Equitable Distribution | The Better Chancery Practice Blog

MANAGING CLIENT EXPECTATIONS

October 18, 2010 § 4 Comments

One of the challenges of being a Chancery practitioner is keeping your clients’ expectations realistic. And I’m not talking only about expections regarding outcome. I’m talking expectations about you, your firm, the court and the legal process itself.

The Pincus Family Law firm in Columbia, South Carolina has a page on its web site that may just be a home run in addressing client expectations. You may find something useful here. I’ve copied and pasted the text for you:

CLIENT EXPECTATIONS (REALISTIC OR UNREALISTIC)

ABOUT US:

We do not work on the weekends and do not provide emergency numbers for the weekends. There are times we may look at and answer your email over the weekend, but this is generally the exception and not to be relied upon by you that we are accessible on weekends.

Do not think we are perfect. We make mistakes. We are competent attorneys and paralegals, but we make mistakes. We will correct a mistake if we find it or if you point it out. Please do not yell at us, accuse us of not doing our job, or insult us over a mistake.

We will return phone calls in the order they are received and based on the priority of the situation. If you leave a message, your message will be passed on to the attorney. Calling three or four or multiple times in a day will not get your call answered any faster. Email is the quickest way to get a response from an attorney.

Attorneys work by appointments only. Please do not show up at our offices to speak with an attorney without an appointment.

Please utilize our paralegals to answer your questions and give you status reports. Our paralegals are very experienced and can, most of the time, respond to your request. We bill our paralegal time at less than 50% than what the attorneys charge so take advantage of their experience and knowledge.

ABOUT OTHERS:

You may not get any consideration from your spouse for anything you have done or will do because you are nice. You are encouraged to be nice, be cooperative, but don’t expect to get anything favorable in return for it.

Most of the research you do about your case online or the advice you get from friends will be incorrect or not applicable to your case so you should not compare what is happening on your case to what you find online or what friends or family may tell you. As your attorneys, we are the only reliable source of information regarding the process and status of your case.

The opposing attorney may be very aggravating and frustrating to you because he or she may accuse you of things you have not done, may be litigious (wanting to fight about everything), may drag his or her feet with moving the case forward, or may be non-responsive to requests from this office. It is unrealistic to expect that we can control how an opposing attorney handles his or her file or practices law.

The legal pleadings (Complaint, Answer, Counterclaim, etc.) are legal documents filled with allegations that must be pled (and some that are merely made to posture for a client). Do not expend any emotional energy (get angry or upset) on the text of legal pleadings drafted on your behalf or your spouse’s behalf. It is not worth it.

We cannot control the court’s schedule or docket. The courts schedule cases as they are processed and in line with the thousands of other cases filed. You will not be happy with the time it takes your case to get through the system. There are thousands of family law cases filed in Lexington and Richland counties each year and most contested cases take several months, sometimes more than one year, to finish.

What you can expect during a Trial (Contested Case)

COURT APPEARANCES—Bonnie and Monet generally work files together although one attorney may be your “lead” attorney. Therefore, at court appearances, it may be necessary for one to cover a court appearance for the other. We will try to give you advance notice if your “lead” attorney will not be attending a court appearance, but sometimes the scheduling decision is made at the last minute.

SUBPOENAS—the other party can send a subpoena to any third party that MAY have information about you, your spouse, your business dealings, your employment, your education, your children and the like. Banks, lenders, business partners, educational facilities, stock brokers, teachers, churches, etc. can all be issued subpoenas for any records they may have regarding you. We can do the same. There is very little we can do to stop this so be prepared to deal with the frustration you may experience. If there is a legitimate reason to try and stop the subpoena, which there rarely is, we can file a motion to do so. Unless the information is privileged in some fashion, the third party will have to disclose the information requested.

