BIFURCATIONS IN DIVORCE PROCEEDINGS
by Veronica Blangy
Sometimes parties in dissolution action want to bifurcate their case and seek a judgment on certain issues. California policy encourages parties in a dissolution action to bifurcate trial whenever it might expedite settlement or simplify the determination of other contested issues. See Marriage of Wolfe, supra, 173 CA3d at 893–894, 219 CR at 340; Marriage of Macfarlane & Lang (1992) 8 CA4th 247, 257, 10 CR2d 157, 163–164.
Generally, the courts will bifurcate a dissolution action for one of the following reasons:
1) Status- only
The court may sever and grant an early and separate trial on the issue of dissolution of marriage status (“status only” judgment), expressly reserving jurisdiction for later determination of all other pending issues (including division of the community estate). Family Code § 2337(a) & (f); see Marriage of Wolfe (1985) 173 CA3d 889, 894, 219 CR 337, 340 (citing text); Marriage of Bergman (1985) 168 CA3d 742, 755, 214 CR 661, 669. A bifurcated proceeding is particularly appropriate where the parties want their marriage terminated as soon as legally possible (e.g., so they will be free to remarry) but substantial time will be required to resolve complex property, support and/or custody issues. The bifurcation allows a judgment of dissolution to be entered (“status only” judgment), reserving jurisdiction to resolve the contested issues thereafter (see Fam.C. § 2337(f)—judgment granting status only dissolution “shall expressly reserve jurisdiction for later determination of all other pending issues”).
2) Bifurcation of issues for separate trial
On a noticed motion of a party, the parties’ stipulation, or the court’s own motion, the court may bifurcate any one or more issues to be tried separately before other issues are tried. CRC 5.175(a).
3) Determination of “pivotal issues”.
Bifurcation is also recommended in “pivotal issue” cases—i.e., where resolution of the bifurcated issue(s) is likely to simplify the determination of, or lead to settlement of, other issues in the case. CRC 5.175(c); Marriage of Wolfe, supra, 173 CA3d at 894, 219 CR at 340–341; Marriage of Macfarlane & Lang, supra, 8 CA4th at 257, 10 CR2d at 163.
For instance, where the central dispute focuses on a particular asset (such as business goodwill), an immediate (bifurcated) trial resolving the focal dispute may then prompt a settlement of the balance of the case, eliminating the need for a protracted trial of other issues.
Specifically, CRC 5.175(c) offers these examples of issues that may, in some cases, be appropriate to try separately in advance:
• The validity of a postnuptial or premarital agreement. (The outcome of this issue may be dispositive of all other property issues in the case.)
• The date of separation. (Because accurate identification of the date of separation can be dispositive of critical property characterization and valuation issues, yet is often intensely fact-driven and hotly contested, separation date disputes are particularly suitable for an early separate trial.)
• The date to use for valuation of assets.
• Whether one or more assets are separate or community property. See Marriage of Lafkas (2007) 153 CA4th 1429, 1432, 64 CR3d 100, 101 (whether H’s interest in partnership established before marriage, but that was the subject of a new partnership agreement executed during marriage, was H’s SP or partially CP).
• How to apportion the increase in value of a business.
• The existence or value of business or professional goodwill; or the value of a major asset.
There are many reasons to seek a bifurcation, however, the majority of the time, parties seeks a bifurcation to obtain a “status only” judgment. In a status only judgment, the parties will be classified as divorced, meaning back to single status, however, the remaining issues are reserved in the case. The tough part is that the court can impose various conditions on the grant of a “status only” bifurcation so as to protect the other spouse’s entitlement to certain benefits that attach only to marital status.
Parties seeking to bifurcate their dissolution case must obtain the bifurcation through a noticed motion. Preliminary declarations of disclosure with completed schedule of assets and debts, Fam.C. § 2104, must be served along with the § 2337 bifurcation motion.
Status only judgment are favored by public policy because it furthers the legislative intent that marriage dissolution not be postponed simply because issues relating to property, support, custody or attorney fees are not ready for decision. Marriage of Fink (1976) 54 CA3d 357, 363–364, 126 CR 626, 630] As such, the propriety of a “status only” bifurcation is deemed to be an issue of law. Gionis v. Super.Ct. (Gionis) (1988) 202 CA3d 786, 790, 248 CR 741, 744.
