The Cost of Being Wrong is More Than the Cost of Doing Nothing

Lelak v. Lelak, 2nd Dist. Montgomery No. 1982-DR-1530, 29308, 29321, 2022-Ohio-3458

Attorney Fees: abuse of discretion
Marital Property: appreciation, bankruptcy, deferred distribution, retirement benefits
STRS

Dated: September 30, 2022
Affirming in Part, Reversing in Part, and Remanding

Editor’s Note: This appeal follows two others in the same matter, which are summarized in prior case blogs here and here.

As part of the parties’ 1983 divorce, Wife was assigned an interest in Husband’s STRS benefits valued at $10,363. These benefits were not yet payable to either party, nor was a statutory mechanism for their transfer available at the time of the decree. Thus, Husband was ordered to pay Wife $50 weekly, until the total award was discharged. Following the parties’ divorce, Husband entered bankruptcy, in which he named Wife as a creditor. Wife intervened, arguing that her ongoing payments constituted spousal support, and were thus not dischargeable. The bankruptcy court disagreed, but wrote:

Finding that the weekly advance payments applying to the retirement benefits do not constitute alimony and support, however, should not be construed as interference with the [trial court] Decree as to the division of the marital property in esse. For that reason, this court has specifically iterated and emphasized above the state court prohibition, ‘that [Husband] is not allowed to withdraw any retirement benefits from either account without ten days written notice to [Wife]… In any event, the judgment by this court should not be deemed any alteration of or interference in the implementation of the division of the retirement benefits property as vested on the date of the state court Decree, when payable.

THEREFORE, IT IS HEREBY ORDERED that the debt from the retirement benefits is dischargeable in bankruptcy as to the advance payments which the [trial court] ordered be paid in weekly installments.

Years later, Husband withdrew substantial amounts from his account without notice to Wife, leading to Wife’s 2016 motion for a finding in contempt. Following a back and forth and two appeals over jurisdiction (as related to the bankruptcy court’s discharge of Husband’s weekly obligation, and the extent to which this constituted the discharge of further obligations), attorney fees, and Husband’s failure to notify Wife, Wife was assigned a simple interest rate of 11% annually on the unpaid $10,313 (for a total of $46,520.24 now due), $2,000 in attorney fees, and Husband was found to be in contempt for failing to notify Wife. Both parties appealed.

In her first assignment of error, Wife argued the trial court erred in applying a simple interest rate, that Husband breached his fiduciary duty, and that compound interest should have applied instead. Finding no fiduciary relationship existed between the parties under ORC § 5815.04 , nor as may exist between spouses whilst still married, the Court sustained the trial court’s assignment of interest.

In her second assignment of error, Wife asserted that the trial court abused its discretion in awarding her only $2,000 in attorney fees, related to the contempt finding for Husband’s failure to notify her of his withdrawal. Wife argued she should have instead received $54,287.

In deciding to award only $2,000 in attorney fees, the trial court relied on R.C. 3105.73 and unspecified “appropriate case law.” 2021 Decision at p. 4. As justification, the [trial court] made the following points: (1) “the vast majority of attorney fees and expenses were not directly related to the issue of whether or not [Husband] committed contempt by failing to provide the 10-day notice of his withdrawal of retirement funds”; (2) [Husband] “did not engage in any conduct that would justify an award of substantial attorney fees, for example [Husband] did not undermine the discovery process or overly protract the litigation”; (3) “the legal issue of contempt regarding the 10-day notice was not novel, complex, or difficult”; (4) “the time and labor related to the contempt on the 10-day notice was not significant”; (5) the contempt issue concerning the 10-day notice “did not require any extraordinary professional skills”; (6) “the miscellaneous expenses regarding expert fees and litigation fees did not directly relate to the issue of contempt in this matter”; and (7) “the court received no testimony regarding the parties’ incomes.”

Disagreeing on all but the 7th point, above, the Court found that the trial court had incorrectly narrowed the scope of Husband’s contempt, and thus awarded Wife $53,123 in attorney fees, expert fees, and court costs.

The Court overruled Wife’s third assignment of error, finding that the trial court’s three-day jail sentence did not constitute an abuse of discretion.

In Husband’s first cross-assignment of error, he argued that the trial court erred when in applying an 11% interest rate to Wife award, and should have utilized a variable rate. Finding neither Husband’s nor Wife’s methods of interest fully applied, the Court wrote:

[T]he appropriate approach here would have been to calculate interest at the statutory rate as it existed from August 31, 1989 to June 2, 2004, and then apply a variable rate thereafter, as required by R.C. 1343.03 (which has retained essentially the same wording since 2004, despite a 2016 amendment). Compare Sub. H.B. 212, 2004 Ohio Laws File 63 with Sub. H.B. 166, 2016 Ohio Laws File 79. As a result, the trial court’s approach of ordering an 11% flat rate was erroneous in two respects: 1) the interest rate the court used was not the 10% statutory rate in effect in on August 31, 1989; instead, it was the certified tax rate from the ODT table; and 2) the flat rate was inconsistent with the 2004 amendments to R.C. 1343.03, which require that a variable rate be applied.

The Court remanded the question of interest rates back to the trial court to recompute Husband’s obligation using the 10% and variable interest rates described above.

Finally, Husband’s second cross-assignment of error argued that the trial court erred when it found him in contempt, and consequently in its award of attorney fees to Wife. The Court overruled Husband and affirmed the trial court’s contempt finding and the award of attorney fees.

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