Virginia Family Law Quarterly - Virginia State Bar has really meant a lot having Chris Malinowski, John Huntington, and Mary Commander so involved ... Family Law Matters, William C

Message from the ChairCarl J. Witmeyer, II, ChairFamily Law Section

I have enjoyed every moment of my service asyourBoard ofGovernors’Chair during the last year.Unfortunately,mytermendedonJune30,2014,andIbecametheimmediatepastChair. Icanonlyhopetoemulatemygoodfriend,CassieChin,inthatoffice. I want to acknowledge those who have been sohelpfulduringthepastyear.Iespeciallywanttothankournewmembers for such a successful and involvedfirstyearontheBoard.Havingtheprivilegeofmeet-ingandreceivingthewiseadviceandinputfromJudgeHuff has been a real treat to all of us on the Board.It has really meant a lot having Chris Malinowski,John Huntington, andMary Commander so involvedandactiveontheBoardduringtheirfirstyear.JudgeWallerstein’s joining the Board as our Circuit Courtrepresentative has provided us with his wisdom andgoodnature,also. Sinceallgoodthingsmustcometoanend,howev-er,weneedtorememberNanJoseph’sandJudgeLeisaCiaffone’stenureontheBoard.Wewillmissbothofyouimmensely. We had the largest crowd ever at the AprilAdvancedFamilyLawSeminarattheJeffersonHotelinRichmond. All of the speakers’ presentations andoutlines were very well received. Based on this,we have already scheduled next year’s CLE at theJefferson. What a wonderful venue for that event.Co-chairsJohnHuntingtonandChrisMalinowskihavealready started working on the October Family LawCLE.Itwillbepresentedbyvideo,afterthescheduledlivepresentationsinFairfax,Richmond,andNorfolk. Finally,IwantedtoendmyfinalChair’smessagewiththeideathatnoneofthegreatworkofthisBoardcouldbepossiblewithouttheparticipationofeachandeverymemberoftheFamilyLawSection.Yourcon-

fidenceinus,yourabilitytoparticipateandcontributetowards issues that involve all active practitioners offamilylawintheCommonwealth,andmostimportant-ly,becomingfriendswithsomanydifferentattorneysthroughoutVirginiawillforeverbeinmymemory.Mygratitudecannotbeoverstated. ThankyouforthisprivilegeandhonortoserveasyourChairforthelastyear.v

The Virginia Family Law Quarterly is published by the Virginia State Bar Section on Family Law for its members to provide information to attorneys practicing in these areas. Statements, expressions of opinion, or comments appearing herein are those of the contributors and not necessarily those of the Virginia State Bar or the Section on Family Law.

TABLE OF CONTENTS

Virginia Family Law Quarterly

Volume34,No.2 Summer2014

Published by the Family Law Section of the Virginia State Bar for its Members

Editor’sNote,Brian M. Hirsch ........................... 2MarkYourCalendars,2014 Events ..................... 2HowtoSubmitanArticle....................................... 2

ArticlesThePensionTrap:AvoidingCommonPitfalls,Cassandra M. Chin and Pamela K. Squires ..... 3

Bostic v. Rainey:AnAnalysisofPositionsintheChallengetoVirginia’sBanonSame-SexMarriage,Susan M. Butler .................................................. 8

ValuationofGovernmentServicesFirmsinFamilyLawMatters,William C. Foote ............. 11

AppealsfromJ&DRtoCircuitCourt:CantheStatutoryRighttoaDe NovoAppealBeWaived?Joseph J. DiPietro .............................................. 15

TheBenefitsofPowersofAttorneyinDivorce,Jordan Jackson .................................................. 18

LegalEthicsinMediation,Mary G. Commander ......................................... 19

Cases of the Quarter .......................................... 22

Outstanding 2014 Graduates Awards ............. 27

Thanks to Carl Witmeyer .................................. 27

Board of Governors ............................................ 28

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VirginiaFamilyLawQuarterlyNewsletter Summer2014

2014Mark Your Calendars

FAMILY LAW EVENTS

July 24VBADomesticRelationsCouncil

meetingatTheGreenbrier

September 13AcademyofProfessionalFamilyMediators–DivorceAgreementsTodayforTomorrow(Reston)

September 24VTLAFamilyLawSectionsemi-nar–NavigatingTroubledWaters:

MentalHealthIssuesintheContextofaCustody/VisitationDispute

September 24VTLAFamilyLawSeminar(Fairfax)

September 26AAMLFallMeeting(Charlottesville)

October 14VSBAnnualSeminar(Fairfax)

October 16VSBAnnualSeminar(Norfolk)

October 21VSBAnnualSeminar(Richmond)

November 5 - 8AAMLannualmeetinginChicago

Ifyouwouldliketohaveyourorganization’seventlistedinanupcomingissueofthe

Virginia Family Law Quarterly,[email protected].

Editor’s NoteBrian M. Hirsch

Byyourcomments,thefirsteditionoftheVirginia Family Law Quarterlywasasuccess–mostly. The“mostly”isduetothefactthatwetriedtooffsetsomenew printing costs with a lower cost mailing rate.Thisbackfiredsinceabouthalfof theSectionmem-bers did not get the first edition at all. Wequicklyreprinted and remailed the first edition; that is whysomemembers received two copies. We are usingfirstclassmailgoingforward.So,lessonlearned.

Thanks for the feedback about the first edi-tion to allwho contactedme. Thenew formatwaswell received. However, if there is something youdon’t likeabout theQuarterlyorwant toseeadded,please do not hesitate to contact me at [email protected].

Many Section members have expressed inter-est inwritingarticles,but seemtobeata loss foratopic.Mypredecessorwouldoftentellpeopletojustlookaroundatacaseyoujustsettledortried,abriefyourecentlywrote,orastatutethatyourealizeneedsrevising. There isalwaysa topic there. Iecho thatsentiment.

Again, thanks for your comments and to thosewhohavecontributedarticlestothisissue.

Happy reading–BrianM.Hirsch.

HOW TO SUBMIT AN ARTICLE

Ifyouwouldliketosubmitanarticleforpublication,pleaseemailittoBrianHirschatBHirsch@NOVAFamilyLaw.com.Mostarticlesarebetween1,000and2,000words,butthisshouldnotlimityouinsubmittingashorterorlongerarticle.DeadlinesforsubmissionsareFebruary21,May21,

August21andNovember21.

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Summer2014 VirginiaFamilyLawQuarterlyNewsletter

The Pension Trap: Avoiding Common Pitfalls

By Cassandra M. Chin, EsquireNichols Zauzig Sandler P.C.

[email protected] K. Squires, Paralegal

Retirement Paralegal Services, [email protected]

Retirementassetsareoftenoneofthemostvaluableassetsinadivorcecase.Yet,manyattorneysareadmit-tedly unaware of the intricacies of retirement plans,particularlydefinedbenefitretirementplans,commonlyknownaspensions. Dividingaformerspouse’sshareof benefits is filled with opportunities to protect theformer spouse and expose the employee/participant.Therefore, the division of retirement assets is an areaparticularlysusceptibletomalpracticeactions. AtypicalPropertySettlementAgreementorFinalOrder of Divorcemay simply state, “TheWife shallreceive 50% of the marital share of the Husband’spensioninXYZCorporation.‘Maritalshare’shallbedefinedasthenumberofmonthsofcreditableserviceearnedfromthedateofmarriagetothedateofsepara-tion,dividedbythetotalnumberofmonthsofcredit-ableserviceearnedatretirement.”So,what’swrongwiththat?Potentially,alot. The circuit court may not later grant benefitsnever contemplated during the proceedings. Bradley v. Bradley, 39 Va. App. 108, 111, 570 S.E.2d 881,882(2002)(holdingthatWifewasnotentitledtopre-retirementsurvivorbenefitsthatwerenotmentionedattrial).Althoughatrialcourthasauthoritytomodifyafinalorder to“effectuate” itsexpressed intent regard-ingpensionandretirementbenefits,anymodificationhastobeconsistentwiththesubstantiveprovisionsoftheoriginalorder.Caudle v. Caudle,18Va.App.795,798, 447S.E.2d 247, 249 (1994). See also Baker v. Baker,38Va.App.384,564S.E.2d164(2002)(hold-ingthatthetrialcourterredbyenteringaQDROthatincludedgainsandlossesonHusband’sprofitsharingplanwhen theparties’agreementdivided theaccountas of the date of the agreement, without addressinggainsand losses);Hastie v. Hastie,29Va.App.776,514 S.E.2d 800 (1999) (holding that the trial courterred by entering an order directing Husband to payopen-ended pension benefits toWife when the clearlanguage and intent of the original divorce decree

was to allot her a percentage of the present value ofHusband’s benefits as of a particular date);Fahey v. Fahey,24Va.App.254,481S.E.2d496(holdingthatthetrialcourterredbyenteringaQDROdividingtheactualvalueofaKeoghaccountratherthanthevaluestatedintheparties’agreement). Onethingisclearfromthecaselaw:Fairornotfair,ifitisnotmentionedintheparties’AgreementorFinalOrder,yourclientwillnotbeentitledtoitifcontested. Each defined benefit plan has provisions specificto that plan, so you must familiarize yourself withtheparticularplansbeforenegotiatingasettlementorgoingtocourtinyourcase.EventhoughtheQualifiedDomesticRelationsOrder(“QDRO”)isoftenthelastorderthatisdraftedinadivorcecase,itshouldbeoneof the first things you think about. If you prepare aProperty Settlement Agreement, it is wise to reviewthe pertinent QDRO procedures andmodel languageto ensure that the terms of your written Agreementare specific and can be implemented by the Plan.Otherwise, you might very well be involved in thebattle of competing QDROs long after you thoughtyou had negotiated a settlement. The same goes foranequitabledistributionhearing;ifyouarenotabletoproperlyinformthecourtaboutthespecificprovisionsof theplanor request theappropriaterelief, thecourtwillnotgrant it toyourclient. However,youshouldnotnecessarilyuseaplan’smodel languageverbatimbecauseitissometimesbiasedtowardsoneparty,usu-allytheparticipant,ormaybeconfusingtotheparties. During negotiations and court proceedings, it iswisetopresentyouropposingcounseland/orthejudgewithdetailedproposedlanguageregardingtheparties’retirementassets, language that is ready to insert intoanAgreementorFinalOrder.Doingsoisthebestwaytomakesurethatnothingslipsthroughthecracks. There are numerous defined benefit plans, rang-ingfromcivilian,military,stateandlocalgovernmentpension plans to private employer-sponsored defined

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benefit plans. Each type of plan has its own uniqueaspectstoconsiderwhenbeingdividedupondivorce.This article generally deals with private employer-sponsoreddefinedbenefitplans. Belowisachecklistofcommonissuestoconsiderin any divorce that involves the division of privateemployer-sponsoredpensionplans.

1. Have you correctly identified all of the pen-sion plans involved in the case?

Themost common and potentially tragicmistakeis not identifyingormisidentifying the retirementassetsinacase.

A few employers providemore than one pensionplan.Forinstance,anelectricianmaybeapartici-pant in theindividualemployer’spensionplan,aswell asnational and/or localunionpensionplans.In addition, it is not uncommon for highly com-pensatedemployeesoflargecorporations(suchasGeneralDynamics,LockheedMartin,andNorthropGrumman) tohaveoneormorequalifiedpensionplans,aswellasanon-qualifiedpensionplan.

Sometimesclientsarenotevenawarethattheyhavea pension plan since typically only the employermakes contributions. A call to the employer’sHuman Resources Department may clarify whatpensionplansareavailabletotheiremployees.

2. What type of pension plan are you dealing with?

Youfirstneedtodeterminewhetheryouaredeal-ing with a traditional defined benefit plan whichprovidesabenefit typicallycalculatedonyearsofserviceandcompensation,acashbalancepensionplanwhich, unlike a typical defined benefit plan,hasahypotheticalaccountbalance,orsomekindofahybridplan.Secondly,youwillwanttoinquireas to whether the plan is governed by ERISA orwhetheritisa“non-qualified”plan.

