Equitable Distribution

Not the best use...
Not the best use...

A very interesting opinion recently came down from the Pennsylvania Superior Court awarding attorney’s fees in a divorce case. This case is a non-precedential opinion, meaning it cannot be cited as establishing law on the issue, but it is emblematic of the risk one runs if you do not follow the rules.

The parties, two attorneys, in fact, had resolved their divorce by way of a Marital Settlement Agreement in March 2011, about two years after the wife filed for divorce. They also had a prenuptial agreement, so the distribution of their estate was addressed in a comprehensive way and nothing was preventing them from getting divorced.

After the deal was done, however, the husband came back and raised an issue about the return of jewelry he gave wife and about the payment of a ten-percent referral fee for a case he sent to his ex-wife’s firm.

Another two years pass.  In March 2013 wife files an Affidavit of Consent under Section 3301(d) of the Divorce Code. That form of affidavit is used when two years have passed since separation and, unlike Section 3301(c), wife was the only one who needed to file it to establish the no-fault grounds for divorce. Once the divorce decree is entered, the parties are prevented from raising any other economic claims. In other words, if husband wanted the referral fee and jewelry, then he needed to have them dealt by raising the issues with the court.

Husband filed a Counter-Affidavit in conformity with the rules. This document is used whenever a party wishes to raise an economic claim for resolution by the court and this was the first step husband needed to take to address the referral fee and jewelry issues he first raised two years prior.

When filing his counter-affidavit, he checked off the box indicating he wished to raise economic claims. Under that box there is language stating that,

“I understand that in addition to checking (b) above, I must also file all of my economic claims with the prothonotary in writing and serve them on the other party.  If I fail to do so before the date set forth on the Notice of Intention to Request Divorce Decree, the divorce decree may be entered without further delay.”

Husband never filed anything else. When the notice period ended, wife obtained a divorce decree on or about May 2, 2013 and husband lost his chance to address his referral fee and jewelry repossession.

When filing his appeal, Husband took the position that the rule requiring him to file his economic claims with the prothonotary wasn’t really followed in Montgomery County. He argued that the trial court abused its discretion because the court generally does not enforce the rule requiring a party to file their economic claims with the prothonotary. Basically, checking the box was enough, wife knew he had additional economic claims, and they should not have entered the decree (or, rather, declined to strike the decree).

Suffice to say, the Superior Court disagreed and found that husband demonstrated no proof that Montgomery County engages in “[a] routine practice…to allow parties to disregard clear instructions set forth in form documents pursuant to the Rules of Civil Procedure” and that “the trial court flatly denies [husband’s] contention, saying that it ‘is unaware of any unspoken practice not to adhere to the instructions on the form counter-affidavit.”

The Superior Court found the appeal frivolous and agreed with wife’s request for counsel fees from husband. As of this writing, the Superior Court has sent the case back to the trial court to determine how much in counsel fees husband will have to pay wife. He cannot feel very confident that the Court he argued did not, as a practice, follow the rules, is now in the position of deciding how much money he will have to pay his ex-wife.

The major lesson from this opinion is that one should never take the rules for granted and assume they can be ignored; do so at your own risk.

No one is perfect and mistakes do happen, however. No one wants to miss a deadline or misinterpret a rule, but if it happens, do not let your ego or pride push you into making worse decisions.

Opinion available at: Savett v. Rovner, No 1743 EDA 2013

Photo: www.myipadretinawallpaper.com

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Aaron Weems is an attorney and editor of the Pennsylvania Family Law Blog. Aaron is a resident of Fox Rothschild’s Blue Bell, Pennsylvania office and practices throughout the greater Philadelphia region. Aaron can be reached at 610-397-7989; aweems@foxrothschild.com, and on Twitter @AaronWeemsAtty.

Avoiding court is a common goal of many clients. Not only can it be expensive and time consuming, but it can also be emotionally exhausting and do further damage the parties’ relationship particularly when they need co-parent. Being prepared for court ensures that a client will always give themselves the best chance at a favorable outcome to their case, but that does not mean a case may not be better served by staying out of court.