The moving party need only present “slight evidence” in support of a “status only“ bifurcation request: i.e., generally, the supporting declaration need simply allege reconciliation is not possible; that, for reasons stated, it would be in the parties’ best interests to dissolve the marriage without delay (e.g., so as not to complicate characterization of postseparation acquisitions, so as to free the parties to remarry at the earliest possible date, so as to alleviate “emotional strain and pressure” and help facilitate settlement on reserved issues, etc.); and that the other issues (support, custody, property division, etc.) would require a lengthy trial. Gionis v. Super.Ct. (Gionis), supra, 202 CA3d at 788–790, 248 CR at 743–744.
In contrast, the opposing party’s evidentiary burden to defeat a “status only” bifurcation motion is far heavier. Since denial of the motion would contravene public policy, the opposing party must present “compelling reasons” in opposition—i.e., a showing of some actual prejudice that would result. Procedural objections are not themselves “compelling reasons” (indeed, procedural defects may be cured by amending the motion). Gionis v. Super.Ct. (Gionis), supra, 202 CA3d at 789–790, 248 CR at 743–744—trial court erred in denying H’s bifurcation motion on ground that he failed to make compelling showing of need where W, in opposition, showed no prejudice.
Because of the statutory conditions on “status only” bifurcations, Family Code amendments postdating Gionis, supra, implicitly raise the possibility that the moving party’s burden may now be far more onerous, and in some cases perhaps nearly impossible to meet. This is because of a vast array of financial conditions that the court may impose on the granting of a “status only” bifurcation motion and entry of a “status only” dissolution judgment Fam.C. § 2337(c) & (d)).
COURT’S POWER
A judgment of dissolution effectively terminates a vast body of rights and benefits attaching to marital or domestic partnership status. Courts are therefore empowered to impose various conditions on the granting of a “status only” bifurcation motion and entry of a “status only” dissolution judgment that will protect the other party against losses that would result from such adverse consequences. Fam.C. § 2337(c) & (d).
In the event of the moving party’s death, whatever § 2337 conditions are imposed by the court will also bind his or her estate; and “shall be enforceable” against any assets (or proceeds thereof) as to which the § 2337 obligations would have been enforceable before the moving party’s death. Fam.C. § 2337(c) & (g).
The potential status only bifurcation conditions are extensive and have significant economic impact; they may cost the moving party a lot of money up front before the community estate is fully divided by a final judgment. It is therefore important that counsel for both sides (whether making or opposing the status only bifurcation motion) be thoroughly conversant with Fam.C. § 2337. In particular, it is imperative that counsel for the moving party discuss the potential § 2337 conditions with the client and advise him or her (both orally and in writing) of their economic impact. A party considering making a § 2337 bifurcation motion may ultimately conclude the financial exposure is simply too steep and that, on balance, it would be best to forego the early termination of marital/domestic partnership status.
The court “may impose” upon the moving party any of the following conditions on granting the status only bifurcation motion (Fam.C. § 2337(c)):
(1) Tax liability indemnification: That the moving party shall indemnify and hold the other party harmless from any taxes, reassessments, interest and penalties payable by the other party in connection with division of the community estate that would not have been payable if the parties were still married when the division was made. Fam.C. § 2337(c)(1).
(2) Continued health care coverage and indemnification: Until judgment is entered on all remaining issues and becomes final, that the moving party maintain all existing health and medical insurance coverage for the other party and any minor children as named dependents, so long as the moving party is eligible to do so. Fam.C. § 2337(c)(2).
Further, if at any time during this period the moving party is not eligible to maintain that coverage, he or she shall, at his or her sole expense, provide and maintain health and medical insurance coverage that is comparable to the existing coverage to the extent it is available; and, to the extent it is not available, the moving party “shall be responsible to pay, and shall demonstrate to the court’s satisfaction the ability to pay” for the other party’s and their minor children’s health and medical care to the extent that care would have been covered by the existing insurance coverage but for the dissolution of marital status, “and shall otherwise indemnify and hold the other party harmless” from any adverse consequences resulting from the loss or reduction of the existing coverage. Fam.C. § 2337(c)(2) (emphasis added).
For purposes of § 2337(c)(2), “health and medical insurance coverage” includes any coverage for which the parties are eligible under any group or individual health or other medical plan, fund, policy or program. Fam.C. § 2337(c)(2); see FL–347, item 5.b.
(3) Indemnification re probate homestead and family allowance: Until judgment is entered on all remaining issues and becomes final, that the moving party shall indemnify and hold the other party harmless from any adverse consequences to the other party if the bifurcation causes the other party to lose (i) the right to a probate homestead in the residence in which the other party resides when the status only bifurcation is granted, and/or (ii) the right to a surviving spouse probate family allowance. Fam.C. § 2337(c)(3) & (4).
