Recent 2014 Family Law Cases

• Publication year: 2015

Recent 2014 Family Law Cases

The continuing collaboration between Continuing Education of the Bar (CEB) and the Family Law Section continues to reap benefits for our members. The Family Law News is pleased to once again publish the CEB Year in Review. Each year, CEB publishes a detailed compilation of important case law and legislative developments on issues ranging from attorneys fees to child custody to enforcement.

Re-printed below for your review and easy reference are some of the summaries of 2014 cases in the Family Law arena. Due to space constraints, the Family Law News is unable to publish the entire list of new cases in this Issue. The next Issue of the Family Law News will include the remaining CEB case summaries. In the meantime, please continue to take advantage of Judge Burke's case summaries that come through on a regular basis to keep fresh on legal developments coming from the courts. Thanks again to CEB for supporting the education of the Family Law section.

Attorney Fees and Sanctions

Effect of Bankruptcy

Bendetti v Gunness (In re Gunness), 505 B.R. 1 (B.A.P. 9th Cir. 2014)

The Ninth Circuit Bankruptcy Appellate Panel affirmed a wife's Chapter 7 discharge of an attorney fee debt arising from a fraudulent transfer action brought by her husband's ex-wife after a marital dissolution, when the ex-wife did not meet the nondischargeability exceptions of 11 U.S.C. § 523(a)(5), (a)(15).

After a family court issued a dissolution judgment, the ex-wife sued both her ex-husband and his current wife in a fraudulent transfer action, which was filed in and connected to the dissolution proceedings. The trial court ordered that the husband and the current wife pay the ex-wife and her attorney approximately $280,000 in attorney fees. The current wife filed for Chapter 7 bankruptcy relief and contended that the attorney fees debt was dischargeable. The bankruptcy court agreed and granted summary judgment to the current wife. On appeal, the Ninth Circuit Bankruptcy Appellate panel affirmed.

The ex-wife and her attorney argued that two statutes provided them an exception to discharge: 11 U.S.C. § 523(a) (5) (debt constitutes a support award) or 11 U.S.C. §523(a) (15) (debt arose out of a non-support domestic relations award). The scope of nondischargeable debt is limited under those two exceptions to debt owed to "a spouse, former spouse, or child of the debtor." Bendetti, 505 B.R. 1, 5. The ex-wife and her attorney flatly could not establish this requisite familial relationship.

The court explained that there are two lines of bankruptcy decisions that either de-emphasize or ignore the familial relationship phrase: one line examines on whom the "bounty" of the debt falls and another line finds that one of the explicitly named protected persons would have been adversely impacted, requiring the court to order that the financial impact fall instead on the debtor. Bendetti, 505 B.R. 1, 6. Neither the ex-wife nor her attorney could establish that the bounty of the attorney fees award would flow to a spouse, former spouse, or child of the debtor. Nor would the discharge of the debt adversely impact a specified protected person. The argument that the bankruptcy court could impute the requisite familial relationship to the current wife, "while creative, lack[ed] merit." Neither the ex-wife nor her attorney could point to an agency relationship or vicarious liability involving the attorney fees award. The court also noted that all exceptions to discharge must be narrowly construed, so that the policy of giving the debtor a fresh start is honored. Thus, the attorney fees debt was dischargeable with regard to the current wife.

Reference: Practice Under the California Family Code: Dissolution, Legal Separation, Nullity, chap 22 (Cal CEB).

Enforcement

Marriage of LaMoure, 221 Cal. App. 4th 1463 (2013)

A pension plan maintained by an attorney-husband was not exempt under ERISA from execution for the payment of court-ordered attorney fees, given that he was the sole employee and shareholder of his law firm, as well as the sole beneficiary, administrator, and trustee of the pension plan, and that he had abused the plan during the litigation.

A couple married in 1993 and separated in 2003. Interim orders in dissolution proceedings gave the parties joint custody of their two sons, but required the husband to pay child and spousal support. In April 2009, the husband fell behind in paying his support obligations and the Department of Child Support Services (DCSS) issued an order to withhold funds from his Morgan Stanley retirement accounts to collect child support arrears. He filed a claim of exemption and an ex parte motion to quash the levy on his retirement accounts. A trial court denied these requests in July 2009. He appealed and petitioned for a writ of supersedes, seeking a stay of the trial court proceedings. The trial court granted the stay pending resolution of the support appeal. On August 2, 2011, the court entered its decision on the support appeal, affirming the lower court's July 2009 order. See Marriage of LaMoure, 198 Cal. App. 4th 807 (2011).

