In re Guardianship of S.H., 2012 Ark. 245, 409 S.W.3d 307 (“S.H. I“) and In re Guardianship of S.H., 2015 Ark. 75 (“S.H. II“) both address the rule that applies when a parent who originally consents to a guardianship later seeks to terminate the guardianship.  In S.H. I (decided in 2012), the Arkansas Supreme Court set forth a two-step burden shifting analysis for determining whether to terminate a guardianship in such situations.  In S.H. II (which was the second appeal of the same case, decided in February 2015), the Arkansas Supreme Court clarified the burdens of proof that apply to each step in the analysis.  S.H. II was a split opinion, however, and for reasons that will be discussed in more detail below, there is some question as to which rule will apply in the future.  Therefore, this blog post analyzes the rule from both the majority opinion (which technically appears to be a plurality opinion) and the concurring opinion, along with a note regarding which rule might apply in the future.

I. Legal Background

SH II addresses situations where a parent consents to another person (typically a family member) serving as the guardian of his or her child, and then later that parent seeks to terminate that guardianship.  This can arise in a number of circumstances, such as when a parent must leave the country to serve in the military (Witham v. Beck, 2013 Ark. App. 351) or when a parent is overcoming a drug problem (Crenshaw v. Crenshaw, 2012 Ark. App. 695).

A. Abolition of the Material Change in Circumstances Standard

For many years, appellate courts in Arkansas had “equate[d] a petition to terminate a guardianship to a change of child custody among natural parents.” Smith v. Thomas, 373 Ark. 427, 432, 284 S.W.3d 476, 479 (2008).  As a result, in order for a parent to terminate a guardianship, the parent was required to prove that there had been a material change in circumstances. Graham v. Matheny, 2009 Ark. 481, 6, 346 S.W.3d 273, 277 (2009).  In Graham, the Arkansas Supreme Court recognized that “there is confusion regarding the standard to be used in termination-of-guardianship cases.” Id. at 14, 346 S.W.3d at 280-81.  Therefore, the Arkansas Supreme Court took the opportunity to set forth five principles that apply in termination of guardianship cases.  Perhaps the most significant of those principles was that “a change-of-custody analysis using the material-change-of-circumstances standard should not be done in termination-of-guardianship cases.” Id. at 15, 346 S.W.3d at 281.

The Court in Graham noted that the guardianship statute, which provides that “[a] guardianship may be terminated by court order . . . [if] the guardianship is no longer necessary or for the best interest of the ward,” is a disjunctive test. See Ark. Code Ann. § 28-65-401(b)(3).  Nevertheless, the Arkansas Supreme Court still held that even if there is evidence that a guardianship is no longer necessary, the best interests of the child must still be examined.  The concurrence in Graham, written by Justice Hannah, joined by Justice Danielson, made the point that the statute is a disjunctive statate and argued that “[u]pon remand, the circuit court should be ordered to determine whether if for any reason, the guardianship is no longer necessary or for some other reason it is no longer in the best interest of [the ward] that the guardianship continue.” Graham, 2009 Ark. 481, at 19, 346 S.W.3d at 283 (Hannah, C.J., concurring).

The concurrence, in a footnote, made one other point: That the parties had not raised the question of whether the guardianship statute as written violated parents’ constitutional rights to the custody and control of children. Id. at 18, 346 S.W.3d at 282 (Hannah, C.J., concurring).  Specifically, the concurrence made reference to Troxel v. Granville, 530 U.S. 57, 120 Sup. Ct. 2054 (2000), in which the Arkansas Supreme Court had held in a grandparent visitation case that “there is a presumption that fit parents act in the best interests of their children.”  The Arkansas Supreme Court had also recognized this principle in a grandparent visitation case, holding that “a fit parent is given a presumption that he or she is acting in a child’s best interests.” Linder v. Linder, 348 Ark. 322, 72 S.W.3d 841 (2002).

Less than three years after the decision in Graham v. Metheny was handed down, the Arkansas Supreme Court would address head-on the issue of parental rights in the context of a termination of a consensual guardianship.

B. Application of Troxel to Termination of Guardianship Cases

As mentioned previously, S.H. I was the first appeal of the case that is the subject of this blog post.  The paternal grandparents in S.H. I filed a petition for guardianship making numerous allegations against the mother.  The mother and father then consented to guardianship of her daughter by the daughter’s paternal grandparents.  About a-year-and-a-half later, the mother sought to terminate the guardianship, but the circuit court denied the petition, and the mother appealed.

In S.H. I, the Arkansas Supreme Court held that the guardianship statute was unconstitutional as applied to a parent who consents to a guardianship and later seeks to terminate that guardianship.  Based upon Troxel, the Arkansas Supreme Court held that a natural parent who has not been deemed unfit is presumed to be acting in the child’s best interest, but the question was whether a parent who consents to a guardianship waives that presumption.  In S.H. I, the Arkansas Supreme Court “align[ed] [itself] with the majority view and [held] that parents who have not been found unfit do not relinquish their fundamental liberty interest in raising their children by consenting to a guardianship and, thus, they are entitled to the Troxel presumption in a proceeding to terminate that guardianship.” S.H. I, 2012 Ark. 245, at 14, 409 S.W.3d at 316.

Based on this holding, the Arkansas Supreme Court set forth a two-part rule, stated as follows:

[W]hen a natural parent, who has not been deemed unfit and who has consented to a guardianship, files a petition to terminate that guardianship, that parent must put forth evidence that the guardianship is no longer necessary. Once the court is satisfied that the conditions necessitating the guardianship have been removed, the guardians shoulder the burden of rebutting the presumption that termination is in the child’s best interest.

S.H. I, 2012 Ark. 245, at 15, 409 S.W.3d at 316.