Youwillalsoneedtodeterminewhatformsofben-efitsareofferedunderthePlan.Althoughmosttra-ditionaldefinedbenefitplansofferonlyamonthlyannuitywithorwithoutapost-retirementsurvivoroption,afewofferalumpsumpaymentinlieuofa

monthlyannuity.Themajorityoftheissuesinthisarticlepertaintoatraditionaldefinedbenefitplan,althoughQuestion 7 below dealswith the uniqueissuespertainingtoacashbalanceplansincetheseplansarebecomingmoreprevalent.

ObtainingacopyoftheSummaryPlanDescription,QDRO procedures and model language will pro-videyouwiththeinformationneededtodeterminethetypeofplanandformsofbenefitsavailable.3. Does the plan offer the former spouse the option of taking a “separate interest” versus a “shared interest” approach?Civilian Federal Government pensions, militarypensions, and usually State and local governmentplans only allow a “shared interest” approach individing those pensions with a former spouse,wherebythepartiessimplyshareabenefit.Afor-merspousecanonlyreceivehisorhershareif,asandwhenreceivedbytheparticipantandtheben-efitisbasedontheparticipant’slifetime.Paymentstoaformerspousewillterminateunlessasurvivoroptioniselectedfortheformerspouse.Unbeknownst to many family law attorneys, vir-tually all private pension plans governed underERISA, as well as some non-qualified and othernon-ERISA plans, provide that a former spousemayreceivehisorhershareusingeithera“sharedinterest”approachor“separateinterest”approach.

A“separate”interestapproachcarvesoutaseparateanddistinctbenefitfortheformerspouse.Thefor-merspouse’sshareisactuariallyadjustedovertheformerspouse’slifetimebasedontheageandgen-deroftheformerspouse,aswellasotheractuarialfactors specific to theplan. Under this approach,aformerspousemayelecttocommencehisorherbenefitanytimeonoraftertheparticipant’s“earli-estretirementage,”eveniftheparticipantdoesnotelecttocommencebenefitsatthattime.Onceben-efits commence to a former spouse, theyarepaidfor the remainderof the former spouse’s lifetime,regardless of whether the participant predeceasestheformerspouse.Inessence,underthisapproach,theformerspouseistreatedlikeamini-participantundertheplan.Theformerspouseisabletomake

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his or her own decisions with regard to when tocommencetheirbenefitandinwhatform.

Pleasenote,however,thatifaparticipantisalreadyin retired pay status, a former spouse is typicallylimitedtoa“sharedinterest”approach.

Thefollowingrulesgenerallyapplytotheseparateandsharedinterestapproaches;although,occasion-allysomeplansvaryfromthesetraditionalrules:

Circumstances may vary depending on the agedifference between the parties and other factors;however, the“separate interest”approach isoftenconsideredacleanerapproachindraftingaQDROwhen theemployee isnot retiredsinceeachpartyis able to make their own decisions with regardto their shareof thepensionwithoutaffecting theother. Inaddition,sincethebenefitisactuariallyadjustedovertheformerspouse’slifetime,nopost-retirementsurvivoroption(whichreducesthepar-ticipant’smonthly annuity) is necessary to ensurethat the former spousewill receiveabenefit aftertheparticipant’sdeath.

4. What effect does the participant’s death have on a former spouse’s benefit if the par-ticipant predeceases the former spouse before retirement?

Regardless of whether you use a “separate” or“sharedinterest”approach,youwillwanttoinquire

astowhataffecttheparticipant’sdeathwillhaveontheformerspouse’sbenefitiftheparticipantprede-

ceasestheformerspousebeforetheformerspousecommenceshisorherbenefit.

AllERISAplans, andmanyotherdefinedbenefitplans, provide some sort of pre-retirement survi-vor annuity which protects a spouse or a formerspouse’sinterestshouldtheparticipantpredeceasethe spouse or former spouse before the formerspousecommenceshisorherbenefit.

Unlike a post-retirement survivor annuity, theQualifiedPre-RetirementSurvivorAnnuity(QPSA)isalmostalways100%subsidizedbytheemployerandthereisthereforenocosttoeitherparty.WithouttheQPSAprotection,undermostcircum-stances, if the participant were to predecease theformerspousebeforeretirement,theformerspousewould not receive any benefits from the plan,despitetheawardofaportionofthepensionintheAgreement,FinalOrderorQDRO.

Typically, even under a “separate interest”approach, theQPSAisnecessary toprotecta for-merspouseintheeventtheparticipantpredeceasesthe former spouse before the former spouse com-mences his or her benefit; however, a few planstakea totallyseveredapproachin implementinga“separateinterest”QDRO,whereaformerspouse’s

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benefitisnotaffectediftheparticipantpredeceasestheformerspousebeforetheformerspouse’sben-efitcommencementdate. Awarding theQPSAtoaformerspouseunderaplanwhichusesa totallysevered approach results in the former spousereceiving an additional benefit upon the partici-pant’sdeathaboveandbeyondtheseparateinterestbenefitawardedtotheformerspouse.

Most private pension plans will allow a formerspousetoreceiveaportionoftheQPSA(typically,“to theextentof the former spouse’sentitlement”or“attributabletothemaritalshare”).Anyremain-ingQPSAcouldinmostinstancesbeawardedtoasubsequentspouseoftheparticipant.

5. What effect does the participant’s death have on a former spouse’s benefit if the participant predeceases the former spouse after retirement?

Undera“separateinterest”approach,nopost-retire-mentsurvivoroption isnecessary(orappropriate)since the former spouse’s benefit is actuariallyadjusted over the former spouse’s lifetime, ratherthan the participant’s lifetime. The participant’sdeathafter theformerspouse’scommencementofbenefits will thus not affect the former spouse’sright to continued benefits after the participant’sdeath.Itisimportanttounderstandthatawardingapost-retirementsurvivoroptionforaformerspouseunder a separate interest approachwould providean additional benefit to the former spouse upontheparticipant’sdeath.Asaresult,mostplanswillnotallowaseparateinterestQDROtoprovideforapost-retirementsurvivoroption.

However, if you are using a “shared interest”approach, the only way to ensure that a formerspousewillreceiveabenefitaftertheparticipant’sdeath after retirement is to award all or a portionof the post-retirement survivor annuity, i.e., aQualifiedJoint&SurvivorAnnuity(QJSA).

If you intend to award aQJSA, be specific as tothe level of theQJSA. Some plans only providea50%QJSA,whileothersprovide66%,75%,or100%QJSAoption. Undersomeplans,awardingthe “maximum” survivor annuity would obligatetheparticipanttoelecta100%QJSA,whichwould

resultinamuchlargerreductioninbenefitsduringthe joint lives of the parties than intended and awindfallupontheparticipant’sdeath.Pleasenotethatif theparticipantisalreadyretiredandelectedapost-retirementsurvivorannuityuponretirement, often that election is irrevocable, evenupondivorce.Likewise,iftheparticipantisalreadyretiredanddidnotelectapost-retirementsurvivoroption, no survivor optionwould be available forthe former spouse, regardless of the terms of theparties’writtenAgreement,FinalOrderorQDRO.

A QJSA will almost always reduce the monthlybenefitundertheplan.Manyplanswillallowthecost/reductioninbenefitstoprovidethepost-retire-mentsurvivoroptiontobeallocatedsolely tooneparty or between parties in some ratio; however,someplans require that the cost/reduction inben-efits to provide a post-retirement survivor optioncome“offthetop,”resultingineachparty’sshareofthepensionbeingreducedforthecost/reductionin benefits in proportion to his or her percentageinterestinthepension.

6. What are “early retirement subsidies” and, if applicable, is a former spouse entitled to a proportionate share of such early retirement subsidy?

Manypensionplansprovidesubsidizedearlyretire-ment benefits for employees retiring from activeemployment. Inmostcases, thesubsidyissimplyaccelerating thenormal retirement age, allowingaparticipanttoretirebeforethenormalretirementagewithoutincurringasubstantialreductioninbenefitsforearlyretirement.Afewplansofferanemployeean additional monthly supplement to encourageemployees to retire early. Early retirement sub-sidies or supplements are not applicable for alldefinedbenefitplans,but thevalueofearlyretire-ment subsidies in some plans is substantial. TheAgreement,FinalOrderandQDROshouldclearlystatewhethertheformerspouseshouldshareinanyearlyretirementsubsidyorsupplement.Some experts contend that the early retirementsubsidy or supplement is part of the participant’saccrued benefit and should thus be considered

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a marital asset subject to division upon divorce.Although a subsidy or supplement may not beoffered until after the marriage, such programsare generally offered only to certain long-serviceemployees who were married during the periodinwhich they accrued enoughyears of service toqualifyfortheseenhancedbenefits.If the parties agree that any early retirement sub-sidy or supplement is a marital asset, the formerspouse’s share of any early retirement subsidy orsupplement should be in proportion to his or hershareoftheregularaccruedbenefit.Early retirement subsidies are only available to aformer spouse if andwhenpayable to thepartici-pant,regardlessofwhetherusingthe“separate”or“shared” interestapproach. Ifnoearlyretirementsubsidyorsupplementbecomespayabletothepar-ticipant,theformerspousewouldlikewisereceivenoearlyretirementsubsidyorsupplement.

Pleasenotethatiftheformerspouseelectstoreceivehis or her benefit before the participant’s actualretirementunderaseparateinterestapproach,heorshewillnotreceiveaportionoftheearlyretirementsubsidyorsupplement;however,ifpermittedunderthe termsof thePlanand theQDROsoprovides,theformerspouse’sbenefitmayberecalculatediftheparticipantreceivesanearlyretirementsubsidyorsupplementatthetimeofhisorherretirement.

7. How can a “cash balance plan” be divided?

Cash balance plans generally do not follow thesamerulesasatraditionaldefinedbenefitplan.Acash balance plan is a defined benefit plan withcharacteristicsofbothatraditionaldefinedbenefitplanandadefinedcontributionplan.Ifthedefinedbenefitplanissuesaccountstatementswhichreflectan“accountbalance”or“interestcred-its”(ratherthaninvestmentgainsorlosses),theplanisprobablyacashbalanceplanorotherhybridplan.Typically, a cash balance plan consists solely ofemployer contributions, and each employee has anindividualcashaccountconsistingofemployercon-tributionsandinterestthereon.Therearetypicallyno

losses,only“interestcredits,”inacashbalanceplan.In recent years, many traditional defined benefitplans have been converted to cash balance plansand replaced theprevious traditionaldefinedben-efitplan.Oneoftheadvantagesofacashbalanceplanisthatitisportableandcanbetransferredtoa different plan if the participant terminates hisemployment. In some instances, new employeeswill be under a cash balance plan while olderemployees remain under the traditional definedbenefitplan.Cash balance plans often offer the choice of alump sum distribution or variousmonthly annuityoptions.Individingacashbalanceplan,determineif andwhen the planwas converted from a tradi-tionaldefinedbenefitplan.ProvidingfortheQPSAisoftennotnecessarywhendividingacashbalanceaccount;however,checkwiththeplantoconfirm.Typically, under a cash balance plan, a QDROmay provide that the former spousemay name abeneficiaryintheeventheorshediespriortotheformerspouse’scommencementofbenefits,ratherthanrequiringthattheformerspouse’ssharereverttotheparticipant.Manycashbalanceplansallowanimmediatelumpsum distribution or rollover to a former spouse,whileothersrequirethataformerspousewaituntilthe participant’s “earliest retirement age” or theparticipant’sterminationofemployment.

Ifthereisapre-maritalcomponenttotheaccount,acombinationofthe“maritalsharefraction”andinter-estcreditsmaybeusedtodeterminethemaritalshare.

