Daphne and Richard's art gallery business dispute

¶ … married, Daphne built a highly successful career with the Jonestown Museum of Art in Jonestown. In January of 1994, she was offered two different jobs. One was as the general manager of the Jonestown Museum of Art and the other was with the prestigious Chicago Art Museum. She would have preferred the Chicago Museum of Art because it had better career potential. By that time however, she had already met and fallen in love with Richard, a local Jonestown artist. Richard made it clear that he was not moving to Chicago and therefore, Daphne took the Jonestown job.

Richard had only mild commercial success as an artist when he met Daphne. His parents were wealthy and generously endowed him with money as he needed it, so he was not overly financially motivated. Between Daphne's nice job at the Museum and Richard's family support, neither were struggling financially.

Richard and Daphne were married in 1995. As a token of their optimism and hope, Richard's parents gave Richard and Daphne $50,000.00 as a down payment on their first home. Knowing they wanted a family sooner than later, Richard and Daphne bought a four-bedroom house in a nearby suburb. The house cost $240,000.00 and both Richard and Daphne were on the deed and signed the promissory note and mortgage.

A few months later, Richard and Daphne decided that they wanted to open their own art gallery in Jonestown. They asked Richard's parents for another $50,000.00 in start-up capital. Richard's parents were skeptical of their son's ability and his wife's motives, so they only agreed to give the money in exchange for a 50% silent interest in the business. Richard and Daphne agreed on the condition that they could buy out his parents' interest at any time by repaying the $50,000.00.

In 1997 the couple opened up their first gallery, called simply Richard's. In order to afford the prime location they secured, they signed a 15-year lease which required a $30,000.00 down payment and on-going payments of $2,500.00 per month for the term of the lease. Although, Richard and Daphne formed a valid corporation to run the gallery, they were required to each sign the lease personally, as joint and several lessees along with the corporation. The reason for this was their lack of a track record as entrepreneurs.

After breaking even for a year, Richard's began to flourish in 1999. At the end of 2000, Richard's showed a profit of $114,000.00. As Richard and Daphne each had also drawn a salary that year of over $60,000.00, the profit was truly disposable income. The couple disagreed on what to do with the surplus. Daphne wanted to use it to it pay off Richard's parents (they were entitled to half anyway as per their initial advance of $50,000.00) and to re-invest the remainder into Richard's. Richard wanted to use the profit to open another gallery, this one across the state in Wellsborough's Art Deco district.

Richard prevailed and in 2001 the two signed a 10-year lease requiring a $42,000.00 deposit and ongoing monthly payments of $3,500.00. Because of their debt to income margin, they were again required to sign the lease personally. This gallery also did very well, producing a total profit of over $200,000.00 by the end of 2004.

With these profits, the couple bought a vacation property in the mountains of western North Carolina. The purchase price of the house was $360,000.00 for a property that was appraised a year earlier for $212,000.00. The couple paid $80,000.00 down and took a mortgage with joint liability for the remaining $280,000.00. With the rest of the profits from Wellsborough gallery, the couple opened a third gallery, this time of state. They purchased the property for this gallery, putting $100,000.00 and signing a mortgage together with joint tenant liability for $320,000.00. With the purchase of each of these properties, Richard had to persuade Daphne that this was the better option to repaying Richard's parents and re-investing these dividend in the two galleries they already operated.

In 2006, the bottom dropped out of the art and real estate market. For the next two years, the galleries did well enough sustain the lifestyle the couple was used to, but they were no longer earning a profit. The vacation home and the commercial property were upside down due to the plunging real estate market.

In 2008, as economic conditions worsened, Richard became severely depressed and withdrew altogether from his wife and kids (two boys, now ages 12 and 9, and one girl, now age 8). To make matters worse, Richard began having an affair with one of the employees at the Wellsborough gallery, and there is evidence of the affair on the video surveillance inside the gallery and from over five witnesses who have told Daphne they will testify as such. After an initial unsuccessful attempt to resolve matters, Daphne filed for divorce in 2009. The divorce has become hotly contested with each side seeking custody and child support and a lion's share of the marital assets.

Family Mediation

Opening Positions And Analysis

Richard and Daphne have both retained lawyers for the divorce proceedings. They have come to mediation hoping to resolve the issues that are being contested. At the opening session each lawyer outlines for the mediator what their respective client's goals are for the mediation. They have several common pursuits. They both want the divorce finalized as quickly as possible, with as little spent in legal fees and as little disruption to the children's lives as possible. They both want to sever their collective business interests and their property interests. There are, of course, also several contested issues, mostly regarding the implementation of the above goals.