DEPOSITIONS—the other party can issue a notice of deposition to any third party witness. This means that a third party can be required to give testimony under oath usually in one of our offices. The purpose of depositions is to find out information and to find out ahead of time what a person may testify to in court. You and your spouse could each be deposed for the same reason. We can issue notices of depositions as well. A fact witness is entitled to a fee of $25 to appear and professionals (doctors, psychiatrists, etc) are entitled to have their time paid for to appear (by the party that deposes them). A court reporter must be present and is paid to attend as well. The attorneys are paid to attend as well. Depositions are costly.

NOTHING HAPPENS QUICKLY—generally, contested cases take several months to move through the court system. A complicated custody or equitable division case can take one, sometimes two, years to complete. The courts are always full and there are several steps that have to be taken before a trial will be set, for instance, mediation, a guardian ad litem investigation, discovery, depositions, pre-trial hearings and motion hearings. It takes a long time to move a contested case through the court system and this will likely be your number one frustration. We will do all we can to move the case forward, but you will still be frustrated with the time it takes to finish a case. Please prepare yourself ahead of time and please do not take this frustration out on us or my staff. We are doing everything we can to move the case along.

DISCOVERY—this is the “formal” name for exchanging information through subpoenas, written questions (interrogatories) and request for documents. Discovery has its own set of rules and deadlines which we will inform you about during the process.

CHILDREN—Marital problems are terribly difficult for children. Do your children a favor and do not “poison” the minds of your children against their other parent. Do not speak about their parent’s faults to children. Do not complain to your children about how much child support you are paying or how little child support you are receiving. Visitation with parents is NOT a bargaining chip or game. Each parent is entitled to visitation privileges with their children. Children are not your property. They are not your pawns. They are absolutely not your messenger. They are innocent individual human beings that need both of their parents, not just the “best” parent.

ADULTERY—Do not become romantically involved with someone other than your spouse if you are still legally married (even if you are separated)! During marital litigation you should behave as though a detective and camera crew were following you and recording you and your conversations at all times.

CHILD CUSTODY CASES—You should behave as though a detective and camera crew were following you and recording you and your conversations at all times. Do not do anything that you would not perfectly happy with a Family Court Judge seeing, hearing or finding out about when the Judge is deciding your custody case.

ATTORNEY’S FEES—in a child custody case, you could spend the price of a car in attorney’s fees. Most contested custody cases run upwards of 10-20 thousand in fees paid out over the course of the case. This usually includes attorney’s fees, guardian fees, psychological fees and expert witness fees. In a complicated equitable division case, the cost can be significant and sometimes more than a custody case depending on how much property there is to value and the difficulty of valuing assets. Even a very small business can run $2,500-$5,000 to value if there is a dispute as to the value. A small equitable division case (which means there is a home, retirement, credit card debt, and other property or debts to divide) can run $5,000-6,000 in attorney’s fees over the life of the case. The most expensive part of the case is going to be trial preparation and attendance costs. That is why a trial retainer (an “up front” payment) is required in all contested cases. You will see this in your fee agreement and we reiterate here that a trial retainer is required for continued representation.

Thanks to the LegalEthicsForum.com for this.

YET ANOTHER REASON TO TAKE EXTRA CARE WITH 8.05’S

October 14, 2010 § 4 Comments

In the case of Trim v. Trim, 33 So.3d 471 (Miss. 2010), the Mississippi Supreme Court held that “the intentional filing of a substantially false Rule 8.05 statement is misconduct that rises above mere nondisclosure of material facts to an adverse party,” and constitutes fraud upon the court.

So what is the significance of the Trim case for everyday practitioners?

Let’s say that your client isn’t deliriously happy with the outcome of her equitable distribution case, but she accepts it without an appeal. Ten months later she comes in to your office mad as a hornet with sheaves of paperwork that prove conclusively that her ex substantially understated on his 8.05 the value of financial assets that he controlled, and the gain to your client could be in the hundreds of thousands of dollars. Aha! You think, we have the sorry so-and-so right by the [indelicate word deleted]!

But wait. How are you going to get this before the court? MRCP Rule 59 relief expired 10 days after the judgment was entered, and the appeal time ran 30 days after entry. MRCP Rule 60 actions to set aside a judgment for fraud have to be brought within six months of the date of the judgment.

