Affirmation of Third-Party Beneficiary Enforcement in Post-Divorce Pension Waivers

Introduction

Culwick v. Wood, decided by the United States Court of Appeals for the Second Circuit on May 27, 2025, addresses the enforceability of a waiver provision in a post-divorce property settlement agreement (PSA) concerning pension and annuity benefits. The key parties are Vivienne Culwick, as Administratrix of the Estate of Steven Eliot Wood (“the Estate”), and Andrae E. Wood (née Kipin), the decedent’s former spouse. After the decedent’s death in 2013, Andrae Wood claimed pension and annuity benefits that the PSA had purportedly stripped her of. The decedent’s father, named as contingent beneficiary, assigned his rights to the Estate and sued for breach of contract. The district court granted summary judgment to the Estate and awarded nearly $925,000 in damages. Wood appealed, contesting liability, third-party beneficiary status, interest and fees.

Summary of the Judgment

The Second Circuit affirmed the district court’s grant of summary judgment in favor of the Estate on the breach-of-contract claim.
The court held the PSA’s waiver clause unambiguous: Wood relinquished “any claims … to these benefits,” barring her from receiving pension or annuity proceeds.
The decedent’s father was deemed an intended third-party beneficiary, and his rights had validly been assigned to the Estate.
The court upheld the award of damages totaling $924,818.35 (principal, pre- and post-judgment interest, attorneys’ fees and costs).
Wood’s challenges to tolling of prejudgment interest and the reasonableness of attorneys’ fees were rejected.

Analysis

Precedents Cited

Kutzin v. Pirnie, 124 N.J. 500 (1991): Clarifies that clear and unambiguous contractual terms must be enforced as written.
Broadway Maintenance Corp. v. Rutgers, 90 N.J. 253 (1982): Defines the test for third-party beneficiary status—whether the contracting parties intended a third party to benefit.
Ross v. Lowitz, 222 N.J. 494 (2015): Emphasizes focus on contracting parties’ intent to benefit a non-party.
Northern Bergen Rex Transportation, Inc. v. Trailer Leasing Co., 158 N.J. 561 (1999): Explains equitable purposes of prejudgment interest and its sparing tolling.
Federal Rule of Appellate Procedure 32.1: Governs citation of summary orders in the Second Circuit.

Legal Reasoning

The court applied New Jersey contract law, since the PSA was governed by New Jersey choice-of-law principles. Under that framework:

Contract Interpretation – The waiver in Paragraph (D)(3) of the PSA (“any claims … to these benefits”) was plain, broad and unqualified. No extrinsic evidence was needed to confirm that Wood relinquished all survivor-beneficiary rights.
Third-Party Beneficiary – New Jersey law does not require the identity of the beneficiary to be known in advance; it only requires that the parties intend to benefit some third party. Because the decedent’s father stood to inherit the benefits once Wood waived her rights, he was an intended beneficiary. His assignment of rights to the Estate enabled enforcement.
Pre-Judgment Interest – Pursuant to Northern Bergen Rex, prejudgment interest on contract damages is discretionary and meant to fully compensate the wronged party. The court found no “exceptional circumstances” warranting tolling, as the litigation delays were routine and not manipulative.
Attorneys’ Fees – The PSA’s fee-shifting clause entitled the prevailing party to fees. Using the “lodestar” method (reasonable hours × reasonable rates), the court approved a $400/hour rate for lead counsel and applied a modest 10% across-the-board reduction for some excess time, finding the result reasonable given the case’s complexity and overall success.

Potential Impact

Culwick v. Wood reaffirmed and sharpened several points of contract law in a family-law context:

Divorce settlement waivers of future survivor-beneficiary rights will be strictly enforced when the language is unambiguous.
Contingent beneficiaries who stand to gain under post-divorce instruments can enforce waiver provisions as third-party beneficiaries, even if unnamed at the time of the agreement.
Courts will award full compensatory interest and fees where contractual fee-shifting clauses exist, limiting tolling to truly exceptional cases.

Family lawyers and estate planners must ensure that settlement agreements explicitly address beneficiary designations and waiver scope to avoid unintended litigation.

Complex Concepts Simplified

Summary Order: A non-precedential appellate decision that resolves a case without a full published opinion.
Third-Party Beneficiary: A non-signatory intended to benefit directly from a contract, with rights to enforce its terms.
Pre-Judgment Interest: Interest awarded from the time the claim arose until judgment, compensating for lost use of money.
Lodestar Method: The standard for calculating attorneys’ fees—multiplying reasonable hours by a reasonable hourly rate.
Probate Exception: A doctrine that federal courts generally will not intervene in the distribution of a decedent’s estate when state probate proceedings are ongoing.

Conclusion

Culwick v. Wood stands as an important affirmation that clear, all-encompassing waivers in divorce agreements will be enforced to the letter. It underscores that intended beneficiaries, even if unnamed at signing, can step into the shoes of contracting parties to enforce their rights. The decision also illustrates the careful balance courts strike when awarding prejudgment interest and attorneys’ fees—fully compensating the wronged party while guarding against abusive delay tactics. For practitioners, the key takeaway is to draft divorce and estate documents with precision, expressly addressing beneficiary designations, waivers and fee-shifting provisions to avoid costly disputes.