Recent Decisions Every New York Family Law Practitioner Should Know

The Court of Appeals decided a number of important family law cases over the past year, addressing an array of issues ranging from technical questions of the interface between the Employee Retirement Income Security Act of 1974 (ERISA) and common law waiver to fundamental issues of protecting children from severe abuse and ensuring their support rights under the Child Support Standards Act.

Death Benefits

In Silber v. Silber, 99 N.Y.2d 395, 757 N.Y.S.2d 227, 786 N.E.2d 1263 (2003), the court held that a Qualified Domestic Relations Order can operate as a waiver of a beneficial interest in an ERISA pension plan, even absent compliance with the change of beneficiary requirements promulgated by the plan. To do so, the QDRO must reflect a voluntary, explicit and good-faith waiver.

In 1998, the ex-husband, by then remarried, entered into an agreement with his first wife that created separate annuities for her and provided her immediate access to benefit payments, the same being funded with almost $1million of plan accumulations. The agreement was incorporated in a QDRO, which provided, inter alia, that: “All ownership rights in the newly issued annuities will belong to Alternate Payee [the ex-wife]. All ownership and interest in the balance of the accumulations in all contracts issued by the Pension Plan [TIAA- CREF] will belong to Participant [Robert Silber].” It further provided that the QDRO “supersedes all prior orders or judgments of this Court and all prior agreements of the parties” and that any “further rights either party has against the other or against their respective estates shall arise solely under this Qualified Domestic Relations Order.” Additionally, the parties executed a waiver of estate claims provision, limiting their rights to those arising under the QDRO, which was subsequently ratified by the pension plan. The ex-husband never returned the plan-approved change of beneficiary form, thus leaving his former wife as designated beneficiary of 50% of the death benefits, based on the divorce judgment.

Because the benefits in question were subject to ERISA, federal pre-emption was implicated. After reviewing the history of ERISA and the Retirement Equity Act of 1984, which created the QDRO for the purpose of facilitating spousal access to plan benefits, the court found that a QDRO may dispose of plan benefits to alternate payees, including former spouses.

Thus, a QDRO may serve as a plan document that changes the beneficiary designation of an ERISA-governed plan absent the filing of a plan beneficiary designation form. Noting that the federal courts disagreed as to whether ERISA authorizes a claim of waiver, the court adopted the majority view, concluding that “waivers of beneficiary rights are possible under ERISA-governed plans [citations omitted]. According to this 'common-law' view, the party challenging payment to the named beneficiary is permitted to show that the beneficiary executed a waiver that meets common-law requirements.”

The federal common-law requirements for a valid waiver have been expressed as a straightforward tripartite test: The waiver must be explicit, voluntary and made in good faith. These standards are generally consistent with New York's waiver requirements in similar situations. Because the parties had waived rights against each other and their respective estates, and had agreed that ownership of the newly created annuities would belong to the first wife exclusively, while all remaining accumulations would belong to decedent-husband, the QDRO was a specific waiver of the first wife's right to the death benefits.

Importance of Precise Drafting

A divorce judgment is not a QDRO until the pension plan qualifies it. Typically, it falls on the alternate payee's attorney to ensure that the plan administrator qualified the judgment. Only then, does it become a QDRO.

In McCoy v. Feinman, 99 N.Y.2d 295, 785 N.E.2d 714, 755 N.Y.S.2d 693 (2002), the judgment incorporated a stipulation that provided for the wife to share in the husband's retirement benefits, but, significantly, did not provide any right to receive pre-retirement death benefits. The husband subsequently remarried and later died before retiring. The attorney for the wife had not submitted the order for qualification. The wife sued for malpractice 8 years after the divorce judgment was filed. The court held that the action was time-barred.

The statute of limitations for legal malpractice actions is 3 years, computed from the moment the cause of action accrues, even if the aggrieved client is then ignorant of the negligence or resulting injury. CPLR 214(6).

“What is important is when the malpractice was committed, not when the client discovered it.” Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541, 620 N.Y.S.2d 318, 644 N.E.2d 1009 (1994). Because any malpractice would have been the failure to include the death benefits in the stipulation, and not the failure to obtain qualification of the judgment, the statute of limitations would have expired, at the latest, 3 years after entry of the divorce judgment that incorporated the stipulation.