“Alternative dispute resolution” is a phrase more commonly heard in civil and commercial litigation cases, but the same principles apply in family court. It describes a category of methods for keeping cases out of court and away from traditional litigation. The advantages being that the parties have more control over the time-frame, costs, and legal issues being addressed in their case. The following is a list of the most common alternatives to going to court:

1.         “Four Way Meeting” – the two parties and their two attorneys sit down together and work on settling the case. The goal of these meetings should be a written agreement between the parties.

2.         Mediation – the parties meet with a neutral third-party to try to reach a mutually agreeable solution. The mediator guides them through their issues and suggests ways to resolve disputes. The mediator will not make decisions, however, and the case is settled only when the parties sign a settlement agreement.

3.         Arbitration – an attorney or expert is hired by the parties to effectively serve as “judge.” The major advantages to this method are that the arbitrator does not have the scheduling constraints of the court system; operates within the rules the parties decide upon in advance, and; addresses only those agreed upon issues. Though often the closest method to traditional litigation, it usually allows cases to move forward more quickly and, for complex cases, less costly.

4.         Collaborative Law – this is a catch-all term encompassing many of the concepts identified in the other methods while also suggesting a philosophical shift away from litigation. Collaborative law often means a series of sessions and meetings between the parties and counsel to work through issues; shared costs and resources for the valuation of the marital estate or custody evaluations, and; a cooperative rather than adversarial approach between the parties and their counsel.

Each case requires a different approach and there will always be some cases which need to move through the traditional litigation track.  Where appropriate, however, these forms of alternative dispute resolution can provide parties with the opportunity to expedite their cases and, hopefully, invest fewer financial and emotional resources to the process.

I am sorry I doubted you, Alan Thicke
(Image: www.aaahighroads.com)
I am sorry I doubted you, Alan Thicke

Like many people, I have a healthy skepticism for infomercials or to-good-to-be-true schemes, so when I kept hearing Alan Thicke – famous for the 1980’s show “Growing Pains,” marrying a Miss World, and the real life dad to pop star Robin Thicke – pitch a tax forgiveness program, I dismissed it. I assumed it was probably another borderline-legal payday loan scheme, reverse mortgage concoction, or debt forgiveness system which prey on fiscally at-risk and naive.

The pitch was about a “Fresh Start Program” offered by the IRS which, it turns out, is a real thing. The basic tenants of the program are to allow for taxpayers to satisfy their back taxes and avoid tax liens on their property. There are three main elements to the program: first, the IRS will, in many cases, hold off on filing a Notice of Federal Tax Lien on amounts up to $10,000.00 which means a delay in the IRS attempts at collection. Secondly, the taxpayer can have up to 72 months of installment payments to pay back taxes up to $50,000.00. Longer installments or back taxes greater than $50,000.00 require some additional disclosures and scrutiny by the IRS. Finally, the program allows for the taxpayer to enter into an Offer in Compromise to pay-off back taxes for less than the amount they owe. That determination is made by the IRS if the Offer in Compromise is a better or more secure outcome for the IRS than other options.

Mr. Thicke is in the celebrity pitchman for a tax preparation company which specializes in the Fresh Start Program, but what he says about it has merit. For individuals who have gone through a lengthy and difficult divorce, they may have tax liabilities which arose before they had the financial resources to properly address them.  The IRS Fresh Start Program may be a viable option to offer some relief and stability to such individuals before they incur the adverse credit event of a Notice of Federal Tax Lien or collection attempts by the IRS. It is certainly worth exploring with your attorney and tax professional.

Wendy Rothstein is a litigation partner in our Blue Bell office and she writes for our Pennsylvania Trial Practice Blog. Recently, Wendy highlighted a case in which the Superior Court declined to consolidate two individual judgments against a husband and wife. The bank wanted to seek the attachment of their house which is titled as “tenants by the entirety” for two individual judgments the bank obtained against the parties.

As Wendy points out, the distinction lies in the legal designation of “tenants by the entirety” and how that asset can only be attached by obtaining a single judgment against the couple. The Superior Court basically declined to rectify the Bank’s mistake in not seeking a judgment against the parties as “husband and wife” or co-defendants. Wendy writes, “[the] Superior Court found that judgments were entered pursuant to separate documents and separate transactions and thus there was not joint liability. The Court affirmed the lower court decision denying the banks request to consolidate the judgments.”

