Case of the Month Archive

Brown did not establish any particular formula for dividing pension benefits . . .

In reversal, Sixth District holds that trial court erred by concluding that Brown formula mentioned in parties’ 25-year-old interlocutory judgment was synonymous with time rule, and by declining to exercise discretion to divide husband’s pension by other equitable method or formula

James and Mary Ann Gray were married in 1963, by which time James had been a member of the International Brotherhood of Electrical Workers (IBEW) for two years. In 1972, when James began to participate in the IBEW’s newly established defined-benefit pension plan, he received a 10-year past-service credit. James subsequently received a yearly retirement vesting credit based on contributions, which were based on hours worked. James and Mary Ann separated on February 1, 1979. At that time, James’s accrued monthly retirement benefit, which was conceded as community property, was $270.

During the disso hearing on November 7, 1980, the parties stipulated that the trial court would reserve jurisdiction over the distribution of the IBEW pension funds. Later that month, the court issued their interlocutory disso judgment, which provided, among other things, that the court reserved jurisdiction over the IBEW plan “ ‘until such time as benefits are due and payable, and at such time, the Brown formula shall be applied’ ” (referring to In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561). James remarried in 1981; that marriage ended in divorce some time after August 15, 1998 (the date of separation). In their disso, he and his second wife stipulated to a QDRO that calculated the community interest in the IBEW pension using a year-by-year analysis instead of the time rule.

James became eligible to receive pension benefits in 2005. Mary Ann applied to the IBEW, which had a copy of the interloc on file, seeking to receive her community share of James’s benefits, starting April 1, 2006. The IBEW responded with a benefit calculation in which it applied the time rule (referred to therein as the Brown formula), and estimated Mary Ann’s share of James’s total monthly benefit ($3,139) at $560 a month. James filed a motion for pension division, asking the trial court to determine the community-property interest in the IBEW plan benefits; he asserted that the reference to the Brown formula in the interloc did not mean that the time rule should apply when benefits became payable. In a supporting declaration, James stated that he understood that reference to mean that there was a community-property interest in the IBEW pension that would be calculated on the basis of benefits earned during the marriage (plus applicable enhancements) and divided equally between him and Mary Ann. He claimed that because of his two marriages, he would receive less than 50% of his pension if the time rule applied, and he asked the court to apply a “modified” time rule. In opposition, Mary Ann argued that the Brown formula and the time rule were synonymous, both at that time and in 1980 when the disso court issued the interloc, and she asked the court to confirm the time rule as the proper method of calculation. After a hearing, the court found that the Brown formula and the time rule are synonymous, and that application of the time rule was “ ‘a done deal.’ ” The court thus declined to exercise its discretion to select the time rule or any other equitable calculation method, “instead merely implementing what it considered to have already been determined.” In July 2006, the court filed an order memorializing those findings and affirming Mary Ann’s community share of the IBEW pension benefits at $560 a month.

James appealed, and the Sixth District reversed and remanded.

Whatever’s fair . . .
The justices noted that Fam C §2610(a) permits a disso court to make whatever orders it finds “ ‘necessary or appropriate’ ” to give each party his or her community share of a retirement plan. Further, per In re Marriage of Gowan (1997) 54 Cal.App.4th 80, 62 Cal.Rptr.2d 453, 1997 CFLR 7552, FIRST ALERT #F-97-799, the court has broad discretion to make an equitable division of pension benefits, using whatever method or formula will achieve such a division. In this case, they continued, the trial court “understood the prior judgment to have already divided the pension per the time rule.” Therefore, the lower court had not used its discretion to select any other method of calculating Mary Ann’s share of James’s pension. The issue here, the panel concluded, was whether the lower court had abused its discretion by interpreting the interloc in that way and declining to use some other method or formula.

Time after time . . .
The justices looked to see whether, at the time the interloc was issued, the Brown formula and the time rule were synonymous. They noted that before Brown , trial courts had struggled over whether to characterize pension benefits as separate or community property, and whether nonvested pension rights “were mere expectancies and not property subject to division.” In Brown , the panel continued, the Supremes held that both vested and nonvested pension rights are community property to the extent that they derive from employment during marriage, and that the trial court could divide the community interest in the pension rights either in kind or by cash out; if by in-kind division, they found, the trial court must retain jurisdiction to divide the benefits when they become payable. However, the justices here found (and the parties agreed) that “the court in Brown did not endorse or employ a specific formula or method of in-kind pension division.” The time rule, the panel emphasized, evolved in subsequent cases, such as In re Marriage of Freiberg (1976) 57 Cal.App.3d 304, 127 Cal.Rptr. 792 and In re Marriage of Judd (1977) 68 Cal.App.3d 515, 137 Cal.Rptr. 318, 1977 CFLR 1138, in which the appellate courts sought to find an equitable means of apportioning pension benefits based on the number of years of employment during marriage. But none of these early cases, the justices pointed out, referred to the newly evolved time rule as the Brown formula. References to that formula in connection with analysis of the apportionment of pension benefits were not seen until the opinion in Zarrahy v. Zarrahy (1988) 205 Cal.App.3d 1, 252 Cal.Rptr. 20, 1988 CFLR 3887, FIRST ALERT #F-88-346, where the Second District mentioned it, and In re Marriage of Oddino (1997) 16 Cal.4th 67, 65 Cal.Rptr.2d 566, 939 P.2d 1266, 1997 CFLR 7649, FIRST ALERT #F-97-815, where the Supremes referred to it, but neither decision considered whether the term was synonymous with the time rule. The first decision to link the Brown formula and the time rule, the panel said, was In re Marriage of Bowen (2001) 91 Cal.App.4th 1291, 111 Cal.Rptr.2d 431, 2001 CFLR 8831, FIRST ALERT #F-2001-1014; there, both the underlying 1984 judgment and the appellate court opinion connected the two. However, the justices here did not think that one mention in a 1984 judgment “connoted a generally accepted association or demonstrated a universal meaning of the term, especially one that could be made retroactive to 1980, the year of the interlocutory judgment in this case.” Accordingly, the panel found that the trial court erred by concluding that the Brown formula and the time rule are synonymous.

Who knew? . . .
The justices reasoned that both James and Mary Ann believed that the IBEW plan benefits would be divided equally between them based on the amount that he had earned during their marriage. Mary Ann stated that she “had no specific understanding” of the Brown formula, and James’s understanding wasn’t based on any particular formula. The justices thought that both understandings “are perfectly consistent with the principles for which Brown stands,” and neither dictates that the Brown formula, as used in the 1980 interloc, “be interpreted as requiring application of the time rule.” Therefore, they concluded, the trial court should have exercised its discretion to apportion the IBEW plan benefits between the parties “by selecting an appropriate and equitable method of apportionment based on the particular facts and circumstances of this case.” They reversed the trial court’s order, and remanded for the lower court to take that action. However, the panel expressed no opinion on what a proper method of apportionment should be.