Dividingadefinedbenefitplanisoneofthemostcomplexaspectsofequitabledistribution. Longafteryou have forgotten the details of the case, your cli-entwillbelivingwiththetermsofthesettlementyounegotiated to divide themarital pensions. Becominginformedaboutthespecifictermsofaplan,whatcanandcannotbeawarded,andhowthetermscanbenefitor disadvantage your client early on in the processprovidesyouwiththeinformationyouneedtoprotectyour client, regardless of whether you represent theparticipantortheformerspouse.v

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A challenge to Virginia’s ban (the “ban”) onsame-sex marriages is pending before the UnitedStatesCourtofAppealsfortheFourthCircuit.Bostic v. Schaefer (formerly Bostic v. Rainey) is one ofseveralcasesthathaveworkedtheirwaythroughthecourts since theUnited States SupremeCourt deci-sioninWindsor v. United States,1whichgrantedfed-eral recognition of same-sexmarriages. Oral argu-mentintheBosticcasewasheardonMay13,2014;theCourt’sdecision in thecase ispending.2 Giventhe legal significance of the case, additional briefsandargumentsfollowingthedecisionareanticipated,regardlessofwhatthedecisionmaybe.

History of the Ban on Same-sex Marriage in Virginia In1975,VirginiaCode§20-45.2waspassed,pro-hibitingmarriage“betweenpersonsofthesamesex.”Thissectionwasamendedin1997topreventrecogni-tionofsame-sexmarriagesenteredintoinotherstatesorjurisdictions,addingaclausethatmakessuchmar-riages“voidinallrespectsinVirginiaandanycon-tractualrightscreatedbysuchmarriageshallbevoidand unenforceable.” In 2004, a new Code sectionwas added, which states that civil unions, partner-ship contracts or other arrangementswhich attempttogivesame-sexpartiestheprivilegesorobligationsof marriage are prohibited. This new section, Va.Code§20-45.3,makessucharrangementsvoid.Anycontractsarisingoutofacivilunionorotherpartner-shiparevoidandunenforceable,evenwhentheyarelegalinthestateinwhichthecivilunion,partnershipor contract is entered into. In 2006, theMarshall-NewmanActwas passedby the voters ofVirginia,whichamendedtheVirginiaConstitutiontostatethatonlya“unionbetweenonemanandonewomanmaybeamarriage...ThisCommonwealthanditspoliti-

calsubdivisionsshallnotcreateorrecognizealegalstatusforrelationshipsofunmarriedindividualsthatintends toapproximate thedesign,qualities,signifi-cance,oreffectsofmarriage.”Article1,§15-AoftheConstitutionofVirginia.

The Players in the Bostic Case Timothy Bostic and Tony London are two menwhohavebeeninarelationshipforthepast25years.OnJuly1,2013,theywenttothecircuitcourtclerk’sofficeintheCityofNorfolktoapplyforamarriagelicense.3 Theywere denied a license andwere toldthat, despite the recent SupremeCourt ruling in theWindsor case, the Commonwealth of Virginia rec-ognizesmarriage asonlybetweenonemanandonewoman.Asecondcouplebecameplaintiffsinthecase:CarolSchallandMaryTownleyhavebeeninarela-tionshipforcloseto30yearsandliveinChesterfieldCounty.Ms.Townleyhasadaughterwhowasbornin1998.WhileMs.Schallhasbeengrantedjointlegalandphysicalcustodyofthechild,sheisnoteligibletoadoptherunderVirginialaw.Eventhoughthecouplewas legallymarried inCalifornia,Virginia does notrecognizetheirmarriage. Michelle McQuigg, the Prince William CountyClerkoftheCircuitCourt,filedamotiontointerveneasaparty insupportofVirginia’sbanonsame-sexmarriages.Thatmotionwasgranted. JoanneHarrisrepresentstheHarrisclassofinter-venors,whofiledaclassaction in theUnitedStatesDistrict Court for the Western District of Virginia.TheclasswaslaterpermittedtointerveneintheBosticcase.TheHarrisclassrepresentsallsame-sexcouplesinVirginiawhoseektoenterintolegalmarriage. An interesting twist in the case occurred whenDefendantJanetRainey,theStateRegistrarofVitalRecords,filedaNoticeofChangeinLegalPosition.

Bostic v. Rainey:An Analysis of Positions in the Challenge to

Virginia’s Ban on Same-Sex Marriage By Susan M. Butler, Esquire

[email protected]

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When she was originally named as a defendant inthecaseshewasbeingrepresentedbythen-SolicitorGeneral DuncanGetchell, who had been appointedby Attorney General Kenneth Cuccinelli, a zeal-ous defender of the ban. However, in 2013,MarkHerring was elected as the new Attorney Generalin Virginia and the legal position of the AttorneyGeneral’s office made an about-face. The NoticestatesthattheAttorneyGeneral“willnotdefendtheconstitutionality of those laws, [and]will argue fortheirbeingdeclaredunconstitutional.” OnFebruary13,2014,thetrialcourt(theFederalDistrict Court for the Eastern District of Virginia,Norfolk Division) issued its written decision. Itbegan with a quote from Mildred Loving, one ofthe plaintiffs in Loving v. Virginia,4 in which shereflects on the importance of freedom tomarry thepersonprecioustoyou,evenifothersdisagree.ThisopeningquotetelegraphedtheCourt’sdecision:thetrialCourt (WrightAllen,J.) found thatmarriage isafundamentalrightsubjecttostrictscrutinyandthatVirginia’s marriage laws violate the Due Processand Equal Protection Clauses of the FourteenthAmendment. Thedecisionwas immediately stayedpending the predictable appeal, which was noticedthesameday. In May, the week before oral argument in theFourth Circuit, a final party attempted to interveneandparticipateinoralargument.ChrisSevierstatedinhisMotiontoIntervenethathehasbeenadverselyimpactedbyVirginia’slaws,inthathehasbeendeniedamarriagelicense.Heclaimstohavearomanticandsexual relationshipwithhiscomputerandwishes tomarryit.Themotionwasterselydenied;themotionforreconsiderationwasalsodenied.

Arguments of the Parties ThebriefoftheDefendant/Appelleeswerebasedon concepts of responsible procreation and optimalchild-rearing. GeorgeSchaefer,inhiscapacityasClerkfortheCircuit Court of the City ofNorfolk, argued that arationalbasistestwasrequiredinthiscase;thatmar-riageisafundamentalright,buttherighttosame-sexmarriage is not a fundamental right; and, that thechallengestothebanbasedonEqualProtectionand

Due Processmust fail under the rational basis test.Further, theSchaeferbriefargues thatStatescannotbecompelledtoincludesame-sexmarriagesintheirdefinition of marriage, and that doing so exposesClerkstoliabilityiftheydenyamarriagelicensetoagroupthatisnotincludedintheexpandeddefinitionofmarriage. TheMcQuiggbriefalsoadvocatedforarationalbasis test, and focusedon the“procreativepotentialofaman-womancouple”andtheresultingbenefittosociety. Thebrief states that“Marriageasapublicinstitution thus exists to channel sex between menandwomen intostableunions for thebenefitof thechildrenthatresultand,thus,forthegoodofsocietyas awhole.” The brief’smain concern is the soci-etalneedformarriagefortheprotectionofchildren,butdoesnotaddressthestate’sinterestinmarriagesof opposite-sex couples who are elderly, who areunable to conceive or who chose not to have chil-dren, or the needs of childrenwhose parents are inasame-sexrelationship.McQuigg’spositionisthatsexualrelationshipsbetweensame-sexcouplesdonotunintentionally create pregnancies. As the childrenin same-sex couples are brought into the relation-ship only through intentional choice, the couples(and,presumably,thechildren)“neitheradvancenorthreatensociety’spublicpurposeformarriageinthesamemanner”asopposite-sexrelationshipsdo. The briefs of the Plaintiff-Appellees (Bostic,RaineyandtheHarrisclass)arguethatastrictscruti-nytestisapplicableundertheDueProcessandEqualProtection Clauses; that the ban infringes on thefundamentalrighttomarry,andthatthebandiscrimi-natesbasedon sexualorientation. TheHarris classbriefdirectlyaddressestheargumentthatmarriageisaboutprocreation,citingcasesthatholdthattheStatemaynotprohibitmarriedorunmarriedcouplesfromusingbirthcontrol;theStatemaynotprohibitwomenfromterminatingapregnancy;thattheStatemaynotprohibitprisonersfrommarrying;and,thattheStatemay not prevent private, consensual, non-maritalsexual activity. The Rainey brief was even morepointedinitsarguments:whileittookissuewiththeSchaeferbrief,itwasopenlycriticaloftheMcQuiggbrief and its failure to address facets of marriageunrelatedtoprocreationwhichhavebeenrecognized

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bytheSupremeCourt,suchasemotionalsupportandpubliccommitment,personaldedicationandspiritualsignificance, not to mention the receipt of govern-mentbenefits,propertyrights,andthelegitimacyofchildren.

Virginia Chapter of the AAML Arguments TheVirginiaChapteroftheAmericanAcademyofMatrimonialLawyers(“AAML”)5filedanAmicusCuriae brief in support of the Plaintiffs/Appellants,arguing that Virginia’s ban on same-sex marriagesshouldberemoved.Thebriefarguedthatthedenialofmarriageequalitydeniesaccesstojusticeforgayandlesbiancouplesandtheirchildren.Justasmar-riagehasbeenheldtobeafundamentalright,divorcehasbeenheld tobea fundamental right. Same-sexparties who are legally married and later becomeresidents and domiciliaries ofVirginia currently donothavetherighttofilefordivorceinVirginia;theydonothaveaccesstothesameremediesforcustodyandchildsupport,spousalsupportorequitabledistri-butionofpropertythatanoppositesexcouplewouldhave.Thebriefdrewattentiontothefactthat,iftheStateisinterestedinthewelfareofchildren,childrenwhoarebornintoorraisedinsame-sexrelationshipsshould have the same rights to child support as allother children. The legal burden for custody andtime-sharing is greater for a non-biological parent.This means that a biological parent can play hide-and-seekwithachild,establishanewstatusquo,andinterruptachild’srelationshipwithapersonwhomayhave been a primary attachment figure since birth,butwhohappenstonotshareDNAwiththechild.Apartnerwhohasbeenastay-at-homeparentandwhoisfinanciallydependentontheworkingspousehasnorecourseinthespousalsupportstatutes.Propertythatisseparatelytitledisthepropertyofthetitleholder;there is no equitable distribution of bank accounts,retirement accounts or other property. If a bankaccountisjointlytitled,thefirstonetothebankwins.

Oral Argument ThethreejudgepanelintheBosticcaseconsistsof Judge Henry F. Floyd, Judge Roger L. Gregoryand JudgePaulV.Niemeyer. The argumentswerelimited to 30 minutes per side. The transcript is

posted on theFourthCircuitwebsite for thosewhochoosetolisten.Thediscussionwaslivelyandsug-geststhatthedebateinchamberswillalsobelively.Atonepoint,JudgeNeimeyerjokedthat“Maybeweshouldjustsaywepassandletthecaseproceedon,”acknowledging that the Fourth Circuit was likelyonlyawaystationinthehistoryofthiscase.JudgeGregoryseemedsympathetictowardeliminatingtheban,focusinghisquestionsonwhetherthechoiceofone’s partner goes to the essence of the fundamen-tal right of marriage, as well as the impact of thebanonchildrenof same-sexcouples. Hepointedlyquestionedthechild-centeredfocusoftheDefendant-Appellantswhenthefocusdidnotseemtoextendtochildrenwhoareadoptedorbeingraisedbysame-sexcouples.JudgeNiemeyer’squestionsindicatedmoreofaconservativebent;hecommentedthattraditionalmarriageistheunitthatkeepssocietygoing,andheaskedwhetherthenextstepinthemarriagedebateislegalizationofpolygamy.JudgeFloydwaslessvocalin the discussion, although he did specifically askwhy the childof theTownes/Schallmarriage (legalinCalifornia)hadnotbeenaddressed in the“child-centered”arguments. Regardlessofthepanel’sdecision,itislikelythatallofthenamedpartiesalreadyhaverequestsforanen banchearingandpetitionsforwritofcertioraritothe United States Supreme Court already saved ontheirharddrives.Staytuned.v

1.__U.S.__,133S.Ct.2675,186L.Ed.808(2013).2. At the time this article was written, no decision had beenrenderedbytheUnitedStatesFourthCircuitCourtofAppeals.3. Theclerkof theCourt in theCityofNorfolk isGeorgeE.Schaefer,III,whobecametheleadDefendantinthiscase.4. Loving v. Virginia,388U.S.1(1967).5. The brief represents views of the Virginia Chapter of theAAMLonly anddoes not necessarily reflect the viewsof theAmerican Academy of Matrimonial Lawyers. The VirginiaChapter includes two sitting judges, who took no part in thepreparation of the brief or the decision to file the brief. ThebriefdoesnotnecessarilyreflecttheviewsofanyjudgewhoisamemberoftheAAML.