Richard's Position

Richard wants shared custody of the children. He would like the children to live with him during the summer months and during two of the three 'school breaks,' i.e. Christmas or winter break, Thanksgiving and spring break. He feels he does not owe Daphne alimony because she is in position to support herself through her education and career experience. He is not opposed to child support, but he feels that he should only be responsible for half of the expenses due to Daphne's financial security.

Richard desires to divide the marital assets as follows: Daphne receives the marital home and is solely responsible for remaining mortgage payments. He receives the North Carolina home and the out of state commercial property. The cash and other personal property (valued at approximately $600,000.00) are to be divided 50/50 and the businesses (the three galleries) should be valued and then either party can buy out the other or they will be up for sale. He will assume sole liability for the $50,000.00 debt to his parents for their investment in the couple's first gallery.

Richard's rationale for this position is that Daphne will be receiving a $100,000.00 benefit and that essentially makes the distribution even. Specifically, his parents put up the $50,000.00 down payment for the marital home and she will receive the benefit of that. Also, his parents' $50,000.00 advance made their business possible and she will receive one half of the proceeds of the sale of the business without being liable for repayment of the $50,000.00 to his parents. Thus, his receiving the vacation home and the commercial property is an even wash in light of this $100,000.00 benefit.

Daphne's Position

Daphne wants full custody of the children. Richard should have custody for two weeks every summer and on certain rotating holidays. Daphne wants the children to have a relationship with their father, but does not feel he is responsible or dedicated enough, in light of his past behavior, to have liberal custody or visitation. In light of the trauma caused to the children by Richard's abandonment, she feels that it is important that she be a stay at home mom, and thus requires alimony and full child support.

Daphne wants the Marital home put in her name and for Richard to make the ongoing mortgage payments. She has no interest in the commercial property or the vacation home but she feels that she is entitled to both of the Florida galleries. She also wants Richard to be required to pay back his parents and for her to own Richard's outright. She wants one half of all marital cash and personal property.

Analysis Of Negotiation Strategies Used At Beginning of Mediation

The initial approach to the mediation by both parties reflects positional bargaining. Both parties brought a bottom line of what they would accept to the mediation and both sides overstated to the other, and the mediator what the bottom line was. This is a very common initial negotiating tool. Two of the preeminent negotiation theorist, Fisher and Ury, were adamantly opposed to positional bargaining. A principal drawback of positional bargaining they argued is that requires a party to defend their position once it has been attacked. Once this has happened, the goal of the party either is replaced by or is distracted by the need to save face. The need to save face does not bring people to the bargaining table, the need to resolve a dispute or issue does (Fisher and Ury, 1991).

Positional bargaining does have advocates. In the case where the parties interests may interfere with their resolving the issues, positional bargaining may be preferred. Issues are deemed to be universal and party specific. Interests are party specific and will vary from case to case. In this matter, the interests include Richard's infidelity and the three ongoing businesses. It may be that in this case, positional bargaining is preferred as the interests will prove to polarizing for the parties to work together (Lax and Sebenius, 1991).

Strategies, Transitions And Progressions During The Mediation

Richard's First Response

Although this subsection is entitled Richard's response, it is really the response of his lawyer. The mediator meets with privately with Richard and his lawyer and explains that the law sets forth certain parameters for these issues. Some of the parameters likely would not be decided favorably for Richard by a judge if the case is not settled. Still, Richard is emotional and immature and his lawyer knew that Richard must be made to understand the intricacies of negotiation.

Richard ultimately offered to lessen his demands for custody to one of the summer months and to establish and pay for pre-paid college accounts for the children. He remained emotionally unwilling to yield on the other issues. He still did not see the negotiations as an exercise in economy or as the means to achieve the ends he set forth at the beginning of the mediation (a quick and cheap resolution). Rather he feels the outcome of the mediation must vindicate him as the righteous of the two parties.

Analysis Of Richard's Negotiation Strategies Used In His First Response

Richard continues to view the mediation as him vs. her. He was not looking as the other party as his long time partner and mate or the mother of his three children. His 'must-win' attitude was a product of his demonizing his wife and his having lost sight of his wife as a fellow human being, let alone one with which he will forever have a significant bond (as parents to the same children). Colloquial negotiation talk speaks of bringing opposing parties 'to the table.' What good does that do in this instance, when one or both or parties sit across the table from each other with arms folded thinking ill of each other. After all, the idea behind negotiating and mediating is to get a deal done, not to not get a deal done.

