The Pennsylvania Superior Court recently addressed the application of the relatively new Domestic Relations Statute 23 Pa.C.S.A. Section 4308.1 pertaining to "Collection of Overdue Support for Monetary Awards," in the case of Faust v. Walker. Interestingly, the appellant in this case was the domestic relations office of the Dauphin County Court of Common Pleas.
The facts in Faust are as follows: Walker was injured in a motor vehicle accident and settled his subsequent personal injury claim related thereto in the amount of $10,000. At the time of the settlement, Walker owed in excess of $12,000 in child support arrears. The trial court initially entered an order directing Walker's personal injury attorney to pay $5,000 of the settlement toward Walker's arrears. It is to be noted, "the Domestic Relations Section is granted the power to initiate judicial proceedings to obtain a settlement from the transferee in the best interest of the child support obligee via 23 Pa.C.S.A. Section 4305(a)(11), as well as, the power to issue orders to secure assets to satisfy support obligations and arrearages by intercepting or seizing judgments or settlements."
In response to the trial court's order directing Walker's personal injury attorney to pay $5,000 of the settlement award toward Walker's support arrears, his attorney, on his behalf, filed a motion to strike the court's order of attachment. Following oral argument on Walker's motion to strike the order of attachment, the trial court entered an order granting said motion pursuant to 23 Pa.C.S.A. Section 4308.1 and "directed the Domestic Relations Office of the Dauphin County Court of Common Pleas to prepare an order of attachment of income in the amount of $1,800.93."
Subsequent to the court's entry of the order, the Dauphin County domestic relations office filed an appeal raising the following issue for review: "Whether the trial court abused its discretion by misapplying the law when it granted [Walker's] request to limit the attachment of income in contradiction to the specific language of 23 Pa.C.S.A. Section 4308.1." The Superior Court disagreed with the Dauphin County domestic relations office's argument on appeal and affirmed the trial court's order.
The Superior Court reiterated that "[i]n evaluating a trial court's application of a statute, our standard of review is plenary and is limited to determining whether the trial court committed an error of law." The Superior Court further stated, "[w]hen interpreting a statute, we must abide by the rules of statutory construction. It is a basic tenet of statutory interpretation that 'when the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.'"
The general rule under Section 4308.1 provides, in part, "Overdue support shall be a lien by operation of law against the net proceeds of any monetary award, as defined in subsection (i), owed to an obligor, and distribution of any such award shall be stayed in an amount equal to the child support lien provided for under this section pending payment of the lien." The focus of the argument in Faust pertained to the definitions of net proceeds and monetary award under Section 4308.1. The statute defines monetary award as follows:
"Any portion of a settlement paid as a lump sum negotiated in lieu of, or subsequent to the filing of a lawsuit for, or any civil judgment or civil arbitration award that is paid as a third party claim for bodily injury or death under a property and casualty insurance policy or paid as a workers' compensation or occupational disease act or under a workers' compensation policy . . . . The term does not include a lump sum payable through a structured settlement annuity. The terms shall only apply to those settlements, judgments, civil arbitrations, Worker's Compensation Act or the Pennsylvania Occupational Disease Act awards, which are asserted and resolved in this Commonwealth."
The statute defines net proceeds as "moneys in excess of $5,000 payable to a prevailing party or beneficiary or in the case of an award under . . . the Workers' Compensation Act, or the . . . Pennsylvania Occupational Disease Act, the claimant after payment of attorney's fees, witness fees, court costs, reasonable litigation expenses, documented unpaid expenses incurred for medical treatment causally related to the claim and any workers' compensation or occupational disease indemnity or medical payment and payments to the medical assistant's program under . . . the Public Welfare Code."
The domestic relations office argued on appeal that the attorneys' fees and costs should not be excluded from the amount of the personal injury settlement subject to the lien. In other words, the domestic relations office argued that only the $5,000 should be excluded from the settlement subject to the lien. The domestic relations section contended that "the part of the definition which would deduct these and other expenses from the portion of the monetary award subject to the lien applies only to workers' compensation or occupation disease awards." Therefore, the domestic relations section stressed that, with the exception of awards from workers' compensation or occupational disease claims, all settlement/awards in excess of $5,000 are subject to the lien.
The Superior Court reasoned, "we find no basis, nor does Appellant [DRO] offer any explanation, for an interpretation of 'net proceeds' that would draw a distinction between awards from personal injury claims and those from workers' compensation or occupational disease claims and only permit attorney's fees and costs and related medical expenses to be deducted from the latter." The Superior Court heavily quoted the trial court's analysis and reasoning behind its order. In making its decision, the trial court stated in its opinion:
"The determinative factor in so concluding is that the statute explicitly identifies that it is the 'net proceeds' of a monetary award that are subject to a lien. The common meaning of 'net proceeds' is '[t]he amount received in a transaction minus the cost of the transaction (such as expenses or commissions). Also termed net balance.' Furthermore, the common meaning of the adjective 'net' is that which remains 'after all the deductions have been made, as for expenses: net profit.' 'Net' is similarly defined as 'free from all charges or deductions: as remaining after the deduction of all charges, outlay, or loss.'"
The trial court further stated: "[t]here is simply no language in the definition of 'net proceeds' limiting the deduction of expenses only to awards made to workers' compensation or occupational disease claimants. Since 'net proceeds' is not an ambiguous term, this court need not undergo further examination of legislative intent under the factors set forth by the Statutory Construction Act."
The Superior Court found the trial court's reasoning "to be sound," and held that "the statute clearly defines 'net proceeds' as monies in excess of $5,000 payable to a prevailing party, beneficiary or claimant after payment of attorneys' fees, costs etc." Therefore, the Superior Court found that the trial court correctly determined the total amount of the settlement award attributed to the child support lien was $1,800.93. In the opinion, the Superior Court provided the mathematical details as follows: The total settlement was $10,000. The counsel fees and costs related to the personal injury matter totaled $3,199.07, leaving a net award of $6,800.93. After subtracting the statutorily required $5,000, the remaining balance of $1,800.93 is what is subject to the arrears lien.
It is important for the family law practitioner to be familiar with Section 4308.1. This newer section to the Domestic Relations Code requires a prevailing party or beneficiary of a monetary award to provide his or her personal injury attorney "with a statement made subject to 18 Pa.C.S. Section 4904 (relating to unworn falsification to authorities)" that includes that party's or beneficiary's full name, mailing address, date of birth and Social Security number. That person is also required to provide his/her personal injury attorney with written documentation of arrears from the "Pennsylvania Child Support Enforcement System website or, if no arrears exist, written documentation from the website indicating no arrears." Interestingly, the statute provides "[t]he attorney shall obtain a copy of the prevailing party or beneficiary's statement and a lien report from the website at the time of the delivery of the release [of proceeds]; the lien report shall be dated within 20 days of the date of the delivery of the release." The statute further provides: "In the event that there are arrears, the attorney shall make payment of any lien to the department's state disbursement unit from the net proceeds of any monetary award."
This case is significant because it analyzes the definitions of "net proceeds" and "monetary awards" under the statute. Further, the case illustrates the broad responsibilities imposed upon the litigant and personal injury attorney by the statute.
MICHAEL E. BERTIN is an associate in the Philadelphia law firm of Obermayer Rebmann Maxwell & Hippel. Bertin is co-chairman of the custody committee and a member of the executive committee of the family law section of the Philadelphia Bar Association.
This article is reprinted with permission from the June 10, 2008 issue of The Legal Intelligencer © 2008 NLP IP Company
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