Hernsberger QDRO Law May 2019

SUDOKU

QDRO Case Studies: 401(K) THEFT

The judge awarded Amy Palmer $35,167 from her husband’s 401(k) at Hewlett Packard (HP). Amy, now a single mother of three, really needed the money, and she needed it quickly.

Amy’s divorce lawyer waited for six months to send the 401(k) qualified domestic relations order (QDRO) to HP for approval. He should have sent it the same day the QDROwas signed.

Imagine everyone’s surprise when the plan administrator rejected the QDRO because there was no money in the account! Amy’s lawyer sent the QDRO to HP in six months, and Amy’s ex- husband had emptied the account much more quickly. The Goals Recover the $35,167 in cash (plus interest and attorney’s fees) that Amy’s ex-husband removed from the 401(k) after the divorce was final but before her attorney submitted the QDRO to the plan administrator. The Approach First, we determined who was legally responsible for Amy’s damages. Her ex-husband was responsible for stealing her money, but her divorce lawyer also bore some responsibility. By law, a 401(k) must immediately place a hold on all funds in an account when it receives a proposed QDRO. If the lawyer had promptly submitted a QDRO, the funds would have been frozen and Amy’s husband could not have stolen her money. The legal principle is known as a “but for causation.” We decided to pursue Amy’s ex-husband and her divorce attorney simultaneously. Though Amy could only recover her damages once, she was more likely to recover all of her damages if she had two sources to collect from. If one defendant could only pay some, or even none, of her damages, she could look to the other defendant for the sum to be made whole. The legal principle is known as “joint and several liability.”

Be Inspired

We filed a lawsuit against Amy’s ex-husband and had him served with citation.

We prepared but did not file a separate lawsuit against Amy’s divorce lawyer. Before filing, I requested a private meeting with the lawyer in her Dallas office. At that meeting, I explained the lawyer’s legal vulnerability and showed her the legal malpractice petition we were prepared to file. After further discussion, the attorney agreed to cooperate and negotiate her financial responsibility with us without the necessity of filing suit. We agreed to look to the ex-husband for satisfaction of Amy’s damages first.

Amy’s husband hired an attorney and responded to the lawsuit.

We began three-party negotiations between representatives for Amy (us), Amy’s ex-husband, and Amy’s former divorce lawyer.

The Results Amy received all of her $35,167 through settlement negotiations between the three parties. Amy also recovered all of her attorneys fees as part of the settlement. We were able to make our representation more affordable for Amy by using a hybrid hourly/contingency-fee model. She paid all costs and reduced attorneys fees in an advance retainer. She continued to deposit funds into her retainer account as the negotiations progressed. In the end, Amy recovered all of her attorneys fees and costs in addition to the $35,167. Our resolution of her problem did not cost Amy a penny.

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