MSC: Consent Divorce Judgment Preempted By Federal Law

A consent judgment of divorce under which the parties agreed that the defendant would pay the plaintiff one-half of his military retirement benefits is preempted by federal law and is unenforceable, the Michigan Supreme Court has ruled.

In Foster v Foster (Docket No. 157705), the parties agreed that if the defendant waived a portion of his military retirement benefits in order to receive military disability benefits, he would continue to pay the plaintiff an amount equal to what she would have received had the defendant not elected to receive disability benefits. The defendant chose to increase his disability benefits when he applied for Combat-Related Special Compensation (CRSC), a form of military disability benefits, pursuant to 10 USC 1413a. He started receiving CRSC shortly after he and the plaintiff divorced. As a result, the defendant’s retirement benefits decreased, which in turn decreased the share of benefits payable to the plaintiff.

When the defendant did not reimburse the plaintiff for the reduced payment, the plaintiff filed this action in Dickinson County Circuit Court, asking that the consent judgment be enforced. The trial court and the Michigan Court of Appeals both enforced the consent judgment and required the defendant to reimburse the plaintiff for the reduction in her interest in his retirement benefits.

The Michigan Supreme Court reversed and remanded.

“We conclude that federal law preempts state law such that the consent judgment is unenforceable to the extent that it required defendant to reimburse plaintiff for the reduction in the amount payable to her due to his election to receive CRSC,” Justice Brian K. Zahra wrote for the Court.

In particular, Justice Zahra noted that the Court of Appeals did not discuss the effect of federal preemption on the trial court’s subject-matter jurisdiction or the defendant’s ability to challenge the terms of the consent judgment outside of direct appeal. “Because these questions remain important, we vacate that portion of the Court of Appeals’ opinion agreeing with plaintiff that defendant was engaging in an improper collateral attack and reverse the balance of the Court of Appeals’ opinion in this case.”

Further, “we overrule the Court of Appeals’ opinion in Megee v Carmine, [290 Mich App 551 (2010)], which held that a veteran is obligated to compensate a former spouse in an amount equal to the share of retirement pay that the nonveteran spouse would have received, pursuant to a divorce judgment, had the veteran not elected to waive military retirement pay in favor of CRSC,” Justice Zahra wrote.

Justice David F. Viviano concurred “fully” in the decision and said he wrote a separate opinion “to more fully address questions that will arise on remand,” which he asserted were inadequately developed in the parties’ briefs. According to Justice Viviano, not all federal preemption deprives state courts of subject-matter jurisdiction and, on remand, he said the Court of Appeals should address whether the particular type of preemption at issue in this case is jurisdictional.

Procedural Background

The trial court proceedings resulted in an order finding the defendant in contempt for not paying the plaintiff in compliance with the consent judgment. The trial court ordered the defendant to pay the plaintiff $1,000 per month, with $812 credited as current payments due under the consent judgment and $188 to be credited against the arrearage of $34,398 until the arrearage was paid in full. The defendant had been paying the plaintiff in monthly installments since the contempt order was entered. The payments were guaranteed by an “appearance bond” in the amount of $9,500 and secured with a lien on his mother’s home.

The defendant appealed, arguing the trial court erred by not finding the plaintiff’s attempts to enforce the consent judgment were preempted by federal law. The Court of Appeals ruled that the matter was not preempted and affirmed the trial court’s contempt order.

The defendant appealed to the Michigan Supreme Court. In lieu of granting leave to appeal, the Supreme Court vacated the judgment of the Court of Appeals and remanded the case for reconsideration in light of the U.S. Supreme Court’s ruling in Howell v Howell, 581 US ___ (2017).

On remand, the Court of Appeals again affirmed the trial court’s contempt order, concluding that Howell did not overrule its decision in Megee. The Court of Appeals reasoned that Howell was distinguishable because it involved general service-connected disability benefits and because the Howell opinion rested squarely on the language in former 10 USC 1408(a)(4)(B), which provided that “disposable retired pay” means a member’s total monthly retired pay less amounts that “are deducted from the retired pay … as a result of … a waiver of retired pay required by law in order to receive compensation under title 5 or title 38[.]”

