Seventh Annual Family Law Institute - May 2nd

I’m honored to be presenting “I’m with —> DOPO” ©, a fun-filled exposé of Ohio’s oft-misunderstood and code-mandated Division of Property Order (DOPO). The CLE is May 2nd, for the Seventh Annual Family Law Institute at the Ohio State Bar Association in Columbus. If you haven’t signed up for the Institute, it’s not too late! You can also join us via webcast by registering here, or download the full brochure of courses here, and I’ve even included a link to download the supplemental materials for my presentation further below.

But only attendees will get the awesome shirt you’re getting a sneak peak of here…

Thank you to the folks at OSBA who put this amazing event together, and to the legal community that makes speaking at these events such a privilege. See you May 2nd!

Click to Download Supplemental MATERIALS

Because wearing a shirt with an O.R.C. inside joke on it isn’t nerdy at all.

Ohio Case Law Update

Toki v. Toki, 5th Dist. Perry No. 22480, 18-CA-00014, 2019-Ohio-817
Laches May not Bar 25 Year Old Monetary Judgment Representing an Interest in the Marital Pension

Dated: March 7, 2019
Affirming in Part and Remanding in Part

In Toki v. Toki, we have a case wherein the parties’ divorce, in 1994, actually precedes the creation of the Division of Property Order (DOPO) form established under ORC § 3105.90, in 2002.

So fasten your seatbelt, I get to do two of my favorite things in this post: talk about DOPOs and self-promote. I’ll also be doing the former on May 2nd for the OSBA Seventh Annual Family Law Institute, in a session designed to walk practitioners step-by-step through the DOPO process, aptly titled “I’m with —> DOPO.” (See what I mean about self-promotion?)

Even if I wasn’t writing this while preparing what is probably the greatest presentation on Division of Property Orders of all time (an admittedly low bar), I’d still be talking about DOPOs in this update. The last few months of case law have been saturated with opinions and decisions concerning DOPOs and Ohio public employee benefits. You might even say we have a plethora. But, like an attorney selecting the form of benefit on the Ohio DOPO form: we have to choose. So, Toki it is.

A 1994 Amended Referee’s Report awarded Wife $53,531.48 of Husband’s OPERS pension. Recognizing the Report’s failure to consider interest on the fixed amount through the date Husband retired, the trial court subsequently ordered a recoupment formula, granting Wife half of a coverture fraction, applied to each of Husband’s forthcoming monthly or lump sum benefits, plus interest. Unfortunately for the parties, or at least Wife, back in 1994, there was no means for them to effect this assignment by directing OPERS to make the payments to Wife upon Husband’s retirement (i.e., no DOPO).

In 2002, coincidentally the same year the DOPO was first being introduced to the world, Husband retired and remitted $20,000.00 by personal check to Wife as a partial settlement of her interest in his pension. Nothing further occurred until 2017, when -apparently spurred in part by a testy exchange between Husband and Wife’s current spouse- Wife filed a Charge in Contempt and Motion to Construe Decree of Divorce in attempt to collect the remaining amount of her interest, which were both the subject of this appeal.

Normally I’d pause here to talk about Ohio public retirement awards being ‘if, as, and when,’ and the problems you’ll run into if you try to make a lump sum dollar amount assignment, and so on… but I’ll be doing that in just a few weeks! And, honestly, when you add the fact that this is a pre-DOPO award to the mix, it’s just too much discuss in one blog post. So, we’ll move on, because there’s one more piece to this case that deserves at least brief discussion here. The Court determined that Wife’s (only 15 years in the making) motion for contempt was barred by the doctrine of laches. However, the Court didn’t throw out Wife’s claim to Husband’s OPERS benefits altogether. Wife’s collection of her monetary judgment, for the original definite amount set forth in the 1994 order, and the extent to which laches may also apply, was remanded back to the trial court. The Court found that while laches could not apply to the monetary judgment itself under Ohio law, the trial court could make a determination as to whether laches applied to payments Husband already received.

Now, before you start muttering to yourself while calculating interest on a 1994 judgment, remember that we have the DOPO now, which could have obviated this entire post-decree headache. The good news is that this case may be regarded merely as vestige of the agonies in the pre-DOPO era. And yeah, I get the irony.

Additional Cases of Interest:

Remember when I told you we had a plethora of cases? There’s just not enough time to give some of these the attention they deserve here (though I’m not saying I won’t eventually), so I’ve included links to them below, adding some key search terms. Enjoy!

• http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2019/2019-Ohio-734.pdf (public retirement and SS offset equalization approaches)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/5/2018/2018-Ohio-5078.pdf (rules of construction, improper modification of decree via QDRO, frozen coverture, and DOPO limitations)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/5/2018/2018-Ohio-3377.pdf (a must-read: DOPO offset, property vs. support or income stream methodology, applicability of RC 3105.171(F)(9) to SS offset of public retirement, and survivorship retention)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/2/2018/2018-Ohio-4768.pdf (public retirement assets/income discovered post-decree and Rule 60 application)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/11/2018/2018-Ohio-3535.pdf (premarital interest, nunc pro tunc, RC 3105.171(I), and court authority to interpret own judgment)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/5/2018/2018-Ohio-3328.pdf (antenuptial agreement and applicability of RC 3105.171(F)(9) to SS offset of public retirement)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/3/2018/2018-Ohio-4471.pdf (property award becomes a claim against an estate and court authority to interpret own judgment)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2018/2018-Ohio-5044.pdf (term life insurance for pre-retirement survivorship under DOPO, court authority to interpret own judgment, continuing jurisdiction, and contempt)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2018/2018-Ohio-5141.pdf (spousal support and/in lieu of retirement benefits and early retirement)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/2/2019/2019-Ohio-306.pdf (determining ‘marital share’ of defined contribution accounts and 401(k) withdrawals pre-QDRO)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/5/2018/2018-Ohio-4097.pdf (important case: consequence of defining marital period without accounting for contributions actually made during such period, misapplication coverture to a hybrid pension formula, and court authority to interpret own judgment)

• https://www.supremecourt.ohio.gov/rod/docs/pdf/9/2018/2018-Ohio-3417.pdf (non-qualified plan spousal interest paid as support or property is income for purposes of determining child support)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2018/2018-Ohio-3985.pdf (creative yet unsuccessful burden shifting argument regarding growth on premarital stocks)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/2/2018/2018-Ohio-4692.pdf (tracing and allocation of domestic relations order preparation fees)

• http://www.supremecourt.ohio.gov/rod/docs/pdf/5/2019/2019-Ohio-609.pdf (ambiguity related to equalizing and offsetting defined benefit plans)

Ohio Case Law Roundup

Williams v. Williams, 2nd Dist. Clark No. 2015-DR-628, 2018-Ohio-611
Marital Accruals are Marital Property

Dated: February 16, 2018
Affirming

This case provides a broad point, which cannot be overstated, as well as two minor points, which don’t require much explanation.

Broad Point:  My mantra, guidepost, and directive for handling all retirement assets is iterated succinctly in this case:

A pension acquired during the marriage is considered to be marital property and is subject to equitable division.  Sprankle v. Sprankle, 9th Dist. Medina No. 621 N.E.2d 1310, 87 Ohio App. 3d 129, 132; R.C. 3105.171(A)(3)(a).  And, as aptly observed by this Court:
"A trial court has broad discretion when considering retirement benefits; flexibility is necessary for the court to make an equitable decision based upon factors relevant to the situation before it.” Id. “When distributing retirement benefits in a divorce, a “trial court must apply its discretion based upon the circumstances of the case, the status of the parties, the nature, terms and conditions of the pension or retirement plan, and the reasonableness of the result.” Hoyt v. Hoyt, 53 Ohio St.3d 177, 179, 559 N.E.2d 1292 (1990). Further, the trial court must attempt to accomplish two goals: (1) preserve the value of the retirement asset and (2) disentangle the parties' economic affairs to bring finality to the marriage. Id."

