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Divorce Mediation Blog

O Pfannenstiehl! Part 4: No Wonder We’re All Confused (Equities Trump Law?)

Wednesday, November 11, 2015

In his recent blog entry about the Massachusetts Appeals Court case, Pfannenstiehl v. Pfannenstiehl, at http://www.margolis.com/our-blog/does-recent-divorce-undermine-centuries-of-spendthrift-trust-law, Boston estate-planning counsel Harry S. Margolis, wrote that:

    This ruling, which undermines centuries of established trust law, was based in part on the equities of the situation and in part on a misunderstanding of wording commonly used in trusts.

Who are we to argue with Mr. Margolis’ observations about trust law? They sound about right to us. Today, instead, we are focused on the equities, and ask did they trump the law of trusts in the courts?

The facts that the Appeals Court highlighted shone harshly and disparagingly on the husband and his family. The decision recited the relaxed and informal manner in which biased trustees (sibling and family accountant) administered the trust, and their divorce-eve cut off of family benefits, in great detail and with considerable care. The court trashes the trust as a sham, and the husband’s advocacy, as disingenuous at best. The husband’s overpaid, no show, family business job (as in four years of paid leave) is reported, even if marginally relevant. The court also details the wife’s considerable burdens, including her care responsibilities for a Downs child, and the husband and family’s pressure for her to exit military service, just shy of her pension vesting.

The trial court’s action was extraordinary in many ways. After determining that the trust is a devisable marital asset (we don’t find that part surprising), the court completely disregards any of the ways that this generational trust restricts beneficiary access to trust resources. It simply divides the corpus by 1/11, despite those restrictions, and the fact that the beneficiary class is subject to expansion. The court ordered a 24-month cash buy out of the wife’s adjudged interest, irrespective of liquidity, taxation and access issues.

But, beyond that, the court then divided the husband’s family trust interest disproportionately against him, in tandem with an unequal split of the non-trust estate, in the same proportions.

It is not unusual in a case of trust-divorce case, for the court to split the non-trust estate in favor of the non-beneficiary spouse. This is usually a form of compensation for a disproportionate split of the trust asset in the beneficiary’s favor. But, here, the judge favored the wife with 60% of the whole estate, trust included. It is entirely fair to argue, that by valuing the trust as if it were cash in the bank, rather than a discretionary vehicle of future distributions, that the net asset split to the wife is substantially greater than the surface 60%.

How does this square with Moriarty v. Stone, still good law that establishes that “contribution” remains “touchstone” of asset division? Neither party created the trust wealth, so the only contributory link is the husband’s lineage. Do the wife’s overall contributions echo Williams v. Massa, the famous case of the multi-hatted (economic and non-economic) contributor, who kept his trust interest? Not really.

In the end, it does look like the trial court punished the spouse whom she took to be the bad actor, and advanced the interests of the needier, and perhaps more virtuous spouse, notwithstanding the law of trusts. The Appeals Court decision, and its machinations to get a majority, does nothing to dispel that view.

In our next blog, we will turn to how the Supreme Judicial Court may look at the situation, should it accept the case.

 

Lawyers Weekly Takes On Rule 1:28: We Agree

Wednesday, November 04, 2015

We have commented here, on a number of occasions, about the Appeals Court's use and misuse of Rule 1:28's so-called "unpublished" opinions.

They are informal, scant on facts and often reasoning, sometimes obscure and too-often just confusing to family law discourse. If the Appeals Court is not going to stand behind its cases as precedent, or if an opinion is truly for the sole benefit of the captioned parties, the public record would be better served by a simple "affirmed" or "reversed" notation. As public records, the "full" opinions would be available to the highly motivated, but the cases would not be citable from the current netherworld of "persuasive but not precedent", to which the Appeals Court has assigned them.

For that reason, we delighted in reading October 26th's Massachusetts Lawyers Weekly, wherein the Editorial Board opined, at p. 38, that newly minted Chief Justice Scott L. Kafker should pay "immediate attention" to the problem of Rule 1:28. Lawyers Weekly described the intent of the rule to address "straightforward cases" and that the Appeals Court overuses the rule to the public's detriment. While our critique goes further, the editorial's targeting of the issue is welcome; and we thank the board for its call to action.

Either way: elevate all opinions to the level of precedent, then analyze and write them accordingly; or reduce them to simple announcements of the action taken on appeal. We respect the burden that the Appeals Court's unchecked, non-discretionary caseload poses. But do something please, Chief Justice Kafker, about this unhelpful practice.

