For many families that own small businesses, the prospect of a divorce can be daunting. There is certainly a lot to be concerned about. Melinda Eitzen joined Jennifer Hargrave to talk about how the collaborative divorce process can really help families to come up with creative solutions as they navigate divorce. Melinda is a partner in the law firm of Duffy and Eitzen here in Dallas serving all of North Texas. She’s also a master-level credentialed collaborative divorce specialist and she is the author of two books. One of the topics of collaborative divorce and one also that is just a great primer on divorce, it’s called ‘Considering divorce’.
Jennifer Hargrave:
Melinda, I’m really excited to have you here today to talk about all things divorce, but especially talk about issues facing families who own small businesses. Welcome.
Melinda Eitzen:
Thank you, Jennifer. I’m glad to be here.
Jennifer:
So before we get started and talking about small businesses, tell us how you came into the collaborative divorce process.
Melinda:
In 2001, I think it was 2001, two lawyers, Larry Hanson, someone else, I think John McShane brought a collaborative trainer here to Texas. Larry called me and said, “Hey, we’re going to have this training and you need to come.” And I really had no idea what I was going to or what it was about. But I went to the training and it was a two-day training, I think of basic. As I was sitting there, I just had such an ‘aha’ moment of, “Oh, my gosh, why aren’t we already doing it this [inaudible]. Then, I ran around the room and found people I had cases with and said, “The case we just started. Let’s do it collaboratively.” So I think, I had the first collaborative case in Dallas.
Jennifer:
So up until that time, you were a divorce attorney. You had been representing lots of families in more of a traditional litigation process, is that right?
Melinda:
We still do that. I really serve in both models, whether it’s collaborative or litigation or mediation but I think collaborative is the process of choice.
Jennifer:
What was it when you were sitting in that training? What was it that really spoke to you that way you saw the potential and possibilities for helping families in a different way?
Melinda:
I think that this will not sound revolutionary to people who weren’t doing litigation but what is so amazing about collaborative is it allows people to get divorced with honor and with self-respect and to beat our higher selves, instead of feeling like they have to throw dirt and talk about all the failings of their spouse.
Collaborative Divorce and Small Business Owners
Jennifer:
I love that. It really helps families focus on the future. What I say is that it’s possible to have a divorce that’s consistent with your values and people who get a divorce still value family. I think this is a process that really allows them to move into that next chapter. Let’s talk about families who have small businesses, in what ways can the collaborative divorce process really help them?
Melinda:
That’s a great question. A lot of my practice does involve people who own a business and often, it’s their primary asset. Instead of building up for 401k, or having a stock portfolio, they’re putting all their assets into this business, they’re just reinvesting in their family business, and sometimes hoping to pass it on to future generations. It’s very important typically to at least one of the couple, one party to have that business continue. What I like about collaborative is it allows us to really have a problem-solving approach to how to maintain that business and keep at least one party in it. I’ve had some cases where they both stay in it, post-divorce but still get the other party, the person who doesn’t want to stay in the business and want some money, how to get them some value.
Jennifer:
I love that. When we do a collaborative case, one of the first things we start off is asking people what their goals are in the divorce process. And I think especially for people who are small business owners really being able to give voice to the fact that they’re coming into the divorce process with a lot of fears, and worries, and concerns. We can really address a lot of those concerns in the divorce process. What are some fears that you see that your clients are struggling with when they are facing divorce and they own a small business?
Melinda:
Well, I think they’re worried about, “Do I have to sell my business?” Right? That’s the immediate question. But even if they feel pretty confident that’s not going to happen or I assure them that I don’t think we have to do that, they’re worried about disrupting business. As we gather information if we need together information in order, for example, to value it if that’s part of what they decide in the process needs to happen, that process of gathering information in litigation can be very disruptive to the business and we’re pulling people off of their tasks running the business together information. In litigation, it can be combative where they’re taking depositions of people in management in the business. So it’s very relieving to people to hear that we don’t have to approach it that way. We can gather the information that we need without being as disruptive.