Minor Point #1: 
For qualified ERISA defined benefit plans, such as the traditional pension discussed in this case, a spouse must provide written consent, or a waiver, for the participant to receive his/her benefit in any form other than the plan’s normal form of benefit, usually a spousal 50% Qualified Joint and Survivor Annuity.  In this case, Husband did just that.  But that is all Husband did.  As the Court aptly noted, by a simple look at the four corners of the consent form itself, Husband’s consent to Wife electing a single life annuity did not also act as a waiver of Husband’s marital interest in Wife’s pension during Wife’s lifetime.  Rather, Husband’s consent only applied to his waiver of survivor benefits in the event of Wife’s death.

Minor Point #2:
"Ohio courts have recognized several methods for the equitable distribution of a spousal interest in a pension fund. 46 Ohio Jurisprudence 3d, Family Law, Section 444. One such method is to “[d]etermine the present value of the fund, calculate the nonemployee spouse's proportionate share, and offset that amount with other marital assets or with a lump sum payment or installment payments from the employee spouse.” Id., citing Sprankle at 132."

In this case, Wife did not argue that an immediate offset should not apply to the marital pension; Wife’s argument was that her lifetime should not be the measuring life for the pension valuation.  However, Wife provided no expert or law to support this position.  Husband’s expert testified that since this was -after all- a single life annuity based on Wife’s lifetime alone, a valuation based on her lifetime only made sense.  The trial court agreed, and the Court of Appeals found no abuse of discretion.

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Wright v. Cramer, 2nd Dist. Montgomery No. 2015-DR-1034, 27586, 2018-Ohio-764
Passive Appreciation and Evidentiary Burden

Dated: March 2, 2018
Affirming in part, Reversing in part, and Remanding

There is a lot here, as evidenced by Husband’s 9 (yes, 9) assignments of error.  The Court rejected all but one: citing his lack of supporting documents/arguments/expert witness in doing so.

The issue the Court remanded back to trial court concerns the utilization of a hypothetical rate of return in determining the marital/non-marital portions of a defined contribution account.  Husband argued the trial court abused its discretion by creating a hypothetical rate of return based on judicial notice of randomly selected index funds, instead of actual account history. 

The trial court established a ‘starting balance’ for Husband’s account, designating such balance as his separate pre-marital funds.  The trial court also established a ‘marital balance’ based on amounts deposited during the marriage.  Using the S&P 500 index, the trial court determined the annual returns for each year of the marriage, adding such amounts to the marital balance.  The trial court then divided the total marital balance in half.

The Court of Appeals duly noted Husband’s burden under state domestic relations law to establish by a preponderance of evidence the portion of appreciation in his account to be deemed passive and separate.  In this case, there was not so much a problem with Husband’s position (that the hypothetical rate resulted in an arbitrary calculation, compared to the rate actually earned), but rather, that Husband’s “proof” was “very scanty.”   For instance, Husband provided his own spreadsheets, but no underlying data.  The Court duly noted that the issue, then, was whether the trial court correctly resolved the insufficiency of Husband’s evidence by utilizing a judicially recognized rate of return.

The Court surveyed several cases where judicial notice was taken of various investment rate sources (i.e., Treasury bills, CDs, etc.) to affect various assets and obligations.  The Court then found that these cases, together, stood for the principle that judicial notice is generally appropriate for the purpose of calculating past rates of return or interest rates, except in situations that are too speculative, or when there is no reasoning of the court provided.  On this latter basis, the Court determined that the trial court erred in its judicial notice of the S&P 500, notwithstanding its recognition that other courts have taken similar judicial notice.  It reasoned that the trial court -unlike courts in other cases- did not explain why it chose the S&P 500 over any other method of calculating appreciation. 

One important caveat here is the Court’s discussion of Mays v. Mays, 2nd Dist. Miami No. 98-DR-479, 2000-CA-54, 2001-Ohio-1450, in response to one of Husband’s arguments.  The trial court in Mays relied upon Husband’s expert’s use of average rates of return to determine appreciation of a retirement account, despite actual rates of return being available.  The Mays Court of Appeals sustained Wife’s assignment of error, holding that: 

“Those numbers used to arrive at the amount of passive appreciation traceable to Mr. Mays’ separate property should be calculated by using the actual rates of returns and fee during the time period in question, instead of hypothetical, average rates or returns and fees.”

The takeaway here is to think about the issue of establishing passive appreciation in terms of three different approaches, or grades of evidentiary value:

1. Actual Account History: Highest evidentiary value;

2. Hypothetical Account History (based on hypothetical rates of return): May sometimes be employed if actual account history is not available; and

3. Insufficient Account History: Remember, a trial court has no obligation to ‘fill in the blanks’ of the proving party’s burden, and may simply deem their claim “too speculative.”

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Colombo v. Chesser, 10th Dist. Franklin No. 10DR-4146, 17AP-278, 2018-Ohio-1477
Ambiguity with Investment Gains and Losses

Dated: 04/17/2018
Reversing and Remanding

When dividing marital defined contribution accounts (401(k)-type plans), you must always address market growth as part of the agreement or trial order. 

All things being equal, parties typically share market growth (including investment gains and losses, interest, dividends, etc.) proportionally to their assigned interests in the marital account until the asset is divided under a QDRO, DOPO, or similar order. 

There are exceptions to this general rule.  In one such instance, where Husband deposited Wife’s stipulated share of 401(k) funds into a stable value fund, and subsequently realized substantial market appreciation on his remaining funds (after the agreed valuation date and through the date Wife’s share was finally segregated into an account in her name), the trial court did not abuse its discretion in not allocating any such appreciation to Wife.  See Sieber v. Sieber, 12th Dist. Butler Nos. DR12-09-1083, CA2014-05-106, CA2014-05-114, 2015-Ohio-2315.   Similarly, in this case, the Court determined by strict reading of the parties’ agreement that it just didn’t provide for such allocation. 

Let me be clear: the law is perfectly clear about being unclear.  With respect to retirement accounts, there is no controlling legal authority directing that any appreciation or depreciation in account value between the date of judgment and the date of account segregation be shared -equally or otherwise- between the spouses, or that directs that such gains or losses go to one spouse or the other.  Rather, the issue is left to the discretion of the trial court.  See Cwik v. Cwik, 1st. Dist. Hamilton Nos. DR-0700706, C-090843, 2011-Ohio-463 ¶73-76.

In this case, the non account-holder spouse’s arguments to have a QDRO entered to include what amounted to about $220,000.00 of gains on her portion of the equalized accounts, after the valuation date, were rejected by the Court of Appeals.  In its Opinion, the Court found that any such QDRO would be an impermissible modification of an unambiguous decree, stating instead that Wife was only entitled to an equalization of the accounts valued as of May 1, 2012 (the valuation date as set forth in the decree).  The Court observed that there was no mention that Wife was to also receive an equalization of amounts appreciated through the date a QDRO was finally entered, and her accounts were finally segregated into her own name.  The Court duly noted that the parties could have agreed to allocate to Wife gains or losses accruing on the retirement assets after May 1, 2012, but did not.

The bottom line:  always negotiate gains and losses in defined contribution accounts, then include them or exclude them (i.e., specifically address what happens to gains and losses from the valuation date until a new account is established by the Plan for the transferee spouse).  Ensure that the parties’ intent is expressly stated in any agreement, or that the court’s intent is expressly stated in any trial order.  Otherwise, the actual, transferred amount may be substantially less (or more) than intended, and the chances for correction through the courts a veritable coin toss.