There was a concurring/dissenting opinion in S.H. I, authored by Justice Goodson and joined by Justices Brown and Corbin.  That opinion made two basic points relating to the first prong of the test (regarding whether the guardianship is still necessary).  First, the concurring/dissenting justices argued that “the fundamental right at stake in this case must be protected by placing the entire burden of proof on those who seek to override the parent’s presumptively valid decision.” S.H. II, 2012 Ark. 245, at 22, 409 S.W.3d at 320 (Goodson, J., concurring/dissenting).  In other words, the guardian would not only have to rebut the best-interest presumption (the second prong of the test), the guardian would also have to prove that the guardianship remains necessary (the first prong of the test).

Second, the concurring/dissenting justices argued that the majority opinion had not made clear what burden of proof the natural parent would bear on the first prong of the test.  Particularly, the concurring/dissenting justices questioned whether the burden on the first prong of the test was a burden of going forward or a burden of proof.  The Arkansas Supreme Court’s decision in the second appeal of this case, S.H. II, would resolve this and other ambiguities that remained after S.H. I.

II. S.H. II: Explanation of the Burdens of Proof . . . And an Alternative Analysis?

On remand of S.H. I, the circuit court again denied the mother’s petition to terminate guardianship, and the mother appealed again.  The Arkansas Supreme Court reversed, this time directing the circuit court to return custody of the daughter back to the mother. S.H. II, 2015 Ark. 75.  The decision was a 3-2-2 decision, and both the majority opinion and the concurring opinion must be evaluated to determine how these cases will be handled in the future.

A. The Majority Opinion: Explanation of the Burdens of Proof

As discussed above, there is essentially a two-part test in termination of consensual guardianship cases.  In the first part of the analysis, the parent seeking to terminate guardianship must establish that the conditions necessitating guardianship no longer exist.  In the second part of the analysis, the guardians then bear the burden of overcoming the presumption that termination of the guardianship would be in the child’s best interest.

(i) Step 1 of the Test from S.H.

As mentioned previously, the Arkansas Supreme Court in S.H. I did not indicate whether the burden in the first part of the test from S.H. I was a burden of going forward or a burden of proof.  In S.H. II, the Arkansas Supreme Court clarified that this is a burden of going forward, and not a burden of proof.  The Arkansas Supreme Court also set forth exactly how a parent meets this standard: “by revoking consent and informing the court that the conditions necessitating the guardianship no longer exist.” S.H. II, 2015 Ark. 75, at 5.  The Arkansas Supreme Court reasoned that this rule applies because a fit parent is presumed to act in the best interest of his or her child, including in making the decision to terminate a guardianship.

(ii) Step 2 of the Test from S.H.

With respect to the second prong of the test from S.H. I (the best interests of the child), the opinion in S.H. I did not indicate whether the guardian’s burden was by a preponderance of the evidence or clear and convincing evidence.  In S.H. II, the Arkansas Supreme Court held that the burden was by clear and convincing evidence. Ark. Code Ann. § 9–27–341(b)(3).  With respect to the mother in S.H. II, the Arkansas Supreme Court held that “while not an ideal parent, [she] remained a fit parent, which is all that matters for constitutional purposes.” S.H. II, 2015 Ark. 75, at 12.

B. Concurring Opinion — Statutory Interpretation

The concurring opinion agreed that a fit parent meets the first prong of the test from S.H. I simply by revoking consent to the guardianship.  Further, the concurring opinion agreed that the standard for the second prong of the test from S.H. I requires that the guardian bear the burden of proof by clear and convincing evidence.  Where the concurrence differs, however, is that the concurrence notes that the guardianship statute allows a guardianship to be terminated when “the guardianship is no longer necessary or for the best interest of the ward.” Ark. Code Ann. § 28-65-401.  The concurring opinion noted that this is a disjunctive test, meaning that once the parent meets the first prong of the test, the analysis should end.  The practical impact of this test would appear to be that once a fit parent who has consented to the guardianship informs the court that he or she revokes the guardianship, the guardianship would have to be terminated by the court.

Although it is sometimes tempting to ignore concurring opinions, this is not an opinion that should be ignored.  There are a couple of reasons for this.  First, the Court’s opinion (written by Justice Wood, joined by Justices Goodson and Wynne) was technically not joined by a majority of the court (the opinions all refer to the opinion as the majority opinion, however, so this blog post is using the same terminology).  The concurring opinion was written by Justice Baker, joined by Justice Hart, which gave the Court a majority.

Second, and perhaps more important, the majority opinion hinted that it would apply a different analysis in the future.  In fact, the majority opinion “acknowledge[d] [the two-step process from S.H. I] is not entirely consistent with the guardianship statutes, which provide that a court may terminate a guardianship ‘if, for any other reason, the guardianship is no longer necessary or for the best interest of the ward.'” S.H. II, 2015 Ark. 75, at 14.  The opinion further acknowledged that the decision in Graham v. Metheny had converted the statute from a disjunctive (“or”) statute in to conjunctive (“and”) statute.  This sounds very similar to the argument made by the concurrence.

So, why did the Court in S.H. II apply the two-step analysis in spite of these acknowledgments?  Recall that S.H. II was the second appeal of the same case, and that the first appeal (S.H. I) was where the Court had initially announced the burden-shifting procedure.  Therefore, the Court held that “[t]he constraints of the law of the case prevent this court from following the cardinal rule of statutory interpretation, which is ‘to construe the statute just as it reads, giving the words their ordinary and usually accepted meaning in common language.'” S.H. II, 2015 Ark. 75, at 15 (quoting McMillan v. Live Nation Entm’t, Inc., 2012 Ark. 166, at 4, 401 S.W.3d 473, 476.

