Rohrbeck v. Rohrbeck

ALAN M. WILNER, Judge, Specially Assigned. This case turns on whether the Circuit Court for Montgomery County entered a judgment — a final, appealable judgment — on July 13, 1988. It has a broader import than that, however, and requires an examination of the nature and function of a device unknown to our courts before 1985 — the Qualified Domestic Relations Order (QDRO). The precise issue before us, and the answer to it, will become more clear if we begin with a discussion of this recent addition to our jurisprudence.

I. The QDRO In 1974, Congress passed ERISA — the Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829 ) — in order to provide better protection for beneficiaries of employee pension and welfare benefit plans abounding in the private workplace. ERISA imposed a number of requirements on these plans relating to reporting and disclosure, vesting, funding, discontinuance, and payment of benefits. These requirements were imposed through amendments to both the Federal labor code (Title 29 U.S.C.) and the Internal Revenue Code (Title 26 U.S.C.). Some of the new statutory language was added to only one or the other of those codes; some was added to both codes to ensure that employers would not receive the tax benefits accorded by “qualified” plans unless those plans met the requirements imposed principally as a matter of Federal labor policy.

One of the provisions added to both codes was an anti-alienation requirement — a “spendthrift” provision precluding plan participants from assigning or alienating their ³¹ benefits under pension plans subject to the Act. ERISA § 206(d)(1) added § 1056(d)(1) to Title 29 U.S.C., requiring that “[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated.” ERISA § 1021(c) added a similar provision to the Internal Revenue Code. To the definition of “qualified trusts,” it added the requirement that “[a] trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated.” 26 U.S.C. § 401 (a)(13). 1 ERISA § 514, which became part of the labor code ( 29 U.S.C. § 1144 ), and to which no counterpart was added to the Internal Revenue Code, provided, with exceptions not relevant here, that the basic requirements of ERISA (including the anti-alienation requirement) “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan [subject to the ERISA requirements].” The term “State law,” for purposes of § 514, includes “all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” ERISA § 514(c)(1); 29 U.S.C. § 1144 (c)(1) (emphasis added). The preemption provision of ERISA has been regarded by the Supreme Court as “deliberately expansive, and designed to ‘establish pension plan regulation as exclusively a federal concern.’ ” Pilot Life Ins.

Co. v. Dedeaux, 481 U.S. 41, 46 , 107 S.Ct. 1549 , 95 L.Ed.2d 39 (1987) (quoting in part from Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 , 101 S.Ct. 1895, 1906 , 68 L.Ed.2d 402 (1981)). See also Shaw v. ³² Delta Air Lines, Inc., 463 U.S. 85 , 103 S.Ct. 2890 , 77 L.Ed.2d 490 (1983). The combination of the anti-alienation provision in both codes and the preemption provision of ERISA § 514 eventually raised a question, apparently not anticipated by Congress, as to the validity of orders entered in State domestic relations proceedings requiring that pension benefits be paid to a person other than the plan beneficiary. The question arose in two principal contexts — attachments served on plan administrators designed to enforce previously entered orders for child or spousal support, and orders entered pursuant to State community property or equitable distribution laws actually transferring pension rights.

Although the courts and the Internal Revenue Service apparently had little problem in giving effect to the first kind of order, there was more uncertainty about the second. While considering what eventually became the Retirement Equity Act of 1984 (P.L. 98-397, 98 Stat. 1433 , hereinafter referred to as REA), however, Congress decided to clarify both aspects. The Congressional concern was clearly reflected in the various House and Senate Committee Reports on the REA. The House Ways and Means Committee Report noted the uncertainty caused by the anti-alienation and preemption provisions and stated, at 18: “Your committee believes that the spendthrift rules should be clarified by creating a limited exception that permits benefits under a qualified plan to be divided under certain circumstances.

In order to provide rational rules for plan administrators, your committee believes it is necessary to establish guidelines for determining whether the exception to the spendthrift rules applies^ In addition, your committee believes that conforming changes to the ERISA preemption provision are necessary to ensure that only those orders that are excepted from the spendthrift provisions are not preempted by ERISA.” ³³ The device created to achieve these ends is the QDRO. As further explained in both the House Ways and Means and Senate Finance Committee Reports: “The bill clarifies the spendthrift provisions of the Internal Revenue Code by providing new rules for the treatment of certain domestic relations orders. The bill creates an exception to the ERISA preemption provision with respect to these orders. The bill provides procedures to be followed by a plan administrator and an alternate payee (a child, spouse, or former spouse of a participant) with respect to domestic relations orders.

