Washington Appeals Court Enforces Arbitration Provision in Divorce Agreement

When a couple reaches an agreement regarding their divorce, it is not uncommon to agree that any disputes regarding the agreement are subject to arbitration. Generally, Washington law favors arbitration. In a recent case, however, a husband challenged a court’s decision not to refer a matter to arbitration.

The couple established a business during their marriage.  The husband ran the business and the wife raised their children.  The husband had developed a gambling compulsion and lost $185,000 in the year before the divorce.

The wife filed for divorce and asked for a restraining order keeping the husband from conducting the business’s finances.  The court granted the wife full authority to run the business “in a fiscally responsible manner.”

The parties subsequently went to mediation and entered into a CR 2A agreement.  The agreement stated the wife would receive the home.  The couple was to sell the business with the proceeds going toward their debts.  The agreement allocated the anticipated proceeds to each party.  Above the allocation to the wife, someone had handwritten “59%.” Above the amount allocated to the husband, someone wrote “41%.” The agreement also identified an arbitrator.

The wife moved for a dissolution decree and enforcement of the CR2A agreement.  The proposed decree provided that the proceeds of the business would be used to pay off the debts.  It noted that it was anticipated that, after the debts were paid, the wife would be awarded the amount allocated to her and the husband would be awarded the amount allocated to him.  If the proceeds were greater than anticipated, the wife would receive 59% and the husband 41%.

In his response, the husband stated there were issues with the pleadings and expenses the wife had not disclosed.  He stated the case would have to go back to arbitration.  The husband argued the language in the proposed decree conflicted with the agreement.  He argued that the agreement provided he should receive 41% of the total community assets.  He also argued that the parties had not reached a meeting of the minds so the agreement should not be enforced.

The court, however, entered a dissolution decree using the language prepared by the wife.  According to the appeals court’s opinion, the wife learned the husband had deposited the funds from the sale of the business into his personal account.  She sought a restraining order to freeze his bank accounts.  She also moved to enforce the decree and the husband moved for relief from the decree.

The court found there was no mutual mistake, that there had been a meeting of the minds, no genuine dispute over a material term of the agreement, and actual performance.  The court order the husband to place the funds into the court’s registry.

The husband argued the court erred in enforcing the agreement because of mutual mistake and lack of mutual consent.  He argued the court should have referred the matter back to arbitration.

The appeals court found the husband had requested the court refer the dispute to arbitration.  The wife argued he had to bring a formal motion for arbitration, but did not provide any supporting citations.  The court therefore rejected her argument, finding the husband had requested the court refer the matter back to arbitration.  Pursuant to the uniform arbitration act, a court cannot deny referral to arbitration just because the claim lacks merit.  The court must only consider whether the dispute is within the scope of the arbitration agreement.  If it is, the court must order arbitration.

The appeals court found the dispute fell within the scope of the agreement to arbitrate and therefore the trial court erred in failing to send the dispute to arbitration.  The appeals court vacated the court’s findings, conclusions, and decree, except the portion dissolving the marriage.  The appeals court remanded for an order referring the matter to arbitration.

If you are anticipating a divorce, an experienced Washington divorce attorney can assist you through mediation, arbitration, or even litigation.  Please set up an appointment with Blair & Kim, PLLC, by calling (206) 622-6562.