Arbitration

Financial Consequences for Engaging in Prohibited Behaviors

Published on: November 6, 2024 | by Kelly McClure

Parties in a high profile divorce might want to enter an agreement that goes beyond dividing the property. Celebrities, business owners, or CEOs might seek an agreement that prohibits their former spouse from disclosing private information, disparaging them or their business, or engaging in other behaviors that might damage their reputation or their business. The agreement can include liquidated damages for violations. In a recent case, a former wife, her former husband, and his business all appealed a judgment confirming an arbitration award relating to an agreement incident to divorce.

The Agreement

At the time of the divorce, the parties entered into an agreement incident to divorce providing for arbitration if a party engaged in certain conduct prohibited by the agreement. The agreement provided for an award of the greater of $500,000 or actual damages. Additionally, the wife would forfeit interest in a trust as liquidated damages if she engaged in certain behaviors. The parties agreed to arbitrate any issue of whether a party committed a prohibited behavior, whether the wife violated specified provisions in the agreement, and whether the wife’s interest in the trust would be forfeited as a result of violating provisions of the agreement. Binding arbitration was to occur within 90 days of notice of a violation. Pursuant to the Agreement, the losing party would pay the arbitration costs and the other parties’ costs and fees. The husband’s company was a third party to the divorce and to the agreement. The decree incorporated the agreement.

Arbitration Demand

The husband and his company subsequently demanded arbitration, alleging the wife violated the agreement. The wife objected and argued the forfeiture and liquidated provisions were unenforceable and that the arbitration clause was therefore also unenforceable.

Appeals Court Reverses Denial of Motion to Compel Arbitration in Texas Custody Modification Case

Published on: August 16, 2023 | by Kelly McClure

Sometimes after agreeing to mediate or arbitrate future controversies at the time of a Texas divorce, one party may not want to follow through on that agreement when a controversy actually arises. In other cases, the parties may disagree on whether the alternative dispute resolution provision applies to a particular claim or controversy. In such circumstances, the party seeking arbitration may move to compel arbitration. That party must show that there is a valid arbitration agreement and that the dispute is within the scope of the agreement.

Arbitration Provision

In a recent case, a father appealed the trial court’s denial of his motion to compel arbitration. According to the appeals court’s opinion, the final divorce decree included an alternative dispute resolution provision. The provision provided the parties shall mediate the controversy in good faith before setting a hearing or initiating discovery in a suit to modify the terms and conditions of conservatorship, possession, or child support, except in case of an emergency. The provision specified it did not apply to enforcement actions. It required a party seeking modification to give the other party written notice of the desire to mediate. If the parties do not agree on a mediator within 10 days or the other party does not agree to or fails to attend mediation, the party seeking modification is relieved of the obligation to mediate. The provision further provides that if a controversy could not be settled by mediation, the parties agreed to submit it to binding arbitration with a specified arbitrator.

In the fall of 2021, the father started trying to negotiate custody matters. In July 2022, the mother’s attorney sent an email to the father’s attorney stating modifications did not need to be arbitrated. The father’s efforts to negotiate or mediate failed, and he sent an email demanding arbitration at the beginning of August.

Court Must Decide Validity and Enforceability of Arbitration Agreement in Divorce Cases

Published on: November 3, 2022 | by Kelly McClure

iStock-1287431987-300x200 Texas prenuptial agreements may include a provision requiring arbitration in the event of a divorce. The Texas Family Code includes provisions making arbitration of divorce cases different from the arbitration of other types of cases. A wife recently sought mandamus relief after the trial court ordered arbitration pursuant to a prenuptial agreement.

Parties Executed Islamic Premarital Agreement

According to the court’s opinion, the parties had executed an “Islamic Pre-Nuptial Agreement.” It included a provision requiring resolution of conflicts in accordance with Islamic law by either in a Muslim court or by a three-member Fiqh panel.

The wife denied knowing the contents of the agreement when it was executed. She claimed she thought it was a second copy of the parties’ marriage contract.

Texas Appeals Court Upholds Arbitration Award in Divorce Case

Published on: November 27, 2021 | by Francesca Blackard

iStock-1287431987-300x200 When a couple enters into a Texas pre-marital agreement or post-marital agreement, they may include an arbitration provision in the agreement. Arbitration can be a cost-effective way to resolve disputes, but an arbitration decision often cannot be appealed. In a recent case, a wife appealed a final divorce decree confirming an arbitration award, arguing the arbitrator exceeded her authority.

Husband and Wife Enter into Post-Nuptial Agreement During Marriage

During the marriage, the parties signed an agreement to make “what would otherwise be community property instead be separate property.” The agreement included an arbitration provision.

When the agreement was executed, the husband was president of a company and the wife was vice president. The agreement stated that the parties agreed each of them would “be guaranteed to receive equal pay and bonuses as both President and Vice President. . .”

Texas Divorce Court Must Compel Arbitration of Dispute Regarding Buyout Provision of Company Agreement

Published on: November 3, 2021 | by Kelly McClure

iStock-1287431987 A family business can complicate the property division in a Texas divorce. A recent case considered whether a husband could compel arbitration to enforce a buyout provision in a company agreement during the divorce proceeding.

The parties formed a limited-liability company together during the marriage, with each owning a 50% membership interest. The husband subsequently petitioned for divorce and the wife filed a counterpetition. Both attached the standing order required by the Travis County District Clerk to protect the parties and preserve their property while the case is pending. The standing order applies to all divorce suits filed in Travis County (and many other counties have similar standing orders, such as Dallas, Collin, Denton, Rockwall, and Tarrant Counties) and prohibits parties from taking certain actions that would harm or reduce the value of the property and from selling or otherwise alienating property belonging to either party.

Wife Seeks to Compel Arbitration on Business Disputes

The husband sought injunctive relief and temporary orders to address disputes relating to operation of the business. The wife asked for those disputes to be resolved according to the company agreement, which required any court proceeding brought by one owner against the other be submitted to mediation first and then to binding arbitration if not resolved. The parties were required to go to mediation and arbitration and the arbitrator entered an award regarding management and control of the business. The wife moved to enforce the arbitration award and the court entered temporary orders in accordance with that award.

Arbitration Provisions in Texas Premarital Agreements

Published on: April 18, 2021 | by Francesca Blackard

Premarital agreement

Some Texas premarital agreements may include a binding arbitration clause. A party may compel arbitration when the claims at issue are within the scope of a valid and enforceable agreement to arbitrate. If the claim falls within the agreement’s scope and there is no defense to enforcing it, the court must compel arbitration. Fraud may be a defense against compelled arbitration, but the party must show that the fraud was specifically related to the arbitration provision.

A husband recently appealed a denial of his motion for arbitration in his divorce proceeding. The parties signed a premarital agreement that included an arbitration clause. The wife filed a petition for divorce in July 2014. In 2016, she filed an amended petition. Neither petition mentioned the premarital agreement. The husband filed an answer in 2016, but did not mention the premarital agreement either.

In a second amended petition, the wife stated there was a premarital agreement and requested it be set aside and vacated. She alleged she entered into it involuntarily and that it was unconscionable.

Arbitration Award Involving Texas Couple’s Business Entities Upheld on Appeal

Published on: January 20, 2021 | by Kelly McClure

iStock-1215119911 A Texas premarital agreement can help protect each party’s assets in the event a marriage ends in divorce. Premarital agreements may also include other provisions, including a requirement to submit certain issues to binding arbitration instead of for determination before a judge or jury. In a recent case, a husband attempted to vacate an arbitrator’s decision, arguing he had exceeded his authority.