C. The Dissent

The dissent was written by Justice Danielson, joined by Chief Justice Hannah.  Although the dissent argued that the opinion in S.H. II was a reversal of the opinion in S.H. I, the dissent seemed more concerned with the majority’s decision to order the circuit court to enter an order returning custody to the mother, rather than remanding the case for further proceedings.

III. Practical Implications of S.H. II

At this time, the law on this issue isn’t entirely clear, although S.H. II certainly answered several questions.  It will be worth watching to see what analysis the Arkansas Supreme Court applies when it reviews a case in which the Court is no longer bound by the law of the case doctrine that applied in S.H. II.  Based on the last part of the majority opinion, it is certainly possible that the majority will adopt the reasoning of the concurrence, but we won’t know for certain until the Arkansas Supreme Court hands down another case on this topic.

So, there are two practical takeaways from this case: (1) This case clarifies a trend that began several years ago of providing more and more protections to fit parents who consented to guardianship; and (2) In order to preserve all arguments for appeal, trial attorneys representing such parents should make arguments based both on the analysis applied by the majority and the analysis applied by the concurrence.

* Our firm was honored to represent the appellant in S.H. II, but would also like to acknowledge the hard work of the trial attorneys (and previous appellate attorneys in S.H. I), Teresa Wineland and Bonnie Johnson, for laying the groundwork and preserving the issues that led to this outcome.

Strother v. Strother

In Strother v. Strother, 2015 Ark. App. 196, the Arkansas Court of Appeals recently held that a decree that “does not contain a final award of custody” is not an appealable order.  A review of Strother, along with several other cases on this topic, reveals that the line between a final custody order and a temporary custody order is not always clear, so attorneys should be cautious before choosing not to appeal from what might appear to be a temporary custody order.

In Strother, the dad and mom had married in 2001, and the mom had filed for divorce in 2013.  In her complaint for divorce, the mom sought joint legal custody, with her having primary physical custody.  The court appointed an attorney ad litem, and eventually held a hearing “on the divorce and custody issues.”  The court then issued a letter opinion in which it granted the couple joint legal custody, and granted the mom primary physical custody.

With respect to custody issues, the circuit court’s order stated as follows:

[T]his court finds that the aforesaid orders of this court in regards [to] custody and other issues concerning the aforesaid two (2) minor children are temporary in nature; that an attorney ad litem will be appointed to represent the aforesaid two (2) minor children; that Defendant shall be solely responsible for payment of all attorney fees and expenses which will [be] owed to the attorney ad litem; and that issues concerning permanent orders in regard [to] custody and other issues concerning the aforesaid two (2) minor children will be determined in the future by agreement of the parties or by order of the court.

The Court of Appeals in this case examined whether this was an appealable order.  Rule 2(d) of the Arkansas Rules of Appellate Procedure–Civil provides that “[a]ll final orders awarding custody are final appealable orders.”  In other words, even if an order granting divorce isn’t otherwise considered a final order, if the order is final with respect to custody, then it will be final for purposes of appealing the custody determination.

In Strother, the Court of Appeals held that the order was not a “final order[] awarding custody.”  The Court of Appeals noted that “the order specifically states that issues of custody ‘are temporary in nature’ and that ‘issues concerning permanent orders in regard [to] custody . . . will be determined in the future.'”  Therefore, the Court of Appeals dismissed the appeal until a final custody award is entered.

In its opinion in Strother, the Court of Appeals cited to an Arkansas Supreme Court case, Gilbert v. Moore, 364 Ark. 127, 216 S.W.3d 583 (2005).  In that case, the trial court had entered an emergency ex parte order granting temporary custody of the couple’s child to the father.  Four days later, the trial court held a short hearing and ordered the custody of the child remain with the father, and that the mother was to receive weekend visitation.  The trial court stated from the bench:

I signed an Ex Parte Order a few days ago which placed the temporary custody in the Plaintiff, the father. I really don’t know where this child is better off long term. I guess that’s something that is going to have to be resolved at a later date. I presume both of these parties want long term custody of this child. I may or may not be right about that. In the meantime I’m going to leave the Ex Parte Order in effect; however, the child shall spend each weekend with his mother beginning 6:00 p.m. on Friday and ending on 6:00 p.m. on Sunday. And when counsel and the parties are ready for this case to be heard in its entirety on its merits thoroughly by myself or somebody, probably somebody else, and hopefully make the right decision on where this child should grow up, then that’s what will happen.

The trial court went on to state from the bench that the order would be “on a temporary basis the child should stay with the father during the week and the mother during the weekends until this case can be resolved on its merits.”  The order itself was not quite as specific as to the temporary nature of the order, but did state that custody would remain with the father “at this time.”

In Gilbert, the Arkansas Supreme Court held that the custody order was a temporary order and therefore not appealable.  This, however, is where the note of caution comes in.  The Arkansas Supreme Court held that “[w]hether a custody order is final or temporary is not dependent upon the style of the order,” and that “custody orders styled as temporary may be nonetheless final for purposes of appeal if the issue of custody was decided on the merits and the parties have completed their proof.”  In Gilbert, the basis of the holding appears to have been that “the issue of custody ha[d] yet to be determined on its merits and . . . the parties ha[d] not completed their proof on the issue.”

This seems to be consistent with previous cases cited by the Arkansas Supreme Court in Gilbert.  Although those cases predate the addition of “final orders awarding custody” to the list of appealable orders (that amendment was adopted in 1999), the holdings are still informative.  In those three cases, the key issue seems to whether there has been a final hearing on the merits.  In Sandlin v. Sandlin, for example, the Arkansas Supreme Court held that the order in that case was not appealable because “the main issue, that of custody,” had not been decided. 290 Ark. 366, 719 S.W.2d 433 (1986).  The Arkansas Supreme Court noted that it had previously held that “there can be no appeal . . . until the proof has been completed and the order entered.” Similarly, in Jones v. Jones, the Arkansas Court of Appeals held that a custody order “is final for purposes of appeal if the the issue of custody was decided on the merits and the parties have completed their proof.” 41 Ark. App. 146, 852 S.W.2d 325 (1993).

