Attorney Diana Skaggs Takes Issue With Ct. of Appeals Ruling Which Voids Family Court Arbitration Procedures – Ruling virtually invites Sup. Ct. Review

 

Editorial by Diana Skaggs published in Louisville Courier-Journal  Feb. 12, 2010

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 courts’ 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 have family 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.

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 have family 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.

Diana L. Skaggs is a Louisville attorney and a fellow of the American Academy of Matrimonial Lawyers.

Comment by Diana Skaggs:

“The Kentucky Arbitration Act does not have a comprehensive list of all causes that may be arbitrated. It does have, however, a list of issues that may not  be arbitrated and domestic relations disputes are not on that list. Thus, the legislature did not exclude domestic matters from arbitratable matters.

 The case before the court could have been reversed and remanded to the trial court on the facts of that case alone, thereby restricting the decision to that case.  Instead, the Court chose to use that case to examine the domestic relations arbitration process as a whole.

 This is a matter of private individuals being able to agree to their processes, especially with respect to financial issues.”  

-Diana Skaggs

 

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LawReader comments on this decision:

JEFFERSON FAMILY COURT RULE ALLOWING ARBITRATION OF DISSOLUTION ACTIONS RULED UNCONSTITUTIONAL- CASE OF FIRST IMPRESSION – (Court virtually invites appeal to Supreme Court)

Arbitration) a court’s mechanical adoption of a judgment containing findings of fact and conclusions of law made by a third party violates the court’s constitutional decision-making authority and CR 52.01

 

We decline to accept this suggestion as the law in Kentucky and believe there exists no present statutory or constitutional authority to support this hybrid domestic proceeding being conducted by the Jefferson Family Court.

 

We find no authority whatsoever that permits a judge to delegate the inherent power of a court to sanction for contempt, without a hearing or any other due process consideration that is otherwise exclusively reserved to constitutionally elected judges in this state.

 

…since domestic relations commissioners in counties establishing family courts have been abolished, there is no authority that allows family court judges to delegate cases to an arbitrator.

 

For full text of case click case number

2006-CA-001803

 

  

JEFFERSON

 

CAMPBELL, GEORGE W.

 

VS.

 

CAMPBELL, GINGER C.

 

 

OPINION REVERSING AND REMANDING WITH DIRECTIONS

** ** ** ** **

 

BEFORE: ACREE, TAYLOR, AND THOMPSON, JUDGES.

 

TAYLOR, JUDGE: George W. Campbell brings Appeal No. 2006-CA-001803- MR and Ginger C. Campbell brings Cross-Appeal No. 2006-CA-001827-MR from a July 31, 2006, Findings of Fact, Conclusions of Law and Judgment, styled as a judgment of the Jefferson Circuit Court, Family Court Division (family court), but

prepared by an arbitrator. The judgment was signed and entered by the court without independent review.

 

We reverse and remand with directions Appeal No. 2006-CA-001803-MR and Cross-Appeal No. 2006-CA-001827-MR.

 

The “judgment” appealed in this case was the result of an arbitration procedure employed after the case was commenced in Jefferson Family Court.

 

The parties agreed to the arbitration which was endorsed by the Jefferson Family Court purportedly to expedite adjudication of the parties’ underlying domestic dispute.

 

The arbitration award was wholly prepared by the arbitrator but styled as a judgment of the Jefferson Family Court. Therein, the arbitrator made detailed findings of fact and conclusions of law. Without benefit of independent review, the family court signed the judgment, presumably to confirm the arbitration award.

 

The award was entered of record on July 31, 2006, as a judgment of the family court (July 31, 2006, judgment). Both parties undertook an appeal (Appeal No. 2006-CA-001803-MR and Cross-Appeal No. 2006-CA-001827-MR) from the July 31, 2006, judgment.

