Appeals Court Case Review: Re-Opening Settlement Agreements and Alimony Law

On June 24, the Appeals Court released its decision in Demarco v. Demarco (Appeals Court: 2016-P-0190), a case with fascinating implications for the bar.  As with the cases explained last week – Commonwealth v. Moore on postverdict juror contact and Bryan Corp v. Bryan Abrano on the “hot potato” doctrine, the BBA’s Amicus Committee considered taking part in the amicus process in this case, but ultimately declined.  In case you weren’t aware, the BBA has an extremely active Amicus Committee which reviews requests for amici and can sign onto or write and submit its own briefs at all jurisdictional levels in cases related to BBA’s mission, such as on the practice of law and access to justice. Here are samples of some of our biggest cases.  If you have a case you think is appropriate for our consideration, please reach out!

The Demarco case revolves around a settlement agreement on alimony issues that was made when interpretation of the recently revised alimony law was still in flux, and whether the Probate and Family Court had the authority to allow the wife’s Rule 60(b) motion to effectively reopen the pre-settlement complaints for contempt and modification.

Case Facts

On May 5, 2010, Katherine and Michael Demarco were divorced after more than thirty years of marriage.  Under their Separation Agreement, signed May 4, 2010, the alimony provision obligated husband to pay wife a base alimony amount and, in addition, 33% annually of his total gross earned income over a fixed amount.  The Separation Agreement provided that the husband’s alimony obligation to the wife would terminate upon the earliest to occur – (a) the husband’s death, (b) the wife’s death, (c) the wife’s remarriage, or (d) at such time as husband has no gross income, after turning age 68.  Further, the Agreement provides that after turning age 68, husband shall continue to pay alimony to wife at the same rate, and if gross income earned after turning 68 is less than the fixed 33% threshold amount, husband shall continue to pay wife 33% of his gross earned income.

On March 1, 2012, the Alimony Reform Act took effect.  The retirement provision codified at G.L. c.208 § 49(f) created uncertainty in family law practice, as to whether it had retroactive effect to Settlement Agreements prior to enactment – in particular, the new provisions on a payor reaching retirement age and a payee co-habitating with a new partner.  On the same date, husband filed a Complaint for Modification, requesting a modification of his alimony obligation.  On February 18, 2013, wife filed a Complaint for Contempt, alleging that husband owed her unpaid alimony and other money and assets.  On February 25, 2013, husband filed an Amended Complaint for Modification seeking to terminate his alimony obligation due to his reaching full retirement age.

On February 19, 2014, the parties appeared for trial on wife’s February 18, 2013, “Complaint for Contempt” and husband’s February 25, 2013, “Amended Complaint for Modification.”  The Court (Judge Casey) encouraged the parties to consider a settlement and expressed its opinion to the parties that Section 49(f) of the Alimony Reform Act applied retroactively, now that the husband had reached retirement age.  The parties came to an agreement on February 19, 2014, whereby the husband was to pay wife $90,000 and thereafter end his alimony obligation to the wife. The Court entered a Modification Judgment on that date ordering the parties to comply with their Agreement.

On January 30, 2015, the Supreme Judicial Court (“SJC”) concluded, in three published opinions, that the retirement termination provision of G.L. c. 208 §49(f) did not apply retroactively.

On August 7, 2015, wife filed a Motion for Equitable Relief and a Motion for Relief from Judgments Dated 2-19-14 under Rule 60(b)(5) and (6).  She argued that the parties’ agreement was based on their and the Court’s incorrect interpretation of the Alimony Reform Act.  On August 13, 2015, husband filed his Opposition to the Motion.

On November 24, 2015, the Probate and Family Court issued a Memorandum of Decision and Order allowing the Motion under Rule 60(b)(6) and reopening both the Complaint for Contempt and Amended Complaint for Modification.  Rule 60(b)(6) states in relevant part:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons:… (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.

The Court reasoned that the wife merited relief under Rule 60(b)(6) and its broad equitable powers.  The Memorandum of Decision explained that it was not equitable to hold wife to an agreement she entered into while relying on the Court’s incorrect interpretation of the law.  Furthermore, it stated that relief was merited under Rule 60(b)(6) both because of the SJC’s clarification of the Act subsequent to the parties’ agreement and because of the Court’s incorrect interpretation of the Alimony Reform Act.  The Court found that the wife’s reliance on the incorrect interpretation was the type of “extraordinary circumstance,” warranting relief under Rule 60(b)(6) because it caused her “serious financial detriment.”

On February 16, 2016, the Appeals Court requested amicus briefs on the following issue by March 18, 2016:

Where a divorce judgment predated the alimony reform act but was later modified by agreement of the parties after the effective date of the act — in order to resolve the former husband’s claim that his alimony obligation terminated under the act’s retirement provision, G. L. c. 208, § 49 (f) — and where their agreement survived the modification judgment, whether a judge could properly relieve the former wife of the agreed modification pursuant to Mass. R. Dom. Rel. P. 60 (b) (6), G. L. c. 215, § 6, or otherwise, based on a “clarification of the law” that occurred when this court subsequently held that the retirement provision does not apply retroactively.

On February 19, 2016, husband/appellant filed his appeal brief.  Oral argument was held April 5, 2016.

The Decision

On June 24, the Appeals Court released its holding in this case, reversing the lower court for incorrectly applying Rule 60(b)(6) to reopen the couple’s settlement.  The Court agreed with the husband’s argument that “subsequent clarification of the law” was not the type of extraordinary circumstance intended to be relieved by the application of Rule 60(b)(6) and noted that it had policy concerns about reopening a settlement without more extreme circumstances:

While Probate and Family Court judges enjoy considerable discretion, that discretion does not extend to vitiating a contract that was negotiated at arm’s length and entered into freely and voluntarily. In the absence of fraud, coercion, or countervailing equities, a signatory to an agreement is bound by its terms.  Knox v. Remick, 371 Mass. 433, 436-437 (1976). Grindlinger v. Grindlinger, 10 Mass. App. Ct. 823, 824 (1980). To hold otherwise would negate the integrity and inviolability of the innumerable surviving agreements relied upon by parties across the Commonwealth. We can never know all of the considerations of parties who elect to resolve their cases in this manner, nor does the record reflect such considerations here. However, to allow an agreement such as the one here to be unwound based on one party’s subsequent determination that she would have fared better if she had tried the case to completion, would deprive the other party of the certainty and finality for which he bargained.

We applaud the courts for taking on these issues.  We also note that we have been keeping an eye on an alimony reform bill that has already passed the House.  The bill proposes to further clarify some of the confusion from these cases and to overturn the SJC’s January 2015 interpretation  by giving retroactive effect to the provisions terminating alimony on the payor reaching retirement age (G.L. c. 208 §49(f)), and suspending, reducing or terminating alimony upon cohabitation of the recipient spouse for a period of at least three months (G.L. c. 208 §49(d)).  The BBA’s Family Law Section has reviewed the bill and we will let you know how it ends up.

– Jonathan Schreiber
Legislative and Public Policy Manager
Boston Bar Association