That’s where Trim comes in. By finding substantial misrepresentation on the 8.05 to be a fraud on the court, as opposed to fraud on the opposing party, the Supreme Court essentially ruled that there is no time limit to bringing an action to aside an action based on 8.05 fraud. That’s because MRCP Rule 60 expressly states: “This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to set aside a judgment for fraud upon the court.”

Trim has ramifications for lawyers in Chancery. If you are in the habit of accepting your client’s 8.05 at face value without going over it with him or her, and without questioning behind it, you may be leaving your client open to an action to set aside that divorce judgment you thought you had laid to rest long ago. The client may well question why you never went over the statement with him and counseled him about what to include and what not to include. “My lawyer never told me that I had to list those three securities accounts; in fact, he never talked with me at all about what to include on the form.”

In case you think this is the kind of thing that happens to somebody else somewhere else, think again. Only this year, I set aside a divorce that was nearly two years old for substantial misrepresentation of financial assets that amounted to a fraud on the court. It can happen to you.

AVOIDING AN EXPENSIVE ERROR

October 12, 2010 § 1 Comment

Imagine having this nightmare:

You represent the husband. He has $376,000 in his securities account. You negotiate a property settlement agreement by which the wife will receive $203,200 from the account, and he will own the remaining $172,800. Couldn’t be plainer or more clear-cut. A few months drag by before you finally get the QDRO drafted and approved by the court. You ship it off to the plan manager, who calls you and tells you that the account is now only worth $204,000, and what exactly is it that you would like her to do. At this point in the nightmare, you wake up in a cold sweat.

Unfortunately for the parties in In re Dissolution of Marriage of Wood, 35 So.3d 507 (Miss. 2010), the nightmare was all too real. The facts set out above are the facts in their case. The former Mrs. Wood sued to collect her entire amount due under the agreement, and Mr. Wood took the position that sticking with the numbers in the property settlement agreement was an impossibility, and to grant Mrs. Wood her relief would produce an unfair and inequitable result.

Chancellor Dorothy Colomb ruled that the parties had actually negotiated an agreement whereby Mrs. Wood would receive 54% of the account balance at the time of the divorce, and Mr. Wood would receive 46%.

In affirming the chancellor, the Supreme Court addressed valuation dates, impossibility of performance and canons of construction. You can read the decision to get an appreciation for the complexity of legal issues that the draftsmanship created in this case.

The cardinal point for practitioners, however, is best summed up in the court’s own language at page 515:

“As this case illustrates, incorporating an estimate of an asset’s value into a property settlement agreement can cause problems when the parties later try to divide the asset, and the estimate turns out to be incorrect or inaccurate. Therefore, we make the following recommendations for the benefit of the bar. Where the value of an asset must be estimated because of the inherently indefinite or fluctuating nature of the asset itself, we recommend the use of percentages when setting forth the asset’s intended distribution in a property settlement agreement. Where the value of an asset remains sufficiently concrete or static, however, we recommend the use of specific dollar amounts.”

Mrs Wood expected to get $203,000, and that’s what she negotiated for. Instead, she got $110,160, or $93,000 less than what she expected. The lesson is to think about what you’re doing and what could or might go wrong, and how you can guard against it.

TRIAL BY CHECKLIST: LUMP SUM ALIMONY

August 31, 2010 § 9 Comments

A practice tip about trial factors is here.

The factors that the trial court must consider in making an award of lump sum alimony are:

Substantial contribution to accumulation of the marital assets by quitting work or assisting in the business;
A long marriage;
Financial disparity;
Other considerations, including payor’s assets and payor’s stability or instability.

Cheatham v. Cheatham, 537 So.2d 435, 438 (Miss. 1988). NOTE: these factors predated Armstrong (periodic alimony) by five years, and the Armstrong factors essentially overlap these. It may be preferable to cover all of the Armstrong factors coupled with a specific request for lump sum alimony as well as periodic or rehabilitative.

