husband because substantial evidence supported that determination, to wit, Scotts testimony and the testimony of Scotts expert that BW would not exist unless it diversified . In support, the court cited Marriage of Dick (1993) 15 CA.4th 154, which held that a court may look past the apparent form of ownership