Monday, January 11, 2016

In Re Marriage of Peterson (Cal. Ct. App. - Jan. 11, 2016)

John Peterson is an attorney in Los Angeles.  Annette Peterson is an attorney in Los Angeles.  They are married for a relatively long time -- 16 years -- and then they separate.  So it's time to divide their assets.  Including their retirement assets.

John's in private practice, so his retirement benefits entail social security payments, which are worth around $220,000.  Annette's not in private practice -- instead, she's a district attorney -- so she doesn't get social security benefits, but instead gets L.A. County retirement benefits, which are also worth around $220,000.

We're splitting things up.  We're a community property state, after all.  So if you were looking at this rationally, you'd let John have his benefits and let Annette have hers.  Or give Annette half of John's benefits and John half of Annette's.  Essentially the same thing.  Since all this stuff was earned during the marriage, you'd think you'd split 'em up.

But that's not what we do.  The Court of Appeal holds that John gets all of his retirement benefits, and half of Annette's as well.  She, by contrast, gets only half of hers, and none of John's.

That's an absurd result.  Obviously.  But the Court of Appeal holds that's the result that's legally compelled, since federal law prevents states from splitting up social security benefits -- so John's benefits are all his -- and California law makes everything community property, so Annette's benefits get split.

Once you know what the law is, you can see why the Court of Appeal comes out, even if perhaps reluctantly, the way it does.

But does it really have to be this way?

I understand that we can't do anything about federal law, which is what it is.  But the Court of Appeal may perhaps be overly willing to view California law as inherently inelastic.  Sure, the usual rule is that assets (including retirement benefits) obtained during the marriage are community property.  But we have this thing called common law.  Through which we've created tons of exceptions to this rule.  I'm not sure it's categorically impermissible to create one more, particularly given the indisputable inequity involved in situations precisely like this one -- where one spouse would otherwise get 150% of the community's mutually earned retirement benefits.

Tons of other community property states, as the Court of Appeal notes, have addressed this identical issue and have come up with ways to make the distribution fair.  Indeed, that's the majority rule, with most such states creating an equitable remedy.  In the present case, Annette comes up with a plethora of ways to make it fair.  But the Court of Appeal has none of it.  It's not going to create a common law rule to make things fair, and instead punts the issue to the Legislature.  Good luck with that.

There are lots of different ways to look at the common law.  Some view it incredibly narrowly, and only think that it's justified in very limited settings; e.g., where the Legislature has completely failed to act in an entire area.  Some view it more flexibly, and believe that it's a good system through which inequitable and/or unexpected consequences of legislative acts can be legitimately rectified.

This opinion is a good one that exemplifies the upsides and downsides of each such approach.

As for the law, know the rule.  If you're in private practice, and getting divorced, you're in very good shape.  If you work for the government, by contrast, you're going to get hosed.

At least in California.  Unlike the vast majority of other states.