IN RE: DONALD WAYNE HARSHAW
- Case Type:
- Case Status:
- 21-1423 (7th Circuit, Feb 23,2021) Published
- The U.S. Court of Appeals for the Seventh Circuit (Circuit) affirmed the ruling of the district court deeming an arbitrator's binding award of half the increase in value of the retirement savings of Donald Harshaw (DH), a debtor, during years of unmarried cohabitation with Elizabeth Harshaw (EH), the ex-spouse who sued him in state court for her contributions to the relationship in this period, to be a dischargeable money judgment, thus favoring DH, and not a non-dischargeable interest in specific property, as EH had argued and the bankruptcy court had ruled.
- Procedural context:
- Having lost his appeal of an arbitrator's award of $435,000 to his former spouse based on her contribution to the couple's post-divorce relationship, which had lasted sixteen years, DH filed for relief in the U.S. Bankruptcy Court for the Northern District of Indiana (BC). Naturally, the parties disputed over whether the arbitrator had awarded EH a money judgment or an interest in specific property. DH asserted that it was the former and therefore subject to discharge in bankruptcy and further claimed an exemption from attachment for his retirement account. In response, EH filed an adversary complaint seeking a declaration from the BC that she had been awarded a non-dischargeable property interest.
The BC ruled in EH's favor. As the BC read the award, it specified the exact source of the funds, the equal distribution of DH's pension fund and 401(k) account, and ordering DH to transfer a portion of the property to EH through an assignment, Qualified Domestic Relations Order, or other mechanism agreeable to the two parties. Crucially, these very factors had also been present in divorce cases finding that the plaintiff‐spouses had been awarded property interests rather than dischargeable money judgments.
DH appealed to the U.S. District Court for the Northern District of Indiana (DC), which reversed. As the DC now reasoned, the award said that EH was awarded “the sum of Four Hundred Thirty‐Five Thousand Dollars & 00/100 ($435,000.00), plus post‐judgment interest.” This is the language of a money judgment, and post‐judgment interest is available under Indiana law only for judgments for money. Additional language about how the arbitration award might be satisfied, the DC added, did not change its nature, from a money judgment into a property award.
EH timely appealed, these proceeding turning entirely on "the familiar difference between a judgment for money and one that awards an interest in specific property."
- EH and DH had a combustible--and legally-fraught--relationship long before DH raced to the BC. Married for 25 years, they had divorced in 1996. Reconciliation "shortly followed," but the couple permanently separated in 2013. As they had not been married during this second period, EH sued DH in state court under equitable theories of express or implied contract, unjust enrichment, and quantum meruit. All these claims were based on her contribution to the relationship during this sixteen-year reconciliation period, during which EH had quit her job to take care of the home and to take care of DH's nieces and grandson, who have special needs, as well as DH himself, who suffered from various health issues. Ultimately, the former couple agreed to submit their dispute to a binding arbitration. Relying on Indiana law, the arbitrator found DH to be liable to EH. As for remedy, The award said that Anne was awarded the sum of $435,000, but also included language referring to DH's retirement savings accounts and a Qualified Domestic Relations Order. The Lake County Superior Court entered judgment on the arbitration award; DH appealed, and the Indiana Court of Appeals affirmed. Thereafter, DH commenced bankruptcy proceedings.
- David F. Hamilton; Diane S. Sykes; and Michael S. Kanne
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!