Former Spouse Seeks to Enforce Money Judgment in New York Divorce Case from Retirement Plan, Other Assets

retirement jar

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Future trips to court may be necessary to enforce maintenance or support obligations after a divorce in New York. Even if a court enters a judgment for unpaid obligations, the judgment creditor may have to go to court again to enforce the judgment. An order issued by the Supreme Court of Monroe County last summer in M.M. v. T.M. addresses this type of situation. The court described “a seemingly interminable battle” between the parties, with the most recent order enforcing a judgment against the judgment debtor’s retirement plan and a retainer paid to his attorney. Quoting Robert Frost about “a road not taken,” the court ventured away from New York family law and into laws dealing with retirement plans and the attorney-client relationship.

The federal Employee Retirement Income Security Act (ERISA) establishes standards for the administration of various types of retirement plans. It generally prohibits the assignment of retirement benefits, unless the assignment is made in accordance with state family law in an order known as a “qualified domestic relations order” (QDRO). The division or assignment of retirement benefits in a divorce case therefore typically requires a QDRO signed separately by the court.

The dispute in M.M. also involved a retainer paid by the ex-husband/judgment debtor to his attorney. The status of a retainer paid to an attorney, under New York law, depends to some extent on the agreement between the attorney and the client. The general rule is that, in the absence of a specific written agreement stating otherwise, the attorney holds the retainer funds in escrow, and the client maintains an interest in any funds not earned by the attorney. State law requires attorneys to maintain a special bank account for escrowed client funds, and ethics rules require attorneys to take great care in managing these funds.

The parties in M.M. divorced in 2005 after 34 years of marriage. The original divorce judgment ordered the husband to pay spousal maintenance in the amount of $41,600 per year. By the time the parties returned to court in 2015, the ex-wife had obtained two judgments for unpaid maintenance, totaling more than $80,000. A court had also awarded her about $47,000 in attorney’s fees, for a total of over $118,000.

The ex-wife sought to collect on the judgment from the ex-husband’s Thrift Savings Plan and federal employee retirement plan, as well as from a retainer in his attorney’s escrow account. When the case went to court, she had served the ex-husband’s attorney with a restraining notice that sought turnover of the retainer to her attorney. The ex-husband argued that the restraining notice was invalid, and his attorney claimed a superior interest in the funds.

The court generally sided with the ex-wife. It ruled that the ex-husband maintained an interest in the retainer funds, and the attorney’s claim to any unearned funds was not superior to the ex-wife’s claim. The restraining notice was therefore valid as to any funds that the attorney had not earned. With regard to the retirement accounts, the court held that they were subject to garnishment to satisfy the ex-wife’s judgments, and it ordered the issuance of several QDROs.

New York City family law attorney Ingrid Gherman has helped clients deal with difficult legal questions in divorce cases, post-divorce proceedings, and other family law matters for over 30 years. To schedule a confidential consultation to discuss your case with a member of our team, contact us today online or at (212) 941-0767.

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