The Court of Appeals Uses an Interesting Approach to Set Aside a Mediation Award in a Divorce

In Heiden v Heiden, unpublished opinion in the Court of Appeals, issued February 26, 2015 (Docket No. 318245), the Court of Appeals used the statutory rules governing binding domestic-relations alternative dispute resolution (ADR) to set aside a common law mediation agreement that purported to divide the parties' property for their judgment of divorce. On October 15, 1987, the parties executed an antenuptial agreement in contemplation of marriage, which stated, “all personal property owned respectively by them shall remain their separate property, no spouse shall have any right in the property of the other spouse, even in the event of the death of either party.” The husband had separate funds that undisputedly flowed from a personal injury lawsuit settlement. In 2012, the wife filed for divorce. When the wife sought a declaratory judgment that the antenuptial agreement was invalid, the trial court held that the plain language of the antenuptial agreement indicated that it did not apply to a divorce action between the parties. The parties then proceeded to mediation based on this understanding. The parties reached a mediation agreement, but the husband hired new counsel who sought to set aside the mediation agreement pursuant to MCR 2.612(C)(1). The husband argued that the mediation agreement was unconscionable because he was required to pay more in spousal support per month than was available to him, his counsel coerced him to sign it, and he was unable to assess the situation at the time of the mediation because he is a diabetic and his blood sugar dropped too low. The trial court refused to set aside the agreement, instead incorporating it into the parties' judgment of divorce. The husband appealed.

The Court of Appeals first held that the trial court committed legal error by interpreting the antenuptial agreement not to apply to a divorce between the parties. The antenuptial agreement also was enforceable as to the divorce under Reed v Reed, 265 Mich App 131, 142; 693 NW2d 825 (2005), even though antenuptial agreements were against public policy at the time of its execution. Next, the Court of Appeals held that the parties and their attorneys failed to consider that absent an antenuptial agreement there are other ways to establish property as separate and also to invade that separate property, and, therefore, both the trial court and the parties and their counsel failed to properly characterize assets as marital or separate. The final issue the Court of Appeals addressed before reaching the specific issue of setting aside the mediation agreement was that the mediation agreement was financially inequitable because it gave the wife “more than four times [the husband's] available income” through the spousal support award, which would also deplete his source of income - annuity and IRA accounts - before the nonmodifiable ten-year spousal support term ended.

Finally, the Court of Appeals addressed the motion to set aside the mediation award, holding that the trial court abused its discretion in denying the husband's motion. The Court of Appeals first held that the trial court's error in interpreting the antenuptial agreement affected the mediation award. It then looked to the law governing domestic relations ADR, specifically the rule that relief from the agreement should be granted if "the agreement was procured by 'corruption, fraud, or other undue means.'" Unpub op at 10, quoting Cipriano v Cipriano, 289 Mich App 361, 367; 808 NW2d 230 (2010), quoting MCL 600.5081. The Court of Appeals noted, though, that in order for an ADR agreement to be set aside "'because of an error of law, the error must have been so substantial that, but for the error, the award would have been substantially different.'" Unpub op at 10, quoting Cipriano, 289 Mich App at 368. The Court of Appeals held that relief must be granted in this case because the trial court's error and the parties' and their counsels' continued misapplication of the law was substantial enough that that property would have been awarded substantially different. The Court of Appeals vacated the mediation agreement and the property and spousal support awards and then ordered that on remand the trial court categorize the parties' assets as marital or separate and then “divine an equitable distribution of the assets.” Unpub op at 10. 

Though unpublished, this case provides another option for parties to set aside a common-law mediation agreement by applying the rules of statutory ADR.