TEN TIPS FOR MORE EFFECTIVE RULE 8.05 FINANCIAL STATEMENTS

August 16, 2010 § 16 Comments

If your case involves economic issues or property division, Rule 8.05 of the Uniform Chancery Court Rules requires that you provide a financial statement complying with the form published in the rules.

An effective financial statement can make or break your case. It is the template for your client’s testimony, and a poorly-prepared statement will make your client cannon fodder for cross examination, while a well-prepared one will inoculate him or her from serious damage. Most importantly, the financial statement is what the judge will spend the most time mulling over when fashioning an opinion. The more effective your statement, the better off your case will be.

Here are ten ways you can make your Rule 8.05 statements more effective:

Never present a financial statement that you have not gone over in detail with your client. As part of your trial preparation, question the client’s figures, test his or her mastery of the information on it. If your experience tells you that a figure is unreasonably high or low, question it and make the client defend it. If the client can not defend the number, suggest that the client reconsider it. And while you’re at it, make sure that your client knows what he or she included in every category. Are there duplications? For instance, if your client charges clothing for the children on her MasterCard, did she duplicate the amount paid on the card in the line for clothing? Don’t just take your client’s figures at face value; inquire about them. I once asked a woman on the witness stand how she came up with $480 a month for entertainment, and she explained that was the amount she had spent the month before for flowers for her aunt’s funeral, and that her sisters were going to reimburse her. When I asked what she usually spent on entertainment, she said $50. In one fell swoop, I lopped $430 a month off of her expenses, diminishing her alimony claim against my client. Her attorney had simply taken her word for the $480 expenditure without questioning behind it.
Always have the statement typed so that it clearly presents your client’s position. A handwritten statement with scratched-out figures and marks, notations and arithmetic that doesn’t add up will just add confusion and make the judge’s job disagreeably more difficult. Take the time to type the figures in their proper places and make sure they add up properly. Remember the old adage: “The easier you make the judge’s job, the more likely it is you will prevail.” Okay, that’s probably not really an old adage, but it should be.
Make sure the tax returns are attached. Copies of the preceding year’s state and federal income tax returns “in full form as filed” are required. This means that all schedules and w-2’s must be attached. If a document was sent with the original return to the IRS, a copy of it must be included.
Have an adequate number of copies. “When offered in a trial or a conference, the party offering the disclosure statement shall provide a copy of the disclosure statement to the Court, the witness and opposing counsel.” This means that, in addition to the original in evidence, you should have three additional copies, plus one for yourself. It does your client absolutely no good for the court not to have a copy to look at while your client is being examined about it. It would even be a good idea to provide an extra copy for the judge to mark up with his or her own notes during testimony.
Include a complete employment history. Some lawyers have deleted this from the form in their computers, for some reason, but it is specifically required in the rule: “A general statement of the providing party describing employment history and earnings from the inception of the marriage or from the date of the divorce, whichever is applicable.” This information is vitally important in connection with property division, alimony, child support and even child custody, and yet it is often omitted by lawyers.
Be sure to explain any discrepancies. If your client has a perfectly logical explanation why the cell phone bill is $375 a month, be sure to cover it. If expenses exceed income, how is the client managing to pay the difference? If your client’s year-to-date income includes a one-time bonus that will never be repeated, notate that and have your client testify about it; if you don’t explain it, you can expect that the judge will include the bonus in your client’s income.
Use an up-to-date statement. A financial statement prepared six months ago in discovery and not updated since is simply not a statement of “actual income and expenses and assets and liabilities,” as required in the rule. It defeats the purpose of the rule for a witness to spend a couple of hours explaining how the statement should be updated when that should have been done in trial preparation. If you come to court without an updated statement, the court may continue your trial to require you to prepare one.
Have your client sign and date the statement. The Court of Appeals has been critical of unsigned financial statements.
Make sure the entries really are what they say. A voluntary 401(k) contribution is not “mandatory retirement,” and should not be listed on that line. Nor is a private health insurance premium “mandatory insurance.” The term “mandatory” as used on the form refers to items required by law, such as PERS retirement.
Remember that a month has more than four weeks. A month is 52 weeks divided by 12, or 4.3. A client who says “I get paid $400 every Friday, so I make $1,600 a month” is wrong; the correct amount would be $1,720.

