9/11 Award Ruled Separate Property in Divorce Case

An injured firefighter's entire federal September 11th Victim Compensation Fund award constitutes separate property for the purposes of equitable distribution, a state appeals court in Brooklyn has ruled. A panel of the Appellate Division, Second Department, found that even though economic damages are typically considered part of a marital estate, lawmakers intended for both the economic and noneconomic portions of personal injury awards to be designated separate property.

“While the logic of the Equitable Distribution Law ' suggests the conclusion that the economic portion of a personal injury award should be marital property, [the] legislative history compels the contrary result,” Justice Robert A. Spolzino wrote for the unanimous panel in Howe v. Howe, 07-07984, N.Y.L.J., D.O.I. 10/05/09, p. 17. “[T]he inescapable conclusion is that the Supreme Court was correct in determining that the portion of the Victim Compensation award received by the plaintiff that
constitutes compensation for economic loss during the marriage is the plaintiff's separate property.”

But the four-judge panel also found that the lower court erred in failing to hold that a portion of the retired fireman's disability pension was also separate property,
notwithstanding the lack of evidence in the record distinguishing the pension's economic and noneconomic proportions.

Justices Mark C. Dillon, Anita R. Florio and Daniel D. Angiolillo joined the opinion.

A Divorce

The parties, Kevin and Lucille Howe, married on Nov. 11, 1990.

In 1995, Mr. Howe became a New York City firefighter. He incurred severe injuries to his lungs in the aftermath of the 9/11 attacks, including scarring in both lungs and a cancerous nodule on his right lung. Mr. Howe also has hypertension and chronic obstructive pulmonary disease (COPD), according to a brief filed in support of this appeal.

Mr. Howe retired in 2005, and filed for divorce later that year.

In July 2007, Supreme Court Justice Andrew P. Bivona in Orange County awarded Mr. Howe 100% of the remaining funds from his 9/11 fund award. (Mr. Howe had already spent about one-third of the $251,000 award fixing the couple's flood-damaged Campbell Hall home.) Justice Bivona also awarded Ms. Howe a so-called Majauskas share of Mr. Howe's New York City Fire Department pension, finding that Mr. Howe had failed to sufficiently support his contention that a portion of his pension was compensation for his injuries. Both sides appealed.

Before the Appellate Court

Ms. Howe asked the Second Department to find that the portion of her ex-husband's 9/11 award specifically designated by the fund's administrator as compensation for economic loss does not constitute “compensation for personal injuries” under the Domestic Relations Law and, therefore, should be deemed marital property.

Mr. Howe asked the panel to determine that a portion of his FDNY pension is his separate property, despite the lack of evidence in the record distinguishing the pension's disability and non-disability ratios.

The panel sided with Mr. Howe on both issues, despite noting that the state of the law is as follows:

The manner in which disability pensions are treated for equitable distribution purposes is well established. “[P]ension benefits or vested rights to those benefits, except to the extent that they are earned or acquired before marriage or after [the] commencement of a matrimonial action, constitute marital property” (Dolan v. Dolan, 78 NY2d 463, 466, citing Majauskas v. Majauskas, 61 NY2d 481, 490). Thus, “to the extent that the disability pension represents deferred compensation, it is subject to equitable distribution.”

(Mylett v. Mylett, 163 AD2d 463, 465; see Link v. Link, 304 AD2d 800, 801; Beshara v. Beshara, 281 AD2d 577, 578). However, “[t]o the extent that a disability pension constitutes compensation for personal injuries, that compensation is 'separate property,' which is not subject to equitable distribution” (Mylett v. Mylett, 163 AD2d at 464-465; see Link v. Link, 304 AD2d at 801; Beshara v. Beshara, 281 AD2d at 578; Domestic Relations Law ' 236 (B)(5)(b)). “[T]he burden of distinguishing the marital property portion of a disability pension from the separate property portion has been placed on the recipient of the pension ' who is resisting equitable distribution ' In other words, until the contrary is demonstrated, the presumption is that the entire disability pension is marital property” (Palazzolo v. Palazzolo, 242 AD2d 688, 689 [internal citation omitted]; see Pulaski v. Pulaski, 22 AD3d 820, 821; Ferrugiari v. Ferrugiari, 226 AD2d 498).

Still, the court was able to cite to other decisions that reflected New York courts' willingness to bend the rules a bit to, in the court's words, “provide for the proper distribution of a disability pension where it is possible to do so, even where the record may technically be lacking.” See, e.g., Carney v. Carney (236 AD2d 574) and McNelis v. McNelis (6 AD3d 673).