Jennifer:
That’s such a good point. I think, too, one of the things that happen in the litigation context is the divorce can impact employees, relationships with employees, employees catch wind and abuzz. It can also impact relationships with clients or with other vendors whoever you’re dealing with in the business. One of the great things about collaborative is it’s confidential. So what’s happening in the divorce really stays within the divorce. I think the couple has a lot more control over the message that they’re sending. So they don’t have to worry about the destructive gossip rumor mill that happens in a litigation context. How have you seen families come up with creative solutions in a family business context?
Melinda:
Well, one thing that I think some people assume is that we would always value the business for example, and that can be very expensive and we would typically hire a neutral. In many cases we do this, we hire a neutral and they come in and their job is to value the business. Well, some people don’t want to do that. They don’t want to bear the expense of it. And collaborative allows us to say, “What do you think it’s worth?” And if they both agree on what they think that value is worth, we do not have to bear that expense and trouble.
Jennifer:
Yeah. I mean, that’s great because you don’t have to hire a business valuation expert at all. I think a lot of people don’t realize in a divorce, typically, if we’re in a litigation context, each side is hiring their own business valuation expert. So, not only do you have one, you don’t have just the intrusive process of one business valuator going through all your records and interviewing all the key people, but now you have it happen twice and you end up with a battle of the experts. I love that in collaborative, we can really avoid that because if we do hire, your higher one and you refer to that as neutral but that’s where both parties just hire one expert to value the business.
But you’re right, I mean, there are lots of times when we don’t even have to do the value. What do you see? I mean, have you seen some creative ways to divide an interest in a business, maybe versus what we see in litigation like, how business interest you get divided?
Melinda:
Yes. I mean, of course, depends on the nature of the business, and is there something that could be sold a piece of it to fund the other person’s value that they’re trying to get out it. Let’s just do a hypothetical. Let’s say that the wife is really the one running the business and she wants to maintain that role and she wants to stay in the business and preserve as much of it as possible. The husband doesn’t have a problem with that but he wants money out of it and that’s their main asset because in my example earlier, they just keep reinvesting in it. Well, we need to identify, is there some small piece of the business, maybe it owns some real estate that we could just sell a portion of it to try to get some value to the husband. Maybe we do a combination of some value in cash or by sale of something, and then a stream of payments over time because in many cases, they are cash positive. It’s not that the business isn’t doing well, it’s that they just keep putting money back in making a bigger and better. So, I’ve had many cases where we just have a stream of payments, and that example going to the husband and we secure that stream of payments by the assets of the business.
Post-Divorce Success for Business Owners
Jennifer:
As you’re talking, it brings to mind the fact that what are the great things about the collaborative divorce process is we actually have a team and so each side is represented by their own lawyer, but then we have a neutral financial expert usually and usually neutral mental health professional. The power of the team all working together to come up with creative solutions is something that I think is so advantageous in the collaborative divorce process because we can brainstorm and come up with all kinds of scenarios. Every business is different. I mean, you mentioned that earlier and every family is different. Their level of involvement post-divorce is going to be different too. So I think that that’s a great thing. Tell us what in terms of the post-divorce success that you’ve seen with families who own businesses– I mean a lot of times a divorce can be a devastating event and that it can make the business go belly-up, how have you seen businesses thrive after divorce?
Melinda:
I think that it really comes down to, do they have respect and trust in each other even though they’re getting divorced, and do they have enough respect and trust that they can problem solve and be successful post-divorce on how we’re getting value from the business to the other person? I have that cases where they continue to both works in the business. That doesn’t seem ideal in those cases but if it’s a business where there’s more than one location or both of them were actively working in it and their duties were very defined in different then I have seen that being successful. They were invested in it and maybe their kids were already working in the business in that instance. So they were successful in keeping that going. But in most cases, one person does want to be removed and go on with their life. But they are invested in that business being successful because that’s how they’re going to get paid out eventually.
Jennifer:
Right. Yeah.
Melinda:
We need to also be creative in leveraging like there might be abilities to get a loan and just buy them out now, and not have to do that stream of payments. It just depends on how creative we can get with getting some lender involved who might be able to help us.
Jennifer:
Now, a lot of people think that collaborative divorce is for people who don’t have any conflict that they’ve already pretty much agreed on everything and so they can come into this collaborative divorce process. What is your experience in terms of working with levels of conflict? And even trust me, I mean, you just were talking about couples who trust each other but if you’re not completely trusting of your spouse, can you still work in the collaborative divorce process?
