11th Circuit Defines "Retention" in Hague Cases

In Pielage v McConnell, --- F.3d ----, 2008 WL 399431 (11th Cir., 2008) Plaintiff Mariette Pielage, a native of the Netherlands, was involved in a child custody battle with James Vincent McConnell, III, a native of this country. That battle was being fought in the Circuit Court of Baldwin County, Alabama, and in the course of it the state court issued a ne exeat order, which forbid Pielage from removing the child from its jurisdiction pending its decision. Pielage filed a complaint in federal district court claiming that the state court's order constituted a "wrongful retention" under the Hague Convention. The district court dismissed her complaint and Pielage appealed. The Eleventh Circuit affirmed. In her complaint, Pielage alleged that all of her time in the United States was just visits, and that the Netherlands was both her and Josha's "habitual residence." Any thoughts she had about returning to the Netherlands while the custody battle was ongoing were interrupted on September 6, 2006, when the Baldwin County Circuit Court granted McConnell's ex parte motion for a ne exeat order. That order prohibited Pielage from removing Josha from the state court's jurisdiction until the custody dispute was resolved. Thirteen weeks after the ne exeat order was issued, Pielage filed a complaint in the United States District Court for the Southern District of Alabama, claiming that the order constituted an "unlawful retention" that deprived her of her custody rights, in violation of the Hague Convention and requested multiple forms of relief, including an order from the district court directing that Josha be returned to his "habitual residence of the Netherlands. McConnell responded with a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, arguing that the state court's ne exeat order did not constitute an "unlawful retention" within the meaning of ICARA. Ruling on the motion, the district court assumed that the Netherlands was Josha's habitual residence. Even with that assumption, the district court agreed with McConnell that the state court ne exeat order did not constitute a wrongful removal or retention under ICARA, because Josha had been in Pielage's physical custody since his birth, and she still had physical custody of him after the order was entered. The district court dismissed Pielage's complaint for failure to state a claim.Pielage contended on Appeal that the ne exeat order constituted a wrongful retention of Josha under the Hague Convention because it amounts to an interference with her custodial right to return the child to his habitual residence in the Netherlands. The obvious initial issue was whether there had been a "retention" at all under the Hague Convention. Neither the Hague Convention nor ICARA actually defines the term "retention." Pielage pointed to Article V of the Hague Convention, which defines a parent's "rights of custody" over a child as including "the right to determine the child's place of residence." Using that definition, Pielage contended that the state court ne exeat order was interfering with one of her rights of custody by preventing her from removing Josha from the state court's jurisdiction to take him to her desired place of residence, the Netherlands. According to her, that is all she needed to show to state a valid claim under the Hague Convention. The Eleventh Circuit was not persuaded to define "retention" to include every breach of a parent's rights of custody. Doing that would render the treaty's definition of "wrongful" superfluous. The treaty provides that a retention is wrongful only where "it is in breach of rights of custody attributed to a person, an institution or any other body." That necessarily means that there are some retentions that are not wrongful. Under Pielage's construction, however, none would be. Any breach of the rights of custody would be a retention and it would be wrongful. There would be no retention unless there were a wrongful one. It noted that according to one dictionary, the primary definition of the term "retain" is "to keep possession of." This meaning of the term "retention" was supported by the Perez-Vera Report, which states that the Hague Convention was meant to remedy situations where a "child is taken out of the family and social environment in which [he] has developed." This indicates that the term "retention" is meant to cover the circumstances where a child has been prevented from returning to his usual family and social environment. The court held that because the order did not disrupt or otherwise alter the "family and social environment in which [he] has developed," it was not the type of "retention" that the Hague Convention was intended to remedy. Although the preamble to the Hague Convention does state that one of its purposes is the return of the child to its state of habitual residence, the substantive provisions of the treaty are silent on where the child is to be returned. This silence, according to the Perez-Vera Report, was intentional and must be "understood as allowing the authorities of the State of refuge to return the child directly to the applicant, regardless of the latter's present place of residence." In cases such as this one, where the child remains in the physical care of the petitioner, it is impossible "to return the child directly to the applicant.". That is so because there has been no "retention" within the meaning of the Convention. There having been no retention, there can have been no "wrongful retention." Because the state court's ne exeat order did not constitute a "retention" within the meaning of the Hague Convention the district court did not err in granting McConnell's motion to dismiss.