 

…we question the ability of this Court to review these arguments if, as the parties argue, this was a valid arbitration under KRS Chapter 417. In 3D Enterprises Contracting Corp. v. Lexington-Fayette

Urban County Government, 134 S.W.3d 558 (Ky. 2004), the Kentucky Supreme Court held that a court may only set aside an arbitration award pursuant to the grounds set forth in KRS 417.160(1).

 

If the arbitration statute applies, we would be duty bound to summarily affirm both appeals. Id. However, the parties submit that their “agreement” permits this Court to review the judgment as if the family court had conducted the proceedings and actually made the findings and conclusions on appeal, rather than merely confirming the award under KRS 417.150.

 

the parties suggest that the laws of the Commonwealth of Kentucky can be modified, changed, or interpreted as needed by agreement of the parties to create a hybrid proceeding that may be reviewed accordingly by this Court.

 

 We decline to accept this suggestion as the law in Kentucky and believe there exists no present statutory or constitutional authority to support this hybrid domestic proceeding being conducted by the Jefferson Family Court.

 

Accordingly, our review at this time is limited to the propriety of the arbitration proceedings in a family court case under the current law in Kentucky.

 

…family courts operate in 71 of Kentucky’s 120 counties

 

(Discussion of constitutional authority and jurisdiciton of Family Court)

 

In this case, the arbitration agreement clearly and succinctly states the family court judge has delegated his power to enter findings and conclusions in the family court to the arbitrator. This delegation of decision-making authority is simply improper, in our opinion.

 

 Indeed, it is axiomatic that a court’s mechanical adoption of a judgment containing findings of fact and conclusions of law made by a third party violates the court’s constitutional decision-making authority and CR 52.01. See Ky. Const., § 109; Bingham, 628 S.W.2d 628.

 

The improper delegation of the family court’s duties and powers is further amplified in paragraph 2 of the arbitration agreement which gives the arbitrator the authority to issue sanctions by awarding attorney’s fees as provided for in CR 11, CR 37, and KRS 403.220.

 

These duties and powers are exclusively reserved to the discretion of the family court and not otherwise subject to delegation to some third party. Perhaps, most egregious under the arbitration agreement is that the arbitrator was permitted to sanction George for contempt

which could be purged upon the payment of $5,000 to Ginger within thirty days upon entry of the judgment.

 

Under the arbitration agreement, this sanction for contempt was adopted by the family court without review.

 

We find no authority whatsoever that permits a judge to delegate the inherent power of a court to sanction for contempt, without a hearing or any other due process consideration that is otherwise exclusively reserved to constitutionally elected judges in this state.

 

…since domestic relations commissioners in counties establishing family courts have been abolished, there is no authority that allows family court judges to delegate cases to an arbitrator.

 

Until the Kentucky Supreme Court directs otherwise, we can neither justify nor condone such an invasion of the family court’s jurisdiction.

 

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. KRS 417.150; KRS 417.160; KRS 417.170; KRS 417.180.

 

These provisions of the Arbitration Act are mandatory and are an essential prerequisite to the enforceability of an arbitration award.

 

…we hold the family court erred by “confirming” the arbitration award and by converting it to a judgment of the court.

 

based upon our review of applicable law, we note that this is a case of first impression in Kentucky.

 

Accordingly, this opinion is limited to the cases before this Court now on appeal and has prospective application only as to any pending or future arbitration proceedings in the Jefferson Family Court or any other family court in Kentucky.

 

For the foregoing reasons, Appeal No. 2006-CA-001803-MR and Cross-Appeal No. 2006-CA-001827-MR are reversed and this cause is remanded with directions that the family court conduct an evidentiary hearing or trial and render independent findings of fact and conclusions of law as required by law.

 

ALL CONCUR.

 

BRIEFS AND ORAL ARGUMENT

FOR APPELLANT/CROSSAPPELLEE:

Terry W. Holloway

Louisville, Kentucky

 

BRIEFS AND ORAL ARGUMENT

FOR APPELLEE/CROSSAPPELLANT:

Bonnie M. Brown

Louisville, Kentucky

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