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Introduction Government contracting is big business, andmany of theworld’s largest government contractorsare headquartered in Virginia. According to www.fedspending.org, contracts performed in Virginiaaccounted for over $50 billion of federal spendingineachyearfrom2008to2011,approximately40%ofwhichwas in the 8thCongressionalDistrict.Notsurprisingly,theDepartmentofDefenseisresponsiblefor much of that procurement spending. Given theprevalence of federal spending, it is nowonder thatVirginiamaritaldissolutioncasessometimesinvolveindividuals who own an interest in a privately-heldgovernmentservicesbusiness. Often in divorce, a party’s ownership interest ina privately-held business represents one the largestassets (if not the largest asset) in themarital estate.Unlike other assets in the marital estate like cash,marketablesecurities,andretirementplansforwhichperiodic account statements are readily available toprovidevalues,aninterestinaprivately-heldbusinesscanbedifficulttovalue. For largecorporationswhosesharesarepubliclytraded,pricingisestablishedonanongoingbasisbystockexchanges.Forprivately-heldbusinesses,how-ever,theregenerallyexistsnomarketinwhichsharescanbetraded.Asaresult,thevaluationofanowner-ship interest inaprivately-heldgovernment servicesfirmmayrequireindependentanalysis,whichiscom-monly performed by a Certified Public Accountant(CPA).CPAvaluationspecialistsarecalledontoper-formvaluationengagementswithrespecttoprivately-heldgovernmentservicesfirmsforavarietyofdiffer-

ent purposes (seeFigure 1), including, for example,maritaldissolutioncases.

Industry Background Contractingwiththefederalgovernmentimposesrequirements on companies not commonly found inthe commercial market. By and large, the govern-ment is spending taxpayer dollars. Understandably,the government requiresmuchgreater visibility intohowdollarsarespentthanistypicallyrequiredintheprivatesector. Among themany unique aspects of governmentcontractingarethelawsandregulationsthatmustbeobservedrelatingtotheformation,administrationandperformance of federal government contracts (e.g.,the Federal Acquisition Regulation), and contractprovisions permitting the government to terminate acontract for its convenience. Another consideration

Valuation of Government Services Firms in Family Law MattersBy William C. Foote, CPA, CVA, ABV, CFF, CFE

Aronson [email protected]

ASK THE EXPERT

www.fedspending.org

www.fedspending.org

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isaccountingsystems,whichcanbeoneof thebig-gest pitfalls in federal contracting.Most contractorsarerequiredtohaveanaccountingsystemacceptableto the government that can (for example) properly:segregatedirectcostsfromindirectcosts;identifyandaccumulatedirectcostsbycontract;allocate indirectcosts;identifyandtrackemployeelabor;andexclude“unallowable”costs. The structure of government contracts is alsosomewhatunique.Therearegenerallythreetypesofgovernment contracts (cost-reimbursable, time-and-materials, fixed-price) and there are also differentcontractingmethodsavailableinfederalprocurement.Twowidely usedmethods are single award/definedstatement of work contracts and indefinite delivery/indefinitequantity(IDIQ)contracts. Anotheruniqueaspectofdoingbusinesswiththefederal government is small businessprograms.TheSmallBusinessAdministrationadministersanumberof programs designed to help small businesses winprime contracts (and subcontracts) with the federalgovernment(seeFigure2).Toqualifyasasmallbusi-ness,acompanymustmeet thesizestandardfor theapplicableindustry,whichmaybeexpressedintermsofannualrevenueornumberofemployees.

The Valuation Process No two privately-held businesses are exactlyalike,evenifthecompaniesoperatewithinthesameindustry (or the same niche within the same indus-try). Likewise, no two business valuation projectsare exactly alike. Nonetheless, there is a typicalprocessthatCPAvaluationspecialiststendtofollowwhenvaluingagovernmentservicesfirminconnec-tionwith adivorce.Thevaluationprocessgenerally

includes (i) defining the assignment and gatheringinformation,(ii)understandingthevaluationsubject,(iii)performingvaluationanalyses, and (iv)arrivingataconclusionofvalue. Defining the assignment entails identifying thepurpose of the valuation, the applicable standardof value (intrinsic value for family law matters inVirginia),thespecificownershipinteresttobevalued,thevaluationdate,andotherengagementparameters.The information gathered for a valuation engage-ment largely focuses on the valuation subject’s his-tory, organization structure, financial condition andoperating results. Examples include financial state-ments and/or income tax returns, workforce data,agreements between owners, and prospective finan-cial information. Much of this information will bein the form of documents, but information obtainedfrommanagementinaninterviewsettingcanalsobeimportant.Whenvaluingabusinessinthecontextofa litigation matter, sometimes deposition testimonytakestheplaceofdirectmanagementinterviews. Once the necessary information has been gath-ered, an understanding of the valuation subject canbe developed. This involves analysis of financialinformation (e.g., audited financial statements), aswell asnonfinancial information (e.g., serviceoffer-ingdescriptionsandmanagementbios)andownershipinformation.Understandingthevaluationsubjectalsocommonly necessitates analysis of its revenues andcustomerbase,andconsiderationofindustryandeco-nomicconditions. Performingvaluationanalyses, inshort, involvesconsideration of available valuation approaches andmethods, selection of an appropriate method basedon facts and circumstances, and application of theselectedvaluationmethodtodevelopanindicationofvalue.Whenmultiplevaluationmethodsareused,theresultsneedtobecomparedforconsistency.Ifvalueindications from different methods are not closelyaligned,certaininputstooneormoreofthevaluationmodelsmayneedtobereevaluated. The next step in the process is for the valuationspecialisttoarriveataconclusionofvalue.Thisgen-erallywillinvolveperformingasynthesiswithrespectto the indications of value for the business,makingadjustmentsfornon-operatingassetsandliabilities(if

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applicable), andbridging the total equityvalue (i.e.,thevalueof thebusinessasawhole) to the specificownership interest being valued. At this point, thevaluationspecialistisreadytocommunicateengage-mentfindingsandtheconclusionofvalue.

Valuation Approaches & Methods So how are indications of value for governmentservices firms developed for the purpose of familylawmatters?CPAvaluationspecialistswillconsidervaluation methods that fall into one of three broadapproachestovaluation,namelytheIncomeApproach,theMarket Approach, and theAsset Approach (seeFigure 3). For profitable government services firms,theIncomeApproach,oracombinationoftheIncomeApproach and the Market Approach, is commonlyusedtodevelopindicationsofvalue.Whileitsuseisnot inappropriate, theAssetApproachmayestablishonlyafloorvalueforaprofitableservicesbusiness.

Within the IncomeApproach, the CapitalizationofCashFlowMethodandtheDiscountedCashFlowMethod are commonly employed. Key steps andinputsintheapplicationofthesemethodsinclude:

• identifyingastream(orstreams)ofeconomicbenefits;

• estimating an appropriate discount rate (usedtoconvertfuturebenefitstopresentvalue);and

• considering a long-term sustainable growthrate.

The Market Approach may entail the use of theGuideline Public Company Method and/or theGuidelineTransactionMethod.Keystepsandinputs

intheapplicationofthesemethodsinclude:• selectingcomparablecompanies/transactions;• calculatingvaluationmultiplesforthecompa-

rables;and• adjusting the calculated multiples for com-

parability and applying them to thevaluationsubject.

Valuation methods under the Income Approachand the Market Approach are based on observ-able inputs to adegree.For example, in the IncomeApproach,thedevelopmentofanappropriatediscountrateinvolvesuseofempiricaldata,andintheMarketApproach, direct market prices are utilized. In thevaluation of any privately-held business, identifyingtheapplicableindustryclassification(s)canbeimpor-tantforanumberofreasons,includingthecollectionofobservableinputs.Governmentservicesfirmsoftendon’t fit neatly within a particular SIC or NAICScode,however,sothevaluationanalystmayneedtoperformadditionalresearch. Regardlessofthevaluationapproachselected,thevaluation specialist has to consider the company’sriskprofileandspecificvaluedrivers.Thisofcourserequiresjudgmentandexperience.Examplesofareaswhere valuation analysts have to exercise informedjudgmentinclude:

• earnings normalization (i.e., adjusting his-toricaloperatingresultsinordertoanalyzethevaluationsubject’sfutureearningcapacityandto make comparisons to benchmarks and/orprospectivefinancialinformation);

• selection of an appropriate discount rate(IncomeApproach);and

• selection of appropriate market multiples(MarketApproach).

Value Drivers in the Government Services Market Thejudgmentareasdescribedabovecanbeaffect-edbycompany-specificattributesandvaluedrivers.Value drivers can and do vary by industry. For agovernment services firm, value drivers frequentlycenter on the extent to which its services/capabili-ties are sought after in the market and the strengthof its relationships with government customers. Anon-exhaustive list of value drivers for governmentservicesfirmsisshowninTable1below.Alsoshown

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inthetablearedirectionalexamplesforeachdriver. Anothermoregeneralizedvaluedriverforgovern-mentcontractorscanbebarrierstoentry.Governmentcon t rac t ingbrings with ita set of com-pliance-ori-ented issuesas describedearlier. Ac o m p a n ywith well-e s t ab l i shedsystems andcompl ianceprogramsisgenerallyatanadvantagecomparedtoacompanytryingtoenterthegovernmentspaceforthefirsttime.

Current Government Contracting Environment Historically, some have considered federal gov-ernmentworktobeasafehaven,particularlyduringuncertain economic times. While profit margins ongovernment contracts can be relatively low, UncleSamhasbeenviewedbymanyasareliableandpoten-tially long-term customer. Keep in mind, however,thatfederalspendingiscyclicalandaffectedbypoliti-calfactors.Recently,manygovernmentservicesfirmshavefelttheimpactofdeclininggovernmentbudgetsdue to a variety of factors. For example, sequestra-tionorderssignedbythePresidentin2013triggeredautomatic reductions in both defense and domesticdiscretionaryspending.Subsequentlegislationhelpedsoftentheshort-termimpactofsequestrationcuts,butgovernment services firms continue to monitor theongoingimpactsofthebudgetcuts. Over the past several years I have worked withnumerous clients experiencing a more competitivegovernmentcontractinglandscape(i.e.,morecompa-niespursuing fewer contractopportunities).Anotherfederal contracting trend is the concept of “lowest-price,technically-acceptable,”whichontheonehandcanhelpthegovernmentcontrolcosts,butontheotherhandcanfavorlesser-qualifiedcontractorsandpoten-tiallydelayinnovation.Clientsalsoincreasinglypointto the fact that they may not receive the full value

of contracts included in their backlog report. Themaximumcontractvaluespecifiedunderanawardedgovernment contract or task order is not necessar-

ily indicativeof the rev-enue thatwillultimately berealized.Changes infederal gov-ernment bud-getary pri-orities candirectlyaffect

the financial performance of government servic-es firms. A shift of expenditures toward or awayfrom supported programs could be beneficial ordetrimental. Priority federal markets, in contrast tolower-priority markets, are more likely to see con-sistency (or even increases) in federal funding lev-els. A few examples of current priority areas arecybersecurity,dataanalytics,andC4ISR(Command,Control, Communications, Computers, Intelligence,SurveillanceandReconnaissance).Giventhecyclicalnature of federal spending, priority markets evolveand change over time, which causes many govern-mentservicesfirmstodothesame.