The Court of Appeals also said the Megee decision distinguished CRSC from general service-connected disability pay found in Title 38 on the basis of CRSC’s status as Title 10 compensation. Given that CRSC was an issue in the case and Howell did not concern or analyze a waiver of retirement pay in favor of CRSC, the Court of Appeals held that Megee was on point and remained binding precedent.

The defendant again appealed. This time, the Michigan Supreme Court granted his application for leave to consider the federal preemption question, the continuing viability of Megee and the propriety of the contempt order.

Federal Preemption

“To the extent that Howell was not concerned with CRSC specifically, the Supreme Court has signaled that Howell is nevertheless applicable to such benefits,” Justice Zahra wrote, citing Merrill v Merrill, 238 Ariz 467 (2015), and In re Marriage of Cassinelli, 4 CA5th 1285 (2018).

“In both cases, the Supreme Court of the United States granted certiorari and vacated the judgments of the state courts before remanding for reconsideration in light of Howell,” Justice Zahra said. “That is, on the basis of its decision in Howell, the Supreme Court vacated state court decisions ruling that veterans could be forced to reimburse former nonveteran spouses in divorce proceedings if they had waived retirement pay in order to receive CRSC under 10 USC 1413a. Such benefits are of the very same kind at issue in this case.”

Therefore, “we conclude that Howell and Mansell [v Mansell, 490 US 581 (1989)] preclude any provision of a divorce judgment requiring that a nonveteran former spouse receive payments in an amount equal to what he or she would have received if the veteran former spouse had not waived his or her retirement pay in order to obtain CRSC,” Justice Zahra wrote. “The Howell Court broadly stated that, in the wake of Mansell, ‘federal law completely preempts the States from treating waived military retirement pay as divisible community property.’ A ‘reimbursement’ or ‘indemnification’ to compensate for the reduction of payments resulting from the nonveteran spouse’s share of partially waived military retirement pay is effectively no different than a direct division of the disability benefits themselves.”

“With the preceding analysis in mind,” Justice Zahra continued, “it is appropriate to conclude that Howell overruled the Michigan Court of Appeals’ judgment in Megee v Carmine.”

According to Justice Zahra, regardless of the voluntary nature of the waiver or the temporal relation of the waiver to the consent judgment, “the Megee panel ultimately held that the portion of retirement pay that the plaintiff waived to receive CRSC was compensable to the defendant in the division of assets pursuant to divorce proceedings. We therefore overrule Megee.”

Collateral Attack?

The plaintiff argued the defendant’s appeal constituted an impermissible collateral attack on the consent judgment.

“The panel below agreed with her in this regard (before ruling on the merits of the parties’ contentions), but did so in a conclusory fashion, stating that ‘defendant is engaging in an improper collateral attack on the divorce judgment’ and citing Kosch v Kosch, a 1999 decision of the Court of Appeals,” Justice Zahra noted.

However, Kosch “merely held that the defendant’s failure in that case to file an appeal from the original judgment of divorce categorically precluded a collateral attack on the merits of that decision,” Justice Zahra explained. “This is ordinarily true except in cases concerning jurisdictional error. The Kosch opinion did not discuss this particular nuance. With this in mind, we leave it to the Court of Appeals on remand to address the effect of our holdings today on the trial court’s subject-matter jurisdiction to enter the consent judgment of divorce containing the offset provision at issue and to address defendant’s ability to challenge the consent judgment on collateral review.”

In conclusion, the Supreme Court said the trial court was preempted under federal law from including in the consent judgment the offset provision on which the plaintiff relied. “The broad language of Howell precludes a provision requiring that plaintiff receive reimbursement or indemnification payments to compensate for reductions in defendant’s military retirement pay resulting from his election to receive any disability benefits, including CRSC as provided for under Title 10,” Justice Zahra wrote.

“Nevertheless,” Justice Zahra observed, “we express no opinion on the effect our holdings have on defendant’s ability to challenge, on collateral review, the consent judgment. The Court of Appeals did not substantively review this point or the effect of federal preemption on the trial court’s subject-matter jurisdiction. We therefore vacate that portion of the … opinion and judgment of the Court of Appeals concluding that defendant’s contentions amounted to an improper collateral attack on the consent judgment, and we reverse the balance of the panel’s opinion. We remand the case to the Court of Appeals so that the panel may address the effect of our holdings on defendant’s ability to challenge the terms of the consent judgment.”