 

O Pfannenstiehl! Part 3: No Wonder We’re All Confused (Be Careful What You Wish For)

Wednesday, October 28, 2015

In our last Pfannenstiehl entry, we looked at the internal inconsistency of the Massachusetts Appeals Court decision, in which it found that the husband’s trust interest was a divisible marital asset, and that he can access its fruits, freely. But, when the trustees called the trial court’s bluff by refusing to give the husband money to pay the wife under the divorce judgment mandate, the appellate court blinked, concluding that trial judge was wrong under the law in enforcing her judgment with the coercive powers of contempt.

Putting aside the impact on the public in future estate planning, family law negotiations, divorce mediations and litigations, what about Mrs. Pfannenstiehl?

We have to assume that the trial judge adopted the wife’s theory the case, or some proximate version of it. The extremity of the result left the husband with little option but to appeal, which he did. But, in a strange irony, while he lost again on the substantive questions, he may have won a larger battle, when the Appeals Court vacated the contempt judgment. There was no remand. There is no re-trial. There is no ready way for the trial judge to make her judgment more enforceable.

So, what does the wife have to show for her efforts, time and cost?

She is a judgment creditor, which gives her 20 years to collect, under Massachusetts law. She is denied the normal enforcement remedies for divorced persons: either a Probate and Family Court contempt, with its coercive powers and streamlined procedures; or, for people with surviving agreements, breach of contract actions in the District or Superior Courts (she has no contract).

Might she sue on the judgment in a supplementary process action in the Superior Court? If so, she would have to bide her time and determine when the husband might have the provable resources against which to proceed. But how will she know? There is no known divorce order to the husband to disclose future circumstances, as there might have been with an “if and when” assignment order. And, she would have to fund the action.

Could the wife obtain some form of equity relief through an action under M.G.L., 215 ch. §6, asking the Probate and Family Court to create a supplemental judgment that obliges the husband to disclose and/or pay over any sums that he ultimately receives from the trust? If so, his failure to disclose may give rise to contempt exposure.

We doubt that she could bring a complaint for modification, because nothing has changed! The trustees stopped distributing on the eve of divorce, and post-divorce, they are just doing more of the same.

Might she negotiate, or even mediate a solution with the husband? Maybe. To avoid the threat of the wife laying in wait to enforce the judgment, and to avoid paralyzing the trustees, the husband might drive down the price to an acceptable level, and then pay off the judgment agreeably (with the trustees’ acquiescence, of course).

Or maybe the SJC will take the case, with who knows what result.

We will take a guess on that, in later blog entry.

 

“Reconstituted” Majority Nixes Panel Consensus, Again

Wednesday, October 21, 2015

Well, maybe we were wrong about this happening infrequently, and we just woke up to it. Or maybe it is a new trend.

On the heels of Pfannenstiehl, in which a “reconstituted majority” vetoed the 2-judge majority who heard the case, AT v. CR is a new decision in which Justices Meade and Blake’s consensus failed, when other non-panel justices rallied with Justice Hanlon to nullify the panel majority. It is not a family law case, but, rather, a juvenile harassment case.

Again, the majority became dissenters, with Justice Blake (a veteran divorce lawyer and former Probate and Family Court Judge) writing a crisp dissent, joined by Justice Meade. Perhaps coincidentally, Justice Berry, whose minority panel view ultimately prevailed in Pfannenstiehl, voted in the rump majority that carried the day, here.

What’s going on up there at the Appeals Court?

 

O Pfannenstiehl! Part 2: No Wonder We’re All Confused (The Appeals Court Doesn’t Even Agree With Itself)

Wednesday, October 14, 2015

At least they aren't throwing food at each other, or publicly calling each other names, as the current U.S. Supreme Court is wont to do. In our last blog entry, we discussed the interesting turn in this appeal, from a minority of 1, to a majority of 3 justices, in search of consensus of all Massachusetts Appeals Court, taking this important case away from the judges who heard it, in favor of a majority of the overall bench.

But, the reconstituted majority opinion doesn’t even agree with itself. Here’s why.

Almost casually, the prevailing opinion concluded that:

  1. the husband’s beneficial trust interest is a marital asset;
  2. the husband’s interest is worth 1/11 of the [presumably gross] corpus;
  3. that the wife’s share of the husband’s interest is 60% thereof; and
  4. the husband (in addition to yielding 60% of the non-trust assets) should pay out the wife’s share of his trust interest, in cash, over a 2-year period.

This, despite the fact that the husband is part of a beneficiary class that is open to expansion, and that the trust (no matter how indifferently administered in the past) provides no apparent means by which the husband could compel distributions to pay out the required sums to the wife.