Obligation For College Expenses Not Subject to Deviation Rules

In Cimons v Cimons, --- N.Y.S.2d ----, 2008 WL 2457243 (N.Y.A.D. 2 Dept.) the Second Department in an opinion by Justice Angiolillo, held that, under the circumstances presented here, the obligation to provide for the future college expenses of the children was not part of the parties' basic child support obligation and therefore was not subject to the CSSA requirement that any deviation from statutorily-mandated childsupport obligations must be recited and explained in a stipulation of settlement. Even though the parties violated the CSSA by failing to recite and explain in their stipulation why they deviated from CSSA standards in providing basic child support, and the basic child support provisions were properly vacated as a consequence, the provision concerning future college expenses survived the vacatur, and was enforceable.

The parties entered into a stipulation of settlement, which was incorporated but not merged in a judgment of separation. Subsequent to the entry of the judgment, the father moved to vacate the child support and related provisions of the stipulation, alleging that the stipulation failed to comply with the "opt-out/deviation" provisions of the CSSA contained in Domestic Relations Law 240(1-b)(h). The Supreme Court determined, in effect, that the parties' agreement deviated from the provisions of the CSSA with regard to the calculation of "basic child support." Since the parties failed to comply with the provisions of Domestic Relations Law 240(1-b)(h), those basic child support provisions were not enforceable, and the Supreme Court vacated those provisions of the parties' stipulation relating to their basic child support obligation for their three children, ultimately scheduling a hearing for a calculation of basic child support pursuant to the CSSA. However, Supreme Court denied the father's motion to vacate the separate provisions of the stipulation that related to the parties' agreement to provide for their children's future college expenses.
The Appellate Division affirmed. It noted that a parent has an obligation to provide support for his or her child's basic needs, an obligation which is addressed in Domestic Relations Law s 240(1- b)(c)(1), (2). Unlike that basic obligation, support for a child's college education is not mandatory. Absent a voluntary agreement, a parent might be required to provide support for his or her child's attendance at college, but the determination of that obligation is dependent upon the exercise of the court's discretion in accordance with Domestic Relations Law s 240(1- b)(c)(7).
Domestic Relations Law 240(1-b)(h) requires that any agreement or stipulation voluntarily entered into between the parties, and presented to the court for incorporation in an order or judgment, must include provisions: (1) stating that the parties have been advised of the provisions of the CSSA; (2) stating that the basic child support provisions of the CSSA would presumptively result in the determination of the correct amount of child support to be awarded; (3) stating what the amount of basic child support would have been if calculated pursuant to the CSSA, if the parties' stipulation or agreement deviates from the basic child support obligation; and (4) setting forth the parties' reason or reasons for deviating from the CSSA calculation, if they have chosen to deviate.The requirements of Domestic Relations Law s 240(1- b)(h) may not be waived byeither party or by counsel.
The Appellate Division noted that in contrast to the add-ons for child care expenses and future reasonable health care expenses, which must be awarded and prorated in the same proportion or percentage as each parent's income bears to the combined parental income, the add-on for educational expenses is within the court's discretion, both as to whether an award of such expenses is to be made in the first instance, and the parties' share of any amount awarded. Domestic Relations Law 240(1-b)(c)(7). Where the parties' stipulation or agreement fails to comply with the requirementsof Domestic Relations Law s 240(1-b)(h), it is fundamental that the basic childsupport provisions of the agreement are invalid and cannot be enforced. Thatportion of the agreement must be set aside and the parties' basic child supportobligation must be recalculated through the application of the CSSA. Nonetheless, the invalidity of the basic child support obligation, due to a deviation from the CSSA standards without full compliance with Domestic Relations Law 240(1-b)(h), does not necessarily require that the entire stipulation be vacated. That a portion of an agreement may be invalid and unenforceable does not necessarily preclude the enforcement of other portions of an agreement. (Ferro v. Bologna, 31 N.Y.2d 30).
The Court held that the determination as to which additional aspects, if any, of the parties' stipulation must be vacated along with the basic child support provision depends on the circumstances of the particular case and the nature of the obligations addressed in the other provisions of a stipulation. Some provisions may be so directly connected or intertwined with the basic child support obligation that they necessarily must be recalculated along with the basic support obligation. Unlike child care expenses and unreimbursed health care expenses, education expenses are not directly connected to the basic child support calculation. Initially,education expenses differ from these other expenses in that, in the absence of an agreement to pay education expenses, the determination as to whether or not such expenses will be paid is within the court's discretion (see Domestic Relations Law 240[1-b][c][7] ), while child care and unreimbursed health expenses are mandatory. Also, education expenses differ in that such expenses are not necessarily prorated in the same proportion or percentage as each parent's income bears to the combined parental income.
The Court held that the entirety of the stipulation should be considered in determining whether the parties' agreement evinces that trade-offs were made which involved the basic child support figure. In such a situation, expenses that are not directly connected to the CSSA calculation, or even to child support, may be so closely intertwined with the basic child support provision as to require vacatur.
The Court cited as an example Farca v. Farca (271 A.D.2d 482), where the wife waived maintenance and equitable distribution of property, upon the understanding that she would receive a certain level of child support. When the court vacated the basic child support provision, it vacated all of the financial provisions of the stipulation and judgment of divorce. The same remedy was applied in LePore v. LePore (276 A.D.2d 677, 678), where the Second Department held that the provisions of the parties' agreement regarding maintenance and financial obligations for college expenses were so "closely intertwined" with the basic child support provisions as to require those provisions to be vacated along with the basic child support provisions. In contrast, it held in Warnecke v. Warnecke (12 AD3d 502), that the record did not support a finding that the maintenance provisions of a stipulation were closely intertwined with the child support provisions. The court reached the same result in Toussaint v. Toussaint (270 A.D.2d 338), where it held that the entire stipulation did not have to be vacated, but only those provisions of the stipulation as failed to comply with the requirements of the CSSA.