This decision underscores the importance of precise drafting. If the alternate payee is intended to share in pre-retirement death benefits as well as retirement benefits, the order must so state.

Waiver of Totten Trust

In Eredics v. Chase Manhattan Bank, N.A., 100 N.Y.2d 106, 790 N.E.2d 1166, 760 N.Y.S.2d 737 (2003), the issue of waiver arose in connection with a separation agreement that contained standard boilerplate language of waiver and release, including, inter alia: “5.b. The parties agree and acknowledge that any and all bank accounts, held jointly or otherwise … not specifically mentioned in this agreement, have been distributed equitably and to the mutual satisfaction of the parties, prior to the execution of this agreement.”

The husband died 3 years later, willing his estate to his siblings. At issue were Totten trusts that he had established for his wife during the marriage and which were never revoked in accordance with the statute. EPTL 7-5.2. Notwithstanding the divorce, the accounts continued to name the ex-wife as beneficiary. His will made no mention of them.

Plaintiff ex-wife commenced action against the banks and decedent's estate to establish her right to the accounts. She contended that absent a valid revocation, they became her property on her ex-husband's death, further claiming that neither she nor decedent intended the separation agreement to remove her as beneficiary. The estate asserted that it owned the funds because plaintiff had waived her rights in the agreement.

Supreme Court granted plaintiff summary judgment, confining its analysis to the issue of revocation and concluded that the agreement had not revoked the trusts in accordance with EPTL 7-5.2. The Appellate Division affirmed, also focusing on the issue of statutory revocation. The Court of Appeals affirmed, concluding that the separation agreement had not revoked the trusts nor waived plaintiff's claim.

Comparing the issue with that presented in Silber, the court stated:

“Guided by the same considerations of fairness in effectuating the clear intent of the parties, we conclude that a beneficiary also can waive rights in a Totten trust, so long as the waiver is explicit, voluntary and made in good faith. In this respect we agree with defendants that the provisions of EPTL article 7 governing a depositor's revocation of a Totten trust do not prevent a beneficiary from freely and independently waiving such rights. We are satisfied, moreover, that the legislative concern for certainty and predictability in this area is sufficiently safeguarded by the requirement that any such waiver be explicit, voluntary and made in good faith. We thus honor the unequivocal intent of the parties as well as the letter and spirit of the statute”.

Unlike the Silber QDRO, however, the agreement here was insufficiently precise to work a waiver and the ex-wife was held entitled to the trust accounts.

Child Support Determination

In Tompkins County Support Collection Unit ex rel. Chamberlin v. Chamberlin, 99 N.Y2d 328, 756 N.Y.S. 115 (2003), the court held that objections filed to a proposed COLA triggered a de novo support determination under the Child Support Standards Act (CSSA) guidelines.

The parties were divorced in 1985. The husband was ordered to pay support for the two children of $70 per week. In 1991, the parties stipulated to modify the decree, increasing support to $100 per week. In 1997, after the oldest child's emancipation, the support obligation was reduced to $57 weekly, payable through the Support Collection Unit (SCU). In 1999, the SCU filed an adjusted order incorporating a COLA, resulting in an obligation of $64 per week. It simultaneously filed objections to the adjusted order pursuant to Family Court Act ' 413-a(3)(a). The husband moved to dismiss, asserting that a party could not request modification of the adjusted support order in excess of the COLA. The motion was denied, and Family Court issued a new order, based on the support guidelines, in the amount of $149.62 per week.

The Appellate Division reversed, holding that review of a COLA objection should result only in a determination of whether or not the COLA should be applied, not a de novo determination under the CSSA, concluding that the objection process is not a means to obtain modification of an order that the party otherwise would not be entitled to receive. On remittal, Family Court restored the adjusted order of $64 per week, and the Court of Appeals granted leave to appeal.

In reversing the order, the Court of Appeals held that:

“Under the plain language of the statute, when a hearing is held pursuant to a COLA objection, the court is to review the order to determine whether an adjustment is warranted based on the guidelines, not merely whether the COLA should be applied.