Conclusion Thevaluationofaprivately-heldbusinesscanbecomplex. Valuations are date-specific, and as suchtheyshouldreflectchangingeconomicenvironmentsandindustryconditions.Selectingavaluationprofes-sionalwhoiswell-versedinbusinessvaluationtheoryis important. And since value drivers can vary byindustry,itmayalsobeimportanttochooseavalua-tionspecialistwithexpertiseintheapplicableindus-try.Where a government services firm needs to bevaluedaspartofafamilylawmatter,thepartiesandtheirattorneysshouldgaincomfortthatthevaluationspecialistisknowledgeableabouttheuniqueworldofgovernmentcontracting.v

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NearlyeveryVirginiafamilylawpractitionerhasexperienced,oratleastheardof,asituationinwhichparties reach the end of an extensively negotiatedsettlement to a custody or visitation case, or fully-litigated trial, in Juvenile and Domestic RelationsDistrictCourt(J&DR),onlytohaveopposingcoun-selnoteade novo appeal toCircuitCourtandstartalloveragain.Akeyincentivetopartiesnegotiatingtoward settlement is the promise of ensuing peace.The offering and consideration of settlement pro-posalsmust take intoaccount thecostandpotentialoutcomesoflitigation.Advisingclientsduringcasespending in J&DR contains an additional layer ofcomplexitynotpresentinCircuitCourts–thethreatofstartingalloveragain less than10daysafter the“final” order is signed. Settlement agreements infamilylawcasescontainmanywaivers,includingtherighttoseekafault-baseddivorce,anyexistingrightsto claims against the other spouses’ estate, lifetimewaiversofspousalsupport,andothervariousrendi-tions of waiver to property division, allocation ofdebts,andotherrightsincidenttothemarriage.Weregularlyadviseourclientsbasedonourknowledgeof future pitfalls, as they decidewhich terms of anoffer to accept or reject. The threat of a de novo appealduringnegotiations in custodyandvisitationcases inJ&DRbegs thequestion:can theright toade novoappealtoCircuitCourtbewaived?Development of Case Law Regarding Ability to Waive Appeal Rights to Circuit Court Cox v. Cox, 16 Va. App. 146 (1993) Cox involves a case where a father filed for amodification of the custody provisions containedin his final divorce decree, 14 months after it wasentered. The parties had four minor children, twoboys and two girls. The Father had been awardedcustodyoftheboysandtheMotherhadbeenawarded

custody of the girls after the divorce. During themodification hearing the Father was awarded pen-dente lite custody of the two girls pending a finalhearing. Prior to trial, the case settled under termsgivingbothpartiesjointlegalcustody,andtheFatherphysical custody of both girls. The case settledthroughaconsentorderendorsed“seenandagreed”bytheparties’attorneys.Afterentryoftheconsentorder,theMotherobtainednewcounsel,andnotedade novoappealtoCircuitCourt.Ajudgedismissedtheappealsua spontebecausethepartieshadenteredintoaconsentorder,andtheMotherappealedtotheCourtofAppeals.See Id. The Court of Appeals in Cox reversed andremandedtheCircuitCourt’sdecisioninanopinionthatfocusedonstatutoryinterpretation.TheCourtofAppealsnotedthat“Code§16.1-296providesinper-tinentpart:“Fromanyfinalorderorjudgmentofthejuvenilecourtaffectingtherightsorinterestsofanypersoncomingwithinitsjurisdiction,anappealmaybetaken...”Cox,16Va.App.at148.TheCourtofAppealsfocusedontheword“any”andheldthatthestatute“makesnodistinctionbetweenconsentordersandnon-consentorders. It alsodoesnotqualifyorlimittheword‘any’”Id.TheCourtwentontociteCode § 16.1-136, reinforcing the concept that “anyappeal, taken under the provisions of this chaptershallbeheardde novointheappellatecourt.”Id.AsummaryoftheholdinginCoxisthat“[t]heconsen-sual nature of the judgment fromwhich the appealwastakenisnotalimitationimposedbystatuteuponthe right to appeal.” Id.At 149. In furtheranceofthis premise, the Court referenced the extension oftheabsoluterighttoappeal,toananalogousscenarioin thecriminal context inwhichadefendantpleadsguilty in J&DR and then appeals to Circuit Court;theguiltypleacannotevenbeusedasanadmissionagainsttheappellantdefendantinCircuitCourt.Cox

Appeals from J&DR to Circuit Court: Can the Statutory Right to a De Novo Appeal Be Waived?

By Joseph J. DiPietro DiPietro, PLLC

[email protected]

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involvedagenericconsentorder,endorsedbycoun-sel,andinterpreted§16.1-296asbroadlyaspossible.However,Coxdidnotaddressacasewherethepar-tiesenterintoaconsentorder,andwaivetheirrighttoappeal.TheCourtofAppealswouldnotaddresstheissueofwaiverof thestatutoryright toappealfromJ&DRtoCircuitCourtforanother18years.

Congdon v. Commonwealth, 57 Va. App. 692 (2011) InCongdon, an individual pled guilty to felonyvandalism in J&DR, with an agreement to attenddrugcourtinexchangeforadismissalofthecharge,upon successful completion of the program. ThepleaagreementwassignedbyCongdonandhisattor-ney,andcontainedanexplicitwaiverprovisionthatCongdon“WAIVES,orgivesup”hisrighttoappealfromJ&DRtoCircuitCourt. Therewereno issuesofwhetherthepleawasenteredintovoluntarily,norwerethereanyotherproceduraldefects. Congdon violated his drug court program andwasterminatedfromit.Thedeferreddispositionwasrevoked and Congdon was adjudicated delinquenton the felony vandalism charge and other relatedcharges. He appealed to Circuit Court, but it wasdismissedwithafindingthatCongdon“hadmade‘anintelligentandeffective’waiverofhisstatutoryrightofappeal[.]”Congdon,57Va.App.at694. TheCourt reasonedthat“[w]ithfewexceptions,most legal rights–whethercommon law, statutory,orconstitutional–canbewaivediftherequisitefor-malitiesareobserved . . . [and]courtshave ‘articu-latedageneralrulethatpresumestheavailabilityofwaiver[.]”Id.at695(quotingNew York v. Hill,528U.S. 110, 114 (2000) (citation omitted)). “Theserightsmaybeasveneratedastherighttoajury,theright tocounsel, therightagainstself-incrimination,and the right to exclusion of evidence seized in anunconstitutionalmanner.”Congdon,57Va.App.at695(quotingMuhammad v. Commonwealth,269Va.451,507(2005)).Waiverscanbeexplicitorimplicit.Forexample,asuspectcanwaiveherMirandarights“byan ‘impliedwaiver’ justaseffectivelyasbyanexpressone.” Congdon, 57Va.App.at695 (quot-ing Berghuis v. Thompkins, 130 S.Ct. 2250, 2262(2010)).Likewise,awould-beappellantfromafinal

orderenteredinaJ&DRCourtcanimplicitlywaiveher right to appealbyallowing the10-daydeadlineto lapse. “What suffices aswaiver depends on thenatureoftherightatissue.”Congdon,57Va.App.at695(quoting Hill,528U.S.at114). There aredifferent standards fordifferentwaiv-ers.Forexample,acriminaldefendant’swaiverofajurytrialandguiltyplearequiresthepersonalatten-danceofthedefendantbeforethecourt,andajudge’ssatisfactionthatthepleawasknowing,voluntaryandintelligent,whilethewaiverofotherrightscantakeplacethroughcounsel.TheCongdonCourttookthedoctrine ofwaiver and applied it to the casewherean individualwaivedhis right toappealbycontractprior to the entry of his guilty plea, in this case apleaagreement. TheCourtheld thatgenerally, “[t]hough the required form of the waiver varies fromrighttoright,thelegalefficacyofthewaiverremainsconstant.” Congdon,57Va.App.at695(emphasisadded). AsstatedbytheCourtofAppeals,sufficiencyofthewaiverdependsoncontext. Manyrightscanbewaived, both explicitly and implicitly, by counsel.For example, the filingof anappeal fromJ&DR toCircuitCourtpastthe10-daydeadlineisfataltotheappeal. Likewise, endorsementsonordersas“seenandagreed”or“seenandobjectedto”canexplicitlyorimplicitlywaiverightstoappealcertainissues.

Waiver Generally “A waiver . . . may be generally defined as avoluntary abandonment of some known legal right,advantage,orprivilege...[.]”Travis v. Finley,36Va. App. 189, 200 (2001) (quoting The Covington Virginian v. Woods,182Va.538,547(1944)).Itiswell-settledthatpartiesoftenwaiverightsbestowedupon them by statute. Godfrey v. Commonwealth,227Va.460,463(1984)(waiverofstatutoryrighttospeedytrial);Norton v. Commonwealth,19Va.App.97 (1994) (waiver of statutory right to independentblood test in DWI case); Williams v. Clinchfield Coal,213Va.445(1972) (waiverofstatutory righttoworker’s compensation benefits). If a party hasknowledge of the facts that are elementary to theexerciseofastatutoryright,andintendstorelinquishthatrightthroughtheiractions,thentheyhavesatis-

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fied the essential elements of waiver. Weidman v. Babcock,241Va.40,45(1991);Fox v. Deese,234Va. 412, 425 (1987). “With few exceptions, mostlegalrights–whethercommonlaw,statutory,orcon-stitutional–canbewaivediftherequisiteformalitiesareobserved.” Congdon v. Commonwealth, 57Va.App.692,695(2011).

Statutory Right to Appeal to Circuit Court from J&DR Can be Waived Virginia Code § 16.1-296(A) (1950) confers abroad grant of jurisdiction upon Circuit Courts inVirginia to hear appeals from any final orders orjudgmentsofthejuvenilecourtssolongastheappealistakenwithin10daysoftheentryofthefinalorderorjudgmentfromJ&DR.Id.; see Cox v. Cox,16Va.App.146(1993).TheCox Courtinterpretedtheword“any”from§16.1-296(A)toincludeconsentorders;eventhosethatareenteredintothroughcounsel,andsettleallmattersrelatedtoacase.See Id.at148-149. In2011,theVirginiaCourtofAppealsnarrowedits interpretation fromCox and recognized the pro-priety of “enforc[ing] a deliberate, express decisiontowaiveanappeal.”Congdon v. Commonwealth,57Va.App. 692, 697 (2011). In interpretingVirginiaCode§16.1-296(A),andapplyingVirginialawwithregard to waiver, The Virginia Court of Appealsrejected the notion that “[t]he indefeasible right ofappeal from the district courts cannot be waivedunderanycircumstances.”Congdon,57Va.App.at697.Indeed,“thegreatmajorityofcourtshavefoundexpress‘waiversofappealsgenerallypermissibleandenforceable.’” Id. at 698 (quotingU.S. v. Khattak,273F.3d557,560(3dCir.2001)).

Must the Right to Appeal be Explicitly Waived by the Client? TheCongdon Court held that “[i]t would seemanomalous that the most venerable constitutionalrightscanbeimplicitlywaived,but[thattherighttoappealfromJ&DRtoCircuitCourtunderVa.Code§16.1-296]cannotbewaivedunderanycircumstanc-es.”Id.at696.Stipulationsbycounselonbehalfoftheirclientsarerecognizedasbindinginthelawpur-suanttothecommonlawdoctrineofagency,whichapplies equally to the domestic relations context.

