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United States District Court, S.D. New York

March 30, 2004.

DEVLIN GRAPHIC INDUSTRIES, INC. PENSION PLAN, and JOAN D. LEWIS, as trustee of Devlin Graphic Industries, Inc. Pension Plan, Plaintiffs, -against- DAVID LEWIS, Defendant

The opinion of the court was delivered by: MICHAEL DOLINGER, Magistrate Judge


On March 30, 2004, Magistrate Judge Michael H. Dolinger issued a Report and Recommendation ("Report") recommending that Plaintiff's motion for summary judgment be granted. No objections to the Report have been filed.

In reviewing a Report and Recommendation, the Court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C.A. § 636(b)(1)(C). To accept the Report and Recommendation of a magistrate judge to which no timely objection has been made, a district court "`need only satisfy itself that there is no clear error on the record.'" Johnson v. Reno, 143 F. Supp.2d 389, 391 (S.D.N.Y. 2001) (citation omitted). See also Brvant v. New York State Dep't of Corr. Serv., 146 F. Supp.2d 422, 424-25 (S.D.N.Y. 2001) (court may accept those portions of report to which no written objection has been made, so long as they are "not facially erroneous").

  The Court has reviewed thoroughly Magistrate Judge Dolinger's well-reasoned Report and has determined that there is no clear error on the face of the record. The Court adopts Page 2 the Report for the reasons stated therein. Accordingly, Plaintiff's motion for summary judgment is granted. The Clerk of Court is directed to enter judgment declaring that the June 30, 1998 Order is not a Qualified Domestic Relations Order under the terms of 29 U.S.C. § 206(d)(3)(B)(i) and enjoining Defendant from enforcing that Order against Mrs. Lewis in any court.

  Magistrate Judge Dolinger's Report follows.


  Plaintiffs Devlin Graphic Industries, Inc. Pension Plan and its trustee Joan Lewis commenced this lawsuit under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132 (a)(3), principally to challenge the validity of a New York State court domestic relations order as unenforceable under ERISA. Plaintiffs now move for summary judgment, which we recommend be granted.


  This lawsuit is an outgrowth of a very long-running matrimonial proceeding between Mrs. Lewis and her estranged husband, defendant David Lewis. The particular point of controversy concerned Mr. Page 3 Lewis' entitlement to payments under the pension plan of a family-owned corporation known as Devlin Graphic Industries, Inc.

  On June 30, 1998, a New York State Supreme Court justice issued an order in the course of the couple's divorce proceeding, directing that a portion of the plan's assets be distributed to Mr. Lewis. (See Affirmation of Scott M. Reimer, Esq., executed Dec. 5, 2002, at ¶ 3 & Ex. C). That order had been submitted by Mr. Lewis, purportedly to effectuate an agreement between him and his wife for the equitable distribution of their assets in the form of a Qualified Domestic Relations Order ("QDRO").

  Mrs. Lewis filed the current action in this court in 2000, in her capacity as a trustee of the pension plan, to seek a determination that the 1998 order did not constitute a QDRO under ERISA, because it was inconsistent with several provisions of the plan. (See Compl. at UU 15-34). Defendant in turn asserted a counterclaim under ERISA for alleged non-provision of plan information. (See Verified Answer & Counterclaim at ¶¶ 5-12).

  Within weeks after commencement of this lawsuit, defendant moved in state court for an order holding his former wife in contempt for non-compliance with the 1998 distribution order. That proceeding in turn triggered a motion by plaintiffs in this court for a temporary restraining order and preliminary injunction. The District Court entered a temporary restraining order on November Page 4 30, 2000, prohibiting enforcement of the 1998 state-court order. See Devlin v. Graphinc. Industries, Inc. Pension Plan v. Lewis, 2001 WL 310626, *1 (S.D.N.Y. March 30, 2001). The Court subsequently entered a preliminary injunction on March 29, 2001, granting the same relief for the pendency of this lawsuit. See id. at *10.

  In granting injunctive relief, the court relied upon its conclusion that the 1998 order was inconsistent in at least two respects with specific provisions of the plan. First, the order defined the benefits payable to the plan participants on the basis of their percentage of ownership of the plan assets — finding that Mrs. Lewis had an "interest" in the plan calculated as 92.3% of plan assets — and ordered a transfer of half that amount (46.15% of plan assets) to David Lewis. In contrast, the plan defined the participants' benefits as a percentage — thirty percent — of their average monthly compensation, reduced by 1/28 for each year of service less than twenty-eight years. Accordingly, the court concluded that "[t]he State Court Order is thus clearly inconsistent with the terms of the Plan in relying on a benefit calculation formula not provided for under the Plan. It fails to satisfy the ERISA section 206(d)(3)(D)(i) requirement that a QDRO not `require a plan to provide any type or form of benefit . . . not otherwise provided under the Plan.'" Id. at *9.

