RENDERED: DECEMBER 15, 2016
TO BE PUBLISHED

Supreme Court of Beniuckg

2015- SC- 000661- DG

KENNETH KIRILENKO n ` APPELLANT

ON REVIEW FROM COURT OF APPEALS
V. CASE NO. 2014-CA-OOO615-MR
BOYLE CIRCUIT COURT NO. lO-CI-OO518

CHERRYL KIRILENKO APPELLEE

OPINION OF THE COURT BY JUSTICE CUNNINGHAM

REVERSING AND REMANDING

Appellant, Kenneth Kirilenko (“Kenneth”), and Appellee, Cherryl Kirilenko
(“Cherryl”), were married in 1986. During the marriage, they resided in
Connecticut, where Kenneth was employed by the state government until July
1, 2001, when he retired and began to receive disability benefits from the
Connecticut State Employees Retirement System. Cherryl moved to Kentucky
`for employment reasons in 2000, and Kenneth followed soon after his
retirement and disability took effect. Kenneth and Cherryl separated in 2004.

Cherryl filed for a dissolution of marriage in Boyle Circuit Court in 2010.
The court entered a decree of dissolution on November 7 , 2012, in which the
parties stipulated that the monthly benefits which Kenneth received were from

the State of Connecticut disability retirement plan. By an amended decree of

dissolution entered on May 2, 2013, the court considered whether the plan
benefits were marital property. In order to resolve this issue, the court first
had to determine Whether to apply Connecticut or Kentucky law. Under
Connecticut law, a portion of these benefits may be considered marital. Mickey
v. Mickey, 974 A.2d 641 (Conn. 2009). Under Kentucky law, however,
disability benefits which replace future income are classified as non-marital
and are not subject to equitable distribution. Holman v. Holman, 84 S.W.3d
903, 908 (Ky. 2002).

The trial court determined that, because Kentucky was the domicile of
both parties at the time of dissolution, Kentucky law, rather than Connecticut
law, governed the classification and distribution of the disputed asset. On
appeal, a unanimous Court of Appeals reversed and instead applied Sections
258 and 259 of the Restatement (Second) of Conflict of Laws (1971). Those
provisions apply the “most significant relationship” test. The court concluded
4 that Connecticut has the most significant relationship to the asset and that the
characterization and distribution of those benefits should be determined under
Connecticut law.

In so holding, the court relied on the facts that Kenneth’s right to receive
the benefits at issue was contractual and based on a statutorily created
retirement plan, that his right to receive those rights accrued in Connecticut,
and that the benefits were payable pursuant to Connecticut law. Although
citing to Sections 258 and 259 of the Restatement, it appears that the court’s

reasoning reflected considerations articulated in Section 188 of the

2

Restatement, which governs conflict of law issues concerning contracts.
However, the Court of Appeals also noted that the “most significant
relationship” test may not be appropriate for all personal property and interests
acquired during a marriage. Having reviewed the record and the law, we

reverse the Court of Appeals and remand this case to the trial court for further

consideration.

Anal!sis

Since the issue here is a matter of law, our standard of review is de novo.
As previously discussed, the Court of Appeals relied on Sections 258 and 259
of Restatement (Second) Conflict of Laws (1971). Section 258 provides:

(1) The interest of a spouse in a movable acquired by the other
spouse during the marriage is determined by the local law of the
state which, with respect to the particular issue, has the most
significant relationship to the spouses and the movable under
the principles stated in § 6.

(2) In the absence of an effective choice of law by the spouses,
greater weight will usually be given to the state where the spouses
were domiciled at the time the movable was acquired than to any
other contact in determining the state of the applicable law.
(Emphasis added).

In addition, Section 259 provides:

A marital property interest in a chattel, or right embodied in a
document, which has been acquired by either or both of the
spouses, is not affected by the mere removal of the chattel or
document to a second state, whether or not this removal is
accompanied by a change of domicil to the other state on the part
of one or both of the spouses. The interest, however, may be
affected by dealings with the chattel or document in the second
state.