Under the bill, if a domestic relations order requires the distribution of all or a part of a participant’s benefits under a qualified plan to an alternate payee, then the creation, recognition, or assignment of the alternate payee’s right to the benefits is not considered an assignment or alienation of benefits under the plan if and only if the order is a qualified domestic relations order. Because rights created, recognized, or assigned by a qualified domestic relations order, and benefit payments pursuant to such an order, are specifically permitted under the bill, State law providing for these rights and payments under a qualified domestic relations order will continue to be exempt from Federal preemption under ERISA.” H.Rep. No. 655 at 18; S.Rep. No. 575 at 19, U.S.Code Cong. & Admin.News 1984, pp. 2547, 2565 (emphasis added). 2 ³⁴ Because the anti-alienation requirement was part of both the labor and the tax codes, Congress amended both codes to provide for this limited exception.

See REA § 104 (amending 29 U.S.C. § 1056 (d)); REA § 204 (amending 26 U.S.C. §§ 401 , 414). Both provisions begin with the statement that the anti-alienation requirement “shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that [it] shall not apply if the order is determined to be a qualified domestic■ relations order.” (Emphasis added.) The law then defines a “qualified domestic relations order” as a domestic relations order that meets certain requirements set forth in the statute. It must first be a “domestic relations order,” i.e., “any judgment, decree, or order (including approval of a property settlement agreement) which— ‘(i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a participant, and ‘(ii) is made pursuant to a State domestic relations law (including a community property law)____’ ” REA §§ 104, 204; 29 U.S.C. § 1056 (d)(3)(B)(ii); 26 U.S.C. § 414 (p)(l)(B). It must then meet three other requirements: (1) It must create or recognize the existence of an alternate payee’s right to, or assign to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, 29 U.S.C. § 1056 (d)(3)(B)(i); 26 U.S.C. § 414 (p)(l)(A); (2) It must clearly specify: ³⁵ “(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order, (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies, and (iv) each plan to which such order applies.” 29 U.S.C. § 1056 (d)(3)(C); 26 U.S.C. § 414 (p)(2); and (3) It: “(i) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan, (ii) does not require the plan to provide increased benefits (determined on the basis of actuarial value), and (iii) does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order.” 29 U.S.C. § 1056 (d)(3)(D); 26 U.S.C. § 414 (p)(3).

The law requires each plan to establish “reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.” 29 U.S.C. § 1056 (d)(3)(G)(ii); 26 U.S.C. § 414 (p)(6)(B). Upon receipt of a domestic relations order, the plan administrator must notify the participant and the alternate payee of the receipt of the order and the plan’s procedures for determining its qualified status. The administrator has “a reasonable period” of up to 18 months in which to determine that status and inform the parties of the decision. See 29 U.S.C. § 1056 (d)(3)(G)-(H); 26 U.S.C. § 414 (p)(6)-(7).

As is evident from this discussion, the QDRO has become an order of high significance in State domestic relations practice. An attempt to cause pension plan benefits pay ³⁶ able to one party to be paid to an alternate payee, whether through an attachment in aid of a support obligation or pursuant to the Marital Property Disposition Act (Md. Fam.Law Code Ann. § 8-205) can succeed only through the mechanism of a QDRO. See Fox Valley & Vicinity Const. Workers v. Brown, 879 F.2d 249, 252 (7th Cir.1989): “[E]RISA preempts any attempt to alienate or assign benefits by a domestic relations order if that order is not a QDRO.” See also Cummings by Techmeier v. Briggs & Stratton, 797 F.2d 383 (7th Cir.1986).

Absent such a qualified order, not only will the pension plan administrator refuse to implement the court’s decision, but, given the anti-alienation provisions extant in both the labor and tax codes, coupled with the preemption provision of ERISA § 514 ( 29 U.S.C. § 1144 ), there is at least a reasonable argument that a non-qualified order may be invalid even as between the parties. 3 II. This Case John and Joan Rohrbeck were married in 1972. They have one child, Douglas, who is now 14 years old. Mr. Rohrbeck has been employed for a number of years as an executive of the National Broadcasting Company, Inc. Through his employment, he participates in three employee-benefit plans — the RCA Retirement Plan, the RCA Income Savings Plan, and a deferred compensation plan.

The parties seem to agree that the Retirement Plan is a qualified pension plan subject to ERISA and that any effort to provide an alternate payee with respect to that Plan would require a QDRO. They agree also that at least one of the other two plans is subject to ERISA, although they disagree as to which one. Mrs. Rohrbeck claims that the Income Savings Plan is subject to ERISA and that the deferred compensation plan is not; at oral argument before us, Mr. Rohrbeck asserted the contrary. ³⁷ After a long and bitterly disputed course of litigation, the Circuit Court for Montgomery County, through Judge Weinstein, entered a Judgment of Absolute Divorce on June 13, 1988. That order granted Mrs. Rohrbeck the divorce grounded upon Mr. Rohrbeck’s adultery, awarded custody of Douglas to Mrs. Rohrbeck, and reserved for future determination by the court Mr. Rohrbeck’s visitation privileges and “all other issues that have been heretofore framed by the pleadings,” including a determination of the marital property pursuant to Md.Fam.Law Code Ann. § 8-203.