  Second, the court agreed with plaintiffs' contention that the Page 5 1998 order was inconsistent with the terms of the plan because it ordered a distribution of plan assets to Mrs. Lewis before she was eligible for receipt of benefits. See id. at *10 (citing 29 U.S.C. § 1056(d)(3)(E)(i)(I)).*fn1

  Following this decision, the parties returned to state court, with defendant seeking enforcement of the 1998 order. At a hearing before the Hon. Fred L. Shapiro, S.C.J., the court directed that a neutral expert be appointed to value Mr. Lewis' share of the plan, with a view to having Mrs. Lewis pay that sum directly to Mr. Lewis rather than through the distribution of plan assets. That approach was explicitly dictated by the ruling of this court that enjoined enforcement of the 1998 order. (See Affidavit of David Lewis, sworn to Jan. 21, 2003 ("Lewis Aff.") at ¶ 3 & Ex. A, Sept. 6, 2001 Tr. at 7-10). This process led to a state-court hearing on August 26, 2002 and to the payment, on September 17, 2002, of $107,190.00 by Mrs. Lewis to Mr. Lewis in accordance with Justice Shapiro's 2001 ruling and the findings of the August 2002 hearing. (See id. at ¶ 4 & Ex. B; Reply Affirmation of Scott M. Reimer, Esq., executed Jan. 23, 2003 ("Reimer Reply Aff.") at ¶ 4).

  As for defendant's counterclaim in this action, that was settled by an offer of judgment that was accepted by defendant in Page 6 November 2002. (See Lewis Aff. at ¶ 6 & Ex. C). Accordingly, all that remains in this lawsuit is plaintiff's current assertion that the 1998 state-court order, which has never been vacated, should be definitively adjudicated as not enforceable under ERISA.


  Plaintiffs now seek summary judgment on their claims and the consequent entry of a declaratory judgment and injunction. Defendant opposes solely on the basis that the payment to him by plaintiff pursuant to Justice Shapiro's ruling moots this case.

  Defendant does not dispute the legal premise of plaintiffs' claim that the June 1998 order did not constitute a QDRO under ERISA. Moreover, the reasoning of the District Court on this point when granting plaintiffs' preliminary injunction motion appears to be unassailable.

  The only remaining issue, therefore, is whether the ruling of Justice Shapiro, and its implementation by the payment of $107,190.00, actually moots plaintiffs' claims. Defendant so asserts, at least in substance, but without the benefit of any legal or even factual analysis.*fn2 We disagree. Page 7

  The order that is the focus of the plaintiffs' claims here has apparently never been vacated, and in addition defendant has refused to issue a satisfaction or sign a release. (See Reimer Reply Aff. at ¶ 3). Thus it is at least conceivable that defendant could again seek enforcement of the order, which defendant apparently viewed as granting him substantially more than he ultimately received in state court. (See id. at ¶ 4; Lewis Aff., Ex. A at p. 2). Although such an application would presumably be doomed to failure in view of Justice Shapiro's ruling, which plainly was designed to fashion an alternative to that prior order, absent relief defendant would not be precluded from pursuing such an alternative in state court.

  It is true that plaintiff could have chosen to seek vacatur of the order in state court, an application that, if granted, would have mooted her claims here. Indeed, she so concedes, but she properly notes that she was compelled by this court's scheduling order to move with respect to her claims before she could obtain relief in state court. (See Reimer Reply Aff. at ¶ 50).

  Under all of the circumstances, plaintiffs' claims are not moot. Defendant has not explicitly consented to the vacatur of the the 1998 order, and the state court has not vacated it. Accordingly the controversy, while considerably paler than it was at the outset of this lawsuit, is still technically alive. See, e.g., Mosley v. Page 8 Hairston, 920 F.2d 409, 414 (6th Cir. 1990) (stating that "`live controversies' are those that persist in `definite and concrete' form even after intervening events have made some changes in the parties' circumstances").


  For the reasons noted, we recommend that plaintiff's motion for summary judgment be granted, and that the court enter judgment declaring that the June 30, 1998 order is not a QDRO under the terms of 29 U.S.C. § 206(d)(3)(B)(i) and enjoining defendant from enforcing that order against Mrs. Lewis in any court.

  Pursuant to Rule 72 of the Federal Rules of Civil procedure, the parties shall have ten (10) days from this date to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court and served on all adversaries, with extra copies to be delivered to the chambers of the Honorable Laura T. Swain, Room 426, 40 Centre Street, and to the chambers of the undersigned, 500 Pearl Street, Room 1670. Page 9 Failure to file timely objections may constitute a waiver of those objections both in the District Court and on later appeal to the United States Court of Appeals. See Thomas v. Arn, 474 U.S. 140, 150 (1985), reh'g denied, 474 U.S. 1111 (1986); Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).

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