In Toussaint, the provisions relating to educational and health costs were vacated along with those relating to basic child support. The father in Toussaint had agreed to pay all health expenses, including costs of a health insurance policy, as well as medical, dental, nursing, opthalmologic, orthodonic, and every other similar expense, and to pay all tuition and related expenses for private school, including uniforms. The father also agreed to be responsible for all college and graduate school expenses. While there was little doubt that the health care expenses in Toussaint were directly connected to the CSSA calculation, it was for the court to determine whether the education expenses were to be treated similarly. Since the education expenses, including those for college, did not receive separate treatment in the parties' stipulation, they were also deemed to be directly connected to the CSSA calculation. Specifically, the agreement merely recited a list of obligations, of which the father agreed to pay the total expense. Accordingly, the education expense provisions of the agreement inToussaint were not separate from all the other child support aspects of theagreement.
This case fell within the ambit of cases that clearly stated that the tuition expense aspect of a college education is distinct from basic child support.
The parties' stipulation, insofar as it pertained to their support for their children's attendance at college, recited as follows: "The parties further acknowledge, each to the other, that it is their anticipation that each of their children attends college. And in this regard, the parties agree to contribute pro rata to income to the minimum of a SUNY education. That is State of New York education for a New York State resident for each child and shall contribute more than that minimum, if possible, based upon their respective financial circumstances at the time each child makes application to college. College expenses with respect to the parties' obligation, to pay for same pro rata to income is defined as including but not limited to tuition, room and board, mandatory books, supplies and fees, pre-college testing classes and actual testing, such as the SATs, scholastic aptitude tests and reasonable number of applications to colleges for purposes of the child or children reviewing campuses for purposes of making a final decision with respect to the selection of college."
The court held that to the extent that the commitment to meet future college expenses addressed room and board, the agreement did not deviate from the CSSA as it provided that the parties will contribute to such expenses pro rata to income. The stipulation also included extensive provisions as to how the parties are to deal with various custodial funds that had been earmarked for college education expenses, including a recital that such funds would be utilized in the first instance beforetriggering the parties' obligation to contribute to college expenses proportionally based on their income.
There was nothing in the record that would support a finding that the father agreed to pay a share of college expenses as a trade-off against some other expense. When the parties agreed to equitable distribution and traded off certain assets, the stipulation directly addressed those trade-offs. Thus, the wife received sole title to the marital residence in exchange for waiving any claim to the husband's pension, IRA, or deferred-compensation account. Similarly, the wife waived any claim to certain stock in exchange for the husband's waiver of any claim to a joint bank account. Additionally, the provisions of the parties' stipulation regarding college expenses were distinguishable from those provisions of the stipulation based upon the calculation of basic child support. In particular, the stipulation provided: "Mr. Cimons shall pay child support for the benefit of the children and to the age of 21 or 22, if in college." The father's agreement to support his children and contribute to their college education expenses beyond the age of 21 years inured primarily to the benefit of the three children. As it is the intent of the CSSA to protect the children, to the extent possible, from the economic consequences of their parents' divorce or separation, it would seem particularly unjust to allow the father, whose adjusted income, in 2005, after deduction of all mandatory deductions including his maintenance obligation, was reported as $130,000, to wield noncompliance with the CSSA as a sword to eviscerate his commitment to provide his children with support for their college education.
The court noted that in Fasano v. Fasano (43 AD3d 988), the Second Department found that the parties to the relevant agreement did not opt out of the CSSA standards with respect to basic child support, but that a cost-of-living adjustment (hereinafter COLA) included in the agreement represented potential future deviations from the CSSA basic child support obligation. The remedy was to vacate the COLA provision, while the basic child support provision of the agreement was not vacated. Similarly, the vacatur of the basic child support provisions of the stipulation here did not warrant thevacatur of the provisions respecting college education expenses.
The parties' stipulation dealt with their commitment to meet their children's college expenses in an extensive provision which was separate and discrete from the child support provision. This case was unlike Toussaint, where the reference to future college expenses was but one phrase in a long list of health and education expenses added on to the child support obligation. Here, by contrast, the parties separately addressed their commitment that their children attend college, by providing that they would share, pro rata, at a minimum, the costs of a State University of New York education, that they would contribute more than that minimum if able, that certain custodial accounts designated for college expenses would be applied to the college expenses prior to the parties' obligation to make pro rata contributions, and that any surplus in such custodial accounts would "spill over" from child to child.
The provisions of the parties' stipulation relating to future college expenseswere thus separate and distinct from the provisions relating to basic childsupport. Those two discrete sets of provisions were not closely intertwined.Accordingly, the Supreme Court properly denied that branch of the father's motionwhich was to vacate the separate provisions of the stipulation that related to theparties' agreement to provide for their children's future college expenses.