But having concluded and implicitly ruled that the husband could make the required payments…

The court then proceeded to vacate the trial court’s judgment of contempt, in which she found the husband guilty, after he stopped paying the monthly sum to the wife. The reason: that he did not have the ability to pay because the trustees had declined to distribute the funds.
Thus, in the same decision, the Appeals Court ruled that:

  1. The husband as an enforceable right to receive distributions, which gives him the ability to pay out the required sum; and
  2. Because the trustees refused to make distributions that the court concluded he can compel, the wife cannot enforce judgment.

At least, the trial court had the courage of its conviction.

So, what does this opinion do for Mrs. Pfannenstiehl, as a practical matter? We’ll tackle that in our next entry.

 

O Pfannenstiehl! No Wonder We're All Confused Part 1: The Appeals Court's Fuzzy Math

Thursday, October 01, 2015

Lawyers will be talking about the recent Massachusetts Appeals Court case, Pfannenstiehl v. Pfannenstiehl, for years to come.  Decided on the question of what happens when trusts and divorce collide, it is rocking the family law and estate planning bar, alike.  We have read it, read it and read it again; and like pollen in allergy season, and the winter snows of 2015, the head-scratchers just keep coming. 

Over subsequent blog entries, we will address the substance of the case (there’s lots to talk about), but for today, we are most curious about the fact that this controversial decision was decided by one panelist (Justice Berry) of the three who heard the case, while the majority disagreed strongly enough to write (Justice Fecteau) and join in (Justice Kantrowitz) a, exceedingly rare family law dissent, a compelling one at that.

From footnote 2 of the decision, we learn that the panel was “expanded” to include two justices who did not participate in the argument of the case, but jumped in only after the circulation of the opinion.  Admittedly unfamiliar with this process, which struck us a bit like expanding the World Series to nine games because the wrong team won, we read the authority cited, and found that it is grounded in Mass. R.A.P. 24 (a); and that:

    The procedure that was followed reflects a long-standing practice of the Appeals Court, designed to ensure that published opinions reflect the view of a majority of the Justices. See Lyons v. Labor Relations Commn., 19 Mass. App. Ct. 562 , 566 n.7 (1985), indicating that published opinions are considered by the entire court prior to release. In the case of a dissent, if a majority of all the Justices agrees with the majority of the panel, the decision is published as a two to one decision of the original panel. If a majority of all the Justices agrees with the dissent, the panel is enlarged to reflect the view of the majority of the court, generally by adding to the panel the two senior Justices who are part of the full court majority.

Sciaba Constr. Corp. v. Boston, 35 Mass. App. Ct. 181, 181 n.2, 617 N.E.2d 1023 (1993) (our underlining).

Let’s break it down:

  1. In the case of a dissent, if a majority of all the Justices agrees with the majority of the panel, the decision is published as a two to one decision of the original panel.

    The opposite occurred, here. An apparent majority of the court agreed with Justice Berry, who was the minority on the panel.

  2. If a majority of all the Justices agrees with the dissent, the panel is enlarged to reflect the view of the majority of the court, generally by adding to the panel the two senior Justices who are part of the full court majority. 

    The implication is that Justice Berry began as the lone dissenter. She then succeeded in gaining a majority, off-panel, consigning the panel majority to the dissent; and, reversing the will of the panel.

Apparently, the events of this case are not unique, but we presume them to be uncommon. One result of this action is that the Appeals Court negated the majority opinion of the justices whom the litigants assumed, incorrectly, would determine their fate.

Is this good policy? As long as Rule 1:28 exists, might it not have been better to simply allow the panel majority to stand, and if the rest of the justices felt it just, limit its impact beyond the parties themselves, with a non-precedent, unpublished opinion?

Were this case a simple one or if it were unassailable in its analysis and result, this curious procedure might matter a whole lot less. But as we will discuss in subsequent entries, this case is anything but. In our view, it is highly problematic.

We hear that a request for further appellate review before the Supreme Judicial Court is likely (if not already pending); and we hope that the SJC takes it. If so, we also hope that the SJC reviews the “longstanding practice” of re-constituting the panel in these circumstances.

Before Yankees fans were cut down to size in 2004, some used to joke that 1975 was the only World Series ever won, 3-4. Maybe the Series actually did revert to nine games that year, and we all just didn’t know it!

 

It's not a world war, after all

Thursday, September 17, 2015

One of us has been listening to a multipart podcast about the First World War. The podcast may be as long as the war itself, but it makes a workout seem quick, by comparison!