Kentucky follows the “most significant relationship” approach in tort and
contract cases. Schnuerle v. Insight Commc’ns Co., L.P., 376 S.W."3d 561, 566-
67 (Ky. 2012); Saleba v. Schrand, 300 S.W.3d 177, 182 n.2 (Ky. 2009).
However, this Court has not adopted such an approach in domestic cases_-and
neither have the majority of our sister states. Instead, Kentucky law provides
that, “[a]bsent an agreement to the contrary, in dissolution of marriage
proceedings the law of the marital domicile applies.” Fehr v. Fehr, 284 S.W.3d
149, 153 (Ky. App. 2008) (citing Rowley 1). Lampe, 331 S.W.2d 887 (Ky. 1960);
In Rou)ley and Fehr, the plaintiffs resided in Kentucky_the forum state for the
dissolution proceedings. Of course, the Kentucky Circuit Court only has
jurisdiction if at least one party has resided in Kentucky for at least 180 days
immediately prior to filing the dissolution petition, or as otherwise permitted
under KRS 403.140.

In fact, “[t]he consistent practice in modern property division cases is to
classify and divide all property under the law of forum.” 1 Equit. Distrib. of
Property, 3d § 3: 13 (Choice of Law) (2015). Other than a few exceptions, “there
is essentially no significant body of nationwide case law dividing property
under the law of another jurisdiction.” Id. The logic of this majority rule is
clear:

To begin with, application of any other rule would pose immense
practical problems. Equitable distribution law is by any standard
complex and difficult to apply. Judges in many states have had
substantial difficulty construing their own law correctly, let alone
understanding the law of other jurisdictions[;]

Beyond its substantial administrative burden, application of
foreign law to individual assets acquired out of state would also
lead to unjust results. Property division systems cannot be viewed
in isolation; they are an integral part of each state's overall
domestic law, and there are often complex trade-offs between
property division and other issues[;] [and]

[T]he Restatement was adopted in 1971, at a time when equitable
distribution did not yet exist. Id.

Even among states adopting the Restatement approach, the forum state is
usually determined to have the most significant relationship to_ the case. Id.

We see no reason to depart from the majority rule that the classification
and division of all property in dissolution cases is governed by the law of
forum-i.e'. Kentucky. However, our decision here does not implicate cases
where title and third party rights are at issue,

Lastly, we must address some additional concerns raised by the Court of
Appeals. In its opinion and order, the court raises the following issues:

The record does not clearly establish the extent, nature and terms

of Kenneth’s disability retirement benefits. There is no evidence

whether the benefits include a retirement component, or whether

they are subject to conversion to retirement benefits at some point

in the future. Likewise, the record does not clearly show that the []

plan administration would honor a Qualified Domestic Relations

Order (QDRO) purporting to divide the benefits. Since these

involve questions of fact, the parties must address these issues to

the trial court. `
In support, the Court of Appeals cites Bailey v. Bailey, 399 S.W.3d 7 97, 802-03
(Ky. 2013), which held that disability benefits subsequently converted to

regular pension benefits are divisible as marital property at the point of

5

conversion. Having reviewed the record and the trial court’s order, we agree
with the Court of Appeals on these remaining issues. Therefore, we remand
this case to the trial court to address these additional concerns.
Conclusion

For the foregoing reasons, we hereby reverse the Court of Appeals and
remand this case to the Boyle Circuit Court.

All sitting. Hughes, Keller, and Wright, JJ., concur. Venters, J., concurs
in result only by separate opinion in which Minton, C.J., and Noble, J., join.

VENTERS, J., CONURRING IN RESULT ONLY: I concur in result only
With Majority. Although I agree that this case must be remanded to the trial
court for application of the proper standard, I believe that instead of applying
the rule of the marital domicile as the Majority directs, we should apply the
“most significant relationship test” articulated by Sections 258 and 259 of the
Restatement (Second) of Conflict of Laws (1971).

Minton, C.J., and Noble, J., join.

COUNSEL FOR APPELLANT:

Ephraim Woods Helton
HELTON, ERWIN &, WALTER
COUNSEL FOR AP_PELLEE:
Theodore H. Lavit

Cameron Cole Griffith
THEODORE H. LAVIT & ASSOCIATES, PSC