Ninth Circuit Adopts Equitable Tolling

In Duarte v Bardales, 526 F.3d 563 (9th Cir. 2008) the main issue was whether the district court properly denied Duarte's Rule 59(e) motion to vacate judgment. Emilia Duarte and Hector Bardales ("Bardales") entered the United States from Mexico in 1990. Together they hade four children--age 17, age 16, age 11, and age 9. Duarte and Bardales never married. In January 2000, they separated and Duarte returned to Mexico with their four children. In 2002, the two oldest children visited Bardales in California. After expressing that they did not want to live with Duarte, they established residency with Bardales in San Diego, California. The two youngest children remained with Duarte in Mexico. (Because the Hague Convention does not apply once a child reaches the age of sixteen, the two older siblings were dropped from the case in December 2006.) On July 8, 2003, Duarte brought the two youngest children to visit with Bardales in Tijuana, Mexico. While there, Bardales removed them from Mexico and brought them to California to live with him. Bardales took the two youngest children without Duarte's knowledge or permission. Bardales then immediately filed petitions in California Superior Court for emergency child custody and to establish paternity. The state court awarded Bardales sole custody until Duarte appeared in state court. In September 2003, Duarte filed a Hague Petition with the Central Authority in Mexico. For reasons unknown, Duarte's petition was not filed in California state court until April 2005. Duarte's state Hague Petition was consolidated with Bardales's paternity petition, and the case was set for a hearing in California Superior Court on April 25, 2005. Duarte appeared at that hearing without counsel. The court granted a continuance to permit Duarte to retain counsel. Duarte, however, failed to show up at two subsequent court dates and as a result, the court removed Duarte'spetition from the calendar without prejudice and awarded Bardales sole custody of the children. Duarte appealed this decision to the California Court of Appeal. While her appeal was pending, Duarte filed the present Hague Petition in federal court. The California Court of Appeal stayed Duarte's appeal pending adjudication of her Hague Petition in federal court. The district court scheduled a hearing on Duarte's Hague Petition for September 1, 2006. At the hearing, Duarte's counsel requested a continuance because Duarte could not enter the United States. Her counsel explained that two days prior to the scheduled hearing date, her bag, containing her passport and visa, was stolen as she was leaving a train station in Mexico. The district court denied the request for a continuance on the grounds that Duarte's counsel failed to offer sufficient proof that Duarte's purse was stolen, and Duarte had a "record of non-appearance" before both the federal and state courts. The district court tentatively denied Duarte's Hague Petition because she was not present to establish a prima facie case of unlawful removal or retention. The court stayed entry of judgment for two weeks to give Duarte an opportunity to file with thecourt a certified police report. If Duarte failed to provide a certified policereport by September 15, 2006, the court would enter judgment denying Duarte'spetition. On September 15, 2006, Duarte filed, as proof that her purse was stolen, adeclaration from a Transit Authority Agent and a copy of the police report. Duartealso indicated that it was not possible to obtain a certified police report inMexico because transit authority agents are not permitted to have such documentsnotarized. Duarte requested that the district court accept the declaration andcopy of the police report in lieu of a certified police report. The districtcourt rejected Duarte's offer of proof finding the declaration and traffic reportinsufficient. The district court lifted the stay on September 15, 2006 and entered final judgment denying Duarte's petition. On September 29, 2006, Duarte timely filed a motion to alter or amend the judgment of the district court pursuant to Rule 59(e). Duarte argued that the district court committed manifest error in entering judgment denying Duarte's petition. Specifically, Duarte claimed that it was impossible for her to comply with the court's order to provide a certified police report because suchreports are not issued in Mexico. In support of her motion, Duarte presentedevidence