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In re Application of McCauley v. New York State & Local Employees' Retirement System

Supreme Court, Albany County

August 13, 2012

In the Matter of the Application of Maureen J. McCauley, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules
New York State and Local Employees' Retirement System, Respondents.

MAUREEN J. McCAULEY, Self-Represented Petitioner.

HON. ERIC T. SCHNEIDERMAN, Attorney General for the State of New York, (ADAM W. SILVERMAN, Esq. of Counsel), Assistant Attorney General For the Respondent.

Patrick J. McGrath, Supreme Court Justice.

In this Article 78 proceeding, petitioner seeks a Judgment annulling and setting aside respondent's August 30, 2011 determination denying petitioner's application for her ex-husband's death benefits. Respondent opposes the petition and petitioner has submitted a Reply.

Petitioner's ex-husband ("the member") was a member of the NYS Retirement System.

During the member's Retirement System membership, he completed three forms designating beneficiaries for his death benefit. The most recent beneficiary designation filed by the member is the designation form on his May 14, 1992 application for membership in the Retirement System. On this form he designated Petitioner as primary beneficiary and his parents as contingent beneficiaries. This is the last Designation of Beneficiary Form the member filed with the Retirement System prior to his passing away on October 20, 2009. On August 30, 1999 the member and Petitioner entered into a separation agreement which resulted in a final divorce decree signed on May 28, 2004. In Article 4 of the separation agreement, the member and Petitioner agreed to sever their rights in each others' estate and particularized their mutual waivers by stating "(1) Each of the parties has been, during the course of the marriage, and is now, a participant in the New York State pension plan. (2) Each party hereby waives any claim in and to the pension of the other. Each pension shall hereafter be the sole and separate property of the respective parties and each waives his or her claim to any and all other rights, including survivor benefits."

Before the member passed away, EPTL 5-1.4 was amended by the Matrimonial Law Chapter 173 of the laws of 2008 to include the following:

"Revocatory effect of divorce, annulment or declaration of nullity, or dissolution of marriage on disposition, appointment, provision, or nomination regarding a former spouse:
(a) Except as provided by the express terms of a governing instrument, a divorce (including a judicial separation as defined in subparagraph (f)(2)) or annulment of a marriage revokes any revocable (1) disposition or appointment of property made by a divorced individual to, or for the benefit of, the former spouse, including, but not limited to, a disposition of appointment by will, by security registration in beneficiary form (TOD), by beneficiary designation in a life insurance policy or (to the extent permitted by law) in a pension or retirement benefits plan, or by revocable trust, including a bank account in trust form, (2) provision conferring a power of appointment or power of disposition on the former spouse, and (3) nomination of the former spouse to serve in any fiduciary or representative capacity, including as a personal representative, executor, trustee, conservator, guardian, agent, or attorney-in-fact. (b)(1) Provisions of a governing instrument are given effect as if the former spouse had predeceased the divorced individual as of the time of the revocation. (2) A disposition, appointment, provision, or nomination revoked solely by this section shall be revived by the divorced individual's remarriage to the former spouse."

The Laws 2008, ch 173, § 2, provides as follows:

"This act shall take effect immediately and shall apply only where the marriage of a person executing a disposition, appointment, provision or nomination in a governing instrument, as defined in EPTL 5-1.4(f)(5), such section as added by section one of this act, to or for the benefit of a former spouse ends in a divorce or annulment, as defined in EPTL 5-1.4(f)(2), on or after such effective date or, where such a marriage ends prior to such effective date, only where such a disposition, appointment, provision or nomination takes effect only at the death of the person who executes it and such person dies on or after the effective date of this act."

At the administrative hearing below, petitioner alleged that she was the named beneficiary of the member's death benefits on file with Respondent and that she was entitled to the member's death benefits. In opposition, the Executrix of the member's estate argued that EPTL 5-1.4 revoked the designation of Petitioner's entitlement to the member's death benefit. A hearing was held on November 22, 2010. On June 2, 2011, Administrative Law Judge Herbert R. Johnston, Jr. denied Petitioner's application. On August 30, 2011, the determination was adopted by Executive Deputy Comptroller Kevin F. Murray for Respondent who determined and directed that Petitioner's application for the member's death benefits was denied.

Petitioner now asserts that the Respondent's application of New York State Estates, Powers and Trusts Law 5-1.4 ("EPTL 5-1.4") was arbitrary and capricious as it "abrogates existing contracts" as well as respondent's own mandate to pay death benefits to the duly named beneficiary. She claims there is no basis in law to apply EPTL "retroactively", as the statute contains no express language allowing such application, and that retroactive application is generally disfavored by New York Courts. Additionally, she claims that respondent failed to give members notice that it was "substituting a new law for prior law."

Further, that Respondent's application of EPTL 5-1.4 violates the New York State Administrative Procedure Act ("SAPA") because respondents did not file a SAPA notice preceding their interpretation of EPTL 5-1.4 and ...

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