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Buckingham v. Buckingham, 2nd Dist. Greene No. 2013-DR-153, 2017-CA-31, 2018-Ohio 2039
Inequitable Tax Effects in Marital Property Division

Dated: 05/25/2018
Affirming and Reversing in Part

This is a long opinion, with the Court expending a lot of ink retelling the facts and procedural background of a 1.2-million-dollar property settlement, paid over a 4-year period.  Of interest to me is the issue of tax impacting marital assets, explored throughout (and especially at ¶¶ 62-69).  Essentially, Husband attempted to transfer to Wife various tax qualified accounts, and an HSA, all established post-decree, to fulfill his settlement obligations, resulting in potentially stiff tax consequences to Wife that she argued were not contemplated at the time of decree.  The Court of Appeals recognized the unfairness to Wife in allowing Husband to utilize such assets, especially to the extent of achieving an equitable division of marital property under R.C. 3105.171.  In its Opinion, the Court limited Husband’s transfers to only those retirement accounts in existence at the time of decree, and denied his use of the HSA altogether, since it was not a retirement account as defined by federal law.

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Walsh v. Walsh, 11th Dist. Trumbull No. 2014DR00028, 2017-T-0032, 2018-Ohio-2466
The "Killer 10/10" Rule & Modifying the Period of Marriage(?!)

Dated: 06/25/2018
Affirming

Always remember what I call the “Killer 10/10” rule when dealing with military retirement benefits in divorce.

In short, for DFAS (Defense Finance and Accounting Service) to pay benefits directly to a former spouse by court order, the parties must have been married at least 10 years during “creditable” military service years.  See 10 U.S.C. §1408(d)(2).  Be very careful here.  The Killer 10/10 rule doesn’t say that otherwise, the military benefit is not marital.  It simply says that to the extent a state domestic relations court deems it is, DFAS won’t pay it directly to the former spouse.  So some other arrangement (offsetting, constructive trust, etc.) has to be made.  Repeat: the Killer 10/10 rule only concerns who writes the checks, DFAS or the military service member.

In this case, the parties were married 10 years, but as part of a consent judgment entry, agreed to a term marriage of only about 6 years.  After some delay, Wife realized this would not be sufficient for DFAS to comply with a state domestic relations order (see above).  Wife brought a Civ. R. 60(b) motion on this basis, in part to extend the term of marriage to its actual 10 years, which the trial court granted. Husband’s appeal thereof was then rendered essentially moot, when,  after reviewing applicable law, the Court of Appeals determined that Civ. R. 60 did not/need not apply, because, in this case, the trial court had specifically retained jurisdiction regarding the QDRO in its Entry, subject to local rule.

Did you catch that?  Yeah, me too.  That seemed a bit easy, didn’t it?  There is a riveting dissent in this Opinion that doesn’t gloss over the fact that just because it would be more convenient for Wife to be paid directly by DFAS, it doesn’t “justify blatant manipulation of the factual record.”  The Dissenting Opinion blasted:
Moreover, what should be questioned is the propriety of any court giving sanction to such a manipulative scheme.

The take home here?  Know about the Killer 10/10 rule.  Don’t forget it when it comes to the parties’ agreement, and negotiating how much and who will pay.  You never know if you will get a second bite at the apple, or if you will instead have a judge, such as this dissenter, who feels that, “[the] court should not be in the business of creating artificial periods of marriage to circumvent federal law for the convenience of a party.”

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Taylor v. Taylor, 10th Dist. Franklin No. 14DR-1977, 17AP-763, 2018-Ohio-2530
Controlling Federal Law in Domestic Relations Proceedings

Dated: 06/28/2018
Affirming

This case just leaves me shaking my head.  The trial court was supposedly dividing a military pension, and determining survivorship rights thereunder.  However, Husband cited law relevant to the federal employees/civil service retirement systems (e.g., 5 U.S.C. §8341(H)(4)), and the Court of Appeals seemed to be listening. 

Please note, controlling law concerning the division of military benefits in divorce is found under the Uniformed Services Former Spouse Protection Act at 10 U.S.C. §1408. 

Thankfully, the Court of Appeals didn’t lie on the sword of any alleged controlling federal law, and instead determined the question itself was not ripe for review, as there was not yet a genuine controversy at issue. 

These QDRO pretzels are making me thirsty!

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Kolar v. Kolar, 9th Dist. Summit No. 2012-07-2214, 28510, 2018-Ohio-2559
Marital versus Separate Property

Dated: 06/29/2018
Reversing and Remanding in Part, Affirming in Part

Separate Property Claims? Yours = your burden.  You’re welcome.

We see a lot of these cases, but I think, when the Court of Appeals is so kind to provide one, a refresher of the applicable case law is always nice to have on hand for your next brief.  And this is one of the better primers I’ve seen in a while, so here you go, courtesy of the 9th District and Mr. Kolar:

"R.C. 3105.171(B) provides that, in a divorce proceeding, the trial court must make a determination of what is marital property and what is separate property and divide such property equitably. “Marital property” includes “[a]ll real and personal property that currently is owned by either or both of the spouses * * * and that was acquired by either or both of the spouses during the marriage[.]” R.C. 3105.171(A)(3)(a)(i). “Marital property” does not include separate property. R.C. 3105.171(A)(3)(b). Separate property includes “[a]ny gift of any real or personal property or of an interest in real or personal property that is made after the date of the marriage and that is proven by clear and convincing evidence to have been given to only one spouse.” R.C. 3105.171(A)(6)(a)(vii).  R.C. 3105.171(H) states: “the holding of title to property by one spouse individually or by both spouses in a form of co-ownership does not determine whether the property is marital property or separate property.”

“The commingling of separate property with other property of any type does not destroy the identity of the separate property as separate property, except when the separate property is not traceable.” R.C. 3105.171(A)(6)(b). “The party seeking to have a particular asset classified as separate property has the burden of proof, by a preponderance of the evidence, to trace the asset to separate property.” Eikenberry v. Eikenberry, 9th Dist. Wayne No. 09CA0035, 2010-Ohio-2944, ¶ 19. The burden to prove the separate identity of property can be met with documents or testimony, but “merely claim[ing] that the property * * * constitutes * * * separate property does not make it so.” Eikenberry at ¶ 27-28. The proponent must demonstrate the amount of separate property traced. See Morris v. Morris, 9th Dist. Summit No. 22778, 2006-Ohio-1560, ¶ 26; see also Measor v. Measor, 160 Ohio App.3d 60, 2005-Ohio-1417, ¶ 55 (11th Dist.) (finding funds not adequately traced when proponent failed to provide documentation of the exact amount or source of the funds).

Because the determination of whether property is marital or separate is a fact-based determination, we review a trial court’s decision under a manifest-weight-of-the-evidence standard. Morris, 9th Dist. Summit No. 22778, 2006-Ohio-1560, at ¶ 23. When reviewing the manifest weight of the evidence, the appellate court “weighs the evidence and all reasonable inferences, considers the credibility of witnesses, and determines whether in resolving conflicts in the evidence, the [finder of fact] clearly lost its way * * *.” Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 20, quoting Tewarson v. Simon, 141 Ohio App.3d 103, 115 (9th Dist.2001). “Only in the exceptional case, where the evidence presented weighs heavily in favor of the party seeking reversal, will the appellate court reverse.” Boreman v. Boreman, 9th Dist. Wayne No. 01CA0034, 2002-Ohio-2320, ¶ 10."

Yup.  Couldn’t have said it better myself!

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Hamlin v. Bosse, 2nd Dist. No. 2017-CV-31, 2017-CA-26, 2018-Ohio-2657
Liability and Court-Appointed Experts

Dated: 07/06/2018
Affirming

The case of the ole’ switch-a-roo:  The QDRO preparer (QDRO-or) in this case sues the divorcing party (QDRO-ee).

QDRO-or sued QDRO-ee for frivolous conduct under Ohio law, seeking sanctions, attorney’s fees, and costs.  The gist is that QDRO-ee claimed that the court appointed expert witness, charged with drafting the QDROs in her divorce matter, prepared such orders inconsistent with the decree, and also ignored her warning letter advising of errors in the amounts distributed under the QDROs as-written.  QDRO-ee filed a complaint against QDRO-or for malpractice, breach of contract, and unjust enrichment.  QDRO-ee cited damages in the amount of $11,260.20 due to the drafting errors.

