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New Developments on Military Retirement

June 6, 2017: Posted by Tom Farrell

We finally had to give in and start a blog. Our first topic will be the impact of two really important legal developments in the treatment of military retirement in divorce, both of which have come up in the last six months.

First, there is the National Defense Authorization Act of 2017, signed by President Obama (remember him?) as one of his last official acts. NDAA 2017 has a proviso amending the Uniformed Services Former Spouse’s Protection Act, which is the federal law that allows state courts to divide military retired pay in divorce cases. Prior to NDAA 2017, state courts could do whatever they wanted as long as they didn’t award more than half to the non-member spouse. Most courts awarded what is called a “coverture fraction,” which is the length of marriage overlapping military service, divided by total service, times one half. This fraction was applied to the actual retirement when received. NDAA 2017 says that courts must now divide a “hypothetical retirement.” So, the same fraction applies, but it is applied to “the retirement defendant would have received if he had retired on 27 May 2017 as an O-3 with 168 months of creditable service and a retired pay base of $5,247/month.” This is a good deal for the service member, but not for the non-member ex-spouse. The ex has to wait until the member retires, but under the new formulation is locked into a portion of the retirement earned as of the date of divorce. That might be fair if the spouse could get benefits immediately following the divorce, but the spouse in the above example might have to wait up to sixteen years. Fair or not, the lesson for divorce lawyers is that you now need much more data to properly draft a divorce decree dividing military retired pay, and these new clauses are going to have a much higher rejection rate at DFAS. The lesson for divorcing military personnel and their spouses is to make sure that you have an attorney who knows how to do this right.

Second, we have the US Supreme Court’s decision in Howell v. Howell, which came out in May. Howell involved a divorced military retiree who was also collecting VA disability. If you are less than 50% disabled, you must waive an equivalent amount of retired pay to receive VA disability. Retired pay is divisible in divorce, but VA disability is not. If you are representing the non-member spouse, you protect your client by putting a proviso in the divorce decree that says if the retiree does anything to reduce the amount of retired pay the ex-spouse would otherwise receive (like waiving retired pay to take VA disability), the retiree will reimburse the ex-spouse the amount that would otherwise have been received. The Supreme Court has now held that state courts cannot enforce such a proviso. The real answer here is that Congress should fix this by not requiring ANY waiver of retired pay to receive VA disability. Retired pay is deferred compensation for services performed. VA disability is compensation for future loss of earning power by reason of service-connected disability. Somehow, Congress got the idea that retirees were “double-dipping,” which is not the case at all. In 2004, it retreated and passed “concurrent receipt” legislation, but this was a compromise measure and only afforded relief to retirees who were more than 50% disabled.

So Congress and the Supreme Court have both spoken, and they haven’t been too friendly to military spouses.

Mandatory Mediation: An Idea Whose Time Has Passed

October 1, 2017: Posted by Tom Farrell

I’m overdue for another good rant. This one has to do with mandatory mediation.

Mediation is where a neutral third-party tries to help the litigants come to an agreement that resolves their case. A mediator can’t decide the case, however. I’m not against mediation, and I’ve participated in mediation both as counsel for one of the parties and also as a court-appointed mediator. Rule 53.1 of the Hawaii Family Court Rules authorizes the court to order the parties to any family law matter to participate in mediation. While it seems like a good idea, mandatory mediation is overused, and has a number of negative consequences. If I were writing the rules, I’d repeal this one.

One of the biggest misuses of this rule occurs when judges refuse to set a trial date, requiring that the parties to go to mediation instead. More often than not, parties don’t get serious about settlement until the threat of a trial on a date certain is hanging over their heads. When you know that you only have until X-day to settle, and the next day your disputes will be put into the hands of a judge, there is motivation to settle instead of diddling around. Pretrial litigation deadlines also encourage settlement. When the exhibit exchange deadline has passed, each party pretty much knows what the other will be able to prove at trial. Big talk ends, and hard reality sets in.

These delays can cause financial losses to clients. For example, in one case I recently handled, a major issue was the buyout of the former marital residence. By refusing to set a trial date and ordering the parties to continue in mediation that they had previously engaged in on a voluntary basis, the court cost my client thousands of dollars because the real estate market was rising. And, of course, if the court does not set a trial date and continues the trial setting hearing for another day, that’s another expensive trip to Kapolei that runs up attorneys’ fees. Some judges have required three or more hearings before setting a trial date.

The second problem with mandatory mediation is that it causes the parties to incur additional attorney’s fees and costs. Mediators generally aren’t free. The good ones charge a retainer of $6,000 and the same hourly rates as divorce attorneys. The court will reach into your wallet and make you pay for the mediator’s time. The parties will also have to pay for their attorneys’ time preparing for and attending mediation sessions. If a settlement is reached, it may well have been less expensive than going to trial. That’s one of the advantages of mediation that is often touted. However, mediation does not always produce settlements. If a settlement is not reached, the case will have to go to trial anyway and the ultimate cost will be much higher than if the parties had skipped mediation and gone straight to trial. Even when a settlement is reached, there are some cases where it would have been far less expensive to put the evidence before a judge and get a decision, than to spend endless sessions in mediation.

A third problem is that there are some cases in which mediation is clearly going to be a waste of time. In family law matters, parties are frequently emotional, bitter and vindictive. Sometimes they are mentally ill. Some of the issues in these cases simply don’t admit of compromise. How do you mediate a child visitation issue where one parent thinks the other is sexually abusing the child?

Good lawyers always discuss the pros and cons of mediation with clients. It’s quite another thing, however, to have mediation shoved down your throat. Nonetheless, family court judges love to force parties into mediation. It keeps their trial dockets under control, and often produces settlements simply because the parties run out of money and can’t afford to get to trial.

Since most of these people pay the taxes that support Hawaii’s judicial system, it’s understandable that they get a little peeved when a judge who is getting paid about $200,000 per year gaffs their case off on someone else to try to solve, and makes them pay for it, too. These folks thought they had already paid for a dispute resolution system, called the Hawaii Judiciary. A number have complained to me that they aren’t getting much bang for their buck.

For now, however, mandatory mediation continues to be in vogue with judges, and my views are a voice in the wilderness.