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Baas v. Baas

Court of Appeals of Kentucky

November 30, 2018



          BRIEF AND ORAL ARGUMENT FOR APPELLANT: Steven Joseph Megerle Covington, Kentucky

          BRIEF AND ORAL ARGUMENT FOR APPELLEE: William G. Knoebel Florence, Kentucky



          NICKELL, JUDGE

         Erin Baas appeals from orders of the Campbell Circuit Court, Family Division, enforcing and incorporating a mediated agreement into the decree dissolving her marriage to Edward Baas. Issues include: whether a "bullet-point" mediated agreement may be incorporated directly into a decree of dissolution as a separation agreement under KRS[2] 403.180, whether mediator or attorney misconduct renders the mediated agreement unconscionable, and whether the mediated agreement is unconscionable. Having reviewed the record, we discern no error and affirm.

         Erin, a business banker, sought divorce from Edward, a construction entrepreneur. The couple had one child together. The divorce proceedings were highly contentious.

         During discovery, both parties had retained and deposed experts to appraise Edward's business interests. Erin hired Lori Wilhelmy, a professional business appraiser with a master's degree in business administration. Edward hired Joy L. Hall, a tax attorney. Both experts noted Edward owned a thirty percent, non-voting interest in American Facade Restoration, LLC ("AFR"). Hall valued AFR at $638, 517 on the date of separation and Edward's thirty percent stake in the company at $77, 419, heavily discounting the value due to Edward's lack of voting control. Wilhelmy valued AFR using two different valuation methods, reaching an average value of $3, 790, 000 and valued Edward's share at $1, 137, 000, considering both Edward's lack of voting control and integral role in operation of the business. Wilhelmy also valued Edward's thirty percent non-voting interest in another business, EML Properties, LLC ("EML"), a real estate holding company whose sole asset is the warehouse it leases to AFR. Rent paid by AFR comprises EML's entire income. Hall was only retained to valuate AFR and did not render an opinion as to the value of Edward's interest in EML. However, the parties ultimately stipulated Edward's share of EML was worth $120, 000.

         The trial court ordered the parties to attend mediation prior to the final hearing. The parties selected a mediator, a practicing attorney with substantial experience in domestic relations cases.

         The parties, their counsel and the mediator, executed an agreement to mediate, which set out the terms under which the mediation would be conducted. Section two of this agreement specified, "[t]he Mediator is responsible for managing the process of mediation[, ]" and "[t]he Mediator will not make decisions for the participants nor advise them as to what should or should not be decided on any issue." Section four of the agreement permitted consultation with outside experts, such as accountants or actuaries, during the mediation. Section six provided the mediator would not give legal advice.

         The mediation took place at the office of Edward's counsel. The parties were never in the same room together. The mediator relayed communications between the parties. The mediation exceeded four hours.

         Erin's counsel left the mediation to run personal errands and remained absent for approximately one hour. Even so, the mediator continued to move the mediation forward through direct communication with Erin-no evidence was presented that the mediator communicated directly with Erin's attorney during her absence from the mediation. During counsel's absence, Erin was able to maintain contact with her attorney, as evidenced by several text messages the two exchanged regarding the mediator's communications. Negotiations continued through Erin's attorney's absence and after her return.

         After her counsel's return but prior to reaching an agreement, Erin prepared to leave the proceedings and donned her coat. It was at that point Erin claims the mediator relayed Edward's offer to allow Erin to claim their three-year-old daughter on her future income tax returns if she would accept his valuation of his business interests. According to Erin, the mediator stated the value of the resulting tax credit would range from $3, 000-$5, 000 annually, with the total tax savings offsetting the disparity between the couple's conflicting valuations of Edward's business interests. Also, according to Erin, her attorney did not dispute the exemption was worth the range presented by the mediator. Erin alleges she agreed to Edward's offer based on these valuations. A "bullet-point" written mediation agreement was prepared, with both parties, their respective attorneys, and the mediator executing the document. Edward's counsel was to prepare a formal separation agreement based on the mediated agreement.

         The "bullet-point" mediated agreement listed several agreements related to division of the couple's property. Among these: Erin waived her right to maintenance; Erin received a Toyota vehicle; Edward received the marital residence as well as another piece of real property the couple owned; Edward assumed liability, if any, for amounts owing on the couple's 2014 Ohio state income taxes and waived entitlement to any refund; Edward waived his right to reimbursement for their child's 2015 medical bills and for fees he paid to the court-appointed parenting coordinator; and both parties waived any marital interest in the retirement/pension accounts of the other. Most importantly for purposes of this appeal, Edward agreed to allow Erin to claim their child on her tax returns and Erin agreed to accept as her portion of Edward's business holdings a one-time lump sum payment of $120, 000, plus monthly payments of $1, 000 for five years.

         In the days following the mediation, Edward circulated a proposed "Separation and Property Settlement Agreement" formally reciting the terms listed in the mediation agreement. Erin refused to execute the document upon learning the negotiated tax exemption was not as valuable as she had understood at the mediation, and because she alleged it addressed issues not previously discussed or agreed upon. In her affidavit, Erin also alleged her attorney "pressured [her] to take the deal after the fact by stating in a text message how 'conservative' Judge Woeste was and how he'd basically never award [her] the amount of money that was agreed upon in the mediation or anywhere close ...

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