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Meanwhile, during proceedings from 2003 through 2010, the trial court ordered the husband to pay the wife's attorney fees and costs totaling over $99,000. In March 2010, the trial court issued a writ of execution for payment of the wife's attorney fees against the husband's pension plan, and he sought a claim of exemption on the pension accounts.

In July 2010, the wife filed an ex parte motion requesting a temporary order restraining the husband from withdrawing, transferring, or disposing of any funds held in his pension accounts. The trial court granted this motion and ordered the husband restrained from transferring any funds in any Morgan Stanley account in his name or the name of his law firm or law firm pension plan. In August 2010, however, the husband transferred approximately $100,000 from his Morgan Stanley pension plan account to his Merrill Lynch trust account.

In October 2010, the court granted the husband's claim of exemption, but in December 2010 granted a motion for reconsideration brought by the wife. The court vacated its October 2010 order and denied the husband's claim of exemption. He then appealed, claiming that the writ of execution levied against his pension plan assets violated the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. §§ 1001-1461) because his pension plan was exempt under ERISA; therefore, the court should not have granted reconsideration and set aside his claim of exemption.

The court of appeal affirmed. Although it found no case law factually on point to support the trial court's exercise of jurisdiction to determine the ERISA status of the husband's pension plan, it cited a Fifth Circuit case by way of analogy. See Plunk v Yaquino, 481 F.3d 302 (5th Cir. 2007). In Plunk, the court held that a bankruptcy court was not required to defer to the Internal Revenue Service's initial determination that a pension plan was a "qualified plan." In this case, as well, the appellate court reasoned, the trial court had jurisdiction to determine the qualified status of the husband's plan.

The appellate court noted that there was some evidence that the husband's plan might not qualify for ERISA protection at all, because he was the sole employee and shareholder of his law firm, as well as the sole beneficiary, administrator, and trustee of the pension plan. However, regardless of whether his plan initially qualified under ERISA, there was substantial evidence that during the dissolution proceedings, the plan no longer qualified under ERISA for protection and the assets were not exempt from being levied under state law because the husband abused his pension plan during the litigation.

Reference: Practice Under the California Family Code: Dissolution, Legal Separation, Nullity, chap 5 (Cal CEB).

Pendente Lite Fees and Costs

Marriage of Sharples, 223 Cal. App. 4th 160 (2014)

Use of a specific Judicial Council form attachment to request attorney fees and costs pendente lite is not mandatory when comparable declarations are submitted.

In a marriage dissolution proceeding, the wife sought an order requiring her husband to pay her attorney fees and costs pendente lite. The court denied the request because the wife did not use the Request for Attorney's Fees and Costs Attachment (Judicial Council Form FL-319), which the court explained was mandatory.

The court of appeal reversed. The court reasoned that under a plain reading of the applicable court rule (former Cal. Rules of Ct. rule 5.93(b)(1)(B); now Cal. Rules of Ct. rule 5.247(b)(1)(B)), a party seeking attorney fees and costs must file and serve either a form FL-319 or a comparable declaration (along with other required forms). Specifically, FL-319 calls for: (1) the reason for the request for attorney fees and costs; (2) the amount of fees and costs requested; (3) the specific fees and costs for which the order is sought; (4) whether fees and costs have been previously ordered; (5) a personal declaration regarding financial need; (6) the attorney's billing rates and the nature of the litigation; and (7) notice to the responding party. Although filing either a FL-319 or a comparable declaration is mandatory, neither is mandatory if the other is filed.

So long as the declaration contained the necessary information, the wife's request for an order should have been considered on its merits. The appellate court noted that the record indicated the trial court's ruling was premised on the mistaken belief that FL-319 was mandatory, and that it did not consider the merits of the order requested. Because the court based its denial solely on that premise, the order was reversed.

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Reference: Practice Under the California Family Code: Dissolution, Legal Separation, Nullity, chap 9 (Cal CEB).

Sanctions

Marriage of Bianco, 221 Cal. App. 4th 826 (2013)

A trial court's sanctions order based on a violation of...