Partner Robert J. O’Regan recently won an important reversal from the U.S. Court of Appeals for the First Circuit in Cooper vs. D’Amore in a far-reaching case that answered what constitutes termination of an Individual Retirement Account (IRA). Burns & Levinson’s client, Alyssa D’Amore, was the beneficiary on an IRA account of her former husband when he died in 2012, but in 2014 his mother and brother (the Cooper family) filed suit in U.S. District Court claiming, among other things, that the IRA account had been terminated in 2011 based on a transfer form that Cooper had signed. In the February 2, 2018 decision, the First Circuit reversed a January 2017 summary judgment in favor of the Cooper family and instead ordered the District Court to enter summary judgment for D’Amore. The facts of the case were extremely complex. D’Amore and Cooper worked together in the financial services field before and during their marriage, and even after their amicable divorce in 2006. They had remained close despite the divorce. Cooper, who was a successful bond trader, named D’Amore as beneficiary of his IRA account with his employer, Mesirow Financial, in 2003 but he never revoked the beneficiary designation even after the divorce. He even continued to pay D’Amore alimony longer than he was required to do under their divorce agreement. In 2011, Cooper signed a transfer form to move the majority of his Mesirow IRA assets to an IRA at another investment firm. Not all of the assets could be transferred. Instead of directing that they be liquidated, Cooper directed his financial advisor at Mesirow to keep those assets in the Mesirow IRA account. After Cooper died in 2012, Cooper’s family sued, claiming the Mesirow IRA assets belonged to his estate and not D’Amore. The key issue in the case was whether D’Amore’s beneficiary designation was automatically terminated by a transfer form that Cooper signed with the new financial firm that did not require liquidation or transfer of all his Mesirow IRA assets. The Burns & Levinson team, led by O’Regan, argued that the form could not have terminated the account and emphasized the potentially devastating consequences that the trial court’s decision could have on all owners of retirement accounts. “The District Court ruled against our argument that because the IRA account itself remained open and held assets under the written account agreement, it could not have lost its protected status as an IRA account. The worst case scenario from the District Court’s decision was that a depositor could be deemed to lose all of the very important tax benefits from an IRA, and even have to pay income taxes and penalties on the balance in the account, based on a form to transfer assets to another retirement fund. There are many reasons why a complete transfer might not occur. Here, it was because Peter Cooper did not direct all of the assets to be moved. But there are many other reasons why the same standard form used by many financial institutions could result in the same, very bad consequences – because of a mistake on the form, an error in execution, illiquid assets that cannot be transferred, or a host of other problems,” said O’Regan. “Imagine the consequences of this. If a person rolls over assets from one account to another and all of the assets don’t transfer, which occurs, then the remaining assets would be subject to taxes and penalties because the loss of IRA status means the depositor would be deemed to have received a distribution,” added O’Regan. O’Regan noted that the problem could be especially devastating to retirees who depend on the tax benefits and regular distribution schedules planned from their retirement accounts and cannot afford to pay the taxes and penalties that could flow from a defect on a form or mistake with a transfer. This was the second ruling in favor of D’Amore by the First Circuit. In 2016, O’Regan prevailed on the Court of Appeals to uphold nearly $80,000 in sanctions against the Cooper family after their lawyer was caught withholding critical evidence. Mesirow is headquartered in Illinois, a fact the Cooper family used to argue vigorously that D’Amore’s beneficiary status terminated automatically under an Illinois trust statute that terminates the interest of one spouse in the other spouse’s trust upon divorce. However, a Delaware bank was custodian of the account as required by tax laws when the couple divorced, and under that written trust agreement Delaware law controlled. Under Delaware law, there was no automatic termination of trust interests upon divorce. This revelation by the Burns & Levinson team proved fatal to the Coopers’ case. The First Circuit’s decision in 2016 agreed with the District Court’s sanctions because the Cooper family’s attorney was in possession of the Delaware at trust agreement, which O’Regan had demanded in discovery along with answers to specific questions about terms of the trust agreement. When the District Court judge imposed the $80,000 sanctions, as Burns & Levinson had uncovered, the Coopers were “in possession of an authenticated copy of the Delaware Charter Trust document, while leading the defendant and the court to believe that such a document did not exist.” “We are very pleased that we could deliver this much deserved win to our client and bring clarity to the law governing the distribution and termination of retirement fund assets,” added O’Regan. “This was a hard fought case with many challenges, and it is gratifying that we were able to turn it around. We were confident that our client was in the right and that the law was on our side.”