(4) Indemnification re retirement benefits: Until judgment is entered on all remaining issues and has become final, that the moving party shall indemnify and hold the other party harmless from any adverse consequences to the other party if the bifurcation causes the other party to lose rights with respect to any retirement, survivor or deferred compensation benefits under any plan, fund or arrangement, or to any elections or options associated therewith, to the extent the other party would have been entitled thereto as the moving party’s surviving spouse. Fam.C. § 2337(c)(5).
(5) Indemnification re social security benefits: That the moving party shall indemnify and hold the other party harmless from any adverse consequences if the bifurcation causes the other party to lose rights to social security benefits or elections to the extent the other party would have been entitled thereto as the moving party’s surviving spouse. Fam.C. § 2337 (c)(6).
(6) Maintaining other party as beneficiary of nonprobate transfer: That the court enter an order (as authorized by Prob.C. § 5600(b)(3)) requiring the moving party to maintain a beneficiary designation for a nonprobate transfer, as described in Prob.C. § 5000, for the other party for up to one-half of or, upon a showing of good cause, all of a nonprobate transfer asset until judgment is entered with respect to the community ownership of the asset and until the other party’s interest therein has been distributed to him or her. Fam.C. § 2337(c)(7)(A). Absent a showing of good cause, the above condition does not apply to:
(7) Assignment/transfer of CP interest in IRA: That one-half or, upon a showing of good cause, all of the community interest in any IRA, by or for the benefit of the party, be assigned and transferred to the other party pursuant to IRC § 408(d)(6), in order to preserve the party’s ability to defer distribution of the IRA upon the other party’s death. Fam.C. § 2337(c)(8) (also stating, “[t]his paragraph does not limit the power granted pursuant to subdivision (g)”.
(8) Security interest: Upon a showing that circumstances exist that would place a “substantial burden” on enforcement of either party’s CP rights or that would eliminate the surviving party’s ability to enforce his or her CP rights if the other party died before the division and distribution or compliance with any court-ordered payment of any CP interest therein—including, but not limited to, situations in which federal preemption applies to a party’s asset, or purchase by a BFP has occurred—the court “may order a specific security interest designed to reduce or eliminate the likelihood that a postmortem enforcement proceeding would be ineffective or unduly burdensome to the surviving party.” Fam.C. § 2337(c)(9) (emphasis added).
The security interest orders may include, but are not limited to:
—if a retirement plan is not subject to an enforceable order for the payment of spousal survivor benefits to the other party, an interim order requiring the moving party to pay or cause to be paid, and to post adequate security for the payment of, any survivor benefit that would have been payable to the other party on the moving party’s death but for entry of the status only dissolution judgment, pending entry of judgment on all remaining issues (Fam.C. § 2337(c) (9)(E)).
(9) Miscellaneous. “Any other condition the court determines is just and equitable.” Fam.C. § 2337(c)(10).
JOINDERS REQUIRED
Court’s usually require certain conditions to be implemented on entry of “status only” dissolution judgment, such as a Joinder of retirement/pension plan where the moving party’s retirement or pension plan “shall be joined” as a party to the dissolution proceeding unless joinder is “precluded or made unnecessary” by ERISA (29 USC § 1001 et seq.) “or any other applicable law.” Fam.C. § 2337(d)(1).
If a plan is not covered by ERISA, such as Federal government plans, the court may require an interim order. “An interim order preserving the nonemployee party’s right to retirement plan benefits, including survivor and death benefits.”
MILITARY/ FEDERAL SPECIAL AREAS WHEN REQUESTING BIFURCATION
When there is a federal government plan involved such as military retirement or federal employees, commonly known as FERS, the plan falls under the federal preemption and makes the request of a bifurcation trickier. It is no longer strictly governed by the California state laws.
Special problems may arise for former spouses in a bifurcated dissolution proceeding. When a judgment of dissolution is obtained before the property division, the now-single employee spouse might retire before the court issues a QDRO and elect to take a life annuity consistent with ERISA; the former nonemployee spouse cannot prevent this election, insisting instead on a joint and survivor annuity, because no longer married to the employee and not yet having the protection of a QDRO. In effect then, the former spouse’s property rights could be “conclusively determined” by the trial court’s decision to bifurcate its judgment.