Regarding the 9/11 award, Justice Spolzino said that although the goal of the Domestic Relations Law is to “treat marriage ' as an economic partnership income, as marital property ' compensation for personal injuries constitutes an explicit exception. Personal injury awards, the panel ruled, cannot be divided into economic and noneconomic components for the purposes of equitable distribution. The entirety of the award ” ' and therefore consider economic awards, such as damages for lost constitutes separate property, Justice Spolzino wrote.

The panel relied on the Domestic Relations Law's legislative history for its decision. Specifically, in an unusual twist, Justice Spolzino cited a treatise written by one of the law's authors, which bemoaned his own bill's designation of “compensation for personal injuries” as separate property. In the treatise, former lawmaker Henry M. Foster wrote that he included the personal-injury-award exception solely to win additional votes.

But in criticizing the exception, Justice Spolzino wrote, Mr. Foster implicitly acknowledged that the Legislature intended for the exclusion to encompass the entire personal injury award, not just the non-economic component. “Since the legislative intent must control, the inescapable conclusion is that the Supreme Court was correct in determining that the portion of the Victim Compensation award received by the plaintiff that constitutes compensation for economic loss during the marriage is the plaintiff's separate property,” Justice Spolzino concluded.

The decision brings the Second Department in line with the state's three other Appellate Division departments, which have all held that the Domestic Relations Law makes no distinction between the economic and noneconomic (such as pain and suffering) elements of personal injury awards. The Court of Appeals has yet to address the issue.

The Parties' Reactions

Barbara J. Strauss of Goshen represented Mr. Howe. Strauss said the
decision will reduce Ms. Howe's annual share of her ex-husband's pension to $11,000 from $30,000. She also said the panel's decision regarding the 9/11 award was both logical and straightforward black-letter law.

Thomas R. Davis of Vergilis, Stenger, Roberts, Davis & Diamond in Wappingers Falls represented Ms. Howe. “Looking at it from the point of view of what's fair, a lot of families were shattered by 9/11, a lot of families ended up in a divorce situation,” Davis said. “Spouses and their children should have been awarded damages for their circumstances. They should share in that compensation. Congress' intent was for the families. I think they did not think it through about what happens when this family is not intact.”

Mark Fass is a reporter for the New York Law Journal, a sister publication of this newsletter in which this article first appeared. He can be reached at [email protected].

An injured firefighter's entire federal September 11th Victim Compensation Fund award constitutes separate property for the purposes of equitable distribution, a state appeals court in Brooklyn has ruled. A panel of the Appellate Division, Second Department, found that even though economic damages are typically considered part of a marital estate, lawmakers intended for both the economic and noneconomic portions of personal injury awards to be designated separate property.

“While the logic of the Equitable Distribution Law ' suggests the conclusion that the economic portion of a personal injury award should be marital property, [the] legislative history compels the contrary result,” Justice Robert A. Spolzino wrote for the unanimous panel in Howe v. Howe, 07-07984, N.Y.L.J., D.O.I. 10/05/09, p. 17. “[T]he inescapable conclusion is that the Supreme Court was correct in determining that the portion of the Victim Compensation award received by the plaintiff that
constitutes compensation for economic loss during the marriage is the plaintiff's separate property.”

But the four-judge panel also found that the lower court erred in failing to hold that a portion of the retired fireman's disability pension was also separate property,
notwithstanding the lack of evidence in the record distinguishing the pension's economic and noneconomic proportions.

Justices Mark C. Dillon, Anita R. Florio and Daniel D. Angiolillo joined the opinion.

A Divorce

The parties, Kevin and Lucille Howe, married on Nov. 11, 1990.

In 1995, Mr. Howe became a New York City firefighter. He incurred severe injuries to his lungs in the aftermath of the 9/11 attacks, including scarring in both lungs and a cancerous nodule on his right lung. Mr. Howe also has hypertension and chronic obstructive pulmonary disease (COPD), according to a brief filed in support of this appeal.

Mr. Howe retired in 2005, and filed for divorce later that year.

In July 2007, Supreme Court Justice Andrew P. Bivona in Orange County awarded Mr. Howe 100% of the remaining funds from his 9/11 fund award. (Mr. Howe had already spent about one-third of the $251,000 award fixing the couple's flood-damaged Campbell Hall home.) Justice Bivona also awarded Ms. Howe a so-called Majauskas share of Mr. Howe's New York City Fire Department pension, finding that Mr. Howe had failed to sufficiently support his contention that a portion of his pension was compensation for his injuries. Both sides appealed.

