Decisions of Interest

Second Circuit Finds Exception to ERISA Anti-Waiver Rule

Holding that a waiver of an annuity in a divorce settlement survives ERISA under certain circumstances, the U.S. Court of Appeals for the Second Circuit has reinstated an action to enforce a divorce settlement filed by a Manhattan woman against her late husband's previous wife. Hallingby v. Hallingby, 574 F.3d 51 (C.A.2 (N.Y.), 7/24/09).

The Metropolitan Life Insurance Company was making annuity payments to decedent Paul Hallingby's fifth wife, Mai V. Harrison, and not to his sixth wife, plaintiff Jo Davis Hallingby, despite the fact that the fifth wife had waived her rights to any retirement benefits in her divorce settlement with her ex-husband. The sixth wife therefore filed this action as the executrix of her husband's estate, claiming that she was entitled to the survivor-benefits payments. Met Life countered that it was required under the Employee Retirement Income Security Act (ERISA) to pay the fifth wife because ERISA requires that pension plans prohibit the assignment or alienation of benefits. ERISA therefore precludes the enforcement of a vested interest by a non-participant beneficiary, claimed Met Life. The fifth wife's position was that, although she had indeed given up her rights to her ex-husband's retirement, pension and annuity payments in her divorce settlement, ERISA controlled the issue and so the sixth wife's claim should be rejected. The District Court agreed and granted the fifth wife's motion for summary judgment.

The Second Circuit reversed, reinstating the case. The reversal was based on the fact that that the deceased husband's employer had, in 1988, terminated its pension plan and purchased the Met Life group annuity contracts, which were not subject to ERISA. “ERISA generally applies to 'any employee benefit plan if it is established or maintained by an employer engaged in commerce and/or an employee organization representing employees engaged in commerce,'” Judge Amalya L. Kearse wrote for the panel. “ERISA allows an employee benefit plan to be terminated, under stated conditions. One method of plan termination is the 'purchase [of] irrevocable commitments from an insurer to provide all benefit liabilities under the plan,' i.e., the purchase of annuities.”

Malpractice Claim Against Divorce Lawyer Goes Forward

A man who claimed he had to take on a huge tax burden to pay his ex-wife $1.2 million pursuant to a divorce settlement was permitted to bring a malpractice claim against the matrimonial lawyer who advised him to sign the allegedly “unrealistic” stipulation. Fielding v. Kuperman, — NYS2d —-, 2009 WL 2431957 (1st Dept. 8/11/09) (Saxe, J.P., McGuire, Moskowitz, Acosta, JJ.).

Plaintiff claimed he incurred heavy taxes when he dipped into a retirement account to satisfy the terms of his and his wife's stipulation of settlement in their divorce action. The stipulation provided that payment to the wife was to be made from “immediately available” funds. The plaintiff claimed Stephanie Kupferman, of the law firm of Kupferman & Kupferman, harmed him by refusing to renegotiate the settlement after he realized he could not obtain a mortgage or home equity line of credit before finalizing his divorce. He also said she failed to inform him that splitting the retirement account would result in adverse tax consequences.

In reinstating the plaintiff's $500,000 action against Kupferman, a unanimous panel of the Appellate Division, First Department, concluded that the documentary evidence “clearly establishes that the overwhelming majority of plaintiff's funds, including the amount necessary to satisfy the obligation to his wife, were not, as characterized by the stipulation 'immediately available.'”

Establishing 'Retirement' Is Harder Than It Looks

Even though a man had not drawn a salary from his family-run business since 1996, he performed duties for the company (i.e., doing the banking, paying the bills) and received some benefits and payments from it, so he was not “retired” such that, in accordance with their divorce judgment, he could pay a lower amount of maintenance to his ex-wife. CR v. ER, N.Y.L.J. 8/26/09 (Sup. Ct., Nassau Cty, 7/30/09) (Falanga, J.).

The plaintiff ex-wife moved for a contempt order against her ex-husband for his failure to comply with the judgment of divorce to pay plaintiff maintenance of $650 a week until his retirement, and $450 thereafter. The defendant had a business selling and installing play surfaces for playgounds, from which he alleged he unofficially retired in 2000 and officially retired in February 2002, approximately two weeks after execution of the judgment of divorce. The plaintiff, however, had hired a private investigator, who testified that defendant was still running his business. The court found that while the defendant might have slowed down and “passed the reigns of operational responsibility” to his son, he had until 2008 performed duties on behalf of the company and received some benefits from it (although not a salary). However, as the divorce judgment provided no objective standard by which either party could define “retirement,” and thus gauge their compliance with the judgment of divorce, a finding of contempt was not warranted.