In Chancellor v. Chancellor, 282 Ark. 227, 667 S.W.2d 950 (1984), the Arkansas Supreme Court held, based on the following, that the custody order was not final:

The record reflects that appellant has not yet completed her proof. The order in the present case did not terminate any cause or right, dismiss any party from the action or conclude their rights. By its very terms it is a temporary order. The court ordered an investigation of the respective homes and ordered that a report be made to the court. It is obvious the court did not intend to take final action on this matter based solely upon the fact that the mother may be living in adultery.

This brings us back to Strother.  In that case, it appears that there had, in fact, been a hearing on the merits.  The order, however, appears to have left custody open until an attorney ad litem could be appointed and could report back to the court.  In that sense, the issue of custody was still open.

The Takeaway

Based on these cases, attorneys should never assume that a custody order is temporary based solely on the fact that the order is styled as a “temporary” order. These cases make clear that there’s more to the analysis than simply what the order is styled.  Sometimes, it might not be entirely clear to counsel whether or not a custody order constitutes a “final order[] awarding custody.”  In those situations, the best course of action is probably to file a notice of appeal as a precaution.  Otherwise, the attorney risks allowing what appears to be a temporary order become a permanent, nonappealable order.

Arkansas Supreme Court An investiture ceremony is being held at the Arkansas Supreme Court today at 1:00 p.m. for the swearing in of three justices: Arkansas Supreme Court Justice Karen Baker, Arkansas Court of Appeals Judge Rhonda Wood, and Arkansas Court of Appeals Judge Robin Wynne.

Supreme Court Justice Karen Baker was originally elected to the Arkansas Supreme Court in 2010. She was re-elected last May to serve an eight-year term on that Court.

Court of Appeals Judge Rhonda Wood was elected to Position 7 on the Arkansas Supreme Court in May of 2014.  Judge Wood replaces Justice Hoofman, who was appointed to fill that position with the retirement of Justice Robert L. Brown at the end of 2012.  Justice Hoofman will, in turn, fill the vacancy left by Judge Wood on the Arkansas Court of Appeals.

Court of Appeals Judge Robin Wynne was elected to Position 2 on the Arkansas Supreme Court in May of 2014.  Judge Wynne will replace Justice Donald Corbin, who has held that position since 1990.  Governor Beebe has appointed Mike Kinard of Magnolia to replace Judge Wynne on the Arkansas Court of Appeals.

As we’ve previously discussed, the addition of Judge Rhonda Wood to the Arkansas Supreme Court will result in Arkansas being one of only a few states with a female majority court of last resort, which is a first for Arkansas as well.

Posted by: Andy Taylor | November 21, 2014

Were Your Arguments Made in Chambers Preserved for Appeal?

Arkansas Realtors Association v. Real Forms, LLC

Any attorney who has spent much time practicing in court knows that many arguments and rulings are made in chambers (and off the record).  The question, then, is how to preserve arguments made in chambers.  The Arkansas Supreme Court’s recent decision in Arkansas Realtors Association v. Real Forms, LLC provides some guidance. 2014 Ark. 385.  Although the opinion does not include a definitive method to preserve such arguments, the takeaway is that attorneys must find a way to make the argument on the record.

The facts of Arkansas Realtors Association are a bit complicated and have been simplified for purposes of this blog post.  In sum, the Arkansas Realtors Association (“ARA”) had been in a long-term contract with Robert Bodily to create desktop software that allowed ARA members to draft contracts electronically.  The ARA later entered into a contract with Real Forms, LLC (technically, it was a predecessor company) to create an online version of the software.  The two programs were apparently not compatible, so the ARA ultimately entered into a contract with Real Forms, LLC (“Real Forms”) to create both a desktop version and an online version of the software.

A number of disputes arose between the ARA and Real Forms, including disputes about the time of delivery, whether the software met the ARA’s needs, and regarding the fact that Real Forms had not obtained errors & omissions (E & O) insurance as required by the contract.  The ARA ultimately sent a notice of termination to Real Forms.  Real Forms sued the ARA, and the ARA filed a counterclaim.  The jury ultimately returned a verdict in favor of Real Forms for $150,000.

The ARA raised several points in its appeal, but for purposes of this blog post, the relevant point that was raised related to the ARA’s motions in limine.  Prior to trial, Real Forms filed two motions in limine (one to exclude lay-witness opinion testimony regarding whether the software was flawed, and another to exclude evidence of insurance), and the ARA filed three motions in limine (one to exclude evidence of Bodily’s contract with the ARA, one to exclude the interpretation of contract terms by a software development expert witness, and one to exclude evidence of the number of hours worked by the owners of Real Form.

On the first day of trial, the court held an off-the-record hearing in chambers regarding the motions in limine.  After returning from chambers, the court ruled on-the-record regarding the insurance motion in limine, but did not make any reference to any of the four remaining motions in limine at that time.

On appeal, the ARA argued that the circuit court had erred by not making a record prior to trial regarding the motions in limine.  The ARA relied on Administrative Order No. 4, which provides that, “[u]nless waived on the record by the parties, it shall be the duty of any circuit court to require that a verbatim record be made of all proceedings . . . pertaining to any contested matter before the court or the jury.”  The Arkansas Supreme Court has previously held that this rule is “mandatory,” and that a party’s silence on this issue does not constitute an implied waiver of this requirement. Thompson v. Guthrie, 373 Ark. 443, 447, 284 S.W.3d 455, 457 (2008)George v. State, 356 Ark. 345, 151 S.W.3d 770 (2004).  The Arkansas Supreme Court has also held, however, that the burden of bringing up a record sufficient to demonstrate error rests with the appellant. Hankins v. Dep’t of Fin. & Admin., 330 Ark. 492, 954 S.W.2d 259 (1997).