There is no federal question jurisdiction over community property division of military retirement pay. State courts are bound to follow procedures under the federal Uniformed Services Former Spouses' Protection Act (USFSPA, 10 USC § 1408) for enforcing support and property division orders against military “disposable retired or retainer pay.” But those procedures do not create independent “federal question” jurisdiction over the division of marital rights in military retirement pay. Steel v. United States (9th Cir. 1987) 813 F2d 1545, 1548; Marriage of Mansell (1989) 217 CA3d 219, 228–229, 265 CR 227, 231–232, cert.den. (1990) 498 US 806—USFSPA preemption requires state courts to defer to federal law in characterizing military pay but does not withhold state court subject matter jurisdiction; see also Marriage of Babauta (1998) 66 CA4th 784, 787–788, 78 CR2d 281, 282–283—state court jurisdiction to divide military voluntary separation incentive pay not preempted.
To fill this gap, the trial court is empowered to subject the granting of a “status only” bifurcation and entry of “status only” dissolution judgment to various conditions designed to ensure the nonemployee spouse’s right to pension benefits, elections and/or survivor benefits will not be forfeited or prejudiced by the early termination of marital status before those rights can be adjudicated. Fam.C. § 2337(c) (5) & (d). The optimum way to protect the nonemployee spouse is to secure an interim QDRO re survivor benefits as a condition to entry of a status only dissolution judgment. Fam.C. § 2337(d)(2) (B).
Federal employee benefits—limited federal preemption
State community property law claims against federal employee deferred compensation benefits are preempted by federal law only to the extent conflicting community property law would do “major damage” to “clear and substantial” federal interests. Hisquierdo v. Hisquierdo (1979) 439 US 572, 581, 99 S.Ct. 802, 808; see also Marriage of Schofield (1998) 62 CA4th 131, 135, 73 CR2d 1, 3—“California courts may apply community property principles to federally created benefits so long as the result does not frustrate the objectives of the federal legislation” (internal quotes and citation omitted).
Extensive federal law has eradicated most “wholesale” preemption of community property rights in federal employee benefits.
Military retirement pay—Uniformed Services Former Spouses’ Protection Act: Effective February 1, 1983, the historical preemption of state law community property treatment of military retirement pay (McCarty v. McCarty (1981) 453 US 210, 232–235, 101 S.Ct. 2728, 2741–2742) was completely nullified.
Pursuant to the Uniformed Services Former Spouses’ Protection Act (USFSPA, 10 USC § 1408), state courts are fully empowered to divide military retirement pay as community property; and state court domestic relations community property division and support orders are fully enforceable against the military. Marriage of Smith (2007) 148 CA4th 1115, 1120, 56 CR3d 341, 344.
The USFSPA completely eradicates “all vestiges” of McCarty preemption retroactive to the date McCarty was decided (6/26/81) and applies to all cases not final as of the Act’s 2/1/83 effective date ... without regard to whether the pension rights accrued before or after June 26, 1981. Casas v. Thompson (1986) 42 C3d 131, 140, 228 CR 33, 38—noting USFSPA’s “express intent to erase McCarty’s impact on all cases ... ”; Aloy v. Mash (1985) 38 C3d 413, 421, 212 CR 162, 167—“no case within our memory has received less retroactive application than McCarty.” Unless the court reserved jurisdiction, the USFSPA expressly prohibits reopening pre-McCarty (pre-June 25, 1981) final judgments in order to divide unadjudicated military retirement benefits. 10 USC § 1408(c) (1); Marriage of Curtis (1992) 7 CA4th 1, 14, 9 CR2d 145, 153; see also Marriage of Olsen (1994) 24 CA4th 1702, 1705–1707, 30 CR2d 306, 307–309.
Retirement pay is affected—state court jurisdiction reaches only 50% of “disposable retired pay”: Although the USFSPA grants state courts the power to divide military retirement pay, its language is still preemptive regarding the limits of state court jurisdiction. State court authority to treat military retirement pay as community property extends only to the military member’s “disposable retired pay” as defined by the Act. 10 USC § 1408(c)(1); Mansell v. Mansell (1989) 490 US 581, 588–589, 109 S.Ct. 2023, 2028–2029; Marriage of Smith (2007) 148 CA4th 1115, 1120, 56 CR3d 341, 344. Further, of the “disposable retired pay” subject to the court’s jurisdiction, only a maximum of 50% can be ordered payable for support and a property division. (The court’s order cannot exceed the 50% limit even with the member’s consent.) 10 USC § 1408(e)(1).
