Court of Appeal Reminds Us That Abuse of Discretion Includes Not Exercising Discretion.
Well, here is a lengthy unpublished family law decision (72 pages) which we will try to summarize succinctly. In essence, husband’s appeals on family law fee awards did not gain traction, while wife did better on her appeal of a failure to award fees on breach of fiduciary duty/271 sanctions, where a lower court punted awaiting a later appellate ruling. The appellate court reminded us all that the lower court needs to exercise discretion rather than awaiting what may happen on appeal later on.
Marriage of Shannahan, Case Nos. D053701/D055292 (4th Dist., Div. 1 Dec. 1, 2010) (unpublished) basically involved an attorney husband and wife battling over community property assets, with a lot of attention focused on retirement funds of one kind or another and husband’s failure to act as a fiduciary for the community (with the trial court’s breach of fiduciary duty findings affirmed on appeal). So, both sides appealed attorney’s fees awards against them (husband, for some affirmative awards and wife, for denial of fees for breach of fiduciary duty and Family Code § 271 sanctions).
Want to guess on what happened?
Husband lost; wife got a reversal, with a remand for additional fees.
Husband challenged an award of fees to come out of his private retirement plans by way of an equalization award to wife. He essentially argued that judgment enforcement insulations should apply in the marital dissolution context, a proposition rejected by the appellate court. Instead, family law judges have power to divide this property equitably and are not shackled by outside rules relating to judgment creditors. (Cf. Phillipson v. Bd. of Adm., 3 Cal.3d 32, 43-44 (1970).)
Husband then challenged the trial court award of fees for wife’s fees incurred in her participation in a federal court interpleader action initiated by husband with respect to fire insurance proceeds. The trial court awarded wife $30,000 in fees. His attempt to argue that these fees were unjustified was rebuffed, because Family Code section 2030(c) authorizes an award for related proceedings, and this certainly qualified.
Husband next contested a fee award of $150,000 against his separate property. However, this did not gain much recognition because Family Code sections 2030-2032 allows a lot of discretion as to how awards are allocated.
Wife’s appeal was given more credence because the record showed that the lower court intended to defer ruling on the breach of fiduciary fees under Family Code section 1101 and sanctions under 271 for a later time. This was error, because the lower court should have ruled notwithstanding what the appellate court did later on. “The trial court’s failure to exercise its discretion under a statute is itself an abuse of discretion.” (Slip Opn., p. 67.)
Finally, husband tried to argue that a $67,000 fee award to wife was erroneous because the order indicated he should satisfy this attorney’s fees award from his private IRA account. He argued that this was preempted under ERISA. Wrong, because ERISA does not apply to a personal IRA. (Charles Schwab & Co., Inc. v. Debickero, 593 F.3d 916, 919-920 (9th Cir. 2010).)
So, at the end of the day, wife gets to go back and seek fees for husband’s breach of fiduciary duty and for reconsideration of previously-denied 271 sanctions requests.