In this case, the Arkansas Supreme Court rejected the ARA’s argument that the case should be remanded to complete the record, holding that the ARA had not been prejudiced by the off-the-record discussion.  In reaching its conclusion, the Arkansas Supreme Court looked at each of the ARA’s three motions in limine individually.  With respect to the first motion in limine (to exclude evidence of Bodily’s contract with the ARA), there had been a sidebar (apparently on the record) regarding the Bodily contract and what counsel could and could not ask during testimony regarding that contract.  With respect to the second motion in limine (to exclude testimony from the software expert regarding contract terms), the circuit court had actually sustained the ARA’s objection to such testimony during that expert’s testimony.  With respect to the third motion in limine (to exclude the number of hours worked by the owners of the company), the ARA had never objected during trial when testimony was given on this point.

Based on this sequence of events, the Arkansas Supreme Court held that “given these specific circumstances, we adhere to our rule that Appellant was required to bring a record sufficient to demonstrate error, and we cannot say that Appellant was prejudiced by the circuit court’s failure to follow Administrative Order No. 4.”

The Takeaway

There are a few points worth making in light of this opinion.  First, off-the-record discussions are quite commonplace, so the question is how to preserve the issue.  In light of this opinion, it appears that even if a motion in limine has been filed and denied, counsel must object on-the-record once the evidence sought to be excluded is admitted.  Although there would appear to be instances in which the Arkansas Supreme Court might remand a case to require the record to be completed in similar circumstances (the Arkansas Supreme Court appears to have limited the holding in this case to “these specific circumstances”), if the issue is important enough, an on-the-record objection is vital to preserving the issue.  That leads to the second point, which is that this decision to object has to be balanced against the negatives of objecting (namely, irritating the jury).  In this case, it appears that counsel did not consider the testimony in question to be vital to the case (this particular point was the fourth of four points on appeal in the ARA’s brief, and took up about 2 of the brief’s 30 pages).  Therefore, the decision not to object was quite possibly a strategic decision in this five-day jury trial.  If, however, a ruling in chambers is more important to a case, counsel should make every effort to make an objection on the record and to obtain a ruling on the record.

In Bank of the Ozarks v. Cossey, 2014 Ark. App. 581, the Arkansas Court of Appeals addressed the question of whether an order that appears to be a non-final order is still appealable under Ark. R. App. P. (2)(a)(12), which permits an appeal from almost all orders entered in probate cases.

Only a brief summary of the facts of this case is necessary.  In sum, there was a dispute about who was the trustee of the Hamilton Family Trust.  One of the beneficiaries of the trust, Ms. Cossey, filed a petition claiming that Bank of the Ozarks was the trustee and demanding an accounting from Bank of the Ozarks.  Bank of the Ozarks claimed it was not the trustee of the trust.  The circuit court held that Bank of the Ozarks had acted as trustee, and ordered Bank of the Ozarks to perform an accounting within 30 days.  Bank of the Ozarks appealed from this order, along with a separate order awarding attorney’s fees and costs to Ms. Cossey.

On appeal, the Court of Appeals first addressed the question of whether the order requiring an accounting was a final order.  The court held that “[a]n order that contemplates further action by a party or the court is not a final, appealable order.” Because this order required Bank of the Ozarks to perform an accounting, and because there would likely be additional oversight and rulings by the circuit court, the Court of Appeals held that this was not a final order.

The Court of Appeals then turned its attention to Ark. R. App. P. (2)(a)(12) and Ark. Code Ann. § 28-1-116, which together permit appeals from almost all orders in probate cases.  In fact, the Court of Appeals held that “[w]e have interpreted section 28-1-116(a) to allow an immediate appeal from almost any probate order.”  However, the issue in this case related to who should be the trustee of the Hamilton Family Trust, a question governed by Ark. Code Ann. § 28-73-701.  The question, then, is whether this statute is part of the probate code.  Based on the notes to Ark. Code Ann. § 28-1-101, which lists the statutes that make up the probate code, the Arkansas Court of Appeals held that the statute applicable to this case (which was not included in the list) was not part of the Arkansas Probate Code.  The Court of Appeals also examined Ark. Code Ann. § 28-1-104, which lists the types of cases that are considered to be probate cases.  Although this statute was originally designed to set the jurisdictional guidelines when there were separate circuit, chancery, and probate courts, the Court of Appeals held that the statute is still applicable when determining appellate jurisdiction.  Because trust matters are not included in the list of matters considered to be probate matters, the Court of Appeals held that the issues in Bank of the Ozarks were not probate matters.

Having concluded that the trust dispute in Bank of the Ozarks was not a probate matter, a final order was required.  Because there was no final order, the Court of Appeals dismissed the appeal.  The Court did, however, give some guidance to the parties as to how to proceed.  The Court suggested in its opinion that a Rule 54(b) certificate (pursuant to which the parties may appeal from a non-final order) might allow the order to become appealable, although the Court of Appeals was very careful not to “comment[] on the propriety of a Rule 54(b) certificate . . .”  Nevertheless, it’s probably a safe bet that this case will soon be before the Court of Appeals again—this time with a Rule 54(b) certificate.

The Arkansas Supreme Court began its fall 2014 term with two decisions rendering arbitration clauses unenforceable in Arkansas state courts where such clauses contain no mutuality of obligation.

Regional Care of Jacksonville, LLC v. Henry

Arbitration Clause

On September 11, 2014, the Arkansas Supreme Court affirmed the Pulaski County Circuit Court’s decision to deny a nursing-home facility’s motion to compel arbitration due to the absence of mutuality of obligation in the nursing-home facility’s admission agreement. See Regional Care of Jacksonville, LLC v. Henry, 2014 Ark. 361.  In Regional Care of Jacksonville, LLC, the nursing-home facility’s admission agreements contained arbitration clauses that excluded from the requirement of arbitration “a dispute over billing or collecting for services.” Id. at 3.