This case can also serve as an important reminder that “tenants by the entirety” can be broken whenever the parties’ divorce. By operation of law, they are no longer “tenants by the entirety” but become “tenants in common” as soon as the Decree is issued. Unless appropriate language and precautions are put into a Marital Settlement Agreement, if parties divorce before a house is sold, it is entirely possible that one party could have a judgment entered against them and their portion of the asset attached. This would make any sale or refinance virtually impossible.

 

Since the inception of equitable distribution in Pennsylvania on July 1, 1980 the law has consistently been that courts have power to divide marital property.  With certain exceptions for gifts and inheritances, marital property is all property “acquired” from the date a couple marries to the date they finally separate 23 Pa.C.S. 3501(a). The challenge in several cases has been to determine when property is “acquired.”  To that evolving legal concept we now have not only a reported decision in Yuhas v. Yuhas but one decided by a nine judge panel of the Superior Court.  The decision was rendered on October 28 by a 6-3 majority.

Husband was a surgeon.  He developed Carpal tunnel syndrome during the marriage that effectively ended his career.  Fortunately, he had a disability insurance policy that was acquired shortly after he and wife married.  At various times the couple paid for this policy from personal funds.  Other payments were funded by his practice.  In April, 2007 husband applied for his disability benefits.  In July, 2007 the application was approved.  In that same month the parties separated.  The monthly benefit was $10,700 per month and was made effective January, 2007. The policy continues to pay although, it also requires that husband periodically prove he remains unable to practice surgery.  Wife claimed that because the policy was acquired during the marriage the benefits arising from the policy were also marital.  The special master appointed to hear the case concurred.  The case was reviewed on exceptions by the Chester County Court of Common Pleas, which reversed the master and held that the post separation payments were “income” but not marital property.  The decision of the trial court appears to have turned on the fact that the payments were not guaranteed but renewable premised upon proof of continuing disability.

In a supplemental opinion the trial court noted that the payments that accrued prior to the July separation were marital.  It then analyzed the case in light of the Supreme Court decision in Drake v. Drake, 725 A.2d 717 (1999) where a workers’ compensation award was to a lump sum payment prior to the separation date.  Because this was an “ongoing” claim for disability and not a commuted lump sum payment the trial court saw each monthly payment as a separate right accruing post separation.

To this decision, the Wife appealed.  Her contention was that the event giving right to the income took place prior to separation as did the approval of the claim.  She also noted the 2011 Supreme Court decision in Focht v. Focht 32 A, 3d 668 where a husband was injured in a raceway accident and filed suit with his wife before separation but settled the case after separation. In Focht the Supreme Court held that proceeds from a settlement made after separation are marital because they were acquired in exchange for a chose in action that accrued before separation. Id. At 674.

The Yuhas court noted that a cause of action accrues when the injury was inflicted under both Drake and Focht.  But here the disability did not arise from an injury and were not received as the result of an award or settlement for a cause of action or claim.” 23 Pa.C.S. 3501(a)(8).  The Superior Court holds that Husband did not “contemplate any legal action, nor did he possess a claim against anyone or any entity.”  The Court then refers to the fact that the payments are subject to a condition subsequent.  If husband recovers from the parathesia that prevents him from working as a surgeon the disability benefits are lost.  For this reason, the Superior Court decided these post separation payments are non-marital.

This makes for an interesting analysis.  Husband and wife bought and paid for a policy of insurance.  The event covered by the insurance (the loss of the ability to be a surgeon) occurred during the marriage.  The right to receive the payment for loss was affirmed before separation as well, albeit subject to the condition subsequent. The opinion state that Husband had no claim against anyone or any entity.  Did he not have a claim against the insurer if the insurer had denied the disability claim.  His action would have been in contract and not tort but is that a distinction contemplated by Section 3501(a) (8) which speak of “any cause of action or claim”

Yuhas v. Yuhas,   2013 PA SUPER. 283 (10/28/13).

