“QDRO” Doesn’t Have to be a Four Letter Word: Practice Preventatively to Manage Risk (PART II of II)

Bowman v. Cortellessa, No. 2012-CA-000416-MR (Ky. App. 2014)
Failure to Properly Discover and Divide All Retirement Benefit Plans

Rendered: January 31, 2014
Not to be Published
Opinion Affirming

As luck would (or would not) have it, it was only two weeks after I received this quarter’s The Risk Manager that the Kentucky Court of Appeals decided Bowman v. Cortellessa, No. 2012-CA-000416-MR (Ky. App. 2014).   For anyone counting, Bowman accentuates yet another area of potential attorney error we can add to the proverbial “Top Ten QDRO Mistakes” list, that is, the failure to discover and divide all marital retirement plans (and no, I did not get permission from Dave Letterman, I’m hoping my blog is somehow passing under his radar).  

The parties in Bowman were divorced in 1984.  During the course of litigation, Wife’s counsel took Husband’s deposition, wherein he testified that he had a non-vested interest in military retirement plans through both the Reserves and the Guard.  Husband further testified that he did not know how the two plans interacted or what the value of the plans were.  The subsequent Domestic Relations Commissioner (DRC) report - incorporated into the Decree - did not mention Husband’s military retirement accounts.  Beginning in 1994, and continuing over the next two decades, Wife filed various motions, pro se, seeking a domestic relations order that would entitle her to the marital portion (1971-1984) of Husband’s military retirement accounts.  Wife argued that the marital retirement assets had been previously hidden from her, purposefully, by Husband and his counsel.  Wife’s motions were all denied for various procedural reasons.  

Thirty years after the parties’ divorce decree was entered (yes, I said that), the Court of Appeals denied Wife’s Rule 60 motion.  The Court found nothing in the record to indicate that Husband or his attorney did anything to prevent Wife or her attorney from contacting personnel in the Guard and/or the Reserves who could have provided the necessary details regarding the accounts (of which, the Court duly noted, Husband admitted to the existence of in his deposition).  Insert M-Bomb here.  The potential malpractice, as seen through the eyes of the Court:

While [Wife] may argue that her attorney in 1984 should have raised this issue prior to when she discharged him, any error by counsel is imputed to the client and is not grounds for relief under CR 60.02(f).

Keeping with my practice of always offering solutions, the answer here (or one of them) is to obtain written disclosure regarding the other spouse’s retirement plans.  Before your client signs any settlement agreement, did you receive a written disclosure statement from the other spouse confirming all plans of coverage?  Without the written disclosure, it may be difficult to reopen the case upon the later discovery of the existence of a plan (concealed or not).  The rest of the solution?  When retirement assets are disclosed, through either a sworn statement or deposition as in Bowman, find out if any portion is marital.  Then follow through to ensure an appropriate classification and division of such property before any agreement is signed or trial findings are entered by the court.

Now this blog post comes full circle, and back to this quarter’s The Risk Manager, and where I will end this post in the good hands of LMICK.  The aforementioned LMICK article suggests the inclusion of certain language in the separation agreement to avoid future problems regarding nondisclosure by a spouse in divorce.  LMICK’s proposed language is based upon the AOC’s Preliminary and Final Disclosure Statements (see AOC PDF Forms 238 at Paragraph F.7., and 239 at Paragraph E.7.; see also FCRPP 2):

The parties have based this Agreement upon the information provided in their respective Preliminary Verified Disclosure Statements – AOC 238, exchanged between the parties during this divorce action. 

And if the Disclosure is not to be filed with the record, as is often the case when the parties come to an agreement, or when otherwise not required by the court, LMICK suggests further adding:

Each party waives the final requirement that the other party file a Preliminary/Final Verified Disclosure Statement.

Disregarding any statute of limitations on potential attorney malpractice in Bowman, the threat is real.  The ‘take home’ again is that there is almost always a solution that can preventatively manage risk (for both the attorney and the client) when dealing with retirement assets.  The key is to identify the potential risks, and have appropriate protective mechanisms in place.  Maybe it is a checklist, maybe it is a more detailed agreement with your client, and maybe it is retaining a third-party with particular knowledge of the subject matter.  Whatever your druthers, act affirmatively. 

* I would be remiss if I did not give credit where credit is due.  In this case, my catchy two-part post title ("QDRO" Doesn't Have to be a Four Letter Word) came from marketing genius of my friend Erin Loudner Emerson, Director of Marketing at the Cincinnati Bar Association.