Melinda:
Oh, absolutely. To me, it’s the better process for almost any instance. I have had really high conflict like slamming the door so hard to the conference room that I thought that the blast in the door was going to break and really misbehaving between meetings. I had one case, we had fourteen meetings which is very unusual, that’s a large amount of meetings. Between the meetings, one of the two did everything that you could ever do and then never spoke at all between the meeting so they had no trust, no respect but they still value the process because of the privacy element was very important to them to keep their divorce details private from the rest of the community. From the creative solution, they didn’t want the cookie-cutter approach that we see from the court sometimes. We can deal with high conflict and high emotion and no trust. In that case, we had one person buy a house without agreement that nobody knew about and then [inaudible] the case but we found out because we had a neutral financial professional that was looking at all the records every month. There are definitely trust but verify.
Jennifer:
It just brings to mind the fact that because when I hear people say collaborative isn’t for me because I don’t trust my spouse or we have a lot of conflicts, what comes to my mind are the litigation cases that go on for years and years and years. I don’t think people realize right now, in terms of privacy, course of always been public forums and that means that anybody can go walk into a courtroom and hear the dirty details but now more than ever, our court battles aren’t just in the courtroom, they’re on YouTube at least where we practice. So it is readily available for people to watch from their own living rooms, they don’t have to pay for parking downtown at the courthouse. And that privacy element is so important. What advice do you have if somebody’s watching this and they have a business and they’re thinking that divorce may be in their future? What tips or advice do you have for them? Besides, I will say they should buy your book and read considering divorce. It’s chock full of good tips.
Melinda:
Yes, they’re on Amazon. No, the best advice I have is don’t do something in preparation for divorce out of fear that will accidentally hit the war bell. And what I mean by that, a great example is moving money. I can’t tell you and I’m sure you’ve seen it too Jennifer, how many times I’ve seen with a lawyer’s advice actually, out of fear, they move half the money out of all the accounts, personal accounts, business accounts because they’re afraid the other person’s going to, but what they’ve done is they’ve hit a war bell. Now, we’re going to war because that person is so angry that they did that and we can’t often recover from that. Now, we’ve set the stage for war for the whole case. In truth, you didn’t need to take half the money because if the other, out of fear, because we have remedies if the other person did that. So the way I say it to people is, “Hey if you could last for two weeks, you could live. You could borrow money from a friend. You could live off your credit cards.” If you could last for two weeks financially, I can get the money back so you don’t need to do something out of fear that hasn’t happened, right? You don’t need to do a fear-based beginning move. Don’t do it. And then the other advice I have is, “Don’t have an affair because that just makes everybody so mad. But if you’ve already had an affair and it’s active and you don’t want to stop, then my advice is to be discreet. So don’t bring the affair partner to the soccer game for your child,” because that just makes everybody really angry, and then it makes it harder to resolve your case and more expensive.
There’s a lot of value in de-escalating conflict
Jennifer:
That is so it really good and practical advice. I think so often people are in a state of fear when they’re entering into the divorce process. They probably may hire a lawyer out of fear thinking I need to have the biggest, meanest, baddest lawyer. And what I often tell people is the problem is that meanest, baddest lawyer is really good at collecting fees and creating conflict, and not helping find a resolution. So, it’s so refreshing to speak with another like-minded lawyer who really understands that there is a tremendous value for our families and helping them get through the divorce process in a way that doesn’t escalate conflicts and escalate fear. Because really, at the end of the day, I mean, we’re going to take the assets, we’re going to find a way of dividing them that makes sense, but hopefully, your family will continue on. It’s just in a different format.
Melinda, thank you so much for taking time. I do want to do a quick plug. Tell us where people can learn more about you and your website and where can they get information about your books?
Melinda:
Oh, thank you so much. So, Duffy and Eitzen spelled duffeeandeitzen.com, that’s our website. Both books are on Amazon and you can just Google by my last name which is E-I-T-Z-E-N to find those and hopefully, they’ll be of help.
Jennifer:
Awesome. Well, thank you again and it’s been a pleasure talking with you.
Melinda:
Thank you. It’s a pleasure of being here.
