Despite erroneous admission of mediation evidence, high court affirms stock award for ex-wife

Despite the erroneous admission of confidential evidence prepared in anticipation of a divorce mediation, the Indiana Supreme Court has upheld the award of half of a man’s stock to his now-ex-wife due to his breach of the divorce agreement.

The high court on Tuesday affirmed the Allen Circuit Court in Russell G. Berg v. Stacey L. Berg, 21S-DC-320. The high court ruled in the case that documents produced in anticipation of mediation are covered under settlement negotiation confidentiality requirements.

The case involves Stacey Berg, who was awarded half of the disputed $122,000 stock account held by her former husband, Russell Berg, after the couple entered into a mediated divorce settlement agreement.

Almost a year after the agreement was approved, Stacey filed a Trial Rule 60(B) motion claiming the stock account was omitted from the marital balance sheet used at mediation. Had it been included, Stacey argued, she would not have agreed to the settlement.

The trial court eventually awarded Stacey half of the stock, but she was stripped of that share on appeal, causing a split among a panel of the Indiana Court of Appeals. The majority of judges L. Mark Bailey and Robert Altice concluded that without the mediation evidence, there was insufficient evidence to find that Stacey could avoid the settlement agreement.

In a dissent, however, Judge Terry Crone wrote that he would have affirmed the grant of money to the ex-wife. He opined that Russell’s argument that Stacey’s exhibits were inadmissible under Indiana Evidence Rule 408 “falls far short of establishing that the trial court abused its discretion in relying on Wife’s exhibits.”

In a Tuesday opinion granting transfer to the Bergs’ dispute, the Indiana Supreme Court sought to answer the question of whether documents produced in anticipation of mediation fall under settlement negotiation confidentiality requirements.

“We conclude that they do and hold that the trial court erroneously admitted a marital balance sheet prepared for mediation to allow Wife to avoid the parties’ settlement agreement,” Justice Christopher Goff wrote for the unanimous court.  “But, because the trial court also found that Husband had breached the settlement agreement, we affirm the trial court.”

The justices, who disagreed with her reading of the rules, first noted that Stacey’s evidence was inadmissible to avoid the settlement agreement under Rule 408. It concluded that information exchanged specifically to assist in mediation, but disclosed prior to mediation, falls under the rule.

Justices also found that the balance sheet wasn’t admissible as evidence discoverable outside of settlement negotiations, stating, “Rather, the figures on the balance sheet reflected the positions that the parties took on the value of certain property for the purpose of negotiation.”

Further, the court found that challenging the validity of the settlement agreement is not a collateral matter for the purposes of 408(b)’s exception. It concluded that because the trial court relied on the inadmissible evidence to find that fraud, constructive fraud, mutual mistake or misrepresentation had occurred, that finding cannot be the basis for Stacey’s relief.

However, the high court found that a warranty clause in which “each of the parties” warrants “one to the other” doesn’t preclude a party from demonstrating breach of warranty. It disagreed with the COA’s holding that because Stacey also warranted that all assets and debts had been “correctly and truly” revealed and reflected in the agreement, she is “estopped from obtaining relief because Wife is disputing the truth of her own assertions.”

“If we were to interpret the warranty clause as the Court of Appeals did, that clause would be meaningless because neither party would be able to enforce it,” Goff wrote.

“… The trial court didn’t abuse its discretion in determining that Husband breached the Agreement. And Indiana has a statutory presumption of a 50/50 division of marital assets. … Thus, the trial court didn’t err in awarding Wife 50% of the Edward Jones account because of Husband’s breach of the Agreement,” the justice concluded.