Richard needs to be guided to the 'same side of the table' as his wife, either literally or theoretically. The mediator and/or his lawyer, as good negotiators, will understand the importance of Richard humanizing Daphne during the mediation. The mere act of the two of them sitting side by side is likely to foster more compassion between them. In this fashion, they can look upon the problem together for a mutually satisfactory solution, rather than glare across a cold, hard table at each other from their own symbolic camps (Fisher and Ury 1991, 17).

Daphne's First Response

Richard's first response provokes an equally emotional response from Daphne. Having just spent the last ten years of her life being pressured to accept his childish and short-sighted decision making, she is not about to let him 'have his way' here to. She sees this as her last chance to create a level playing field between them and she is not about to be 'walked all over.' Besides, she is fully aware that she has better chance of prevailing in the judge that he does. She instructs her lawyer to tell the mediator the case cannot be settled and they are leaving.

Analysis Of Daphne's Negotiation Strategies Used In His First Response

Just because Daphne starts to walk out does not mean that she is giving up or acting in bad faith. In fact, her response is a result of her perception that Richard will not negotiate in good faith. There are two concepts of negotiating strategy at work here. One is that the best approach to an unfair negotiator is often to stop negotiating. Negotiating is not a display of power or a test of wills. It is about find a better path out a particular issue.

The other concept is that there is power in understanding the legitimacy (or lack thereof) of your position. Here Daphne, knowing the advantage she will have in a courtroom, realizes that she Richard's tactics are likely to backfire in front of the judge. Sometimes, the desire to have an unsettling issue resolved needs to defer to putting yourself in the best position to obtain a tolerable outcome. (Fisher and Ury, 1991, 183)

Richard's Transitions And Progression

After the mediator successfully lobbies for Daphne to stay for one more round of negotiations, the mediator and Richard's lawyer let Richard know that while he is free to conduct however he sees fit, he is adopting some self-destructive positions. The mediator and Richard's lawyer both feel that Richard stands to make out better at the mediation than he would in front of a judge, but he has to first 'divorce' himself from his present mindset. One way, the mediator succeeds in doing this is by assuring Richard that if they can make a deal today, that means that Daphne will have to soften her demands and they both will feel like they lost. "That is the mark of a fair settlement," says the mediator. Richard begrudgingly begins to listens to what the mediator has to say.

Analysis Of Richard's Transitions And Progression

The mediator explains to Richard the importance of focusing on interests and not positions. Rather than focusing on the degree of separation in the two parties bottom lines, focus on why each party has a different bottom line. What are the fears, desires, needs and wants that motivates each party (Fisher and Ury 1991, 41). This is important for two reasons.

First, this is where the solution to the issues lay. When a party is assured that its fears are assuaged or its needs met, the barrier to agreement often vanishes. Also, there is often multiple solutions to the problem of interests that would not come to find if the negotiation is looked at only from a positional standpoint (Fisher and Ury 1991, 42).

Second, often times a close inspection interests reveals how aligned the parties respective positions actually are. In this instance, Richard and Daphne share several key interests. They both want the divorce finalized as quickly as possible, with as little spent in legal fees and as little disruption to the children's lives as possible. They both want to sever their collective business interests and their property interests. In fact, each lawyer stated this at the onset of the mediation. However, because each side employed the positional bargaining approach, they each lost of the shared interests.

Easy Negotiations

Richard and Daphne reconvene in the same room and begin to calmly and sincerely list what their concerns are. Richard is scared that Daphne will fill the children with hate towards their father due to his previous marital and parenting transgressions and this was motivating his demand for custody. The mediator interjects and says in this state, the law prohibits Daphne from doing this. Richard instantly withdraws his shared custody demand and says that he will be fine with limited custody of one weekend a month, in the town of Jonestown where the family home is, two weeks in the summer and alternating Christmas and Thanksgiving holidays every year. Daphne accepts.

Daphne then conditionally withdraws her alimony demand, so long as she has proper security for herself and the kids. Richard, realizing that Daphne will not be able to work if she is taking care of the kids for the next ten years, offers to pay full child support and all 'routine household expenses' until the children are all at least eighteen years old. Daphne agrees and the issues of child custody, child support and alimony are now resolved.