The Arkansas Supreme Court noted that to have mutuality of contract, “an obligation must rest on each party to do or permit to be done something in consideration of the act or promise of the other; that is, neither party is bound unless both are bound.” Id. at 7.  The Court also observed that “[t]here is no mutuality of obligation where one party uses an arbitration agreement to shield itself from litigation, while reserving to itself the ability to pursue relief through the court system.” Id.

The Court found that the nursing-home facility’s arbitration clause lacked mutuality of obligation because it reserved the right to litigate billing or collection disputes, thereby excluding from arbitration the only likely claim it might have against a resident while strictly limiting the residents to arbitration.  Because the arbitration clause imposed no real obligation on the nursing-home facility to arbitrate its own claims, the Arkansas Supreme Court held that the arbitration clause could not be enforced.

Alltel Corporation and Alltel Communications, Inc. v. Rosenow

The following week, on September 18, 2014, the Court handed down a 4-3 decision in Alltel Corp. v. Rosenow, 2014 Ark. 375.  The majority opinion in that case determined that Alltel’s arbitration agreement was not enforceable because it lacked mutuality of obligation.

The Court’s decision was not based on the language found in the arbitration clause itself, but on the language found in another provision in the same contract that read, “[I]f we do not enforce any right or remedy available under this Agreement, that failure is not a waiver.” Rosenow, 2014 Ark. 375, at  8.  According to the majority opinion, that contract provision meant that Alltel was clearly reserving for itself “the option of pursuing remedies other than arbitration, without the consequence of waiver.” Id.  The Court noted that Alltel had reserved for itself a protection that was not extended to the customer:

Succinctly put, Alltel provided itself with an “out” to the required arbitration; Alltel customers, such as Rosenow, however, were limited to pursuing relief against Alltel in the form of arbitration, while Alltel alone was provided absolution if it chose to pursue an alternate remedy.

Id.

Justice Goodson wrote the dissenting opinion, joined by Justices Baker and Hoofman.  Among other things, the dissenting Justices took issue with the basis for the majority’s ruling on the mutuality of obligation issue.  According to the dissent, “the majority affirms the circuit court’s ruling on mutuality of obligation for a reason that the parties have not developed and on which the circuit court has not ruled.” Id. at 15.  The dissenting opinion explained that Rosenow had argued that the lack of mutuality of obligation existed because of Alltel’s past actions of utilizing the services of collection agencies and filing lawsuits against customers to collect on delinquent accounts.  According to the dissenting opinion, the circuit court had determined that Alltel’s arbitration agreement “imposed no real liability on Alltel because Alltel had previously ignored it.”

The dissent claims that “the majority has reached well beyond the limited issue presented on appeal, which is based on Alltel’s conduct and not a specific provision within the contract.” Id. at 16.

The majority’s response is included in the following footnote:

While the dissent takes issue with our decision in this matter using the analysis that we do, the question presented to this court is whether the circuit court erred in finding a lack of mutuality of obligation. The issue of mutuality of obligation was raised to, and ruled on by, the circuit court. Although we have reached the same result as the circuit court in a different manner, the result, conclusion, or decision is the same—mutuality of obligation is lacking. Had we determined that any other element required for a valid contract was not present, then we would have contravened our precedent. But, to be clear, we have in no way raised an issue sua sponte, because the mutuality-of-obligation issue is squarely before us.

Id. at 9 n.5.

The Takeaway

Following these recent decisions, parties should expect any questionable arbitration clause to be contested in litigation in an Arkansas state court.  Although the Federal Arbitration Act (FAA) might be applicable, it is state contract law that ultimately decides whether an arbitration clause will be enforced in state court.  These recent decisions indicate that the Arkansas Supreme Court will be hesitant to allow an arbitration clause to be enforced where there is no mutuality of obligation.  Under Arkansas contract law, arbitration clauses either bind both parties or neither party is bound to such an agreement.  Although there was some dispute among the members of the Court as to how the Rosenow case should have been decided, it seems fairly certain that where an arbitration clause is clearly one-sided (thereby imposing no real obligation to arbitrate on one party to the agreement, as was the case in Regional Care of Jacksonville, LLC) the Court seems to be in agreement that such an arbitration clause will not be enforceable.

Be aware that a similar argument will not fly in an Arkansas federal court. See Enderlin v. XM Satellite Radio Holdings, Inc., No. 4:06-CV-0032 GTE, 2008 WL 830262, at *10 (E.D. Ark. Mar. 25, 2008) (holding that “Arkansas law requiring mutuality within the arbitration paragraph itself is preempted by the FAA because it places the arbitration clause on unequal footing with other contract terms that do not each have to be mutual.”); see also Southeastern Stud & Components, Inc. v. American Eagle Design Build Studios, LLC, 588 F.3d 963 (8th Cir. 2009).  In Regional Care of Jacksonville, LLC, The Arkansas Supreme Court acknowledged these federal decisions and expressed its disagreement with them. 2014 Ark. 361, at 11-12 n.7.

Further Reading

If you’re interested in reading more on this topic, I recommend the following law review article:  Katherine B. Church, Arkansas and Mandatory Arbitration: Is the Feeling Really Mutual?, 65 Ark. L. Rev. 343 (2012).

Tim Cullen

We Support Tim Cullen for Supreme Court

This blog is mostly read by lawyers, but around election time, a lot of voters (who are not necessarily lawyers) visit our blog to learn about the candidates running for appellate court positions.  This year there is only one contested appellate court race. That’s the race between Tim Cullen and Robin Wynne for an open seat on the Arkansas Supreme Court.

