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Divorce Mediation Blog

Parenting Coordination Case with Implications for Family Law Arbitration: Leon v. Cormier

Wednesday, May 24, 2017

The Massachusetts Appeals Court recently upheld a Probate and Family Court contempt judgment where the defendant had not violated any specific order of the court, in the important case Leon v. Carpenter.

The parties had agreed at the time of divorce that they might someday appoint a parenting coordinator, with the power to make binding decisions on parenting matters, with the reservation that either party could seek court review of the PC’s decisions. Later, they hired a PC, who proceeded to issue decisions in a series of emails, from which the mother did not seek judicial review, and with which she did not comply. A trial judge sanctioned her with a contempt finding and associated remedies; whereupon, and the mother appealed.

She argued that there was no order made by a judge to disobey. The Appeals Court responded that the voluntary undertaking of the parties to comply with the potential PC’s future orders was itself enough to form the core of an unequivocal command, without reference to any specific possible order.

The mother complained that the court had impermissibly delegated its parens patraie role as final arbiter of all things custodial. The Appeals Court disagreed because the trial judge hadn’t imposed the PC on the parties and because some right of review was included in the underlying agreement.

The mother contended that the PC’s decisions had no force since the father had not sought their confirmation by the court, but the Appeals Court held her to her agreement’s words: the burden was on her to seek review; she didn’t; so she was stuck.

The Appeals Court “take” is consistent with many of its family law arbitration cases, including last summer’s Gravelin v. Gravelin, which reiterated the parties’ ability to opt out of the public system in favor of private family law arbitration generally, with the implication that some form of review may be required, but without clear articulation of it form, format or substance.

It is unfortunate that we still don’t have real clarity on the level of review implicated by the cases, but Leon does seem to support two important points:

  1. That arbitration of child matters does not require any heightened level of review, let alone any specific kind (though we still believe that there must be some inherent “best interests’ standard); and
  2. The parties can agree to be bound by an arbitrator’s decision that arises from an agreement that was made well before the onset of the controversy that is arbitrated.

Both points touch on highly sensitive matters for those who resist the spread of family law arbitration. It really is time for a statute to codify this important remedy in a way that reflects societal consensus on its acceptability, standards and boundaries.

 

A Cautionary Concurrence on Decanting: Ferri v. Powell-Ferri

Wednesday, May 10, 2017

In an unusual context, the Massachusetts Supreme Judicial Court recently answered questions put to it by the Connecticut Supreme Court about its view of whether the decanting of a divorce litigant’s trust assets to another trust, with spendthrift provisions, was permitted by Massachusetts law.

The SJC concluded that the trustee’s maneuver, which likely placed the trust assets outside the equitable division reach of the non-beneficiary’s divorcing wife, respected the probable intent of the settlor, making the asset transfer permissible, even though under the original trust’s terms, the beneficiary-husband had the unfettered right to withdraw 75% of the trust res at the time of decanting.

This seems a harsh result from the spouse’s perspective. We wonder how this situation really differs from the case of a self-settled revocable trust, the contents of which are uniformly treated as unfettered marital assets because the grantor can seize the trust assets at any time; therefore, for divorce purposes, the trust is a nullity. Mr. Ferri, too, could demand and receive 75% of the original trust corpus, too, so how is that different, at least regarding that portion? Yet, the Ferri ruling will presumably put those same assets out of reach for Ms. Powell-Ferri, and the divorce court.

Did the SJC elevate form over substance?

The SJC’s answer, at the bottom line, is “no”, because the beneficiary had not in fact, taken control of the trust principal, and the trust instrument established the settlor’s intent that, the trustee’s obligations of asset protection and control persist until distribution of the trust corpus, irrespective of the beneficiary’s prior withdrawal rights.

So, as the trust instrument compelled the trustee to shield the trust corpus from others, could decant (i.e., transfer the entire trust asset base to a new, more restrictive trust) to further the settlor’s wish.

Yet, Chief Justice Gants clearly recognized, the mischief that this decision might work in Massachusetts divorce world: encouraging divorce planning by spouses and fiduciaries, and resulting disruption to the commonwealth’s generally policies in favor of broad marital asset identification and against prejudgment manipulation.

Thus, in a rare concurrence, he (with Justices Lenk and Budd) “[wrote] separately” to emphasize what the SJC did not decide:

    … whether Massachusetts law will permit trustees in Massachusetts to create a new spendthrift trust where the sole purpose of the transfer is to remove the trust’s assets from the marital assets that might be distributed to the beneficiary’s spouse in a divorce action.

    Exactly what the Ferri trustee had done in Connecticut, now blessed by the SJC.

Justice Gants girded his caution on the Massachusetts Uniform Trust Code’s prohibition against trusts that violate public policy (M.G.L., ch. 203E, §404), and common law, suggesting strongly, while not explicitly stating, that decanting for the sole purpose of divorce planning just – might – well – be such a violation. While not cited by the him, procedural rules of the Probate and Family Court, common bench and bar understanding and perhaps an ethics-based view, all support Justice Gants’ caution.

In the end, what the Ferri family and trustee got away with in Connecticut, will likely not pass muster in future Massachusetts. The Ferri concurrence may be its most influential part: a bright, flashing yellow light, with a red light against trustee divorce planning likely to follow.

 



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