QDRO-or filed a motion to dismiss, and that same day, QDRO-ee filed a notice of dismissal.
(Who knows what happened there?)

Two months later, QDRO-or filed his complaint for frivolous conduct.  The trial court denied QDRO-or sanctions, attorney fees, and costs.  QDRO-or appealed.

QDRO-or argued that the complaint was frivolous for two reasons:  (1)  QDRO-ee’s complaint was filed outside the statute of limitations for civil actions brought against accountants; and (2) as a court-appointed expert, QDRO-or was entitled to immunity from liability for his work performed related to the divorce and distribution of retirement benefits.

QDRO-or’s first argument went nowhere.  The Court of Appeals agreed that yes, the “delayed-damage rule” (QDRO-ee’s defense to the statute of limitations claim) ultimately did not apply to such cases, but that, at the time QDRO-ee filed her complaint, the Ohio Supreme Court had not yet settled that question (as it later did in LGR Realty, Inc. v. Frank & London Ins. Agency, 152 Ohio St.3d 517, 2018-Ohio-334).

QDRO-or’s second argument also went nowhere.  In fact, QDRO-or concedes, himself, that there is no case law in Ohio stating that court-appointed accountants are entitled to absolute immunity for their evaluations and/or testimony in domestic relations cases.

Regardless, the Court of Appeals points out that the absolute liability argument is not at issue.  At issue is whether the fact that the matter is unresolved gives way to a finding of frivolous conduct.  Of course, that very same fact provided the basis for the Court’s decision to sustain the trial court’s decision.

Not much overall value here in terms your own practice.  But, it sure is a new spin on me… the idea of the QDRO preparer suing one of the divorcing parties.  No worries here, I am too busy blog writing to even think about this case much longer, much less sue anybody.

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Keller v. Keller, 5th Dist. Delaware No. 14 DRA 01 0007, 18 CAF 01 0008, 18 CAF 01 0009, 18 CAF 01 0010, 2018-Ohio-3141
'Frozen' versus Traditional Coverture

Dated: 08/06/2018
Affirming

Thanks to Greg Adams, Esq. for tipping me off to this one.

This comes up a lot, especially on the river.  This is because on one side, ‘frozen coverture’ is the case-law favored method to determine the marital portion of a pension for purposes of a QDRO.  On the other side, ‘traditional coverture’ is case-law favored (Hello Ohio, and Hoyt v. Hoyt!).  The general idea of the former method is that coverture is essentially defined on the date of divorce, whereas the latter method looks at the pension on the date of retirement and divvies out a smaller piece of the bigger pie to the non-pension holding spouse.

At the end of the day, regardless of case-law, the parties can agree to whatever method they so choose.  This can be done directly by precise meaningful language, or inadvertently with haphazard language.  Keller is a case where the agreement had two meanings to two different people… so arguably the inadvertent bucket. 

The language at issue in Keller stated, “[t]he parties shall divide equally all retirement/employment benefits.”  The Keller Court immediately looked to Oberst v. Oberst, 5th Dist. Fairfield No. 09-CA-54, 2010-Ohio-452. Oberst involved potential ambiguity in the parties’ agreement, similar to Keller, in that it stated the pension plan was “to be equally divided by a QDRO.”  Oberst concluded that the mere absence of such a division date did not create an ambiguity in the property division.  The Keller Court then observed that, while the parties in this case could have agreed to a future date in the divorce decree, they did not. Therefore, the Court held that the divorce decree unambiguously stated that the pension plans are to be equally divided, effective as of the termination of the marriage, on July 31, 2015 (‘frozen coverture’).

When drafting, no matter what side of the river you are on, make sure to belabor the details.  If you mean to divide the pension by frozen coverture, say it by utilizing a value as of the date of divorce, such as “50% of the marital portion as of the date of divorce, the marital portion defined by years of marriage overlapping with years of credited service as of date of divorce.”  If you mean to divide the pension by traditional coverture, say it by utilizing a value as of the date of retirement, such as “50% of the marital portion as of the date of retirement, the marital portion defined by years of marriage overlapping with total years of credited service.”  Simply dividing pension plans “equally between the parties,” is not enough to keep you out of the inadvertent bucket.

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For more Ohio Case Law updates, check out my last installment, here.

Hammertime - Part Four: Ohio Case Law Updates

What's round on the end and high in the middle? QDROs, that's what.

We've almost made it all the way through my four-part 'Hammertime' blog series! I don't know about you, but I'm getting pretty exhausted with all this QDRO news, so here's that .gif of MC Hammer dancing again.  Let us all look to its perpetual motion, and effortless, unending dance, as a source of strength, and a testament to the boundless nature of human endurance...  And endurance you'll need, because we've now entered the final installment of my 'Hammertime' blog series, highlighting some of the most recent and important decisions coming out of Ohio.

Cook v. Cook, 9th Dist. Summit No. DR-2003-08-3121, 2017-Ohio-8848
Trial Court has Broad Discretion to Determine Marital Property Interests in a Pension

Dated: December 6, 2017
Affirming

This is a great case for a refresher course on your favorite thing, coverture!  In this case, the decree stated, in part, that Husband’s OPERS pension (payable at Husband’s retirement as a stream of future monthly benefits over his lifetime) should be equally divided by DOPO (Division of Property Order), and that, for purposes of making the division, the marital period was from the date of marriage to the date of trial.  The subsequent DOPO, entered by the trial court and signed by both parties, awarded Wife a percentage of a fraction of Husband’s benefits (50% of the coverture fraction, i.e., number of years of marriage overlapping with OPERS participation, divided by total years of service credit).   The DOPO did not indicate a limit to the number of monthly payments Wife should receive.  Ten years later, Husband claimed that the DOPO should terminate because Wife had, by the time of his motion, received half of the marital portion of his OPERS pension (based on what appeared to be a present day cash valuation he obtained for the term of marriage).  Husband further claimed that if the DOPO was not terminated, the trial court would otherwise run afoul of improperly modifying the decree by way of the DOPO. 

The crux of Husband’s argument was premised on his notion that the decree provided for a fixed value assignment of the marital portion of the OPERS account to Wife, and that this ascertainable amount had been paid.  The trial court disagreed with Husband’s interpretation of the decree, and determined instead that a specific value had not been established by the terms of the decree, and therefore, that there had likewise been no improper modification of the decree by way of the DOPO. 

This opened the door to the Court of Appeals’ full review of the trial court’s excellent analysis distinguishing the methods that a trial court might employ to determine an equitable division of a pension based on either: a fixed present cash value (for an immediate distribution offset with property other than the pension itself); a frozen coverture method (to divide the pension itself at retirement, with a formula and value that are fixed as of date of divorce); or a traditional coverture method (to divide the pension itself at retirement, with a formula that is based on the value as of the date of retirement - the method employed by the DOPO).  The differences between the three methods, and what circumstances warrant utilization of one over another could be the basis of a white paper; so suffice it to say for this post, at least, that Ohio courts typically utilize the traditional coverture method, as espoused under Hoyt v. Hoyt.   But if you ever get confused, Cook provides an excellent primer.

Berger v. Berger, 11th Dist. Geauga No. 2017-G-0108, No. 2017-Ohio-9329
Trial Court has Broad Discretion to Secure an Awarded Property Interest

Dated: December 29, 2017
Modified and Affirmed as Modified

Although this case is concerned more with the adequacy of the security ordered by the trial court to preserve a spouse’s awarded marital property interest ($1.9 million, which was to be paid over a 12 year period), it is hinged on the proposition that a trial court has broad discretion in fashioning its equitable division of marital property.  To the extent a trial court deems necessary, as in this case, this may include the discretion to order Husband’s maintenance of a life insurance policy for Wife’s benefit to protect her property interest until fully transferred. The take home here: particularly when assigning an interest in a retirement asset that cannot be immediately realized by the assignee spouse, such as with many non-qualified ‘executive’ plans and certain government and church plans exempt from ERISA (which do not accept QDROs or other state court property division orders), precaution must be taken to ensure the transferee spouse’s property interest is secured.  This may be by a term-life policy, or some kind of beneficial interest in the asset itself, such as with a preretirement or postretirement survivor annuity, when available under the plan terms.