One of the difficult aspects of taking a complex case to trial is not the subject matter, necessarily, but the Court’s ability to schedule several consecutive days of trial.  Due to case volume, the court administrators can rarely carve out two or more consecutive days of trial without significant advance notice and, often, direct instruction and assistance from a judge’s chambers. As a result, a judge’s schedule may require you to have a week-long trial spread out over several weeks or months. Not surprisingly, attorneys, witnesses, and even the judges can lose some of the thread of arguments presented in such a disjointed fashion.

An alternative to trial is to take the case to arbitration.  An arbitrator is a third-party hired by the litigants to basically serve in the role of a judge-like finder of fact. The parties sign an arbitration of agreement and usually stipulate to certain ground rules for how they will handle the arbitration. For instance, some parties make the arbitration “binding;” in other words, the arbitrator’s decision becomes the law of the case. 

Another advantage to arbitration is to help limit costs through the arbitrator’s assistance in narrowing issues and avoiding some of the costs of broad discovery. Because the arbitrator is hired by the parties, he or she works on the litigants’ schedule – the arbitrator can set aside a full week for trial at a time that works for all involved and take the time to really hone in on issues without being at the mercy of the court’s availability. Rather than prolonged discovery schedules and waiting for trial, the arbitrator can help move the case to swift conclusion.

Eliminating the pressure of having to fit a two day trial into an afternoon before a judge helps the parties and the courts. Arbitration is one of many forms of “alternative dispute resolution” and by diverting cases off the Court’s docket and into arbitration, the parties are helping to free up the Court to adjudicate other cases.  There is the added advantage of the parties that unlike a court proceeding, the parties can agree to make the record and information disclosed within the mediation confidential.

Finally, utilizing an arbitrator is often like hiring a mediator. Having already reached an agreement to arbitrate and move the case out of court, it may also be possible for the arbitrator to help facilitate other agreements between the parties, be they discovery rules, stipulations of fact, or interim relief.  Agreements often lead to other agreements and once the parties start to work together, it may be possible to resolve the entire case. 

Even where settlement seems impossible, by moving their case into a venue where they will help set the schedule, parties will know that on a definite date they will have had their “day in court” and can expect a decision from a finder-of-fact. The certainty of those two elements, alone, may be its most attractive benefit.

A South Carolina attorney was recently disciplined for failing to have an active email address.

Despite characterizing herself as “retired” and not having a client in thirty years, the South Carolina Disciplinary Board still found that she “poses a substantial threat of serious harm to the public and to the administration of justice” for repeatedly failing to comply with the Court’s rule about having an active email address.

This case got me thinking about my practice, particularly my frustration with the tiny but hardcore group of attorneys who refuse to use email. One more than one occasion, I have had to take extra measures to hand deliver, courier, or Federal Express a document or correspondence to an attorney who does not use email. This has cost my client extra money to accommodate someone who is a rare exception in an industry that has accepted email, faxes, and smartphones (albeit, begrudgingly at times).

In one situation, I hand delivered a copy of a sizable responsive pleading to an attorney’s office. Faxing wasn’t an option and mailing would not work due to the forthcoming weekend. Though I could have served the document on the attorney at our hearing and been in complete conformity with the rules, I wanted to give the attorney the courtesy of having the pleading in advance. Had he used email, he would have had the PDF Friday afternoon to peruse at his convenience over the weekend. No good deed goes unpunished, however, and though his practice methods made service before the end of business on Friday virtually impossible (or, alternatively, cost prohibitive to the client), he nevertheless wrote a letter to tell me my hand delivery on Monday morning, in advance of the hearing, was “offensive.”

I scanned the letter into the system for future reference and dropped it in the recycle bin.

I recognize that some attorneys feel email is the scourge of the 21st century. The incorporation of email into smartphones makes us tethered to work around the clock. But in an industry that is essentially about customer service, it seems irresponsible – and in South Carolina, a breach of professional responsibility – not to have an active email account to communicate with clients, counsel, and the Court. To the best of my knowledge, no attorney in Pennsylvania has been disciplined for not having an email address or, even minimally, a fax machine. I can only speculate that it is a matter of time before a client – having become frustrated by being limited to either in person visits, phone calls, or “snail mail” letters – finds a new attorney or worse, files a disciplinary complaint against them.