Before the Appellate Court

Ms. Howe asked the Second Department to find that the portion of her ex-husband's 9/11 award specifically designated by the fund's administrator as compensation for economic loss does not constitute “compensation for personal injuries” under the Domestic Relations Law and, therefore, should be deemed marital property.

Mr. Howe asked the panel to determine that a portion of his FDNY pension is his separate property, despite the lack of evidence in the record distinguishing the pension's disability and non-disability ratios.

The panel sided with Mr. Howe on both issues, despite noting that the state of the law is as follows:

The manner in which disability pensions are treated for equitable distribution purposes is well established. “[P]ension benefits or vested rights to those benefits, except to the extent that they are earned or acquired before marriage or after [the] commencement of a matrimonial action, constitute marital property” ( Dolan v. Dolan , 78 NY2d 463, 466, citing Majauskas v. Majauskas , 61 NY2d 481, 490). Thus, “to the extent that the disability pension represents deferred compensation, it is subject to equitable distribution.”

( Mylett v. Mylett , 163 AD2d 463, 465; see Link v. Link , 304 AD2d 800, 801; Beshara v. Beshara , 281 AD2d 577, 578). However, “[t]o the extent that a disability pension constitutes compensation for personal injuries, that compensation is 'separate property,' which is not subject to equitable distribution” ( Mylett v. Mylett , 163 AD2d at 464-465; see Link v. Link , 304 AD2d at 801; Beshara v. Beshara , 281 AD2d at 578; Domestic Relations Law ' 236 (B)(5)(b)). “[T]he burden of distinguishing the marital property portion of a disability pension from the separate property portion has been placed on the recipient of the pension ' who is resisting equitable distribution ' In other words, until the contrary is demonstrated, the presumption is that the entire disability pension is marital property” ( P alazzolo v. Palazzolo , 242 AD2d 688, 689 [internal citation omitted]; see Pulaski v. Pulaski , 22 AD3d 820, 821; Ferrugiari v. Ferrugiari , 226 AD2d 498).

Still, the court was able to cite to other decisions that reflected New York courts' willingness to bend the rules a bit to, in the court's words, “provide for the proper distribution of a disability pension where it is possible to do so, even where the record may technically be lacking.” See, e.g., Carney v. Carney (236 AD2d 574) and McNelis v. McNelis (6 AD3d 673).

Regarding the 9/11 award, Justice Spolzino said that although the goal of the Domestic Relations Law is to “treat marriage ' as an economic partnership income, as marital property ' compensation for personal injuries constitutes an explicit exception. Personal injury awards, the panel ruled, cannot be divided into economic and noneconomic components for the purposes of equitable distribution. The entirety of the award ” ' and therefore consider economic awards, such as damages for lost constitutes separate property, Justice Spolzino wrote.

The panel relied on the Domestic Relations Law's legislative history for its decision. Specifically, in an unusual twist, Justice Spolzino cited a treatise written by one of the law's authors, which bemoaned his own bill's designation of “compensation for personal injuries” as separate property. In the treatise, former lawmaker Henry M. Foster wrote that he included the personal-injury-award exception solely to win additional votes.

But in criticizing the exception, Justice Spolzino wrote, Mr. Foster implicitly acknowledged that the Legislature intended for the exclusion to encompass the entire personal injury award, not just the non-economic component. “Since the legislative intent must control, the inescapable conclusion is that the Supreme Court was correct in determining that the portion of the Victim Compensation award received by the plaintiff that constitutes compensation for economic loss during the marriage is the plaintiff's separate property,” Justice Spolzino concluded.

The decision brings the Second Department in line with the state's three other Appellate Division departments, which have all held that the Domestic Relations Law makes no distinction between the economic and noneconomic (such as pain and suffering) elements of personal injury awards. The Court of Appeals has yet to address the issue.

The Parties' Reactions

Barbara J. Strauss of Goshen represented Mr. Howe. Strauss said the
decision will reduce Ms. Howe's annual share of her ex-husband's pension to $11,000 from $30,000. She also said the panel's decision regarding the 9/11 award was both logical and straightforward black-letter law.

Thomas R. Davis of Vergilis, Stenger, Roberts, Davis & Diamond in Wappingers Falls represented Ms. Howe. “Looking at it from the point of view of what's fair, a lot of families were shattered by 9/11, a lot of families ended up in a divorce situation,” Davis said. “Spouses and their children should have been awarded damages for their circumstances. They should share in that compensation. Congress' intent was for the families. I think they did not think it through about what happens when this family is not intact.”

Mark Fass is a reporter for the New York Law Journal, a sister publication of this newsletter in which this article first appeared. He can be reached at [email protected].