In describing the siege that took hold in the fall and winter of 1914-1915, the narrator describes the phenomenon of European powers having invested so much in blood and treasure that no one was willing to consider any form of withdrawal from the winter stalemate, let alone a nuanced solution to the conflict.

This description resonated with many seemingly endless experiences of clients who enter into divorce litigation with black-and-white views, and goals to match. Sometimes, like quicksand, the deeper the descent, the stronger the pull. The more invested, the less the inclination to compromise. As time and costs increase, perspective, empathy and the ability to listen to, let alone hear or consider the “opponent’s” point of view, diminishes proportionately.

Until, that is, someone is broke or broken, or the clock runs out.

The comparison between divorce litigation and the conflict that introduced a level of lethality previously unknown to human warfare is fraught, to be sure. Divorce litigation almost never kills anyone. Too often, it does, however, diminish people, their coffers, their ability to co-parent and their dignity. Strategy and tactics replace perspective and understanding.

In our practice, we mostly see people avoid the carnage, and we work with many who are in the midst of it and are looking for a way out, sometimes desperately. We preach, at all times, the need for clients to be wary of conflict, and to review every stage of their divorce matter from the perspective of cost-effectiveness, both financial and relational.

Most listen; some cannot. For the unfortunate few with whom we work who cannot, many are condemned to ignore Santayana and reenact their own personal version of the European siege one hundred years ago. The hope that these numbers will become fewer and fewer motivates us to do keep at it, every day.

 

This time it's a state case: merger and survival, with an alimony waiver twist McManus v. McManus

Wednesday, September 02, 2015

McManus follows on the heels of Judge William Young's federal trial court decision in Irish v. Irish, about which we recently wrote in "Making a federal case of surviving agreements", in the August 3, 2015 issue of Massachusetts Lawyers Weekly. This time, the Massachusetts Appeals Court confronted a separation agreement that unambiguously recited the parties determination that the parties' alimony exhibit survive incorporation in the divorce judgment.

The problem was that the parties' alimony exhibit stated expressly that both parties were waiving "past and present" alimony, but it did not state with particularity that they were waiving the right to seek alimony in the future. The wife later demanded alimony. The husband claimed that the silence, in the context of survival, established mutual intent to preclude future alimony; and he sought dismissal. The trial judge agreed and entered a defendant's summary judgment.

The Appeals Court did not agree, though. It concluded that silence was not golden for the husband, though it may not be ultimately for the wife either. The appellate court vacated the judgment and ordered the Probate and Family Court to hear "parol evidence", i.e., the parties' recitation of facts about what they intended at the time of the separation agreement. From there, the trial court must rule on the legal question of whether alimony is precluded by the contract, and if not, proceed to fact-finding in accordance with judgment modification standards.

This was a tough call. One logic says that the parties' selection of survival without any reservation of future alimony rights implies, as the trial court concluded, that their mutual intent was expressed as being preclusive. On the other hand, future alimony rights are so significant, and negotiations over them so frequently fraught, that if the husband had secured a preclusion, he would have been sure to include it in bright lights, in the parties' agreement.

Did the parties reach a sort of impasse at the time of divorce, such that the only way to reach a settlement was to finesse the issue by endorsing the agreement as written, and hope that the issue would never arise? Did the two sides differ about the meaning of the ultimate language? Is one side opportunistically side-stepping the parties' known divorce consensus?

Whatever the cause, the current mess is arguably the result of imperfect "boilerplate"; and perhaps both sides are paying the price. Often, this kind of an appellate outcome will facilitate settlement before formal remand proceedings, sometimes with help of the trial judge, or even in mediation. Both parties have distinct interests in resolution without trial, and avoidance of another appeal, later. Both sides have real risks; and both have the ability to compromise, and mitigate those risks.

Perhaps, cooler heads will prevail.

As we have addressed previously, "boilerplate" matters.

 

It is marital -- or isn't it? Canisius v. Morgenstern

Wednesday, August 19, 2015

The Massachusetts Appeals Court's recent case, Canisius v. Morgenstern, followed substantial precedent for the proposition that contractual rights that accrue during marriage are divisible marital assets, even when the financial fruits of those rights a) may stretch beyond conclusion of the marriage, and b) may be uncertain, even speculative, as to amount or ultimate duration.

In correctly reversing a trial court judge for implicitly excluding potential post-divorce book (and possibly film) income from asset division, the appellate court added royalty rights to stock options, many trust benefits, "guaranteed" partnership distributions and pension plans, a growing list of assets that are divisible despite indeterminate values and time of future enjoyment.