The statute directs the court to issue either 'a new order of support in accordance with the child support standards' [citation omitted] or, 'where application of the child support standards … results in a determination that no adjustment is appropriate,' to enter an order of no adjustment [citation omitted]. An order 'in accordance with the child support standards' should be exactly that – an order that comports with the guidelines as set forth in section 413.”

This holding underscores the vulnerability of agreements that provide for less than the amount of support that would be produced by the guidelines. Tippins, T.M., “Contractual Child Support Shields – Real Protection or Historical Relic?” N.Y.L.J., 9/13/02, p. 3, col. 1. Prior to Chamberlin, one might have thought that once a contract established the baseline, any future increases, absent an independent basis for modification, would be pegged to the COLA, not recalculation under the guidelines. It is now clear that the COLA process unlocks the contract and opens the way for a guidelines application, though the court notes that a party is free to raise the contract as a factor warranting deviation from the guidelines.

Placement of Abused Children

Matter of Marino S., NYLJ, July 3, 2003, p. 18, col. 1, was a termination of parental rights case. Respondents, Raquel T. and Marino S., were the parents of two children in common. Additionally, Raquel was the mother of another child, Shaina. Though unmarried, respondents lived together with the three children. In 1997, Marino raped Shaina, then age 8, as she slept in a bed with her 4-year old half-sister See New York Family Law Monthly Vol. 4, No. 11, p.3. Respondents then conspired to cover up Marino's crime as Shaina hemorrhaged without medical care. As a consequence, Shaina almost died and was hospitalized for 9 days.

As discussed in this journal's August Issue, Marino pleaded guilty to rape and was sentenced to 15 years in prison. Raquel pleaded guilty to reckless endangerment and was sentenced to 1 to 3 years imprisonment for her part in the cover-up. Abuse proceedings were commenced, and Family Court placed all three children in the custody of the Administration for Children's Services (ACS) for 1 year. At the end of that year, while the underlying proceeding was still pending, ACS filed to terminate respondents' parental rights, based on permanent neglect. Family Court granted the petitions and the Appellate Division affirmed.

In affirming, the Court of Appeals stated that a “central issue was whether diligent efforts to reunite respondents with the children, concededly not undertaken by the foster care agency, were required.” The issue was impacted by New York's enactment of the Adoption and Safe Families Act (ASFA) (L. 1999, ch. 7), which occurred while the proceedings were pending, a federally mandated act which “made explicit our law's constant concern for prompt permanency in a child's life.”

Thereafter, the termination petitions were amended, adding causes of action for “severe abuse,” a rubric contained in the newly amended statute. Simultaneously, petitioner moved for a finding of “aggravated circumstances,” the effect of which also is to dispense with the mandate that the agency exercise diligent or reasonable efforts to reunite the respondent with the children. Because the statutory amendment was remedial, the court found its retroactive application to the instant case to be proper.

Additionally, the court found that Family Court had authority to make derivative findings of severe abuse as to Shaina's siblings who were not the victims of the rape. Even though Article 10 is silent with respect to derivative findings, the court noted that “courts have consistently sustained derivative findings where a respondent's abuse of the subject child is so closely connected with the care of another child as to indicate that the second child is equally at risk” and cited to past decisions that had held that derivative findings of severe abuse may be “predicated upon the common understanding that a parent whose judgment and impulse control are so defective as to harm one child in his or her care is likely to harm others as well.” Even though the statute mentions derivative findings only with respect to homicide and assault, the court stated, “It would be unthinkable to interpret the Social Services Law so that a derivative finding can be made when a parent assaults a sibling, but not when the parent rapes a sibling or seriously injures her under circumstances evincing a depraved indifference to her life.” Thus, although it had to weave its way through a tangle of technical statutory cross-references, the court arrived at a result that comports with common sense and serves the ultimate purpose of protecting children from severe abuse.

Conclusion

The volume of important family law decisions from the Court of Appeals over the past year is impressive. The holdings signify the importance of precise drafting of contractual provisions as well as the court's ongoing commitment to securing the financial and familial rights of children.