Analysis Of Earnest And Easy Negotiations

Richard and Daphne finally began collaborative negotiations. That is, they finally realized an interdependence on each other, and started to seek legitimate solutions to the other one's concerns (Mitchell2009). This is markedly different from Richard's initial posture of needing to win. He has been aided in his transition by an able mediator who has enlightened him as to the realities of taking his case to court and to the attitudes and techniques needed to forge a workable agreement. The final stage of negotiations will involve the disposition of the businesses and properties.

Final Negotiations

With three pieces of real property, three businesses and over a half million dollars of cash and personal property to divide, there is still much good negotiation to be done. The mediator asks each of them to write down on a piece of paper their biggest financial fear. They both list the fear of economic insecurity. The mediator then asks them each what one asset could most assuage his fear for each of them. Richard says the commercial property because of its rental value. Daphne says the cash. The mediator asks the parties what the current value of the commercial property is and they both feel it is about 325,000.00 with an equity (including the $100,000.00 down payment) of $145,000.00. The mediator proposed to distribute the commercial property to Richard and the first $325,000.00 cash to Daphne. Both sides agreed.

The mediator then asks them what remaining property they each want most. Richard says the vacation home and Daphne says the first business Richard's. They both have the same relative value, but the vacation home is worth less than is owed on it. To compensate, Daphne suggests that Richard can retain ownership of the house and that Daphne retain a possessory interest until the children are all at least 18 years old. Daphne further insists on a right of first refusal upon the expiration of her possessory interest. Richard agrees.

Now there are two businesses and about $225,000.00 in cash and other personal property to divide. Richard proposes a very simple plan to dispose of the remaining property: He receives the business operated at the commercial property. The remaining business (Wellsborough) will be sold and the proceeds added to the cash. Daphne will receive the cash equal to the sale of the Wellsborough gallery and the two evenly divide the remaining cash. Since they both benefitted from the parents $50,000.00 advance toward the first business, they each will pay back $25,000.00 to Richard's parents.

Analysis of Final Negotiations

The final portion of the negotiation is flawless and efficient. Richard and Daphne have realized that they can both win in the mediation. What they learned was that in their case, they could only win if the other won also. By adjusting their demands and expectations considerably, they changed their perception of the outcome. Everybody walked away big winners, not only because they divided up the modest fortune fairly and sensibly, but the ultimately accomplished their initial goals of ending the divorce proceedings quickly and (relatively) cheap.

Conclusion

Richard and Daphne's divorce negotiation was a complete success but only after it seemed destined for total failure. At the onset of the negotiations, Richard was not willing to negotiate. Instead he wanted to win. He had no awareness of some of the basic concepts of negotiating. Specifically, Richard had to learn that the object of negotiating is not to give up nothing, nor to walk away with more than other person.

The idea behind negotiating is to find common ground with a potential adversity so as to avoid an adversarial conflict. Some of the core concepts for negotiating include, realizing that the other negotiator is fellow human with emotions and beliefs. Another core concept involves avoiding establishing a position that you cannot move off of. It is important to identify objective criteria from which to base your initial and subsequent demands.

In the case of Richard and Daphne, they had lawyers and a mediator present to help guide them through the negotiation process. These are vital tools as the nature of divorce is so emotional. The art of negotiation combines elements of proper communication, psychology and courtesy to all people to see past their differences and to work together for the common solution.

Richard and Daphne were both capable of grasping these elements and so their negotiations were successful. Hindsight tells us to have a better understanding of what negotiation is and is not prior to beginning a formal negotiation. Do not assume that a feeling of moral righteousness or anger will be a useful tool during negotiations. Also, thinking outside the box is helpful. In other words, do not limit the solutions to the boundaries of the problem. Seeking original imaginative solutions is often central and Richard and Daphne did not know how to do that until they had been negotiating for a while.

Works Cited/Consulted

Burgess, Heidi. (2004) "Negotiation Strategies." Beyond Intractability. Eds. Guy Burgess

and Heidi Burgess. Conflict Research Consortium, University of Colorado, Boulder.

Posted: January 2004

Fisher, Roger and Ury, William. (1991). Getting to Yes: Negotiating Agreement Without

Giving In. New York, NY: Penguin Books.

International Online Training Program of Intractable Conflict; Conflict Research Consortium

(1998). Retrieved from http://www.colorado.edu/conflict/peace/!overlay_problems.htm.

Lax, David and James Sebenius. (1991) "Interests: The Measure of Negotiation." Negotiation

Theory and Practice, January 1, 1991.

Mitchell, Rex. (2009). Core Negotiation Concepts. Retrieved from http://www.csun.edu/~hfmgt001/456page.htm.