from several attorneys and government officials in Mexico declaring thatDuarte reported to the police that her purse was stolen on August 29, 2006, andthat the Transit Authority in Mexico does not issue certified or non-certifiedpolice reports. In a written order, the district court practically conceded that it may havecommitted clear error when, as a result of Duarte's failure to submit a certifiedpolice report, it entered judgment against her. The instead ruled on the merits ofDuarte's Hague Petition. The court concluded that because Duarte's Hague Petitiondid not entitle her to any relief, the production and acceptance into evidence ofa police report would not have affected the outcome of the case. The court denied Duarte's Rule 59(e) motion. The Ninth Circuit reversed. The Ninth Circuit held that it was error not to set aside the judgment. Also it was clearly improper for the district court not to follow through with its representation that if Duarte submitted proof that her purse was stolen it would reschedule the hearing. Finally, it was error for the district court to decide the merits of Duarte's petition when the only issue before it was whether, under Rule 59(e), the court should vacate the previously entered final judgment. With respect to the merits of Duarte's Hague Petition, the record was incomplete. A significant dispute existed between the parties as to whether the filing period for Duarte's Hague Petition should be tolled. This was acritical issue in determining the merits of Duarte's petition. If tolling did not apply, Duarte had filed her petition more than a year from wrongful removal, and Bardales could assert the affirmative defense that the children are well settled and should not be returned. If, however, tolling did apply then the "well settled" affirmative defense was not available to Bardales. Duarte contended that the court should toll the period between September 1, 2003 and June 2, 2005, because during that time Bardales hid the children from her. She claimed that she did not know their whereaboutsor have any contact with them until Bardales's attorney contacted her on June 2, 2005 and gave her Bardales's phone number. Duarte argued that during this period she made genuine efforts to locate Bardales and the children to no avail. Bardales contended that he did not hide the children from Duarte. The Ninth Circuit pointed out that the one-year filing period is of particular importance under the Convention because the "well settled" affirmative defense is only available if the petition for return was filed more than a year from wrongful removal. The potentially prejudicial effect of failing to file within a year from removal has led courts to apply equitable principles to toll the one-year period, notwithstanding the factthat both the Convention and ICARA are silent as to whether such principles apply. (Citing Furnes v. Reeves, 362 F.3d 702, 723 (11th Cir.); Giampaolo v. Erneta, 390 F.Supp.2d 1269, 282 (N.D.Ga.2004); Belay v. Getachew, 272 F.Supp.2d 553, 562-64 (D.Md.2003); Bocquet v. Ouzid, 225 F.Supp.2d 1337, 1348 (S.D.Fla.2002); Mendez Lynch v. Mendez Lynch, 220 F.Supp.2d 1347, 1362-63 (M.D.Fla.2002). It noted that the Eleventh Circuit was the only Circuit to have decided whether equitabletolling is applicable under the Convention. In Furnes, the court held that the one-year filing requirement could be tolled under circumstances where the abducting parent took steps to conceal the whereabouts of the child. In so holding, the court adopted the district court's reasoning in Mendez Lynch. In Mendez Lynch, the court reasoned that "[i]f equitable tolling does not apply to ICARA and the Hague Convention, a parent who abducts and conceals children for more than one year will be rewarded for the misconduct by creating eligibility for an affirmative defense not otherwise available." The Ninth Circuit agreed with Furnes and held that equitable principles may be applied to toll the one-year period when circumstances suggest that the abducting parent tooksteps to conceal the whereabouts of the child from the parent seeking return andsuch concealment delayed the filing of the petition for return. It held that equitable tolling is available under the Hague Convention and ICARA because applying equitable principles to toll the one-year filing period in circumstances where the abducting parent hides the child is consistent with the purpose of the Convention to deter child abduction.