The Court of Appeals decided a number of important family law cases over the past year, addressing an array of issues ranging from technical questions of the interface between the Employee Retirement Income Security Act of 1974 (ERISA) and common law waiver to fundamental issues of protecting children from severe abuse and ensuring their support rights under the Child Support Standards Act.

Death Benefits

In Silber v. Silber , 99 N.Y.2d 395, 757 N.Y.S.2d 227, 786 N.E.2d 1263 (2003), the court held that a Qualified Domestic Relations Order can operate as a waiver of a beneficial interest in an ERISA pension plan, even absent compliance with the change of beneficiary requirements promulgated by the plan. To do so, the QDRO must reflect a voluntary, explicit and good-faith waiver.

In 1998, the ex-husband, by then remarried, entered into an agreement with his first wife that created separate annuities for her and provided her immediate access to benefit payments, the same being funded with almost $1million of plan accumulations. The agreement was incorporated in a QDRO, which provided, inter alia, that: “All ownership rights in the newly issued annuities will belong to Alternate Payee [the ex-wife]. All ownership and interest in the balance of the accumulations in all contracts issued by the Pension Plan [TIAA- CREF] will belong to Participant [Robert Silber].” It further provided that the QDRO “supersedes all prior orders or judgments of this Court and all prior agreements of the parties” and that any “further rights either party has against the other or against their respective estates shall arise solely under this Qualified Domestic Relations Order.” Additionally, the parties executed a waiver of estate claims provision, limiting their rights to those arising under the QDRO, which was subsequently ratified by the pension plan. The ex-husband never returned the plan-approved change of beneficiary form, thus leaving his former wife as designated beneficiary of 50% of the death benefits, based on the divorce judgment.

Because the benefits in question were subject to ERISA, federal pre-emption was implicated. After reviewing the history of ERISA and the Retirement Equity Act of 1984, which created the QDRO for the purpose of facilitating spousal access to plan benefits, the court found that a QDRO may dispose of plan benefits to alternate payees, including former spouses.

Thus, a QDRO may serve as a plan document that changes the beneficiary designation of an ERISA-governed plan absent the filing of a plan beneficiary designation form. Noting that the federal courts disagreed as to whether ERISA authorizes a claim of waiver, the court adopted the majority view, concluding that “waivers of beneficiary rights are possible under ERISA-governed plans [citations omitted]. According to this 'common-law' view, the party challenging payment to the named beneficiary is permitted to show that the beneficiary executed a waiver that meets common-law requirements.”

The federal common-law requirements for a valid waiver have been expressed as a straightforward tripartite test: The waiver must be explicit, voluntary and made in good faith. These standards are generally consistent with New York's waiver requirements in similar situations. Because the parties had waived rights against each other and their respective estates, and had agreed that ownership of the newly created annuities would belong to the first wife exclusively, while all remaining accumulations would belong to decedent-husband, the QDRO was a specific waiver of the first wife's right to the death benefits.

Importance of Precise Drafting

A divorce judgment is not a QDRO until the pension plan qualifies it. Typically, it falls on the alternate payee's attorney to ensure that the plan administrator qualified the judgment. Only then, does it become a QDRO.

In McCoy v. Feinman , 99 N.Y.2d 295, 785 N.E.2d 714, 755 N.Y.S.2d 693 (2002), the judgment incorporated a stipulation that provided for the wife to share in the husband's retirement benefits, but, significantly, did not provide any right to receive pre-retirement death benefits. The husband subsequently remarried and later died before retiring. The attorney for the wife had not submitted the order for qualification. The wife sued for malpractice 8 years after the divorce judgment was filed. The court held that the action was time-barred.

The statute of limitations for legal malpractice actions is 3 years, computed from the moment the cause of action accrues, even if the aggrieved client is then ignorant of the negligence or resulting injury. CPLR 214(6).

“What is important is when the malpractice was committed, not when the client discovered it.” Ackerman v. Price Waterhouse , 84 N.Y.2d 535, 541, 620 N.Y.S.2d 318, 644 N.E.2d 1009 (1994). Because any malpractice would have been the failure to include the death benefits in the stipulation, and not the failure to obtain qualification of the judgment, the statute of limitations would have expired, at the latest, 3 years after entry of the divorce judgment that incorporated the stipulation.

