What’s On Their Minds: Are Unvested Military Retirement Benefits Marital Property Subject to Division in a Divorce? Christen M. Daniel v. Sean M. Daniel.

Update: On March 26, 2014, the Supreme Court handed down a merit decision in this case.  Read the analysis here.

On October 22, 2013, the Supreme Court of Ohio heard oral argument in the case of Christen M. Daniel v. Sean M. Daniel, 2012 -2113. The issue before the Court was whether unvested military retirement benefits are marital assets subject to division in divorce proceedings. Appellee Sean Daniel did not file a merit brief, so he was not permitted to participate at oral argument. Both Chief Justice O’Connor and Justice Lanzinger expressed their concern over this, but that certainly wasn’t the appellant’s fault.

Case background

The parties were married in 1995. Sean had enlisted in the National Guard shortly before the parties married.  When they separated, Sean had thirteen years in, and by the time of the divorce hearing he had sixteen years in. At some point, Sean re-upped for another six years. Sean will be eligible to receive retirement benefits once he has accumulated twenty years of military service credit.

Procedural Posture

The magistrate found that there were no retirement benefits to divide because they were not vested. Over Christen’s objection, the trial court agreed with the magistrate that there were no retirement benefits for it to divide, because there was no evidence to establish that Sean presently had any vested retirement benefits. Any retirement benefits that he may receive in the future were a mere expectancy. In a split decision, the Third District Court of Appeals found that while a trial court may consider the value of an unvested pension plan as a marital asset for purposes of reaching an equitable distribution, given the minimal record in this case on this point, and lack of specificity about the particulars of Sean’s retirement benefits, it was not an abuse of discretion for the trial court not to include it in this case. The dissent would find that the portion of the retirement benefit attributable to the years of the marriage should be deemed marital property subject to division.

Read the oral argument preview of this case here.

At Oral Argument

Christen’s Argument

Trial courts should absolutely make orders dividing unvested military retirement benefits in a divorce.  The failure to do so in this case was unconscionable.  It was pretty much the only asset of the parties.  Thirteen of the needed twenty years for vesting took place during the marriage.  Christen argues she should get a pro rata share of the benefits based on the percent that accrued during the marriage.  If for some reason the pension never vests, neither party would get anything.  But if it does, it would be totally unfair to give the husband all of it, and the wife none. This case should be reversed and remanded to the trial court with instructions to consider the military pension and divide it appropriately.

What Was on their Minds

The state of the record

Chief Justice O’Connor really went off on a tear on this. She strongly suggested that the case should be dismissed as improvidently allowed because there was seemingly so little in the record by way of particulars about Sean’s pension, and no expert testimony on it whatever. She pressed counsel to explain what evidence there was in the record which would have enabled the court to make a decision, suggesting that it looked “pretty nebulous” to her. If the commanding officer had been present, he probably could have answered many questions about this. (there was discussion about the attempt to subpoena the correct person, but the return not being filed until after the hearing). But she expressed her strong concern about having this case, on this record, stand as a precedent for the 40,000 Ohio men and women in the armed services.  She noted that this ruling wasn’t just for the parties to this case—it had vastly broader impact. Justice O’Donnell added his concerns about the state of this record.

It’s Just Math, Isn’t It?

Justice O’Neill, using the assumption that 16 of the twenty years needed for vesting was marital (it turns out it was more like 13 years), added up to 80% of the pension benefits.  Was it wife’s position that she should get 40% of whatever amount does vest? (answer: yes) Was this really any different from a vested plan?

Does the Wife Automatically Get Half of the Marital Amount?

If this pension is marital property subject to equitable distribution, doesn’t the trial court have the complete discretion in how to divide it?  Can’t there be set-offs, so that one party retains all the retirement benefits, asked Justice French, who seemed to articulate the clearest understanding of equitable distribution issues.  Wouldn’t the case have to be sent back to the trial court to determine what is an equitable distribution in this case?

In a bit of a testy exchange, the Chief noted that the wife might not get half if there were set-offs.  Counsel responded that if the Court were to make a bright-line rule that it wouldn’t include the benefits at all, that issue would be irrelevant.  He commented in his concluding remarks that to make a rule that benefits acquired during a marriage are not to be divided is just plain wrong.

What is the Case Law on Division of Unvested Retirement Benefits?

Does the case law include both vested and unvested benefits, asked Chief Justice O’Connor?

Isn’t this point up in the air, asked Justice Lanzinger, commenting that was all the more reason it was unfortunate only one side was arguing before the court.

Justice O’Neill noted that the issue seemed very narrow to him—does a spouse have a property interest as a marital asset in an unvested pension—has the Supreme Court ever determined this? (only in dicta, counsel suggested).

Wasn’t the problem that the trial court concluded it had no authority to do anything about an unvested pension, asked Justice Pfeifer? Was there any case law that said that?

How it Looks from the Bleachers

To Professor Bettman

Some folks wrongly think that if you have no opponent at argument, it is a walk in the park since only one side appears and presents his or her view.  This case is a good example of why that is not so.  It is often more difficult to argue without an opponent, because all of the Court’s skepticism is focused on you.

When arguing that something is an abuse of discretion, I generally caution lawyers not to say the decision was unconscionable—but that’s right where wife’s lawyer went.  While I don’t think he should have, I also thought he conducted himself very professionally in a difficult circumstance.

Chief Justice O’Connor clearly thinks the case should be dismissed as improvidently allowed because of the apparent lack of evidence in the record about the particulars of this plan. She may have Justices O’Donnell and Lanzinger with her.  I think that would be unfortunate, because this is an issue the domestic relations bar is really interested in.  And in fairness to the wife here, the magistrate found she couldn’t divide the asset because it was not vested—a point of law that deserves to be answered. Short of improv’ing the case, a majority could find that such an asset could be a marital asset subject to equitable distribution, but that in this case there was no abuse of discretion in finding it wasn’t because of the lack of specifics in the record about this particular military retirement pension. Essentially, that was the majority opinion of the appeals court.

It seems to me a very fair argument that wife should get some share of 13/20th of the pension, subject to it actually vesting.  Whether that should be 50% of that amount is unknown, but if that really is the only asset of these parties, as counsel asserted, that would certainly be the presumptive starting point.  Justices French, O’Neill, and Peifer seemed leaning more this way.

I thought it unfortunate that Justice Kennedy said absolutely nothing at oral argument, as this is her field.  She was a domestic relations judge before joining this case. Questioning by her could have been helpful in shaping the dialogue, because of her special knowledge of equitable distribution. Presumably, she will share that knowledge in conference.  She also asked no questions at oral argument in Morrow v. Becker Slip Opinion No. 2013-Ohio-4542, another domestic relations case recently decided.

To Student Contributor Elizabeth Chesnut

I thought the attorney for Mrs. Daniel handled the Court’s questions very well. Perhaps the best argument was that in the division of unvested military benefits, no harm is done to either party if the benefits never vest. It seems likely that the Court will treat unvested military retirement benefits as benefits earned during the course of the marriage, and therefore subject to division at divorce.

 

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