Okoye v. Okoye, 9th Dist. Summit No. 2013-09-2546, 2018-Ohio-74
Trial Court has Broad Discretion to Determine Marital Property Interests in a 401(k)

Dated: January 10, 2018
Affirmed

Husband argued that a marital 401(k) account should not be considered marital property subject to division to the extent a portion of it – he claimed – was pledged to re-pay a marital debt, including a loan expended for purposes of medical treatment and the adoption of the couple’s children.  The trial court did not find Husband’s evidence of the debt (his unrebutted oral testimony) to be credible, and instead found Husband had dissipated funds from the account without Wife’s knowledge.  The trial court thus determined the entire account to be marital, and subject to equitable division.  The Court of Appeals, in affirming, reminds us that: “Only in the exceptional case, where the evidence presented weighs heavily in favor of the party seeking reversal, will the appellate court reverse.”  The Court was unimpressed by the fact that the testimony was unrebutted, noting, “The mere fact that testimony is uncontroverted does not necessarily require [a court] to accept the evidence if [it] found that the testimony was not credible.”

Fitzgerald v. Fitzgerald, 8th Dist. Cuyahoga No. DR-14-352039, 2018-Ohio-387
A QDRO that Improperly Modifies the Decree is Voidable for Error and Subject to Appeal

Released and Journalized: February 1, 2018
Reversed and Remanded

The parties in this case agreed that the QDROs entered by the trial court deviated from the terms of their settlement agreement.  The parties disagreed, however, as to whether this made the QDROs "void" for lack of subject matter jurisdiction (meaning the QDROs were not final appealable judgments, but could be vacated or set aside under the inherent powers of the trial court), or "voidable" for error only, and subject only to appeal for review of the error concerned.  The Court traversed a riddled landscape of prior case law within the 2nd and 8th Districts – including review of the dangers inherent in “jurisdictionalizing” error – and determined that the QDROs, which were agreed to be non-compliant with the settlement terms, were not void for lack of jurisdiction, but rather, voidable for error, and appealable.  Since the appeals were timely filed, the Court vacated the QDROs, and remanded to the trial court for further review in light of the parties’ agreement.  

As an aside, noting the potential consequence of its decision, in that often a plan administrator may reject a QDRO long after the time for an appeal has expired, the Court opined that when there was no issue regarding the conformity of a QDRO to settlement terms, but rather an issue arises because a plan administrator subsequently refuses the terms of the QDRO, a Rule 60(B) motion is the appropriate venue for reconsideration. 

_________________________________________________________________________________________________________________________

In closing out 'Hammertime' - I can't resist hammering it home with this final gem.  The takeaway?  Sometimes when you have a hammer, it really is a nail!  Thanks to Maury White, Esq. for sharing this from a past IACP workshop.

Hammertime Installments:

• Part One: The Tax Cuts and Jobs Act
• Part Two: Sixth Circuit Weighs in On QDROs
• Part Three: Kentucky Case Law Updates
• Part Four: Ohio Case Law Updates

Additional Links of Interest for Diehard QDRO Fans:

• https://www.politico.com/story/2017/12/11/budget-shutdown-pension-fix-291705 (Solvency of troubled major multiemployer pension plans playing a role in Senate budget negotiations)
• http://opinions.kycourts.net/coa/2014-CA-001623.pdf (Entity seeking removal from Kentucky's County Employee Retirement System, 'CERS')
• http://opinions.kycourts.net/coa/2016-CA-001060.pdf (Denial of application for disability benefits under Kentucky Retirement Systems)
• http://opinions.kycourts.net/coa/2017-CA-000568.pdf (Miscalculation of military retirement and VA income for support obligations)
• http://www.opn.ca6.uscourts.gov/opinions.pdf/18a0016n-06.pdf (Dismissal of class action based on breach of fiduciary duty caused by failure to protect ESOP participants from artificial inflation of employer stock price)

Hammertime - Part Two: Sixth Circuit Weighs In On QDROs

Sun Life Assurance Co. v. Jackson, No. 17-3120 (6th Cir. 2017)
United States Court of Appeals for the Sixth Circuit:  Decree Deemed to be a QDRO

Decided and filed: December 13, 2017
Affirming

What could be inside?

It isn’t often LeBron James comes up in a QDRO case, trust me.  But that is exactly what you will see when you sit down to read this important case coming out of the 6th Circuit.  In outlining its standard of what is and is not 'clearly specified' (as defined under the 'REACT' amendments to ERISA, 1984), the Court observed:

"...of a sports fan asked this question:  Who is the greatest basketball player of all time: Michael Jordan or LeBron James?  He might respond “LeBron James,” which clearly specifies the answer.  Or he might respond “Number 23,” which does not clearly specify the answer.  But if he responded “Number 23 of the Cleveland Cavaliers,” no one would be confused.  The sports fan did not state “LeBron James.”  But he did specify him."

This case touches upon several circuit-specific themes, including preemption of state law, and the validity of posthumous orders.  In this case, a divorce decree itself was deemed to be a QDRO, establishing the divorced couple's child as the legal beneficiary of Husband’s employer-sponsored life insurance policy.  This, despite Husband’s failure to change his designation to name the child in compliance with the decree (Husband had instead left intact, through the time of his death, his pre-decree designation of his uncle).  The Court found that the proceeds must be paid to the parties’ daughter, pursuant to the terms of the decree-deemed-QDRO, and not to Husband’s designated beneficiary on file with the insurance company (naming his uncle).  To reach this result, the Court went through the QDRO requirements under ERISA in detail, and found, under § 1056(d)(3), that the terms of the decree “clearly specified” each of ERISA’s requisites.

That's it for this installment of my four-part 'Hammertime' blog series, but keep checking back for my Kentucky and Ohio case law updates, which will follow quite closely after this posting.  And who knows? Maybe I'll work in a few more hammer jokes, while I'm at it. A certain Peter, Paul and Mary song, perhaps?

Hammertime Installments:

• Part One: The Tax Cuts and Jobs Act
• Part Two: Sixth Circuit Weighs in On QDROs
• Part Three: Kentucky Case Law Updates
• Part Four: Ohio Case Law Updates

November Case Law Update

Nothing says "thank you" in November like a QDRO blog update.  So mooooove over turkey leftovers, and make room for an extra helping of QDROs:  Always delicious, nutritious, and pairs well with a red!

Reed v. Reed, Appeal No. 2015 02 ES 00094, 9th App. Dist. of Ohio (2017)
‘Til Death Do Us Part

Released and Journalized: October 30, 2017
Affirming

The parties' 2013 decree left unresolved the division of certain contested separate property claims, which remained unresolved at the time of Husband's death in 2015.  At issue was the burden of proof for establishing a claim of separate property (in this case, the traceability of a jointly held investment account), as further complicated by the commingling of said separate property.  The trial court assumed probate administration, to avoid conflict with the divorce proceedings, and eventually Wife filed this appeal.

Setting aside the testator/estate as party to a divorce aspect of this case -- which is deserving of discussion and reading unto itself -- readers may find the decision interesting for its overview of Ohio case law and examples of what is generally deemed an acceptable level of evidence to establish a separate interest claim in otherwise marital property.   In this matter, Wife was overruled regarding her argument against Husband’s non-marital interest in a joint investment account.  The Court of Appeals agreed with the trial court that the divorce did not abate at Husband’s death, and that Husband had sufficiently established that a portion of the parties’ joint investment account was funded by his own inherited investment account, such that the inherited portion should be awarded to Husband, and the balance divided by the parties.