“Underthecommonlawofagency,thesignatureofadisclosed,authorizedagenthasthesamelegalforceas the signature of his principal. Unless the factsshow otherwise, a contractual instrument should be‘interpreted as the instrument of the principal andnotoftheagentif,inthesignatureordescriptionoftheparties,thenameoftheprincipalandagentbothappear, theagent indicatinghis agency.’” Newman v. Newman, 41 Va. App. 557, 567 (2004) (quot-ingRestatement (Second) of Agency § 156 (1958)).“Consequently, ‘[a]ny signatureordescription fromwhichitappearsthatthepartiesintendthattheprin-cipalandnottheagentshallbeapartyisefficaciousincreatinganinferencethattheprincipalisaparty.’”Id.; see alsoE.AllanFarnsworth,2Farnsworth on Contracts § 6.8 (2d ed. 2001) (recognizing that aparty’s signaturemay bemade by an agent). And,“[c]ommonlawagencyprinciplesapplytotheattor-ney-client relationship.” Newman, 42 Va. App. at567.Attorneysareroutinely,andfrequentlytreatedaslegalequalswiththeirclientsthroughoutproceed-ings,inandoutofcourt.“Anyotherviewwouldbe‘wholly inconsistentwith our systemof representa-tivelitigation[.]’”Id.(quotingLink v. Wabash R.R.Co.,370U.S.626,634(1962)).Thisappliesequallytostipulationsbycounselthroughconsentorders,asitdoestocontracts.

Practice Tip ItseemsthattheCourtofAppeals’interpretationof the doctrine of waiver and agency, in conjunc-tion with their statutory interpretation of Va. Code§ 16.1-296(A), allows for waivers of appeal rightsfromJ&DRtoCircuitCourts.CounselshouldobtainsuchwaiverspriortosettlingtheircasesinJ&DR,inthe samemanner that counsel obtainswaivers fromparties in a property settlement agreement, both topetition the court for further relief, or appeal to theCourt of Appeals. Stipulations in settlement con-tractstowaiveappealrights,canprovidepartieswithmorecertaintyaboutthefinalityoftheirsettlements,reduceduplicativelitigation,andencouragepartiestoresolvedisputesoutsideofthecourtroom.v

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The Benefits of Powers of Attorney in DivorceBy Jordan Jackson, Esquire

Culin, Sharp, Autry & Day, [email protected]

Powersofattorneyandadvancedmedicaldirec-tives are relatively inexpensive tools available toclients toappoint appropriateparties for clientsandtheir affairs and property when they are medicallyormentallyincapacitated.Thesetoolsareusefulfordivorcingpartiesoncethedivorceisfinal,andmanyattorneysrecommendsuchtoolsforinclusionintheirclients’post-divorceplans.Useofapowerofattor-ney or advanced medical directive is more criticalthanmostdivorcingclientsrealize. Considerarecentcaseinwhichanadultdaughter,whowasnottakinghermedications,andwaslivingwith her divorced mother. The daughter regularlythreatened her mother’s life, and to lie so that hermotherwouldloseherjob.Thepolicewerecalledtothehouseregularly.Sherefused tomoveoutofhermother’shome,abuseddrugsandalcohol,couldnotholdajob,andherchildrenhadbeenremovedfromhercarebychildprotectiveservicestwice.Suddenly,her mother suffers a stroke and is in a coma withlifeordeathdecisionsonthehorizon.Thedaughterrefusestoleavethemother’shomeandundertakesacourseofactionresultinginthedestructionofsomeofthemother’spropertyanddissipationofherassets. The mother had been divorced for years andwas engaged to be married, but had undertaken nopost-divorce planning regarding her personal affairs.Although her fiancé lived with her, he had no legalstanding to make decisions on her behalf, whetherforhermedicalcareortopreserveherpersonalestatefrom the daughter’s destruction. Nor did he have aclear legal right to continue residing in the propertyoncethemotherbecameincapacitated.Theseproblemscouldhavebeenaddressedinadvancehadthemotherexecuted a medical directive and a carefully drafteddurablepowerofattorneyinfavorofherfiancé. Absentamedicaldirectiveinfavorofthefiancé,the doctors looked to the daughter for direction on

hermother’smedicalcare.Thedoctorswereboundtodosobystatelawdespitethefactthatitwascleartootherfamilymembersthatthedaughterdidnothavehermother’sbestinterestsasherfirstpriority. Section54.1-2986oftheVirginiaCodeprovidesthatwhenanattendingphysicianhasdeterminedthatapatient is incapableofmaking informeddecisionsandthatthepatienthasfailedtoexecuteanadvancedmedicaldirective, thephysicianmayobtainauthori-zation frompersons in the followingpriority, if the physician is not aware of any available, willing, and capable person in a higher class(emphasisadded):

1. Aguardianforthepatient;or2. Thepatient’sspouse;or3. Anadultchildofthepatient;or4. Aparentofthepatient;or5. Anadultsiblingofthepatient;or6. Anyotherrelativeofthepatientinthedescend-

ingorderofbloodrelationship;or7. Anyadultwhohasexhibitedspecialcareand

concernforthepatientandisfamiliarwiththepatient’sreligiousbeliefsandbasicvalues.

Thishierarchyofauthorityisobjectiveanddoesnotrequirephysicianstotakeintoaccountanysubjectivecircumstances, such as the mental stability of eachpersonineachofthedecision-makingclasses,orthenature of the relationship between the incapacitatedpersonandthedecisionmakerdesignatedaccordingtothisstatute. Theabsenceofdiscretionbyphysiciansinchargeof an incapacitated person as towhom they shouldturn for guidance in making medical decisions istroublesome in the best of circumstances, and par-ticularly for both the mother and daughter in theaboveexample.Therecouldbedifficultiesformar-riedpartieswhohaveconflictingbeliefsandinterests

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regardingmedicaltreatments,unmarriedcouples,andother situations in which family members may becompromisedintheirabilitytoact inthebest inter-estsofanincapacitatedperson.Theidealmethodofavoidingsuchconflictandensuringaparty’sdesiresandconvictionsarerespectedintheeventofincapac-ityistheuseofanadvancedmedicaldirective.Evenmore importantly forpartieswhoare in theprocessof divorcing, execution of a medical directive per-mitsthepartytocontrolthosewhomakelifeordeathdecisions to the exclusion of an estranged spouse,whichfreesthefamilyfromhavingtofirstprovethatspousesareestrangedbeforesomeoneotherthanthespouse may become the decision maker under thestatute. Adurablepowerofattorneyisequallyimportantfor the protection of the person and property of aclient, in appropriate circumstances. In the presentexample,adurablepowerofattorneyinfavorofthefiancéwouldhaveenabledhimtotakecontrolofthe

mother’sfinancialaccountsaswellasherrealestatefor the duration of her incapacity, to the exclusionof the daughter.Thepower of attorneywould haveenabledthefiancétopursueremovalofthedaughterfromtheresidenceandeliminateotherlegalproblemscreatedbythedaughter.Thecombinationofamedi-cal directive and durable power of attorney namingthefiancéasthedecision-makingpartyforthemotherwouldhaveeliminatedtheabilityofthedaughtertointerfere with the mother’s critical care and initialrecovery. Post-divorceplanningisanimportantactionitemforanyclient.Thesameneedforplanningexistsforpartieswhoarenotyetdivorced,andwhomaydesirethatpartiesotherthananestrangedspousebeplacedinapositiontomakedecisionsandactontheclient’sbehalfifnecessary.Aclient’spre-andpost-divorceplansshouldincludearrangingpersonalaffairssothatthe right people aremaking choices on the client’sbehalfintheeventofincapacity.v

Legal Ethics in MediationBy Mary G. Commander, Esquire

Commander & [email protected]

Mediation is a “process in which a mediatorfacilitates communication between the parties, andwithout deciding the issues or imposing a solutiononthepartiesenablesthemtounderstandandreacha mutually agreeable solution to their dispute.”Virginia Code Section 8.01-581.21. It is based onthe “principle of self-determination by the parties.”Standards of Ethics, Section E, infra. Mediation is“now the preferred method of ‘alternative disputeresolution,’ or ‘appropriate dispute resolution.’”1Yet,untilonlyacoupleofyearsago,therehadbeennowell-developedliteratureonethicsinthefield.2

Ethics in mediation involves lawyers, both asmediators or third party neutrals as well as advo-cates for their clients.Manyof theethical concernsand duties are identical, while others differ vastly.Various ethical rules are implicated in mediationconducted by lawyers. There are theVirginia StateBarRulesofProfessionalConductwhichwillapply

always, as well as the Standards of Ethics andProfessional Responsibility for Certified Mediatorswhich have been established by the Office of theExecutive Secretary of theVirginia SupremeCourtto govern all certified mediators (lawyer and non-lawyer).TheRulesofProfessionalConduct imposespecificobligationsonlawyerswhoserveasmedia-tors and third party neutrals pursuant toRules 2.10and2.11.

ETHICAL RULES FOR LAWYER-MEDIATORS

TheRulesprovidethatalawyer/mediator:

- SHALL inform the parties of the differencebetweenthelawyer’sroleasaneutralandthelawyer’sroleasonewhorepresentsaclient.

- SHALL encourage unrepresented parties toseek legal counsel before an agreement is

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executed.- SHALLdeterminethatmediationisanappro-

priateprocessfortheparties(forexample,dodomesticviolencescreening).

- SHALL determine that each party is able toparticipateeffectivelywithinthecontextofthemediationprocess(e.g.legalcapacity).

- SHALLdeterminethateachpartyiswillingtoenterintoandparticipateintheprocessingoodfaith.

- SHALLinformunrepresentedpartiesorthosenotaccompaniedbycounselabouttheimpor-tanceof reviewing the legal informationwithlegalcounsel.

- SHALL (prior tomediation) (1) consultwiththepartiesabout(i)thenatureofthemediationprocess;(ii)thelimitationsontheuseofevalu-ation; (iii) themediator’s approach, style andsubject matter expertise and (iv) the parties’expectations regarding the mediation processand(2)enterintoawrittenagreementtomedi-ate.

- SHALL conduct the mediation in a mannerthatisconsistentwiththeparties’choicesandexpectations.

- MAYencourageandassistthepartiesinreach-ingaresolutionoftheirdispute.

- MAYofferlegalinformation.- MAYofferevaluationifitisincidentaltothe

facilitative role and does not interfere withimpartialityortheparties’self-determination.

- MAY NOT compel or coerce the parties tomakeanagreement.

- SHALLNOTdiscloseinformationexchangedor observations regarding the conduct anddemeanorofthepartiesandtheircounseldur-ing mediation, unless the parties otherwiseagree.VirginiaCodeSection8.01-581.24.

ExceptionstoconfidentialityarefoundatVirginiaCode Section 8.01-581.22 as follows: (i) where allpartiestothemediationagree,inwriting,towaivetheconfidentiality; (ii) in a subsequent action betweenthemediatorormediationprogramandapartytothemediationfordamagesarisingoutof themediation;(iii)statements,memoranda,materialsandothertan-

gibleevidence,otherwisesubjecttodiscovery,whichwerenotpreparedspecificallyforuseinandactuallyused in themediation; (iv)where a threat to inflictbodilyinjuryismade;(v)wherecommunicationsareintentionallyusedtoplan,attempttocommit,orcom-mitacrimeorconcealanongoingcrime;(vi)whereanethicscomplaintismadeagainstthemediatorbyapartytothemediationtotheextentnecessaryforthecomplainanttoprovemisconductandthemediatortodefendagainstsuchacomplaint;(vii)wherecommu-nicationsaresoughtoroffered toproveordisprovea claim or complaint of misconduct or malpracticefiled against a party’s legal representative based onconductoccurringduringthemediation;(viii)wherecommunications are sought or offered to prove ordisproveanyofthegroundslistedin§8.01-581-26inaproceedingtovacateamediatedagreement;or(ix)asotherwiseprovidedbylaworrule. Unethicalconductbythelawyer-mediatorwouldconsistoffailingtodoanyoftheeight“Shalls”,doingthe“Maynot”or“Shallnot”,orgoingtoofarintothe“evaluative” realm. The latter conduct canbeverytempting to a lawyer-mediatorwho should exercisespecialcaretoavoiddoingso.VirginiaCodeSection8.01-581.26 provides the statutory authority to setaside mediated agreements and orders approvingthemviaanindependentaction.Oneofthebasesforsuchactionis“evidentpartialityormisconductbythemediator,prejudicingtherightsofanyparty.”Section8.01-581.26(3).Misconduct for the purposes of theCode section includes “failure to inform the partiesatthecommencementofthemediationprocessthat:(i) the mediator does not provide legal advice; (ii)anymediated agreementmay affect the legal rightsof the parties; (iii) each party to themediation hastheopportunity toconsultwith legalcounselat anytimeandisencouragedtodoso;and(iv)eachpartyto the mediation should have any draft agreementreviewedbyindependentcounselpriortosigningtheagreement.” (The“FourLegals”). The fact that themediatedagreementcontainedprovisionsthatwouldnot bemade by a court is not, in itself, a basis forvacatinganagreement.