Before this election cycle, the Arkansas Appeals Blog had never endorsed a judicial (or any) candidate.  That changed when, in February, our good friend and mentor, Tim Cullen, decided to run for a position on the Arkansas Supreme Court.  We have known Tim for the past seven years.  We know Tim to be an outstanding appellate lawyer, a zealous advocate for his clients, and a professional in every sense of the word.  Tim is also a family man who always puts his three children first.

In addition to Tim’s character and integrity, Tim has the experience necessary to be an outstanding Supreme Court Justice.  Immediately after law school, Tim went to work for for two years for the late Arkansas Court of Appeals Judge Terry Crabtree.  Once Tim entered private practice, he focused his practice heavily on appellate work.  In fact, during his 15 years in private practice, Tim has been lead counsel on approximately 150 appellate cases, before the Arkansas Court of Appeals, the Arkansas Supreme Court, the Eighth Circuit Court of Appeals, and the United States Supreme Court.  (By way of comparison, a Westlaw search reveals that Tim’s opponent had been lead counsel on only four appellate briefs during that three decades he had been a licensed attorney.)  Tim’s experience is part of the reason the readers of Soirée magazine voted Tim one of the best appellate lawyers in Arkansas.

The Attack on Tim’s Integrity by an Out-of-State PAC is Appalling 

We never doubted that we had made the right decision in choosing to endorse Tim Cullen.  Given the events of this past week, we are more confident than ever of our decision to support Tim.

In the past week, an out-of-state PAC has spent an estimated $400,000 on vicious, dishonest attack ads against Tim Cullen.  This is about twice what the two candidates will spend combined on their entire campaigns.  The PAC’s ads claim that Tim Cullen believes child pornography is a victimless crime.  If that sounds so outrageous that it couldn’t possibly be true, it’s because it’s so outrageous it couldn’t possibly be true.  The PAC knows it’s not true.  Judge Wynn knows it’s not true. However, Judge Wynne did not repudiate the ad.  Instead, he just watched and received the benefit as an honorable man had his character assassinated.

I don’t need to go through an explanation of what makes the ad so wrong on so many levels, because several other lawyers and writers have already done so: [updated 5/17/14 to include additional articles and commentary]

  • FactCheck.org calls the ad “beyond the pale” because the ad “distorts the record in a blatant appeal to fear and emotion.”
  • Dan Greenberg at The Arkansas Project goes through a thorough analysis of not only why the ad is untrue, but also why the attack ad is an attack on the judiciary.  He concludes that “Wynne’s conduct makes me think he should be kept far away from the bench.
  • Max Brantley with The Arkansas Times writes that “Wynne’s failure to repudiate the secret money and the anti-American message of the ads from which he benefits raises fair questions about his fitness to serve.”
  • Jennifer Wells at hawglawblawg explains the entire campaign finance system for judicial elections in a very witty post that explains the problem with out-of-state money and the problem with the content of the ads.
  • Jennifer Flinn at Arkansas Legal Pad explains that attorneys often represent clients they don’t agree with, because that’s their job.
  • Matt Campbell of the Blue Hog Report writes that “[a]nyone who might ever find him- or herself in front of the Arkansas Supreme Court (which, honestly, could be pretty much anyone) should be outraged by the idea that a judge could have deep financial ties to the other side of your case and you would never know it.”
  • John Brummett wrote yesterday, “I know Robin Wynne a little and like him. But I’d prefer a Supreme Court justice who didn’t get his robe by passively riding the coattails of cowardly smear artists.”

Listen: When you have Dan Greenberg, Matt Campbell, and John Brummett all on the same page on a topic, you should take note.  

You’ll notice a variety of people condemning Robin Wynne for his refusal to repudiate the ad.  Instead of repudiating the ad, he released one of those overly lawyered statements that had a lot of words in it but didn’t really say anything. (He claims not to have known about the ad, but the evidence brings that claim into question.) When Tim Cullen called and asked him to repudiate the ad, Robin Wynne literally hung up on Tim.

[5/17/14 UPDATE:] Both candidates were invited to attend a rally on the steps of the Arkansas State Capitol at noon on Thursday.  The event was attended by approximately 100 lawyers, and included many prominent speakers, including former Arkansas Supreme Court Justice Annabelle Imber Tuck.  Tim Cullen accepted the invitation and gave a very forceful speech.  Judge Wynne rejected the invitation to attend and speak.  As Tim said in his speech, “only one person benefits from these ads: Judge Robin Wynne.  I stand here in utter disbelief that any judge would allow this group and their vile tactics and their complete disregard for the constitution to carry the ball for their campaign.”  We couldn’t agree more. (Click here to watch the video from the beginning, or click here to watch this particular quote.)

Join Us in Voting for Tim Cullen for Our Arkansas Supreme Court

Tim Cullen is a personal friend of ours.  He is a good, decent, honorable man.  He is the antithesis of what these groups claim he is.  I hope you’ll join us in casting a vote FOR TIM CULLEN for Arkansas Supreme Court.

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Tim Cullen for Supreme Court

Arkansas Supreme CourtLack of Final Order Prevents Arkansas Supreme Court from Issuing a Stay of Pulaski County Circuit Court’s Ruling in Same-Sex Marriage Case

The Arkansas Supreme Court handed down a decision late this afternoon dismissing without prejudice the appeal taken by the State from the Pulaski County Circuit Court’s recent decision declaring Arkansas’s ban on same-sex marriage unconstitutional.

According to the per curiam decision, the circuit court’s order was not final because it failed to adjudicate all the claims or to otherwise include a Rule 54(b) certificate, which would allow an interlocutory appeal from an otherwise non-final order.