This decision underscores the importance of precise drafting. If the alternate payee is intended to share in pre-retirement death benefits as well as retirement benefits, the order must so state.

Waiver of Totten Trust

In Eredics v. Chase Manhattan Bank, N.A. , 100 N.Y.2d 106, 790 N.E.2d 1166, 760 N.Y.S.2d 737 (2003), the issue of waiver arose in connection with a separation agreement that contained standard boilerplate language of waiver and release, including, inter alia : “5.b. The parties agree and acknowledge that any and all bank accounts, held jointly or otherwise … not specifically mentioned in this agreement, have been distributed equitably and to the mutual satisfaction of the parties, prior to the execution of this agreement.”

The husband died 3 years later, willing his estate to his siblings. At issue were Totten trusts that he had established for his wife during the marriage and which were never revoked in accordance with the statute. EPTL 7-5.2. Notwithstanding the divorce, the accounts continued to name the ex-wife as beneficiary. His will made no mention of them.

Plaintiff ex-wife commenced action against the banks and decedent's estate to establish her right to the accounts. She contended that absent a valid revocation, they became her property on her ex-husband's death, further claiming that neither she nor decedent intended the separation agreement to remove her as beneficiary. The estate asserted that it owned the funds because plaintiff had waived her rights in the agreement.

Supreme Court granted plaintiff summary judgment, confining its analysis to the issue of revocation and concluded that the agreement had not revoked the trusts in accordance with EPTL 7-5.2. The Appellate Division affirmed, also focusing on the issue of statutory revocation. The Court of Appeals affirmed, concluding that the separation agreement had not revoked the trusts nor waived plaintiff's claim.

Comparing the issue with that presented in Silber, the court stated:

“Guided by the same considerations of fairness in effectuating the clear intent of the parties, we conclude that a beneficiary also can waive rights in a Totten trust, so long as the waiver is explicit, voluntary and made in good faith. In this respect we agree with defendants that the provisions of EPTL article 7 governing a depositor's revocation of a Totten trust do not prevent a beneficiary from freely and independently waiving such rights. We are satisfied, moreover, that the legislative concern for certainty and predictability in this area is sufficiently safeguarded by the requirement that any such waiver be explicit, voluntary and made in good faith. We thus honor the unequivocal intent of the parties as well as the letter and spirit of the statute”.

Unlike the Silber QDRO, however, the agreement here was insufficiently precise to work a waiver and the ex-wife was held entitled to the trust accounts.

Child Support Determination

In Tompkins County Support Collection Unit ex rel. Chamberlin v. Chamberlin , 99 N.Y2d 328, 756 N.Y.S. 115 (2003), the court held that objections filed to a proposed COLA triggered a de novo support determination under the Child Support Standards Act (CSSA) guidelines.

The parties were divorced in 1985. The husband was ordered to pay support for the two children of $70 per week. In 1991, the parties stipulated to modify the decree, increasing support to $100 per week. In 1997, after the oldest child's emancipation, the support obligation was reduced to $57 weekly, payable through the Support Collection Unit (SCU). In 1999, the SCU filed an adjusted order incorporating a COLA, resulting in an obligation of $64 per week. It simultaneously filed objections to the adjusted order pursuant to Family Court Act ' 413-a(3)(a). The husband moved to dismiss, asserting that a party could not request modification of the adjusted support order in excess of the COLA. The motion was denied, and Family Court issued a new order, based on the support guidelines, in the amount of $149.62 per week.

The Appellate Division reversed, holding that review of a COLA objection should result only in a determination of whether or not the COLA should be applied, not a de novo determination under the CSSA, concluding that the objection process is not a means to obtain modification of an order that the party otherwise would not be entitled to receive. On remittal, Family Court restored the adjusted order of $64 per week, and the Court of Appeals granted leave to appeal.

In reversing the order, the Court of Appeals held that:

“Under the plain language of the statute, when a hearing is held pursuant to a COLA objection, the court is to review the order to determine whether an adjustment is warranted based on the guidelines, not merely whether the COLA should be applied.