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ETHICAL RULES FOR LAWYERS

- SHALLprovidecompetentrepresentationtoaclient.(Rule1.1)

- SHALLabidebyaclient’sdecisionsconcern-ing the objectives of representation and shallconsult with the client as to the means bywhich theyare tobepursued.A lawyer shallabidebyaclient’sdecision,afterconsultationwiththelawyer,whethertoacceptanofferofsettlementofthematter.(Rule1.2(a))

- SHALLexplainamattertotheextentreason-ably necessary to permit the client to makeinformed decisions regarding the representa-tion.(Rule1.4)

- SHALL exercise independent professionaljudgmentandrendercandidadvice.(Rule2.1)

- SHALL withdraw from representation if theclientpersistsinacourseofactionthatthelaw-yerreasonablybelievesis“illegalorunjust”ortheclientinsistsonpursuinganobjectivethatthe lawyer considers “repugnant or impru-dent.”(Rule1.16)

- SHALLNOTobstruct another party’s accesstoevidenceoralter,destroyorconcealadocu-mentorothermaterialhavingpotentialeviden-tiaryvalue.(Rule3.4)

ETHICAL QUESTIONS FOR LAWYERS REPRESENTING CLIENTS IN MEDIATION

Considering the obligations imposed upon lawyersand thefoundationsofmediation,questionsremain.Theseinclude:

- SHOULDyouappearatthemediationsessionand if so, SHOULD you “lawyer,” question,comment, argue, or attempt to shift power toyourside?

- SHOULDyoube“evaluative”andtellthecli-ent your opinion as towhat a court probablywoulddo?SHOULDyoueversay“you’lldobetterincourt?”

- SHOULDyoucounselyourclienton“media-tionstrategies,”e.g.nottovolunteerinforma-

tion(orworse),usetheprocesstogatherintel-ligencefordiscoveryrequests,exitplans?

- SHOULD you treat the disclosure obliga-tions inmediation tobe theequivalentof therequirementsunderthediscoveryrequirementsoftheRulesoftheSupremeCourtofVirginia?

- SHOULDyoupre-screenyourclient(andthecase)toensurethattheclientandthecaseareappropriate for mediation? Is this solely themediator’stask?Whatconcernscouldcounselhave?Howcouldconcernsbeaddressedshortof avoiding mediation? SHOULD domes-tic violence victims be mediating with theirattackers?

- SHOULDyouhaveanyadvancecontactwiththemediator,e.g.setgroundrules,preliminarydiscussions?Dobothcounselneedtobepres-ent?

- SHOULDthechildreneverbeinvolvedinthemediation?SHOULDtheguardianadliteminacustodycaseand/orvisitationcase?

- SHOULDyoubeconcernedwith theparties’self-determination and thequalityof thepro-cess?Isthisjustformediators?

- Is there any difference between the lawyer’srolewhentheclientisinmediationasopposedtolitigation?

All of these important legal ethics guidelinesshouldbeconsideredbeforeplunging intoamedia-tion,whetherasacertifiedmediatororasa lawyer,toprotectthepublicandpreservetheintegrityoftheprocess.v

1. R.Burns,SomeEthical IssuesSurroundingMediation,70FORDHAML.REV.691(2001).2. 2E.WALDMAN,ed.,MEDIATIONETHICS,CASESandCOMMENTARIESx(2011).

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CASES OF THE QUARTEREquitable Distribution – Tracing Separate Interest in Spouse’s Separate Property

Name: Anthony v. Skolnick-Lozano, 63VA.App. 76(2014)

Facts:Priortotheparties’marriage,thewifepurchasedimproved real property. The husband contributed$14,000towardthepurchaseprice,andthewifepaidthebalance.Thewifewassolelyliableunderthemortgage.At the time of the equitable distribution hearing, thepropertyremainedtitledsolelyinthewife’sname.Thehusband proved the $14,000 contribution, but did notofferanyevidenceofthevalueofthecontributionasofthedateofthehearing.Thehusbandalsoaskedthetrialcourttoimposearesultingtrustovertherentsreceivedfromthecottagelocatedontheproperty.Thetrialcourtgrantedthehusbanda$14,000monetaryawardincon-siderationofhisinitialcontributiontowardthepurchaseprice,anddeniedhisrequesttoimposearesultingtrust.Thewifeappealedthe$14,000awardsincethehusbanddidnotprovethevalueofthecontributionasofthedateof thehearing. Thehusbandappealed the trialcourt’sdenialoftheresultingtrust.

Issue:Whetherthetrialcourt:(1)erredingrantingthehusbandamonetaryawardbaseduponhisinitialcontri-butiontowardthepurchaseof thepropertywithouthisshowingthevalueof thecontributionasof thedateofthe hearing, and (2) had authority to grant a resultingtrust.

Ruling:TheCourtofAppealsreversedthetrialcourt’smonetaryaward,andaffirmedthetrialcourt’sdenialofaresultingtrust.

Rationale: The Court quoted Virginia Code §20-107.3(A)(3)(g),statingthatwhentheseparateprop-ertyofonepartyhasbeencommingledintotheseparatepropertyoftheother,“totheextentthecontributedprop-

ertyisretraceable . . .,eachpartyshallbereimbursedthevalueofthecontributedproperty.”TheCourtwentontosaythat“thevalue”meansthevalueofthecontri-bution“combinedwiththeappreciationordepreciationofthatproperty,”andthatsuchvalueshallbe“asoftheevidentiary hearing.” TheCourt reasoned that “reim-bursingthehusbandtheexactvalueofhiscontributionwouldnottakeintoaccountanypassivelossesorgain.Ordering the precise reimbursement of the husband’s$14,000 contribution would create a danger that thehusband would either receive a windfall or suffer anunnecessary loss. A valuation date as of the date ofthehearingobviatesthisproblem.”Withregardtotheresultingtrustissue,theCourtruledthatVirginiaCode§ 20-107.3 limits the circuit court’s powers to dividepropertyofdivorcingparties;itdoesnotgrantthecircuitauthoritytodeclarearesultingtrust.

Equitable Distribution – Sufficiency of Evidence in Valuing Business

Name:Hugh v. Hugh,14VapUNP1417134(2014)

Facts: The Husband owned a small semiconductorbusiness. The husband was fairly uncooperative insupplyingthewife’sbusinessvaluationexpertwithnec-essary information to value the business. At trial, thehusbandstated that thebusinesshad little tonovalue.Thewife’s expertvalued thebusiness at$1.4Million,despite not having all of the information he needed.The trial court stated that it had insufficient evidenceuponwhichtoplaceavalueonthebusiness.Thewifeappealedthisissueaswellasothers.

Issue: Whether the trial courthad sufficientevidenceuponwhichtoplaceavalueonthebusiness.

Ruling:Thetrialcourthad“arelativewealthofinfor-

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mation”regardingthebusiness,andcouldhavevaluedthebusiness.Thetrialcourt’sdecisionwasreversedandremandedonthisissue.

Rationale: Wherethereissufficientcredibleevidenceas to thevalueof abusiness, a trial courtmust assignavalue to thebusinesswhenmakinganequitabledis-tribution award. There is no precise approach to thevaluation of a business. Rather, courts have adopteda flexible approach that allows for consideration ofthe individual circumstances ineachcase. Thewife’sexpert reviewedavarietyof information regarding thebusiness and employed a market approach in valuingthebusiness.Thiswouldhaveallowedthetrialcourttohavevaluedthebusinessdespiteithaving“understand-able doubts as to the husband’s credibility, aswell astheprofessionallylimitedbasisfor[thewife’sbusinessvaluationexpert]’stestimony.”

Equitable Distribution – Valuation of Husband’s Law Firm Interest

Name:Brake v. Brake,14VapUNP1204134(2014)

Facts:Thepartiesdivorcedafter11yearsofmarriage.Theysettledall issuesexceptvaluationanddivisionofthehusband’s10%interestinhislawfirm.Attrial,eachparty’sexperttestifiedtothreepossiblevaluationmeth-ods:(1)incomeorexcessearningsapproach,(2)assetornet-assetapproach,and(3)marketorcontractapproach.Thehusband’sexpertclaimedthatthemarketapproachwasthebestmethod,whichyieldedavalueof$20,000.This also coincided with the law firm’s ShareholderAgreement,whichpaidout$20,000 if thehusband leftthe firm. Thewife’s expert testified that the net-assetapproachwasthebestmethod,andthatunderthistheorythevalueofhusband’sinterestwas$308,439.Thewife’sexpertopinedthatthemarketapproachwasinappropri-ateduetothesmallsizeofthelawfirm,andbecausethehusband’s 10% share represented more than $20,000.Thewife’s expert stated that the husband’s 10% shareearnedhimaportionofthefirm’sprofitsthroughquar-terlydistributionsandbonuses,notingthat thehusbandreceivedabonusdistributionof$124,000shortlybefore

trial. Thetrialcourtfoundthewife’sexpertmoreper-suasive and valued the husband’s interest at $308,439,awardingthewife$144,966.33,or47%oftheasset.Thecourtorderedthehusbandtopaythewifewithin90days.Thehusband filedamotion for reconsideration, askingthecourttoreconsideritsdeterminationofthevalueofhisinterestinthefirm,aswellasthemethodofpaymentsincetheonlyasset topaysuchawardwashis401(K).The trial court modified the payment schedule, allow-ing thehusband topay thewifeeitherby lumpsumorperiodicpaymentsplusinterest.Thehusbandappealed.

Issue:Whetherthetrialcourtproperlydetermined:(1)thevalueofthehusband’sinterestinhislawfirm,and(2) themethodofpaymentof thewife’sshareofsuchinterest.

Ruling: The trial court correctly determinedboth thevalueofthehusband’sinterestandthemethodofpay-ment.

Rationale:TheCourt ofAppeals noted that thevalueofpropertyisanissueoffact,notoflaw.Atrialcourtis entitled tochooseamongconflictingassessmentsofvalue.Here,thetrialcourtfoundthewife’sexpertmorepersuasive.TheCourtofAppealsalsodidnotconsiderthemethodofpaymentasanabuseofdiscretionsincethe trial court concluded that the husband was ableto pay the wife from the $124,000 bonus he recentlyreceivedaswellfuturedistributions.

Equitable Distribution – Court’s Use of Powers to Enforce Award

Name: Weedon v. Weedon, 14 Vap UNP 1378132(2014)

Facts: As part of the equitable distribution, whichincluded a jointly-titled corporation, the trial courtawardedthecorporationtothewife,andorderedthecor-porationtopaythehusband$83,959. Thecorporationfailed topay thehusbandanyamount. Inanenforce-ment actionunder§20-107.3(K), thehusband sought,andthetrialcourtgranted,ajudgmentagainstthewife

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(andnotthecorporation)intheamountof$83,959since,underthissection,“thecourtshallhavethecontinuingauthorityandjurisdictiontomakeanyadditionalorderstoeffectuateandenforceanyorderenteredpursuanttothis section.” Thewife appealed the decision, statingthat the trial court lacked jurisdiction to substantivelyalteritsawardmorethan21daysfollowingentryofthefinalorder.

Issue: Whether the trial court’s judgment against thewife, in order to satisfy the corporation’s debt to thehusband, exceeded the court’s powers under VirginiaCode§20-107.3(K).

