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.

Improper to Fail to Award Credit for Marital Debts Paid By One Spouse

Improper to Fail to Award Credit for Marital Debts Paid By One Spouse


In Grasso v Grasso, --- N.Y.S.2d ----, 2008 WL 193262 (N.Y.A.D. 2 Dept.)
Supreme Court, awarded the defendant nondurational maintenance, directed him to pay the defendant retroactive maintenance and child support arrears without a credit to him for mortgage and real estate tax payments he made with respect to the marital residence, pursuant to a pendente lite support order, directed him to pay, in full, the principal and interest on all marital debts bearing the defendant's name, awarded him the sum of $103,000 from the net proceeds of the sale of the marital residence as reimbursement of his contribution of separate property, directed that, after the parties each received reimbursement of their contributions of separate property from the net proceeds of the sale of the marital residence, the remainder of those net proceeds be divided equally between them, refused to award him a credit of $1,700 for expenditures he incurred for the benefit of the defendant's daughter from a prior marriage and, refused to to award him a credit of $2,500 for legal fees he expended on behalf of the defendant's son from a prior marriage. The Appellate Division found that that while the husband correctly contended that the court improperly admitted into evidence and relied upon a determination of the Social Security Administration as to the wife's disability, there was other sufficient admissible evidence which supported the finding that the wife was totally disabled. It found that the husband correctly contended that, in directing him to pay maintenance and child support arrears, the Supreme Court erred in failing to credit him for the mortgage and real estate tax payments on the marital residence which he made pursuant to a pendente lite support order. The amounts for which the husband should have been credited, were more than sufficient to offset the maintenance and child support arrears calculated by the Supreme Court. The husband also correctly contended that the Supreme Court improvidently exercised its discretion by, in effect, holding him responsible for 100% of the credit card obligations that constituted the parties' marital debt as well as all the marital debt that was solely in the wife's name. The parties' marital debt would have been more appropriately distributed by allocating it equally between them, and offsetting it against the net proceeds of the sale of the marital residence after deduction of their contributions of separate property. The Supreme Court erred in failing to award the husband a credit for the sum of $1,700 in expenses he incurred on behalf of the wife's daughter from a prior marriage and the sum of $2,500 in fees expended from marital funds on behalf of the wife's son from a prior marriage. Since, at this juncture, the marital residence may already have been sold and the proceeds distributed, the matter was remitted to the Supreme Court, for a hearing and determination of the amount of the parties' marital debt, including accrued interest as of the commencement of the action, and the entry thereafter of an amended judgment directing the wife to pay 50% of the entire marital debt, including 50% of that portion of the marital debt previously satisfied by distribution of the parties' properties in this action. The Court noted that at the trial Supreme Court erred in precluding the husband from offering evidence in support of his contention that a loan taken out against his 401(k) account was used to satisfy the marital debt obligation and directed Supreme Court tol permit the husband to offer proof as to this at the hearing, and to credit him with the wife's portion of any marital debt which he proves was paid from the proceeds of this loan.

Error to Decide Custody Without Forensic Report Where Conflicting Testimony

Error to Decide Custody Without Forensic Report Where Conflicting Testimony Regarding Parties Conduct, and Evidence Suggesting Children Exhibiting Behavioral Problems


In Ekstra v Ekstra, --- N.Y.S.2d ----, 2008 WL 669895 (N.Y.A.D. 2 Dept.) Supreme Court appointed psychologist Lobel as a neutral forensic expert to conduct evaluations and submit a written forensic report on the custody issue. The appointment order provided that "[t]he neutral forensic evaluator's final report shall be admitted as evidence-in-chief without the necessity for independent foundation testimony or evidence, pursuant to 22 NYCRR 202.16(g)." The order further provided that "[a]ny party who wishes to cross-examine the neutral [forensic] evaluator, as permitted by the Uniform Rules, shall bear the cost of the neutral [forensic] evaluator's services in preparing such testimony, travel and testifying unless the Court directs otherwise." After Dr. Lobel's report was submitted, the father's counsel expressed an intention to cross-examine him and asked the court whether the father would be required to bear the costs of his appearance. The court responded that the father would not be required to bear that expense, but made no other provision for payment. As a consequence of not receiving his fee, Lobel did not appear, and the court granted the father's application to preclude the forensic report. Relying largely on its evaluation of the credibility of the witnesses, the court awarded sole custody of the parties' two children to the father. The Appellate Division reversed. It held that the in light of the sharply conflicting testimony regarding the conduct of the parties, and evidence suggesting that the children were exhibiting behavioral problems, the court should not have rendered a custody determination without first receiving the report of the neutral forensic expert it had appointed. Moreover, inasmuch as the father had the right to cross-examine the expert (see 22 NYCRR 202.16[g][2] ), and the expert could not have been compelled to testify without appropriate compensation the court should have made provision for payment to Lobel as it indicated that it would in the order appointing him. It reversed and remitted the matter to the Supreme Court, to reopen the custody hearing, at which time Lobel's report should be received in evidence and, should either party wish to cross-examine him, the court should make provision for the payment of his fee and expenses in accordance with the order appointing him.