Arkansas Supreme Court Essentially Holds That a Stay is Unnecessary Because There is No Order Striking Down Licensing Statute

The Arkansas Supreme Court also denied the State’s plea for the Court to help alleviate confusion among circuit clerks by granting a stay pursuant to the Supreme Court’s superintending authority.  The Court noted that because the circuit court had not issued a ruling with respect to Arkansas Code Annotated Section 9-11-208(b) (Repl. 2009), “License not issued to persons of the same sex,” the circuit court’s order had no effect on that statute and its prohibition against circuit and county clerks issuing same-sex marriage licenses.

Although the Pulaski County Circuit Court’s decision struck down as unconstitutional two state statutes that ban marriages by people of the same sex (Arkansas Code Annotated Sections 9-11-107, “Validity of foreign marriages” and 9-11-109, “Same sex marriage void”), it failed to rule on Arkansas Code Annotated Section 9-11-208(a)(1)(B), which provides, “A license shall not be issued to a person to marry another person of the same sex, and no same-sex marriage shall be recognized as entitled to the benefits of marriage.”  It appears that this means that that statute is still in effect, so the practical effect of this ruling appears to be that circuit clerks are prohibited from issuing licenses to same-sex couples until the circuit court clarifies its ruling.

The Court’s full decision is available here: Arkansas Supreme Court Same-Sex Marriage Decision.

Posted by: Andy Taylor | May 14, 2014

Arkansas Supreme Court Releases Election Decisions

Two big decisions from the Arkansas Supreme Court today (actually several, but four of them are about the same issue).  We will update the blog with more information later, but summaries of the decisions follow.  We’re getting these out quickly, so please let us know if you read the opinions and have a different understanding.

Supreme Court Holds Candidates for Judicial Office not Disqualified for Delinquency in Paying Dues

The Supreme Court held that (1) a suspension for failure to pay dues is not the same as not having a license; and (2) that suspending an attorney without notice is a violation of Due Process.  Justice Hart wrote separately, concurring in part and dissenting in part.  She agreed with point 1, which she argued made point 2 moot.  Justice Corbin dissented on both points, and would have held that a delinquency makes a candidate ineligible.

Here are PDFs of the opinions:

CV-14-367 Fox

CV-14-358 Bailey

CV-14-370 Byrd

CV-14-369 Foster

Supreme Court Allows Voter ID Law to Remain in Place (For Now); Strikes Down Rules Relating to Absentee Voters

On what appear to be procedural grounds, the Arkansas Supreme Court struck down a circuit court opinion holding that Arkansas’s voter ID law was unconstitutional.  The Court held that the constitutionality of the statute was not properly before the Circuit Court.  Presumably, this leaves open the question of whether the law could be attacked in the future.  The Arkansas Supreme Court also held that the Arkansas State Board of Election Commissioners had acted outside the scope of its authority when it promulgated rules allowing for provisional ballots for absentee ballots, where the statute did not expressly allow for such a rule.

Here is a PDF of the opinion:

CV-14-371 Voter ID

 

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Posted by: Andy Taylor | March 25, 2014

Future Obligations and Finality Problems: Nix v. Nix

Nix v. Nix

The Arkansas Court of Appeals recently handed down its decision in Nix v. Nix, 2014 Ark. App. 162.   Nix was a divorce case in which the husband appealed, arguing that the trial court had erred: (1) in finding that a car was his wife’s nonmarital property; and (2) in failing to equitably divide his pension payments.  The Arkansas Court of Appeals was not able to reach the merits of the husband’s arguments, however, because of a finality problem with the order.

In Nix, the Arkansas Court of Appeals found two paragraphs in the divorce decree to be problematic.  The first problematic paragraph stated as follows:

The Court further finds that the parties owned certain real estate which constitutes the marital home. This property should be listed for sale immediately with an agreed upon realtor and listing price. The parties shall be equally responsible for the major repairs pending a sale however Ms. Nix will be responsible for any ordinary wear and tear and utilities. . . .

The second problematic paragraph stated as follows:

The Court finds that all of the property including but not limited to the Montana Fifth Wheel, the 2012 Arctic Cat, Ranger Boat motor and trailer all of which are on Schedule C are marital property. The parties shall have thirty days to reach an agreement regarding the division of marital personal property listed in Schedule C, otherwise the property shall be sold at private auction.

In holding that the divorce decree was not a final order, the Arkansas Court of Appeals held that “[s]everal matters have been left undecided between the parties.”  In particular, the Court of Appeals highlighted the following unresolved questions:

  • whether the husband and wife will agree on a realtor and listing price;
  • whether the husband and wife will agree on what constitutes a major repair and what constitutes ordinary wear and tear;
  • whether the husband and wife will reach an agreement regarding the remaining personal property; and
  • whether the husband and wife will agree on a date, place, and terms of sale for a private auction.

In reaching its conclusion that the divorce decree in Nix was not a final order, the Court of Appeals relied on Wadley v. Wadley, 2010 Ark. App. 733.  In Wadley, the divorce decree had provided as follows:

Unless otherwise specified herein, the parties shall have sixty (60) days from entry of this DECREE OF DIVORCE to agree upon a disposition of the remaining items of marital property. Any property division not agreed upon within the sixty (60) days shall be sold by public auction, with the parties responsible for hiring an auctioneer and advertising said sale. Any and all proceeds from the sale of the property, after the costs of the auctioneer and advertising shall be equally divided between the parties.

As in Nix, the court in Wadley had determined that there were simply too many unresolved questions left open by the order.  Therefore, the Court of Appeals had held that the order in Wadley was not a final order.

The Takeaway

There have been a number of cases lately dealing with finality, and although lack of a final order means that there is still the opportunity to appeal (once the final order is entered), there are still significant costs involved in having to rebrief a case. Therefore, the best option when attempting to pursue an appeal is to try to make certain that the trial court enters a final order.

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