TRIAL BY CHECKLIST: EQUITABLE DISTRIBUTION

August 5, 2010 § 23 Comments

A practice tip about trial factors is here.

The decision in Ferguson vs. Ferguson, 639 So.2d 921, 928-9 (Miss. 1994), sets out the factors that the trial court must address in making a determination of equitable distribution. Those factors are:

Substantial contribution to the accumulation of the property, based on direct or indirect economic contribution to the acquisition of the property, contribution to the stability and harmony of the marital and family relationships as measured by the quality, quantity of time spent on family duties and the duration of the marriage, and contribution to the education, training or other accomplishment bearing on the earning power of the spouse accumulating the assets.
The degree to which each spouse has expended, withdrawn or otherwise disposed of marital assets and any prior distribution of such assets by agreement, decree or otherwise.
The market value and the emotional value of the assets subject to distribution.
The value of assets not ordinarily, absent equitable factors to the contrary, subject to distribution, such as property brought to the marriage by the parties, and property acquired by inheritance or inter vivos gift by or to an individual spouse.
Tax and other economic consequences, and contractual or legal consequences to third parties, of the proposed distribution.
The extent to which property division may, with equity to both parties, be utilized to eliminate periodic alimony and other potential sources of future friction between the parties.
The needs of the parties for financial security with due regard to the combination of assets, income and earning capacity.
Any other factor that in equity should be considered.

Some principles of equitable distribution to bear in mind:

Equitable distribution applies to marital assets, which are assets acquired through the work efforts of one or both parties during the marriage. Included in the definition of marital assets is added value, as where an asset was the pre-marriage property of one party, but its value was increased during the marriage by contribution. An example is a 401(k) plan with a value of $10,000 at the time of the marriage that increases through contributions during the marriage to $100,000. The increased value attributed to contributions is a marital asset.
Equitable distribution does not mean equal distribution. The division must be equitable, considering all of the Ferguson factors. Each asset need not be divided; the overall division must be fair.
Equitable division of the marital estate involves four steps: (1) The trial court classifies each asset as marital or non-marital; (2) The court determines the value of each asset based on the proof, which may require appraisals; (3) The marital assets are divided equitably based on the Ferguson factors; and (4) move on to the Armstrong factors to determine whether, after equitable distribution, alimony is appropriate.
The parties’ separate, or non-marital, assets are not subject to equitable division, although they are to be taken into consideration in the distribution as well as in ajudicating the need for alimony. The values of non-marital assets must be in the record as well as that of the marital assets.
Equitable distribution may be used to eliminate the need for an alimony award. As the court stated in Ferguson at 639 So.2d 921, 929 (Miss. 1994), “Alimony and equitable distribution are distinct concepts, but together they command the entire filed of financial settlement of divorce. Therefore, where one expands, the other must recede.”
The contribution of a homemaker to the marital estate is presumed equal to that of a wage-earner, but the presumption can be overcome with proof that the homemaker’s contribution was actually minimal.
A spouse may be granted a greater share based on greater need.
In making its allocation of assets, the court considers the asset value net of debt, and may also factor in the amount of debt assigned to a party in determining how to award assets.
The valuation date is in the judge’s discretion, but the judge can be influenced by your proof and argument. Give careful consideration to the date you wish for the assets to be valued. For example, due to fluctuations in the stock market, it may be in your client’s interest for the valuation date to be closer to the date of the divorce than to the date of separation. Make your position and its rationale clear to the court. Caveat: The appellate courts have made it clear that entry of a temporary judgment stops accumulation of marital assets, so that any increased value or newly acquired assets after the temporary are the separate property of the party to whom they are attributable.

Equitable distribution is a complex subject with many nuances that are far beyond the scope of this post. I recommend that you obtain a copy of Professor Deborah Bell’s Family Law in Mississippi, which includes an exhaustive analysis of the subject at Chapter VI.

What you can expect during a Trial (Contested Case)

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