Stipulated Agreements Required to Comply with DRL 177

Domestic Relations Law 177, which became effective on October 27, 2007, provides in subdivision 1, that prior to accepting and entering as a judgment any stipulated agreement between the parties in an action for a divorce, the judge is required to ensure that the agreement contains a provision relating to the health care coverage of each individual. The agreement must either provide for the future coverage of the individual, or state that the individual is aware that he or she will no longer be covered by his or her spouse's health insurance plan. Every agreement accepted by the court must contain the following statement, signed by each party, to ensure that the provisions of subdivision 1 are adhered to:

I, (spouse), fully understand that upon the entrance of this divorce agreement, I may no longer be allowed to receive health coverage under my former spouse's health insurance plan. I may be entitled to purchase health insurance on my own through a COBRA option, if available, other-wise I may be required to secure my own health insurance. ___________________________ ____________
(Spouse's signature) (Date)

The statute does not apply to any other types of matrimonial actions. It is confusing and raises many issues. It appears to apply only to “stipulated agreements”, presumably referring to agreements made during the course of an action for a divorce, and agreements and stipulations executed before its effective date. A literal reading of the statute requires every agreement that is submitted to a judge for incorporation into a judgment of divorce to contain this statement, even if either or both spouses do not have a health insurance plan.

Legislation has been introduced in the Assembly to amend the statute but until it has been signed into law, the following provision is suggested for all agreements and stipulations:

ARTICLE __
FUTURE HEALTH INSURANCE COVERAGE

1. The parties have been advised that New York Domestic Relations Law 177, subdivision 1 (“the statute”) provides that prior to accepting and entering as a judgment any stipulated agreement between the parties in an action for a divorce, the judge is required to ensure that the agreement contains a provision relating to the health care coverage of each individual. The agreement must either provide for the future coverage of the individual, or state that the individual is aware that he or she will no longer be covered by his or her spouse's health insurance plan.

2. The parties have been advised that New York Domestic Relations Law 177, subdivision 1 provides that every agreement accepted by the court must contain the following statement, signed by each party, to ensure that the provisions of subdivision 1 are adhered to:

" I, (spouse), fully understand that upon the entrance of this divorce agreement, I may no longer be allowed to receive health coverage under my former spouse's health insurance plan. I may be entitled to purchase health insurance on my own through a COBRA option, if available, other-wise I may be required to secure my own health insurance.

____________________________ ____________
(Spouse's signature) (Date)

3. The parties have been further advised that a literal reading of the statute requires every agreement that is submitted to a judge for incorporation into a judgment of divorce to contain this statement, even if either or both spouses do not have a health insurance plan.

