Brown et al. v. Continental Airlines Highlights Importance of Retirement Funds in San Diego Divorce

A federal court has ruled against Continental Airlines in a fight over whether it could sue pilots it claimed faked their divorces in order to tap into retirement funds.

The ruling in Brown et al. v. Continental Airlines was upheld by the U.S. Court of Appeals for the Fifth Circuit. The Associated Press reports Continental had accused nine pilots of sham divorces so their ex-spouses could tap their lump sum pensions while they still worked for the airlines. The pilots then remarried their former spouses. The court ruled that employers cannot decide whether a divorce is genuine. The original lawsuit by Continental had been dismissed.
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San Diego divorce attorneys understand the importance of determining how retirement funds are divided in a divorce. For many couples, retirement funds represent their biggest asset. Failure to properly secure your share of retirement funds during property division can impact the rest of your life. Too many spouses will not have time to rebuild adequate funds to maintain their standard-of-living in retirement.

An attorney for the pilots called the decision “a victory for employee privacy rights — nobody wants their employer looking into their divorce.” The pilots were fired or resigned and are now suing Continental in federal court in Houston, claiming wrongful termination and interfering with their pension rights.

The airline claimed it paid out as much as $11 million in distributions that the pilots had assigned to their spouses. The airline claims that the pilots — seven men and two women — got divorced in states that assigned nearly all of the retirement benefits to their former spouses, who then demanded payment.

Continental is now owned by United Continental Holdings Inc. The airline claimed the pilots were worried the airline might turn over pension obligations to the government — as many airlines have done in the past decade — leaving them with reduced benefits.

The ruling noted a pension plan might be able to recover payment if a court ruled a divorce was a sham — but that did not happen in this case.

There are other important division-of-property considerations aside from retirement funds. In many cases, the marital home is a large asset, although that is an issue that has become more complex since the economic downturn. Obtaining a valuation of marital home is also critical. Is a home valued at the purchase price or the current market value? The former may leave a spouse with a paper asset while the latter provides only a liability in cases where the marital home is underwater.

Year-end work bonuses and taxes are two other often overlooked issues. Inheritance and the value of a college degree earned during the marriage may also warrant your San Diego divorce attorney’s careful attention.

San Diego Family Law Attorney Nancy J. Bickford is the only board-certified divorce lawyer in San Diego who also holds an MBA and a CPA. Don’t settle for less when determining your rights during a divorce or child custody case. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

Additional Resources
Pilots Win “Sham Divorce” Case Against Continental, by David Koenig, AP Airlines Writer.