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Stoddard v. Stoddard

Supreme Court, Cayuga County

January 2, 2018

Marlene A. Stoddard, Plaintiff,
William M. Stoddard, Defendant.

          Michael Bass, Esq. Attorney for Plaintiff

          John C. Rossi, Esq. Attorney for Defendant


         In this matter, the court faces a nettlesome query: can a qualified domestic relations order ("QDRO"), which describes the procedure for determining an equitable share of a pension, be modified if the text of the QDRO specifies a specific dollar value for the non-participant's interest?

         The facts in this matter are not disputed. In their settlement and opting out Agreement, this couple agreed that the husband's pension was "a martial asset" and that "it shall be allocated according to established formulas." The parties further agreed that the wife was entitled to a one-half share of the pension multiplied by a coverture fraction based on 24.75 years of marriage and further that the husband, the participant, had been enrolled in the plan for 30 years. While the agreement specifies the duration of the couple's marriage and the duration of the husband participation in the pension plan, the agreement does not contain the arithmetic calculation that would be utilized under the Majauskas formula for calculating the wife's marital share of the pension. Majauskas v Majauskas, 61 N.Y.2d 481, 486 (1984). [1]

         Instead, the agreement provided that the husband was receiving a benefit of $4, 494.59 and the agreement stated: "the parties agree that the wife's share shall be $1, 853 per month." The agreement also anticipated future changes in the payments under the plan. It provided that if the plan were amended "any such change shall inure to the benefit" of both former spouses and the benefit would be shared in "equal proportions." The agreement concluded by stating that the "wife shall benefit in the same proportion as the husband from any amendments to the plan." The agreement did not specify what would occur if an amendment in the plan inured to the detriment of either party.

         The subsequent filed QDRO provided that the annual payment for which the husband was eligible was $4, 494.59. The QDRO added that the "the alternate payee shall be allocated and paid under a segregated account the sum of $1853.00." The QDRO also contained further language that the alternate payee would "receive a pro-rata share of the subsidized early retirement benefits, cost-of-living adjustments or any other economic improvements made to the Participant's benefits or after the date of retirement." The QDRO then described that the additional benefits would be "calculated as follows: 41.25 per cent" and added: "The alternate payee shall be paid on a percentage basis an equivalent or benefit of 41.25 percent."

         In 2017, the participant learned that as a result of changes in federal law, the monthly benefit under the pension would be reduced to $3, 191.16. When the participant inquired of the pension administrator for a proportionate reduction in the amount payable to the non-participant under the QDRO, the plan administrator refused to allocate any portion of the reduction to the non-participant recipient without a modification of the QDRO by this court. In response to the plan's decision, the participant moved before this court for an order to modify the terms of the QDRO to allocate the percentage reduction in benefits to the alternate payee. The ex-wife, in response, argues that the agreement specified that she would receive a fixed benefit - the hard-dollar amount of $1853 - and that any reduction in the benefit was, as a result of the agreement, allocated solely to the participant.

         In McCoy v. Feinman, 99 N.Y.2d 295 (2002), the Court of Appeals advised if parties have legal capacity to negotiate and do in fact freely negotiate their agreement, the courts should not disturb a valid stipulation absent a showing of good cause such as fraud, collusion, mistake or duress or unless it suggests an ambiguity indicating that the words did not fully and accurately represent the parties' agreement. In this court's view, the agreement in this instance has a latent ambiguity in the text between the references to the fixed dollar amount and the references to "percentage basis." In reading the agreement alone - without reference to the text of the QDRO - it is readily apparent that the dollar amount was calculated through the Majauskas formula and was a result of a "percentage" calculation. The conclusion that a percentage calculation was the underlying concept is bolstered when the language regarding future additions to the payout is considered in conjunction with the remainder of the paragraph. While the parties's agreement anticipated a change in the plan or its payments, they only devised language that allocated any future increase in benefits and never considered the consequences if a future amendment reduced the available benefits. But, in calculating those benefit changes, the parties agreed that the new benefit would be calculated on the same percentage formula that had produced the hard-dollar amount set forth in the prior sentences in the agreement.

         For these reasons, the Court concludes that an ambiguity exists regarding the intention of the parties when calculating the consequences of a reduction in the pension benefit.

         The New York courts provide only partial guidance in resolving this ambiguity. In support of the claim that the court is bound by the fixed-dollar amount set forth in the agreement, the former wife cites Tolosky v. Tolosky, 304 A.D.2d 876 (3rd Dept. 2003) which involved a lump-sum pension distribution in a judgment of divorce. The Third Department framed the issue as whether the payments pursuant to a judgment constituted maintenance or a pension distribution and held that the payment of a monthly amount from the pension did not convert the payment into a form of maintenance. For that reason, the case is easily distinguished, as the issue here is not the nature of the payments, but rather whether the specification of the dollar amount, in the agreement, precludes this court from modifying the marital payout when the underlying pension payment is reduced. [2] The more pertinent authority in this instance lies in another precedent cited by the wife. In Kraus v. Kraus, 131 A.D.3d 94 (2d Dept 2015), the Second Department dealt with a modification in a pension payout caused by the participant's election of survivor benefits to his second wife. The court cautioned that courts should avoid modifications of QDROs if the effect was "to grant more expansive rights to the [beneficiary] than that which the parties had negotiated and agreed upon in the stipulation." Id. at 105. The court in Kraus concluded that the impact on a marital share of a pension could be "subject to an employer's lawful amendment of the underlying pension plan." Kraus v. Kraus, 131 A.D.3d at 107. The Court of Appeals gave similar guidance in Olivo v. Olivo, 82 N.Y.2d 202 (1993), when it commented:

parties' rights are generally subject to changes in the terms of a retirement plan, as well as to circumstances largely beyond their control, such as the salary level finally achieved by the employee and used to calculate the pension benefit. What the non-employee spouse possesses, in short, is the right to share in the pension as it is ultimately determined.

Id. at 209-210. See Unser v. Fox, 83 A.D.3d 1429 (4th Dept. 2011)(pursuant to Olivo, the right of plaintiff to a share of defendant's pension is contingent on the amount of pension benefits that are "actually obtained"); Lemesis v. Lemesis, 38 A.D.3d 1331 (4th Dept. 2007) (a former spouse had no basis to seek a higher payout when the participant chose a lesser payout to benefit a second spouse). The Fourth Department has also held that post-retirement cost-of-living adjustments and "supplements and enhancements" to existing pension benefits should distributed to the non-participant spouse. Antinora v. Antinora, 125 A.D.3d 1336, 1340 (4th Dept. 2015)

         In citing these decisions, this court acknowledges that these decisions are not directly on point in this instance, in which the agreement states a specific dollar amount, but also references the Majauskas formula for calculating that dollar amount. In this court's view, the arc of the these precedents is that if an equitable formula is utilized to reach a hard dollar amount - in this case, by a strict application of the Majauskas formula - then that amount may be subject to downward modification by a court unless the parties have expressly assigned the risk of a future diminution solely to the participant. This conclusion, accords with the original intention of the parties; i.e., to give the non-participant - and the participant - the benefit of their full marital share under the equitable formula. These prior precedents have permitted modification of the benefits to the non-participant even if the participant's voluntary choices - e.g., ...

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