4. In order to comply with the provisions of the statute the husband and wife represent to each other and state as follows:

a). The wife (does) (does not) have a health insurance plan.

b). The husband (has) (has not) been covered under the wife’s health insurance plan.

c). This agreement (does) (does not) provide for the future health insurance coverage of the husband.

d). In order to comply with the provisions of Domestic Relations Law 177, subdivision 1 the husband states:

" I, ___________________, fully understand that upon the entrance of this divorce agreement, I may no longer be allowed to receive health coverage under my former spouse's health insurance plan. I may be entitled to purchase health insurance on my own through a COBRA option, if available, other-wise I may be required to secure my own health insurance.
____________________________ ____________
(Spouse’s Signature) (Date)

e). The husband (does) (does not) have a health insurance plan.

f). The wife (has) (has not) been covered under his wife’s health insurance plan.

g). This agreement (does) (does not) provide for the future health insurance coverage of the wife.

h). In order to comply with the provisions of Domestic Relations Law 177, subdivision 1 the wife states:

" I, ___________________, fully understand that upon the entrance of this divorce agreement, I may no longer be allowed to receive health coverage under my former spouse's health insurance plan. I may be entitled to purchase health insurance on my own through a COBRA option, if available, other-wise I may be required to secure my own health insurance.
____________________________ ____________
(Spouse’s Signature) (Date)

Not Error to Award Wife Portion of New Business Created as a Sham

Not Error to Award Wife Portions of Real Estate Originally Owned by Plaintiff and His Brother Where Partnership Dissolved and New Business Structure Created as Sham to Deprive Defendant of Her Interest in Marital Assets.