Ruling: TheCourtofAppealsreversedthetrialcourt’sgrantingofapersonaljudgmentagainstthewifetosat-isfythecorporation’sobligationtothehusband.

Rationale:VirginiaCode§ 20-107.3(K) does allowatrial court to enter ordersmore than 21 days after theentryof the finalorder forpurposesof effectuatingorenforcing its orders. However, in this case, the trialcourt’sordersubstantivelyalteredtheprovisionsofthefinal order by awarding the husband a personal judg-mentagainst thewifeon thedebtowed tohimby thecorporation.Thus,thetrialcourtexceededitsauthority.

Property Settlement Agreement – Determination of Unconscionability

Name:Woodward v. Woodward,14VapUNP0159143(2014)

Facts:Thehusbanddesiredtoenterintoapost-nuptialagreement, but the wife was reluctant to do so. Thehusbandpresentedthewifewiththepost-nuptialagree-mentatheroffice;shewascryingatthetime.Thewifecalledherlawyerandwasadvisednottosigntheagree-ment. Thewifewasalsocryingwhenshespokewithher lawyer. The parties nevertheless entered into thepost-nuptialagreement.Lessthanaweeklater,thewifeadmittedherselfintoahospitalwithhomicidalandsui-cidalthoughtsrelatedtomeetingwiththehusbandandramifications of the post-nuptial agreement. Thewifeattempted to set aside the agreementon thegroundof

unconscionability.Thetrialcourtupheldtheagreementsince,althoughthehusbandreceivedmorevalueinrealestate,thedisparityofthevalueswasnot“sosignificantthat it isunconscionabletosetasidethemaritalagree-ment.”Thewifeappealed

Issue:Whether thepost-nuptialagreementwasuncon-scionable.

Ruling:Thepost-nuptialagreementwasnotunconscio-nable,andthetrialcourt’sdecisionwasupheld.

Rationale:Anyissueofunconscionabilityofanagree-ment is decided as amatter of law. Thewifehas theburdenattrialtoprovebyclearandconvincingevidencethegroundsallegedtovoidorrescindtheagreement,bydemonstrating that (1) a gross disparity existed in thedivisionofassetsand(2) thepresenceofoverreachingoroppressive influences. TheCourtofAppealsnotedthatapersonmaylegallymakeabadbargain,andcon-cludedthat,basedon therecord, itcouldnotconcludethat thedistributionof thepropertywassogrossas toshocktheconscience.

Spousal Support – Failure to Award Additional Support

Name:Johns v. Johns,14VapUNP1628133(2014)

Facts:Thepartiesdivorcedafter17yearsofmarriage.Thetrialcourtgrantedthewifespousalsupportof$1,700for48months,witha42-monthreservation. Thewifemovedthetrialcourtforadditionalsupportaftertheini-tial48monthsofsupportwerepaid.Atthetimeoftheinitialaward,thewifehadahighschooleducationandwasastay-at-homeparent,andthehusbandoperatedanautobusiness,earning$139,000peryear.Atthetimeofthehearingonthewife’smotionforadditionalspousalsupport, the wife was earning approximately $19,000per year at a clerical job. The husband’s income haddecreased to approximately $112,000 per year. Thetrial court found that the wife had previously earnedmorethanhercurrentincome,andhaddonenothingtoenhanceherearningcapacitysincethedivorce.Shedid

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notworkforthetwoyearsfollowingthedivorce,nordidshereturntoschoolortakeanyclasses.Thetrialcourtalsofoundthatthewifehadexaggeratedexpenses,pay-ingalmost$1,900inBotoxtreatmentsandover$1,200peryearinhairappointments.Thewifeappealed.

Issue: Whether the trialcourtabused itsdiscretion infailingtoawardthewifeadditionalspousalsupport.

Ruling:Thetrialcourtdidnotabuseitsdiscretion,andtherulingwasaffirmed.

Rationale:The trialcourtproperlyconsideredeachofthestatutoryfactorsandfoundthatthewifehadtheabil-itytosupportherself.Therewasnothingintherecordtosuggestthatthetrialcourtignoredorplacedimproperweightonanyofthefactors.

Spousal Support – Manifest Injustice Finding

Name:Nowlakha v. Nowlakha,14VapUNP2377134(2014)

Facts:Thepartiesweremarried24yearspriortosepa-ration. The wife admitted to committing adultery ontwooccasions,whichadulteryoccurredafterthedateofseparation. Thehusbandsaidhe forgave thewifeandattemptedtoreconcilewithher,butsherefused.Atthetimeofthehearing,thehusbandwasearning$180,000per year. Thewife had not been employed since thebirthof their first child in1991, except toworkocca-sionally in the parties’ business. She earned approxi-mately$5,000peryearatthetimeofthehearing.Thehusband filed a complaint for divorce based upon thewife’sadultery,andthewifefiledacounterclaimbasedon the husband’s cruelty and constructive desertion.Thehusbandputonevidenceattrialofthewife’sadul-tery,andsheputonevidenceshowing“thehusbandtobephysically,sexuallyandverballyabusivetowardher;tobedemeaningofhervalueashiswife;tobesecretiveand completely un-sharing with family finances; andto be almost irrationally controlling of virtually everyaspectof[her]life.”Thetrialcourtgrantedthehusbanda divorce on the ground of adultery, but awarded the

wifespousalsupportof$4,000aftermakingamanifestinjusticefinding.Thetrialcourtfoundthattheevidencesupported a gradual dissolution of the marriage thatwasattributablelesstoanyfaultbutmorefromaclashof cultures and the parties’ inability to communicate.Accordingly,thepartieswereequallyresponsibleforthedissolutionofthemarriage.Thetrialcourtalsomadeasignificantequitabledistributionawardtothewife.Thehusbandappealedthemanifestinjusticefinding.

Issue: Whether the trial court erred in: (1)making amanifest injustice finding in light of the wife’s largeequitabledistributionaward,and(2)basingitsdecisiontoawardspousalsupportonanon-statutoryfactor(i.e.,thehusbandtellingthewifeheforgaveher).

Ruling:Thetrialcourtproperlyappliedthestatutoryfac-torsinmakingaspousalsupportawardafterfindingthattodenythewifespousalsupportwouldconstituteamani-festinjustice.Thetrialcourt’sdecisionwasaffirmed.

Rationale: There are three components to making amanifest injustice determination. First, the evidencemust rise to the levelof“clearandconvincing”proof.Second,theexceptionappliesonlyincasesof“manifestinjustice.”Third,thestatutelimitsthefactfinder’sdis-cretiontotwospecificvariables:(i)therelativedegreesof fault and (ii) the economic disparities between theparties. In the present case, the trial court adhered tothese requirementsby findingbyclearandconvincingevidencethattherewasasignificantdisparityinthepar-ties’incomes(despitetheequitabledistributionaward)and that there was equal responsibility for the break-downofthemarriage.

Spousal Support – Determining Income and Duration of Support

Name:Sitoula v. Sitoula,14VapUNP1354134(2014)

Facts: The parties separated on April 2, 2012, after6yearsofmarriage, andhad twochildrenbornof themarriage.Atthetimeofthedivorce,thewifestayedathomewiththechildren,butearnedsomemoneydeliv-

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ering newspapers. She had earned a nurse’s assistantlicense during themarriage, but it expired. The hus-band had a full-time job and twopart-time jobs. Thehusbandtestifiedthatheearnedatotalofapproximately$47,000peryear.However,thetrialcourtdidnotfindthehusband’stestimonycredible,andconcludedthatthehusbandearned$71,440annuallyfromhisfull-timejoband$13,703fromhistwopart-timejobs.Thetrialcourtawardedthewife$1,600permonthinspousalsupportforanindefiniteperiodand$920permonthinchildsup-port.Thehusbandappealed.

Issue:Whether the trial court erred in: (1) imputingincometothehusband,(2)notimputingincometothewife sinceshe lethernursingassistant’s license lapse,and (3) awarding the wife an undefined duration ofspousalsupport.

Ruling: TheCourtofAppealsaffirmedthetrialcourtonallissues.

Rationale: The trial court was permitted to find thehusband’s testimony not credible. The trial court didnotimputeincometothehusband,insteaditdisallowedmany of the husband’s unexplained “business deduc-tions”indetermininghisincome.Thewifewascaringfor theparties’youngchildren, shedidnothaveacartoobtainemployment,andthehusbandofferednoevi-dencefromavocationalexpertaboutthewife’searningcapacity.Furthermore,itwasthetrialcourt’sdetermi-nationinfindingthewifemorecrediblethatthehusbandhadrepresentedtoherthathewould“takecare”ofherlicenseandthattherewasnoissuewithitlapsing.Thetrialcourtdidnotabuseitsdiscretionwhenitfoundthat,dueto“currentcircumstances,”adefineddurationspou-salsupportawardwasnotdictated.v

Carl Witmeyer Concludes Term as Chair of Family Law Section

WhenIjoinedtheBoardofGovernor’sfiveyearsago,oneofthefirstpeopletogreetmewasCarlWitmeyer.HestartedoutbysayingwhatagreatexperiencehehadontheBoardandthatwewere“thehardestworkingBoardintheVSB.”Hewasright.HewasalsorightwhenhetoldmethatwealsohadthemostfunofanyBoardaswell.PartoftheenjoymentofthelastseveralyearshasbeenthehonorandpleasureofworkingwithCarl.Heistrulya“gentlegiant.”Healwayshasanicethingtosayabouteveryoneheencounters,andcancutthetensioninanyroomwithhisself-deprecatinghumor.DuringhisyearasChair,hehasguidedtheBoardwithcourtesyandtact,andhaslefthugeshoestofill;hewilltrulybemissed.

RichardGarriott,in-comingChair,VirginiaStateBarFamilyLawSection.

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AWARDSFamily Law Section Outstanding 2014 Graduates Awards

EachyeartheFamilyLawSectionoftheVirginiaStateBaracknowledgesalawschoolgraduatewhohasexcelledinfamilylaw.Thisyeartheyare:

1. Washington&Lee,SchoolofLaw–Jan M. Fox

2. UniversityofVirginia–Megan Loftus

3. UniversityofRichmondT.C.Williams–Danielle Chaé Wingfield

4. RegentUniversitySchoolofLaw–Elizabeth Oklevitch

5. CollegeofWilliam&Mary–Kathryn Ellen Leary

6. LibertyUniversitySchoolofLaw–Lindsay Horne

7. AppalachianSchoolofLaw–Corie Rife

8. GeorgeMasonUniversity,SchoolofLaw–Lynn Thompson

Congratulations to this year’s Outstanding Graduate Award recipients!

FIRST CLASSU.S. POSTAGE

PAIDPERMIT NO. 709

RICHMOND

2013-2014 Board of Governors Virginia State Bar Family Law Section

Virginia Family LawVIRGINIA STATE BAR1111 EAST MAIN STREETRICHMOND, VIRGINIA 23219-3565

CarlJ.Witmeyer,IIChairAshland

RichardE.Garriott,Jr.Vice ChairVirginiaBeach

CharlesE.Powers,SecretaryRichmond

CassandraM.H.ChinImmediate Past ChairWoodbridge

BrianM.Hirsch,EditorReston

PeterV.ChiusanoVirginiaBeach

NanM.JosephLeesburg

LawrenceP.VanceWinchester

Hon.LeisaK.CiaffoneSalem,

DanielL.GrayFairfax

JohnS.HuntingtonChristiansburg

MaryG.CommanderNorfolk

ChristopherF.MalinowskiFairfax

Hon.GlenA.HuffVirginiaBeach

Hon.DeborahV.BryanVirginiaBeach

Hon.RichardS.Wallerstein,Jr.Henrico

Prof.LynneMarieKohmVirginiaBeach

Ms.DollyShaffnerLiaisonRichmond

Documents

Virginia Family Law Quarterly - Virginia State Bar has really meant a lot having Chris Malinowski, John Huntington, and Mary Commander so involved ... Family Law Matters, William C