Iske v. Iske, Appeal No. 17AP-215, 10th App. Dist. of Ohio (2017)
“Stuff that’s hidden and murky and ambiguous is scary because you don’t know what it does.” – Jerry Garcia

Released and Journalized: November 28, 2017
Enforcing Decree (in Regard to Retirement Accounts with the Understanding that Social Security Accounts are Not to be Divided and May Only be Considered for Purposes of Dividing a Public Pension)

Husband argued that the trial court erred in its consideration of Husband's Social Security benefits as part of the determination of marital property rights.  First, Husband argued that since his Social Security benefits were itemized and valued in the court’s 'list' of the parties’ marital retirement benefits, Wife’s Social Security benefits should likewise have been valued and made part of the list.  The Court of Appeals observed that the trial court record was deficient as to Wife’s Social Security benefits, and therefore, the trial court’s failure to consider evidence not in record was not abuse of its discretion.

Husband further argued that the trial court’s direction that “the [retirement] plans shall be equalized between the parties,” was at worst a violation of law, and at best ambiguous. Specifically, Husband argued the court’s order could be construed in such a way as to allow his Social Security benefits to be divided or considered other than for the purpose of dividing Wife’s public retirement system benefits.  Such action,  Husband reasoned, would be a violation of the proscription established by the legislature in 2009, wherein  R.C. § 3105.171(F)(9) was revised to significantly limit a trial court’s ability to consider Social Security benefits in making an equitable distribution of marital property in a divorce proceeding.  R.C. § 3105.171(F)(9) currently provides that a court may consider “[a]ny retirement benefits of the spouses, excluding the social security benefits of a spouse except as may be relevant for purposes of dividing a public pension.”  (Emphasis added.)  

The Court of Appeals agreed with Husband that the trial court’s order to 'equalize all retirement benefits' was ambiguous and could be construed in such a way as to inappropriately consider Husband’s Social Security benefits for purposes other than as permitted by R.C. § 3105.171(F)(9).  In remanding for correction, and directing that the trial court order should be construed to include Husband’s Social Security benefits solely for purposes of dividing Wife’s public retirement system benefits, the Court relied upon a lineage of Ohio cases recognizing that ambiguous court orders often require interpretation by the same or another court.

LUNCH & QDROS WITH THE Central Ohio Academy of Collaborative Divorce Professionals

Thank you to Susan Moussi and the Central Ohio Academy of Collaborative Divorce Professionals [COACDP] for inviting me to 'talk QDROs' (while you tried to digest your lunch) today in Columbus. 

Your group has a lot of exciting projects in the mix, and as a fellow collaborative member of The Cincinnati Academy of Collaborative Professionals [CACP] and The Academy of Northern Kentucky Collaborative Professionals [ANKCP], it was an honor and a pleasure to meet with you. 

Such a welcoming (...and forgiving, you know what I'm talking about...) group of professionals. 

Thank you again.

AAML Ohio Chapter Harold R. Kemp Annual FAMILY LAW Symposium

I am excited to talk QDROs with the good folks at the AAML Ohio Chapter Harold R. Kemp Family Law Symposium this year in Columbus.

I will be presenting an 'early bird' (cage-free!) CLE session between 6 and 7pm on Sunday, October 9th, before the Symposium officially kicks off the following Monday morning.

Now what could be better than thinking about QDROs on a Sunday night?!  Hope to see you there...

Click here for a brochure

All-Ohio Legal Forum - April 29th

I will be presenting "Hot Topics in QDROs" on April 29th at the All-Ohio Legal Forum in Cincinnati.  I look forward to seeing everyone there.

I'm Back...

I'm back... with your Kentucky and Ohio case law updates.

KENTUCKY

Pollard v. Pollard, No. 2014-CA-000130-MR (Ky. Ct. App. 2015)
A QDRO is an Appropriate Deviation from Parties’ Agreement

Rendered: July 17, 2015
Not to be Published
Opinion Affirming

Husband appealed the Jefferson County Circuit Court decision entering a Qualified Domestic Relations Order (QDRO) directing the Kentucky Employee Retirement System to pay $1,000 a month directly to his former spouse. The issue on appeal was whether the trial court appropriately granted Wife’s motion to amend the dissolution decree by entering the QDRO instead of continuing to enforce the parties’ prior property settlement agreement wherein Husband would pay Wife directly.  Of historical note, the Kentucky Retirement System did not accept QDROs at the time of the parties'  divorce, but subsequent legislation has resulted in QDROs being accepted when submitted to the System in accordance with KRS 61.690 and 105 KAR 1:190. 

The Court of Appeals affirmed, holding that since Husband had been inconsistent and often times unwilling to pay Wife, entering the QDRO would be an appropriate method of ensuring Husband’s future compliance. 

Lykins v. Lykins, No. 2014-CA-000524-MR (Ky. Ct. App. 2015)
Marital Misconduct Can Be Considered in Equitable Division of Retirement Assets

Rendered: July 17, 2015
Not to be Published
Opinion Vacating and Remanding

The Court of Appeals vacated and remanded the Carter County Circuit Court decision refusing to consider marital misconduct when dividing the marital assets. Husband and Wife were married for 33 years prior to their divorce in 2012, at which time Wife was incarcerated. Following her release the trial court conducted a hearing to divide the parties’ marital property. Husband asserted that Wife had misappropriated $100,000 from his IRA and another $65,000 from his employer-based retirement account. The trial court determined that Wife redeemed a mortgage on the parties’ real estate with roughly $70,000 of the $100,000 withdrawn from the IRA, leaving only $30,000 unaccounted. The trial court determined that the marital property should be allocated without regard to any marital misconduct and without determining whether Wife dissipated the funds from the retirement accounts.

The Court of Appeals had a different take, holding that unless Wife was able to show that Husband gifted the remaining money to her within the 18 months of the divorce, she would have to account for that money.  The Appeals Court additionally held that the trial court must make a finding addressing the assignment of these assets. The Court further concluded that the trial court failed to make findings to allocate the tax liability associated with the withdrawal of the IRA and pension funds, causing additional reason for remand.

OHIO

Carnes v. Carnes, Appeal No. C-140520, 1st App. Dist. of Ohio (2015)
Two Wives?  No IRA For You!

Released and Journalized: July 22, 2015
Reverse and Cause Remanded

Wife motioned the Hamilton County Court of Common Pleas, Domestic Relations Division, to set aside the divorce decree, claiming the marriage was void on the basis of newly discovered bigamy (subsequent to the divorce, Appellant Wife discovered that Husband had another wife at the time of their – Appellant Wife’s and Husband’s - marriage).  The parties signed a separation agreement which required Wife to pay Husband $15,000 for his portion of the marital equity in the marital residence and to transfer to Husband an IRA retirement account. The trial court refused to set aside the divorce decree and Wife appealed.

The Court of Appeals for the First Appellate District of Ohio determined that Appellant Wife established sufficient evidence to support setting aside the divorce decree. The judgment was reversed, the divorce decree was vacated, and the case was remanded for further proceedings.

Cincinnati Bar Association - Domestic Relations Institute CLE (April 17, 2015)

I had a wonderful time this past Friday speaking about QDROs at the Cincinnati Bar Association's Annual Domestic Relations Institute CLE, presented by the all-star Domestic Relations Court Committee.  Thank you to all the attendees for such a warm reception (and for staying awake).  

QDROs + Captive Audience = Delighted Eileen

DOPOs & QDROs Keeping You Up at Night? - Advice on Getting it Right

SHOW ME THE MONEY: UPDATE TO MY BLOG POSTS DATED JUNE 12, JULY 1 & AUGUST 21, 2014

Fraley v. Maxey, NO. 2013-CA-001447-MR (Ky. App. 2014)
In Allocating the Marital Portions of 401(k) Accounts, the Non-Participant Spouse is Only Entitled to 1/2 of the Marital Contributions and Appreciation Thereon

Rendered: November 21, 2014
Not To Be Published
Opinion Affirming

Add another notch to my QDRO lipstick case. If you click on “TRACING” on the tag-cloud to the right of this post, you’ll see this is my fourth blog post highlighting this well-settled area of law:  traceable gains on pre-martial contributions are non-marital when the increase does not result from the efforts of either party. (See my blog posts dated June 12, 2014; July 1, 2014, and August 21, 2014).