Those remaining issues were tried before Judge Bell, sitting by special designation, on July 11, 12, and 13, 1988. At the conclusion of that hearing, Judge Bell announced her decisions from the bench, informing the clerk, near the outset of her remarks: “The Clerk would — Madam Clerk, I am going to try and tell you to enter judgment when I get to these because this is going to be the final judgment in this case with the one exception, and that is to the extent there are quadras [QDRO’sJ I would like to have the order that you both have agreed to on my desk on Monday so that I can sign the order on the quadros. All right. I will try to clue you, Madam Clerk, when you need to enter a judgment.” (Emphasis added.) Judge Bell began by instructing the clerk to enter “a judgment for custody of the son to the wife with the visitation that was specified as part of the hearing.” She then proceeded to direct that Mr. Rohrbeck provide health insurance for Douglas and that the parties cooperate in fixing up the marital home so that it could be sold.

She declared which of the personal property was marital property and which of it was not, and, in that regard dealt specifically with the items “that are going to be subject to a quadro....” She valued Mr. Rohrbeck’s Income Savings Plan at $81,084; “the pension plan, $210,000, subject to a quadro; deferred compensation, $256,889, subject to a qua ³⁸ dro, and I will specify what they would be afterwards.” 4 Judge Bell then continued with her declaration and valuation of the marital property, arriving at an aggregate value of approximately $840,115. After considering what part of that property each party had and certain credits, she announced a monetary award to Mrs. Rohrbeck of $3,993. Moving then to the question of support, Judge Bell discussed the various statutory factors and eventually decided to award Mrs. Rohrbeck alimony in the amount of $2,600 a month and child support for Douglas in the amount of $2,500 a month. Following that, she directed that Mr. Rohrbeck contribute $25,000 toward Mrs. Rohrbeck’s counsel fees, to be paid from his share of the proceeds from the sale of the marital home.

In the midst of some further discussion concerning funds or accounts belonging to Douglas, counsel for Mrs. Rohrbeck interjected: “MR. GREENBLATT: Your Honor [said] that you wanted the quadro by Monday. I am unfortunately going to be away this weekend, and I am going to be in trial on Monday, Tuesday and Wednesday of next week. Would it be at all possible if we could submit the quadro, not the judgment — the judgment I will get to work on right away — -but the quadro until the end of next week?

MR. KRUGER: Certainly. I have no problem with that. THE COURT: Fine.” Realizing that she had not yet announced what, if any, portion of the three plans should be awarded to Mrs. Rohrbeck, Judge Bell then declared that Mrs. Rohrbeck would be entitled to (1) one-half of the $81,084 income savings plan, (2) “one-half of [the] pension times the ³⁹ [B]angs’ formula,” 5 and (3) “a [Bjangs’ formula times three-fourths of the deferred comp[ensation].” After a bit of clarifying discussion not relevant here, the hearing was concluded.

The docket entry for the day made by the clerk said: “JUDGMENT ENTERED AS TO CUSTODY, HEALTH INSURANCE, MARITAL AND PERSONAL PROPERTY, SAYINGS ACCOUNTS, ALIMONY, CHILD SUPPORT, MONETARY AWARD, PENSION PLANS AND ATTORNEYS FEES. ORDER TO BE SUBMITTED.” No written order reflecting or delineating Judge Bell’s oral pronouncements was ever presented to or signed by the court, and no further, more explicit docket entries regarding these matters appear. On August 26,1988, counsel for Mrs. Rohrbeck submitted three proposed QDRO’s to Judge Bell. On September 2, 1988, Judge Bell declined to sign the orders.

In a brief Opinion and Order, she explained: “Final Judgment was entered herein on July 13,1988 at the direction of the Court under Rule 2-601a in accordance with the oral opinion of the Court subject only to the stipulation by the Court that a qualified domestic relations Order to be presented by July 18, 1988 would be signed to permit the parties the benefit of such an Order. ⁴⁰ At the request of the Plaintiff, the time was extended to July 22, 1988. It appearing to the Court that because the proposed Order was not submitted to counsel for the Defendant for approval, nor to the Court until over 30 days after the entry of the Judgment, the Chancellor concludes that under Rule 2-601 she no longer has jurisdiction. Hence, the proposed Orders submitted by letter of August 26, 1988 be and the same hereby are denied on the jurisdictional basis.” On September 12, 1988, Mrs. Rohrbeck filed a motion pursuant to Md.Rule 2-534, asking the court to “[ajlter or [a]mend its September 2,1988 order, and enter the previously submitted Orders on the ground that the Court still has jurisdiction to do so.” She attributed the delay in submitting the proposed QDRO’s to a disagreement between counsel, apparently as to the content of the orders, but urged that, in any event, no final judgment had been entered