Then, after finding and explaining the trial judge's error, the Appeals Court gave parameters for remand, instructing the Probate judge to revise his property judgment, to include the net-after-tax royalties that the wife may later receive, for "if and when" division. Shadowing the Supreme Judicial Court's Baccanti v. Morton ("time" formula for granted but unvested stock options), the Canisius court preemptively endorsed a "sliding scale of decreasing percentages".

This suggestion was necessary and appropriate to capture the concept that future royalties may increasingly be seen as the product of the wife's post-divorce efforts, where the initial flow of royalties had subsided substantially pre-divorce, and a future revival of fortune would likely arise from the wife's own post-divorce professional efforts, be they purely promotional or by future creativity that causes renewed interest in her inaugural book. Think To Kill a Mockingbird and Go Set A Watchman, but in reverse!

So far so good.

But -- and we wish there weren't a "but" -- the Appeals Court then exceeded all of the Massachusetts precedent on which it relied, by inviting the trial judge on remand to include a "specific termination date." In other words, the wife's royalty rights may be perpetual, but at some yet-to-be defined point, they would cease to be marital at all.

Really? If not so for options, trusts and pensions, then why for royalties?

We understand the court's equitable impulse. The parties were, after all, married for barely 5 years at the time of separation. Doesn't fairness suggest that a time be reached where the relationship of future royalties to the parties’ mutual marital efforts melts to zero? Maybe. But does reason dictate the same result? Probably not.

Think about it. The court concluded that the contract was a product of the marriage. A reducing fraction of division is a proxy for the declining ratio of marital to post-marital efforts. But, once the nexus is drawn on a property theory, how can it be extinguished, let alone merely by time, when the underlying rights persist? Is it not arbitrary to say that the marital gift keeps on giving, but at some point it stops giving to both partners, whose marital enterprise brought it forth? A right is a right, unless it is not.

In fairness, the opinion stated: "That the future royalty, and other payments in the present case are to be divided on an if and when received basis does not require that such payments continue indefinitely." (Italics ours.) Thus, appellate panel did not exactly mandate the result, but it repeated the concept no fewer that 3 times in one paragraph, and its footnote. By doing so, the Appeals Court irrevocably changed the dialogue on remand, and in any future appeal, especially striking since the opinion does not identify it is as an issue that was raised by the trial judge, or by either party on appeal.

Clearly, the Appeals Court could not find Massachusetts precedent to support its time limit suggestion. Its only citation is to Connecticut's Gallo v. Gallo, a 1981 case of the Supreme Court of Connecticut that upheld a sharing of the husband's academic text and workbook revenue, post-divorce, but for a period of 5 years only, with little explanation except its apparent acceptance of the husband's trial testimony that he expected royalties to extend for that time period. If the Appeals Court felt compelled to import authority to establish a time limit parameter, was it prudent to ground it in a case where the foreign court had, in fact, upheld royalty share for the entire expected duration of royalties?

As we have worried in the past here, when appellate courts go beyond what needs to be decided in a precedent case (Canisius is a "reported case", and hence, deemed precedent), the law of unintended consequences too often intrudes.

What facts can this trial judge find on remand to fix the vanishing point of marital nexus? Length of the marriage? A fraction of same? The wife's projection of likely duration? An "expert's" word? We worry that whatever time limit the trial court chooses, as he inevitably will, will simply fuel the next appeal. How then will the Appeals Court discern sound discretion from an abuse?

To say nothing of the fact that that the Appeals Court also said that the "...judge may also limit... amount to be received..."

Stay tuned.

 

Making a federal case of surviving separation agreements

Wednesday, August 12, 2015

The divorce bar does not often look to the federal trial court for guidance in family law matters. In fact, outside of discovery and the Rules of Civil Procedure, we rarely look to federal courts at all when constitutional rights are not at issue.

But U.S. District Court Judge William G. Young’s ruling in Irish v. Irish is a noteworthy exception.

Young’s fndings and conclusions establish contractual liability from a former husband’s false statement on his Supplemental Probate Court Rule 401 Financial Statement, filed in a Middlesex Probate & Family Court divorce case and referred to in a separation agreement that the state court incorporated into its divorce judgment. Critically, the agreement survived incorporation in the judgment and did not merge therein.

The federal case concerns a payout to defendant Craig S. Irish that plaintiff Dawn E. Irish, and now Judge Young, view as a form of phantom equity, in which the former wife has continuing contractual rights. Young makes quick and eloquent work of Mr. Irish’s contention that a substantial sum received by him afer divorce was merely a bonus and, thus, outside the scope of Ms. Irish’s property claims.

The forum and the substance both merit close consideration for divorce lawyersRead more...

 



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