In jurisdictions such as Kentucky and Ohio, tracing is utilized as an evidentiary vehicle to value and prove the passive increase of pre-marital contributions in a 401(k)-type plan during the period of marriage. [For citations to applicable Kentucky and Ohio statutory and case law, see my blog post dated August 21, 2014.]

Tracing allows one to make an accurate determination of the growth (or loss) on both the marital and non-marital contributions in the account by calculating the rate of return experienced on the account during the marriage. Take the following example from one of my own consulting cases (the story you are about to hear is true; only the names have been changed to protect the innocent), wherein I traced the passive growth of a pre-marital account balance over the span of a ten-year marriage:

The balance in Steven’s 401(k) on his date of marriage was $173,364. At the time of the divorce, the account had grown by $251,266 to $424,630. However, of this $251,266 increase, it was determined that only $144,290 was divisible due to contributions made during the marriage, and passive market growth thereon. Therefore, Steven retained $280,339, in addition to half of the divisible $144,290. 

Without competent evidence, a court may have instead found the full $424,630 divisible – netting $212,315 to each spouse. However, after my tracing of the marital contributions and growth thereon during the marriage, Steven ended up with $352,485, and his spouse with $72,145.  Wow!

What is interesting and notable about Fraley (even after multiple exhilarating blog posts on the subject), is that – unlike Steven’s marriage – the parties were only together three years. The trial court in Fraley initially found that Wife’s Fidelity and TIAA-CREF accounts had increased in value during the three-year marriage in the amount of $72,564.00. Thus, the trial court determined Husband’s share was ½ of that, or $36,282.00. 

However, Wife subsequently filed a motion to alter, amend, or vacate the trial court’s findings of fact. Wife’s motion pointed to competent evidence within the record that traced her pre-marital contributions and passive growth thereon during the marriage, proving the marital portion was only $3,127.00. In response, the trial court amended its findings, concluding that Wife met her burden, and that Husband was only entitled to $1,563.55 (½ of $3,127.00), instead of $36,282.00. Wow! The Court of Appeals, citing to KRS § 403.190(2)(e), affirmed, summarizing:

In allocating the marital and nonmarital portions, we agree with the family court that [Husband] was only entitled to one-half of the total marital contributions and any appreciation in value of the marital portion during the marriage. The nonmarital contributions and any increase in value of those contributions not attributable to the efforts of the parties during the marriage were correctly assigned to [Wife].

Today’s lesson? Don’t make the mistake of thinking a short-term marriage isn’t worth the effort to examine. 

The law holds no secret at this point as to the evidentiary burden itself. What may still be somewhat elusive is understanding how tracing works and identifying the most preferred (and court-approved) methods of tracing. At risk of self-aggrandizing my QDRO Blog (with an admitted readership consisting of only close family and a few other gluttons), I refer you to my previously mentioned three related posts. These posts thoroughly explore relevant state law in Kentucky and Ohio, evidentiary considerations, how-to’s, and even some tips for trial motions.

KY & OH: “EQUITABLE” IS ALWAYS FAIR, BUT NOT ALWAYS EQUAL

Pitman v. Pitman, NO. 2013-CA-000249-MR (Ky. App. 2014)
The Trial Court Has Discretion to Award the Entirety of a Marital Retirement Account to One Party

Rendered:  October 24, 2014
Not To Be Published
Opinion Affirming

Another case where it doesn’t matter whether you are a practitioner in Kentucky or Ohio. The law is essentially the same on this point: Kentucky and Ohio law provide for an equitable division of marital property upon dissolution of a marriage. The word "equitable" means "fair," which does not always equate with an equal division of property. (Say that ten times fast.)

Division is not always 50/50

While Ohio Revised Code (ORC) § 3105.171 does state that a division shall be equal, it allows the court to order an unequal division if "an equal division of marital property would be inequitable." The statute contains various factors for the court to consider in deciding whether to award an unequal division of marital property.

Kentucky Revised Statute (KRS) § 403.190 has similar effect. Although the statute does not expressly reference an ‘equal division’ of marital assets, as does the ORC, it does require the court to divide marital property in “just proportions” with consideration of “all relevant factors” (including a list of four specific factors). It is well settled that, pursuant to KRS § 403.190, an unequal award of marital retirement benefits is proper if needed to make the overall division of marital property in “just proportions”. See Pitman at page 4, citing Snodgrass v. Snodgrass, 297 S.W.3d 878, 888 (Ky. App. 2009); Smith v. Smith, 235 S.W.3d 1, 17 (Ky. App. 2006); Overstreet v. Overstreet, 144 S.W.3d 834, 839 (Ky. App. 2003). 

In Pitman, the facts are more interesting than the outcome, in that the above-holding is not breaking news. Husband and Wife lived apart much of their marriage, with Wife ultimately raising their son in Kentucky. Wife had a successful business designing “Fabulous Hats” and selling them at various events, including the Kentucky Derby (she was eventually successful enough to have a brick and mortar establishment). During big hat events (pun intended), Husband would come to Kentucky and care for their son while Wife tended to her business. Wife did not disclose her business assets, but during a single event she earned as much as $100K in gross income. 

During the pendency of the divorce, Husband offered that Wife keep her business and in exchange Husband would keep his retirement account, estimated at $25K (both were marital property). Wife did not agree, arguing she contributed to Husband’s ability to earn a living by caring for their son.

After considering the relevant factors set forth in KRS 403.190(1), particularly (1)(a), the trial court awarded Wife’s business to her and Husband’s retirement account to him.  Wife appealed, wanting half of Husband’s account. The Court of Appeals affirmed, finding the trial court did not abuse its discretion.

As I said, nothing newsworthy here, just a reminder that you have license to be creative (pun intended) when negotiating the division of marital assets.  It isn’t necessary that marital assets just get divided down the middle. However, when on the defensive, it may not hurt to remind your client that the trial court can divide the marital piggy any way it deems equitable in light of the parties’ circumstances.

UPDATE TO MY BLOG POSTS DATED JULY 20 & JULY 29, 2014: THE REST OF THE STORY

Complaint by the Medina County Bar Association to the Board of Commissioners on Grievances and Discipline of the Supreme Court of Ohio

Filed: September 4, 2014

What Happens ‘Behind the Scenes’ When a QDRO is Not Timely Administered?

If you’ve read this blog before, you know I try my best to avoid dropping the “M-bomb” whenever possible. However, occasionally, there is just no getting around it. 

[ENTER STAGE LEFT]  The attorney in this disciplinary case allegedly failed to file a QDRO attendant to a 1995 divorce action.  I share this case on the heels of two of my recent posts, wherein the courts in both Kentucky and Ohio were forced to deal with the aftermath of a party attempting to enter a QDRO 20 years after the decree of dissolution was entered. 

We all know what can happen in twenty years. Just ask my graying hair, thinning lips, and ever-increasing waistline (my wit only gets sharper with age, as you can plainly see). What happens is that we experience ‘life changes’ (no, don’t worry, that’s not where I’m going with this one)... Loss of employment, divorce, remarriage, divorce again, remarriage, financial crises, retirement, and death (taxes go in there somewhere too). Particularly in today’s climate where retirement assets are often a couple’s greatest (or only) marital asset, the negative consequences in failing to timely enter a QDRO can be significant, even life-altering, for the non-employee spouse.   

But what happens to the attorney who represents the client of a forgotten QDRO? Harkening back to another of my blog posts from the past, I think I’ll let someone else much more privy drop the M-Bomb:

[I]n response to the rising number of QDRO-related claims, it seems appropriate that this quarter’s Lawyers Mutual Insurance Company of Kentucky (LMICK) newsletter, The Risk Manager, spotlights “Avoiding Legal Malpractice and Bar Complaints in Family Law Cases”. The front page article, authored by Ms. Baxter, highlights the predominance of QDRO claims in Kentucky, and identifies two specific areas of attorney error in the preparation of a QDRO, including: (1) the failure of the QDRO to include the proper language, and (2) the failure to process the QDRO correctly. In presenting a solution, LMICK suggests that practitioners who anticipate a potential claim in this area should, among other things, retain a company or individual who specializes in the preparation of QDROS.