In Blay v Blay, --- N.Y.S.2d ----, 2008 WL 1969734 (N.Y.A.D. 3 Dept.) the parties were married in June 1992 and had three children. In 1978, plaintiff and his brother established a partnership which performed landscaping and snow removal services. The brothers each held a 50% interest in the partnership. In 1989, plaintiff and his brother purchased a 16-acre parcel of real estate. Plaintiff renovated the house on the property. This house, which later became the marital residence, was further improved during the marriage. Also during the marriage, a karate studio was built on the property, from which the parties taught karate classes. Shortly after defendant informed plaintiff that she was unhappy with their relationship, plaintiff and his brother dissolved the partnership, formed a corporation in which the brother was the sole shareholder, formed a limited partnership and transferred most of the partnership's assets to the limited partnership, including the land, marital residence and karate studio. The corporation was the general partner in the limited partnership with a 1% interest, plaintiff was a limited partner with a 12.75% interest and his brother was a limited partner with an 86.25% interest. According to plaintiff and his brother, the reorganization was undertaken to protect the partnership's assets and to provide the brother with his fair share of the partnership's value, as he had allegedly contributed all of the initial capital and drew only $50 per week from the business while plaintiff drew $350 per week. Plaintiff never informed defendant of this reorganization, or that he transferred the real property out of his own name. In May 2005, plaintiff commenced this divorce action. The Appellate Division held that Supreme Court did not err in awarding defendant portions of the real estate originally owned by plaintiff and his brother. The court found, under the circumstances, that the partnership dissolution and creation of the new business structure was invalid for purposes of equitable distribution, concocted as a sham to deprive defendant of her interest in marital assets. The court further found that the mortgage payments on the property, and money to improve the house and build the karate studio, came from partnership funds earned during the marriage, not from plaintiff's brother individually. As plaintiff was a half owner of the partnership, the mortgage was deemed paid with marital funds. Additionally, the marital residence was improved during the marriage through the addition of a basement bedroom and laundry room, new flooring and remodeling in the kitchen, installation of a hot tub and erection of an outdoor deck, presumably with marital funds .Thus, the court properly awarded defendant half the value of plaintiff's one-half interest in the property, after deducting the nonmarital percentage attributable to mortgage payments made prior to the marriage. Similarly, based upon Supreme Court's finding that the corporate reorganization was invalid as to equitable distribution and considering plaintiff's one-half ownership of the business, the court did not err in awarding defendant half of plaintiff's interest in the corporation's bank accounts. Defendant was entitled to distribution of the value of the GMC Jimmy vehicle that plaintiff purchased during the marriage. Despite plaintiff's testimony that he purchased the vehicle as a gift for defendant's daughter who resided with him, he purchased it with marital funds and maintained title to it. Although plaintiff testified and provided documentary proof that a 1994 Ford Taurus was titled to his brother, partnership documents listed that vehicle as a partnership asset and plaintiff apparently used the vehicle regularly. Considering the way that plaintiff and his brother loosely adhered to the corporate form, there was no error in Supreme Court's determination to deem this vehicle marital property in plaintiff's possession.The Appellate Division held that Supreme Court incorrectly distributed plaintiff's retirement assets. There was no proof that plaintiff or the partnership contributed to plaintiff's IRA account after the marriage. Any passive increase in value to this separate property was also separate property.. The court found that the partnership contributed to a Keogh retirement plan during the marriage, making part of the accrued value in that plan marital property. The court also held that the plan was established to benefit both plaintiff and his brother, yet awarded defendant half of the accrued value as if the entire plan was established to benefit plaintiff alone. Accordingly, it reduced defendant's portion of the Keogh plan to $7,196.72 and award her no portion of plaintiff's IRA account.The award of $300 weekly maintenance to defendant for seven years was excessive. The court appropriately exercised its discretion in imputing income to plaintiff as a result of his failure to disclose all of the business's tax documents, which failure made it impossible to determine whether claimed expenses were legitimate or whether any additional business income existed. The court also imputed income to plaintiff based upon money he received from family members, free rent for the home and karate studio, the numerous personal bills paid by the partnership or corporation and year-end business distributions made to family members. While imputation of income was appropriate, the amount imputed was incorrect. One-time gifts or alleged loans from family members should not have been calculated as part of plaintiff's annual income. The court's figures also contained a mathematical error and double counted some items. Thus, we reduce the amount of imputed income to $65,000, giving plaintiff a total annual income of $83,200 when including his $350 weekly draw. The parties were married for 13 years at the time of commencement of the action and were in good health. During the marriage, plaintiff, who has a 10th grade education, worked in the family business. Defendant stayed home with the children during their formative years and did not begin working outside the home until the children were all in school. At the time of trial, defendant, who is a high school graduate, earned anannual salary of approximately $25,000. She had been working at least part time since 1998 and did not present any proof that she intended to pursue training to increase her skills, or that she lost out on any particular employment opportunities. The parties never lived an extravagant lifestyle, and both lived modestly after separating. While plaintiff's income was considerably higher than defendant's, he is supporting their three children and defendant's daughter without receiving any child support. Under the circumstances, a maintenance award of $200 per week for two years from the date of judgment was appropriate. A retroactive award was required because maintenance shall be awarded from the date of application. That award was also to be in the amount of $200 per week. The Appellate Division held that Supreme Court should not have ordered plaintiff to maintain a $100,000 life insurance policy and at the same time distribute the marital portion of the cash surrender value of that policy. The court was authorized, in its discretion, to direct plaintiff to pay the premiums and keep the life insurance policy in effect for defendant's benefit until his maintenance obligation is satisfied. The proof supported a determination that a portion of the policy, paid for during the marriage by the business that plaintiff half owned, was marital property subject to equitable distribution. By ordering immediate distribution of the cash surrender value, however, the court was essentially requiring liquidation of that asset at the same time it ordered that the asset be maintained in its present form. Based upon the reduction of the length of the maintenance award, plaintiff's current maintenance obligation was substantially satisfied. Accordingly, it removed the requirement that he maintain the life insurance policy for defendant's benefit, but affirm the court's direction to distribute the marital portion of the policy's cash surrender value. It held that Supreme Court did not abuse its discretion in awarding counsel fees to defendant, but it reduced reduce the amount of the fee awarded. Some factors to consider include the extent of legal services provided, the complexity of the case and the parties' financial circumstances, taking into account any distributive awards. Considering the income imputed to plaintiff, he was in a better financial position than defendant, but he was also supporting the children without assistance from defendant. Distributive awards to defendant totaled approximately $100,000, many of which plaintiff must pay from nonliquid assets. The counsel fees were partially based upon additional work required to sort out the confusing financial arrangements created by plaintiff and his family business, plaintiff's failure to advise defendant of the business restructuring and the failure to turn over complete financial documents in response to demands. The court parsed counsel's billing statements, deleting items deemed excessive, and awarded plaintiff $24,741.50. The complexity of the case due to the confusing financial situationmade an award of counsel fees to defendant appropriate but, when considering the parties' financial circumstances as a whole, it reduced the award to $15,000.