The statute directs the court to issue either 'a new order of support in accordance with the child support standards' [citation omitted] or, 'where application of the child support standards … results in a determination that no adjustment is appropriate,' to enter an order of no adjustment [citation omitted]. An order 'in accordance with the child support standards' should be exactly that – an order that comports with the guidelines as set forth in section 413.”

This holding underscores the vulnerability of agreements that provide for less than the amount of support that would be produced by the guidelines. Tippins, T.M., “Contractual Child Support Shields – Real Protection or Historical Relic?” N.Y.L.J., 9/13/02, p. 3, col. 1. Prior to Chamberlin, one might have thought that once a contract established the baseline, any future increases, absent an independent basis for modification, would be pegged to the COLA, not recalculation under the guidelines. It is now clear that the COLA process unlocks the contract and opens the way for a guidelines application, though the court notes that a party is free to raise the contract as a factor warranting deviation from the guidelines.

Placement of Abused Children

Matter of Marino S., NYLJ, July 3, 2003, p. 18, col. 1, was a termination of parental rights case. Respondents, Raquel T. and Marino S., were the parents of two children in common. Additionally, Raquel was the mother of another child, Shaina. Though unmarried, respondents lived together with the three children. In 1997, Marino raped Shaina, then age 8, as she slept in a bed with her 4-year old half-sister See New York Family Law Monthly Vol. 4, No. 11, p.3. Respondents then conspired to cover up Marino's crime as Shaina hemorrhaged without medical care. As a consequence, Shaina almost died and was hospitalized for 9 days.

As discussed in this journal's August Issue, Marino pleaded guilty to rape and was sentenced to 15 years in prison. Raquel pleaded guilty to reckless endangerment and was sentenced to 1 to 3 years imprisonment for her part in the cover-up. Abuse proceedings were commenced, and Family Court placed all three children in the custody of the Administration for Children's Services (ACS) for 1 year. At the end of that year, while the underlying proceeding was still pending, ACS filed to terminate respondents' parental rights, based on permanent neglect. Family Court granted the petitions and the Appellate Division affirmed.

In affirming, the Court of Appeals stated that a “central issue was whether diligent efforts to reunite respondents with the children, concededly not undertaken by the foster care agency, were required.” The issue was impacted by New York's enactment of the Adoption and Safe Families Act (ASFA) (L. 1999, ch. 7), which occurred while the proceedings were pending, a federally mandated act which “made explicit our law's constant concern for prompt permanency in a child's life.”

Thereafter, the termination petitions were amended, adding causes of action for “severe abuse,” a rubric contained in the newly amended statute. Simultaneously, petitioner moved for a finding of “aggravated circumstances,” the effect of which also is to dispense with the mandate that the agency exercise diligent or reasonable efforts to reunite the respondent with the children. Because the statutory amendment was remedial, the court found its retroactive application to the instant case to be proper.

Additionally, the court found that Family Court had authority to make derivative findings of severe abuse as to Shaina's siblings who were not the victims of the rape. Even though Article 10 is silent with respect to derivative findings, the court noted that “courts have consistently sustained derivative findings where a respondent's abuse of the subject child is so closely connected with the care of another child as to indicate that the second child is equally at risk” and cited to past decisions that had held that derivative findings of severe abuse may be “predicated upon the common understanding that a parent whose judgment and impulse control are so defective as to harm one child in his or her care is likely to harm others as well.” Even though the statute mentions derivative findings only with respect to homicide and assault, the court stated, “It would be unthinkable to interpret the Social Services Law so that a derivative finding can be made when a parent assaults a sibling, but not when the parent rapes a sibling or seriously injures her under circumstances evincing a depraved indifference to her life.” Thus, although it had to weave its way through a tangle of technical statutory cross-references, the court arrived at a result that comports with common sense and serves the ultimate purpose of protecting children from severe abuse.

Conclusion

The volume of important family law decisions from the Court of Appeals over the past year is impressive. The holdings signify the importance of precise drafting of contractual provisions as well as the court's ongoing commitment to securing the financial and familial rights of children.