In its Complaint before the Board of Commissioners on Grievances and Discipline, The Medina County Bar Association asserted that an attorney’s failure to ensure a QDRO was filed with the court and submitted to the retirement plan (after nearly twenty years) was violative of the professional code of conduct, specifically alleging that “such neglect caused irreparable harm to the grievant” and was “prejudicial to the administration of justice”. 

As you’ll see, I’ve redacted the names on the Complaint. That is because there’s no picking on this particular attorney for his failure to timely administer a QDRO. Rather, this is a recently exposed pandemic in the divorce world, as revealed by reiteration of my blog post above and my more recent blog posts dated July 20 and July 29, 2014. So what happens to the attorney that represents the client of a forgotten QDRO? The Medina County Bar Association alleged that an attorney’s failure to timely secure a QDRO in the course of representation is chargeable as professional misconduct, and requested disciplinary measures be taken by the Supreme Court of Ohio. 

As Paul Harvey would say (many more than twenty years ago)... And now you know the rest of the story.

UPDATE TO MY BLOG POSTS DATED JUNE 12 & JULY 1, 2014: SHOW ME THE MONEY

Deboer v. Deboer, NO. 2012-CA-000464-MR AND NO. 2012-CA-000514-MR (Ky. App. 2014)
Traceable 401(k) Gains On Pre-Martial Contributions Remain Non-Marital When the Increase Does Not Result From the Efforts of Either Party

Rendered: August 22, 2014
Not To Be Published
Opinion Affirming

I’ve written several recent blog posts providing ample citation to cases in both Kentucky and Ohio reciting the law concerning the evidentiary burden of proving non-marital amounts in retirement accounts.  Deboer raises the issue once again, with Wife claiming that the trial court erred in calculating Husband’s non-marital interest in his 401(k) by including a net increase in the value of his premarital contributions realized over the course of the marriage.

We know the question that is raised anytime passive growth accrues on pre-marital contributions made to a 401(k)-type plan during the marriage.  Who gets the money?  The answer has been made clear through the litany of repetitious cases presented to the Courts of Appeals in both Kentucky and Ohio.  When passive growth on pre-martial contributions occurs during the period of marriage, if it is traceable in such a manner that the party claiming the non-marital interest can meet their evidentiary burden, that party takes home the proverbial money bag.

This is a well-settled area of law that can’t seem to be set out to pasture:  traceable gains on pre-martial contributions are non-marital when the increase does not result from the efforts of either party.  As in Deboer, this includes when market forces - rather than efforts of the parties - generate the increase in value.

The trial court in Deboer did just as the Kentucky Court of Appeals has previously avowed – over and over again.  The trial court granted Husband an additional non-marital portion of his 401(k) that represented the gains attributable to his pre-marital contributions realized over the course of the marriage, but which did not result from any effort by Husband.  Why?  As the Court of Appeals found in affirming, there was ample evidence within the record tracing the growth upon the pre-marital funds.

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For an in-depth analysis of the issues relating to tracing and proving the evidentiary burden in both Kentucky and Ohio, see my blog post dated June 12, 2014.  For a practical tip to help ‘short-cut’ writing the supporting brief on this issue in Kentucky, see my blog post dated July 1, 2014.  

UPDATE TO MY BLOG POST DATED JULY 20, 2014: ANTICIPATION IS KEEPING ME WAITING... (BUT NOT ANYMORE IN OHIO)

Klik v. Moyer, 8th Dist. Cuyahoga No. 100576, 2014-Ohio-5994
Wife Denied Relief from 1993 Divorce Decree for Failure to Take Timely Action to Seek QDRO

Released and Journalized: July 24, 2014
Opinion Affirming

In Opinions decided less than a week apart, both the Kentucky and Ohio Courts of Appeals have had the pleasure of dealing with “delayed-QDRO-aftermath” (you know, when the attempted entering of a QDRO is delayed nearly 20 years from the date of decree).  My previous blog post dated July 20, 2014 took a look at a recent Kentucky Court of Appeals case and whether a pensioner spouse might defeat the entry of a QDRO more than 15 years post-decree based on a statute of limitations defense.  However, because the appeal in that case was filed prematurely (Husband filed his appeal at the discovery stage, when the trial court permitted Wife discovery regarding the pension), the Kentucky Court of Appeals determined the issue was not yet ripe, and that Husband should come back and see the Court if/once the QDRO was finally entered by the trial court.  So we wait in anticipation in Kentucky.

On the other side of the river, Ohio’s most recent QDRO-related Court of Appeals Opinion will not keep us waiting.  And so what is today’s lesson from the 8th District of Ohio?  Wait for it... DON’T WAIT!  That’s the lesson.  DON’T WAIT!  Read on.  DON’T WAIT!

The Klick Court was faced with the task of determining whether the trial court abused its discretion in denying Wife relief from the 1993 divorce decree, after she waited 18 years before taking any action to seek a QDRO to effectuate her award of an interest in Husband’s pension.  In short, Wife and Husband entered into a settlement agreement, incorporated into the final decree, which specifically awarded Wife an interest in Husband’s “LTV Steel Pension.”  No other pension was mentioned, although as you might have guessed, Husband owned two separate and distinct pensions.  The settlement agreement further indicated that a QDRO would “be prepared by agreement of the parties and incorporated into this final decree”.  Which, as you also may have guessed by now, never happened.

Years went by, and in 2009 Wife found out Husband had retired and begun commencement of his retirement benefits.  In 2011, Wife filed several of motions with the trial court seeking relief from the 1993 decree awarding her an interest in only the LTV Steel Pension plan.  The premise behind Wife's motions was that it was presumed between the parties (and ostensibly the trial court) that the LTV Steel Pension was used interchangeably and collectively to encompass both Husband’s pension plans, and therefore, she was entitled to the marital portions of both. However, as the Appeals Court observed, since the 1993 decree expressly referenced the LTV Steel Pension, the only way to award Wife an interest in any other pension was to grant her relief from the 1993 divorce decree.

Wife argued that relief from the 1993 decree was unnecessary, as it was not a final order since it did not consider all assets.  The Court of Appeals quickly dispensed with Wife’s argument citing – among other things – ye olde bar exam favorite “invited error doctrine” (i.e., that a party is not entitled to take advantage of an error that she herself invited or induced).  The Appeals Court determined that even if the trial court erred by omitting any reference to Husband’s other pension in the final decree, Wife induced that error by submitting the settlement agreement to the trial court as the final resolution of the parties’ dispute. 

Wife argued alternatively that her Rule 60 motion was timely filed and should be granted, as she had just learned of Husband’s retirement in 2009.  The Court of Appeals didn’t agree that 2009 was the date to start the clock.  Instead the Court found it started somewhere closer in time to the 1993 decree:

Had [Wife] timely prepared the QDRO as required by the terms of the final decree and her settlement agreement, her belief of a mistake in designating the correct pension would have surfaced, however untenable that argument is in light of the fact that [Wife] agreed to accept the LTV Steel [Pension] in the settlement agreement. As a rule, 18 years of conscious inaction does not constitute a reasonable time within which to file a motion for relief from a final judgment.

If my two most recent blog posts are not reason enough to heed the lesson (DON’T WAIT!), then stick around, the clock is still ticking.  I’m guessing there will be no shortage of these cases on both sides of the river in the near future – where an attempt to enter a QDRO is delayed until the employee commences benefits, and then suddenly everyone wakes up from inertia.  The question is how many ways will the non-employee spouse be thwarted from obtaining his/her rightful (and likely most substantial) marital property interest?  The count is on.