 

The rate divorce among couples in their 50’s or older has grown so much in recent years that it has earned its own moniker: gray divorce. A recent article in the Fiscal Times by Christina Couch highlights some of the financial issues which are resulting in retired couples spitting up. Not surprisingly, they are really not any different from the reasons why any couple decides to divorce. A generalization of the reasons would be that couples in their 50’s develop different expecations as to how to spend this time of their life. In many respects, the decision to retire or not retire; the type of lifestyle to live in retirement; or life goals closely mirror the same tensions younger couples have in their marriages.

People come into a marriage or grow within a marrige to have different goals for how they want to live their life. From the standpoint of what one person is prepared to accept in the other, the decision to retire at 62 while the other spouse works is not too dissimilar from a spouse in their late 20’s deciding to go back to go back to school or make a radical career change with finanical reprecussions. There are pressures which may not have been expected. From a financial standpoint, the couple may not have been on the same page as to the impact the retirement of one has on the financial stability of the couple.

Ms. Couch makes some connections that this growing segment of divorces is driven by demographics as much as anything: members of the baby boomer generation are living longer lives; women have had long careers and can afford to divorce; parties are not necessarily in disparate financial positions once they reach retirement age. As complications arise with health care, Social Security, and other retirement issues increase, the rise of gray divorce is not likely to subside; the possibility exsits, however, that some divorces could be prevented through communication and financial education.

That is, essentially, the question asked by a recent New York Times op-ed piece written by Sarah Elizabeth Richards. The argument goes that children may have been part of a couple’s overall plan, not unlike one spouse going to graduate school while the other works, or someone giving up their career to stay with the kids. In this instance, the thought is that a marriage may span the reproductive years of a woman; upon the divorce, she may find she lost the opportunity to have a family. The case referenced in the article is in New Jersey, but the general premise could be applied anywhere.

The New York Times op-ed offers a brief “slippery slope” possibility of how far a woman could go in seeking redress for spending her best years with someone and she’s not far off in one point – people (not just women) demand numerous concessions in a divorce. Can a woman ask for cosmetic surgery costs be paid for at equitable distribution? Sure. Can a man ask to be compensated for the cost of reversing a vasectomy so he can have kids with his girlfriend? Absolutely. Will a Court, sitting in equity to divide the marital estate, award those types of requests? Probably not. Or at least not without a reason so compelling that I would not feel comfortable even taking a guess at it in print or otherwise.

The similarity between Ms. Richards’ anecdotal case and cases elsewhere is that most states have relatively little or no existing law on dealing with assisted reproductive issues.  Pennsylvania dealt with the equitable distribution of pre-embryos in a divorce, and my colleague, Julie Ganz, recently moderated a panel discussion on the drafting and reviewing of written agreements for gestational carriers, egg donors and sperm donors. Many of these issues end up being contract driven; as these conflicts become more common and are addressed in the Courts, I also foresee provisions dealing with these issues becoming prevalent in prenuptial agreements, as well.  Assisted reproductive issues – unlike the cosmetic surgery – are very much on the Court’s radar. It is an emerging area of law and the epitome of the blending of competing and complimentary interests in a divorce: financial, emotional, and contractual.

I heard a commentator on the radio this morning talking about how “financial infidelity” (or secret spending) can ruin a relationship.  You’ve probably heard that money is one of top reasons people get divorced.  So, what can you do to prevent money from ruining your marriage?  I think it starts before you get married.  Have frank discussions with your spouse-to-be about each of your financial situations, including your assets and debts.  Talk about your financial goals.  Make a plan for how you will spend and save your money during your marriage.  Determine who will handle the finances during your marriage.  You have to determine if you have the same financial goals.  Once you are married, you have to work together to achieve your financial goals.  It is not a one-time discussion.  It is an on-going dialogue to ensure that your financial goals will be met – and to ensure that you do the best you can to make sure money doesn’t ruin your marriage.