Second Circuit Finds Exception to ERISA Anti-Waiver Rule

Holding that a waiver of an annuity in a divorce settlement survives ERISA under certain circumstances, the U.S. Court of Appeals for the Second Circuit has reinstated an action to enforce a divorce settlement filed by a Manhattan woman against her late husband's previous wife. Hallingby v. Hallingby , 574 F.3d 51 (C.A.2 (N.Y.), 7/24/09).

The Metropolitan Life Insurance Company was making annuity payments to decedent Paul Hallingby's fifth wife, Mai V. Harrison, and not to his sixth wife, plaintiff Jo Davis Hallingby, despite the fact that the fifth wife had waived her rights to any retirement benefits in her divorce settlement with her ex-husband. The sixth wife therefore filed this action as the executrix of her husband's estate, claiming that she was entitled to the survivor-benefits payments. Met Life countered that it was required under the Employee Retirement Income Security Act (ERISA) to pay the fifth wife because ERISA requires that pension plans prohibit the assignment or alienation of benefits. ERISA therefore precludes the enforcement of a vested interest by a non-participant beneficiary, claimed Met Life. The fifth wife's position was that, although she had indeed given up her rights to her ex-husband's retirement, pension and annuity payments in her divorce settlement, ERISA controlled the issue and so the sixth wife's claim should be rejected. The District Court agreed and granted the fifth wife's motion for summary judgment.

The Second Circuit reversed, reinstating the case. The reversal was based on the fact that that the deceased husband's employer had, in 1988, terminated its pension plan and purchased the Met Life group annuity contracts, which were not subject to ERISA. “ERISA generally applies to 'any employee benefit plan if it is established or maintained by an employer engaged in commerce and/or an employee organization representing employees engaged in commerce,'” Judge Amalya L. Kearse wrote for the panel. “ERISA allows an employee benefit plan to be terminated, under stated conditions. One method of plan termination is the 'purchase [of] irrevocable commitments from an insurer to provide all benefit liabilities under the plan,' i.e., the purchase of annuities.”

Malpractice Claim Against Divorce Lawyer Goes Forward

A man who claimed he had to take on a huge tax burden to pay his ex-wife $1.2 million pursuant to a divorce settlement was permitted to bring a malpractice claim against the matrimonial lawyer who advised him to sign the allegedly “unrealistic” stipulation. Fielding v. Kuperman, — NYS2d —-, 2009 WL 2431957 (1st Dept. 8/11/09) (Saxe, J.P., McGuire, Moskowitz, Acosta, JJ.).

Plaintiff claimed he incurred heavy taxes when he dipped into a retirement account to satisfy the terms of his and his wife's stipulation of settlement in their divorce action. The stipulation provided that payment to the wife was to be made from “immediately available” funds. The plaintiff claimed Stephanie Kupferman, of the law firm of Kupferman & Kupferman, harmed him by refusing to renegotiate the settlement after he realized he could not obtain a mortgage or home equity line of credit before finalizing his divorce. He also said she failed to inform him that splitting the retirement account would result in adverse tax consequences.

In reinstating the plaintiff's $500,000 action against Kupferman, a unanimous panel of the Appellate Division, First Department, concluded that the documentary evidence “clearly establishes that the overwhelming majority of plaintiff's funds, including the amount necessary to satisfy the obligation to his wife, were not, as characterized by the stipulation 'immediately available.'”

Establishing 'Retirement' Is Harder Than It Looks

Even though a man had not drawn a salary from his family-run business since 1996, he performed duties for the company (i.e., doing the banking, paying the bills) and received some benefits and payments from it, so he was not “retired” such that, in accordance with their divorce judgment, he could pay a lower amount of maintenance to his ex-wife. CR v. ER, N.Y.L.J. 8/26/09 (Sup. Ct., Nassau Cty, 7/30/09) (Falanga, J.).

The plaintiff ex-wife moved for a contempt order against her ex-husband for his failure to comply with the judgment of divorce to pay plaintiff maintenance of $650 a week until his retirement, and $450 thereafter. The defendant had a business selling and installing play surfaces for playgounds, from which he alleged he unofficially retired in 2000 and officially retired in February 2002, approximately two weeks after execution of the judgment of divorce. The plaintiff, however, had hired a private investigator, who testified that defendant was still running his business. The court found that while the defendant might have slowed down and “passed the reigns of operational responsibility” to his son, he had until 2008 performed duties on behalf of the company and received some benefits from it (although not a salary). However, as the divorce judgment provided no objective standard by which either party could define “retirement,” and thus gauge their compliance with the judgment of divorce, a finding of contempt was not warranted.