District Court of Kansas

District Court of Kansas.

Johnson County

In the Matter of the Marriage of: Thomas F. LEE, Petitioner,

v.

Jean J. LEE, Respondent.

No. 07CV5539.

June 3, 2010.

Order on Issuance of Qdro After the Death of a Party

David W. Hauber, District Court Judge.

After receipt of a proposed Qualified Domestic Relations Order (“QDRO”)[FN1] submitted by respondent Jean J. Lee's counsel, the Court ordered that appropriate motions be filed in this matter and that all necessary parties be noticed for a hearing. The proposed QDRO stems from a July 18, 2007, emergency divorce decree, following which, petitioner Thomas F. Lee died on January 8, 2008. The agreed decree referenced that respondent would receive survivor benefits from “any pension” that petitioner possessed. Consequently, respondent filed a motion for issuance of a QDRO to reinstate benefits terminated by the John Deere Pension Plan for Wage Employees pension plan in February of 2010, and a motion to substitute petitioner's son as a party representative.

FN1. A QDRO, in order to qualify as such under ERISA, requires a divorce decree to “clearly specif[y]” the name and last known mailing address of the participant and the name and mailing address of each alternate payee covered by the order; 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; the number of payments or period to which the order applies; and each plan to which such order applies. 29 U.S.C. § 1056(d)(3)(C). A domestic relations order (“DRO”) cannot qualify as a QDRO if it requires a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan; requires the plan to provide increased benefits; or requires the payment of benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO. § 1056(d)(3)(D). A plan is required to establish written procedures for determining whether a DRO is a QDRO. § 1056(d)(3)(G)(ii).

FACTUAL BACKGROUND

The attorneys for Ms. Lee submitted to Court a proposed QDRO, without a motion, approved only by respondent's counsel, who is in the same law firm as petitioner's counsel, who indicated that she was not aware of the submission of the proposed order. However, at the hearing of this matter on June 3, 2010, counsel for both parties indicated that this emergency divorce was a “friendly divorce” compelled by the need to satisfy Medicaid eligibility. Nonetheless, the Court noted the proposed QDRO that was submitted was not executed by both counsel, and indicated that the petitioner was deceased. As a result, the Court ordered respondent to file any appropriate motions, including the potential substitution of an estate representative upon suggestion of death.

Following communication with counsel, the Court conducted a hearing at which it established that there are no competing claimants to the pension survivor benefits and that the plan administrator apparently decided, after allowing survivor benefits payments for over two years to require the issuance of a QDRO after terminating benefit payments in February of 2010.

This case represents a close call for counsel and a teaching moment as to why the issuance of QDROs should occur promptly and be spelled out in the decree, a settlement agreement incorporated in the decree or a contemporaneous QDRO to avoid catastrophes for counsel and clients years later. For purposes of outlining some of the issues that may occur and which are suggested by the matter at bar, the Court has endeavored to set out the potential minefields represented by those who seek QDROs after execution of a final decree.

In this case, the facts show that the final divorce decree was filed on July 18, 2007. Further, the proposed QDRO recites that Mr. Lee died on January 8, 2008, raising a subject matter jurisdiction issue should the QDRO seek to obtain relief not spelled out in the final decree, particularly because a divorce action either abates by the death of a party before finality or cannot fix a QDRO issued afterward that is significantly different than the term of the decree, as will be discussed below.

Ms. Lee recites in her brief that at the time of the parties' marriage, Mr. Lee was retired and that he had executed an election of a survivor benefit designation after his retirement that named Ms. Lee as his beneficiary. Ex. B to Respondent's Brief. That election stated that Mr. Lee's former spouse had died. According to respondent, the pension plan paid benefits to Ms. Lee as Mr. Lee's designated recipient of survivor benefits pursuant to an executed election form. However, those payments were terminated in February of 2010, respondent says, because the plan administrator decided that it needed a QDRO. Ms. Lee filed an appeal of that decision but was given until June 7 to provide the plan with a pre-approved QDRO form from the plan administrator.

It is also clear that Mr. Lee's son and executor, who appeared at the hearing and submitted an affidavit urging the Court to approve the QDRO, is aligned with the continuation of benefits. However, he is not an estate representative and has no standing in this matter and his hearsay statements cannot bolster the decree's language.[FN2] For this reason, the Court denies the motion to substitute parties.

FN2. This, potentially, in a true adversary case, would raise a host of other issues as to whether the substitution of parties was done within a reasonable period of time, as required by K.S.A. 60-225, which allows counsel to continue in the matter until such substitution is made. Additionally, the death of an ex-spouse raises dormant judgment issues. See K.S.A. 60-2403 and 60-2404 (addressing support enforcement proceedings).

The motion to approve the QDRO, however, requires the Court to question its own subject matter jurisdiction, particularly as to issuing orders almost three years after a final decree when the party conferring survivor benefits has died. The decree recited as an emergency Mr. Lee's “health and long-term care needs,” ¶ 2 of Decree, and the Court learned at the hearing that he had been brought to Kansas recently before his divorce to a nursing home facility from out-of-state. The decree recites that when the parties were married, there was an antenuptial agreement dated October 1, 1998, [the parties were married October 3, 1998], that provided that property should be divided in a manner that gave to Ms. Lee “Survivor Benefits of any pension of Thomas.” ¶ 7 of Decree.[FN3] The Court's own examination of the antenuptial agreement mentions no pension benefits. Fortunately for respondent, Mr. Lee executed a designated election form for such survivor benefits and the agreed decree is also evidence of a meeting of the minds as to the same.

FN3. In Hill v. AT&T Corp., 125 F.3d 646, 648 (8th Cir. 1997), the Eighth Circuit noted, in reversing the district court's summary judgment order in favor of a former husband, still named a beneficiary under his deceased wife's employee savings plan:

The issue of whether and how a divorce decree may divest a person of beneficiary rights is not explicitly considered in ERISA and thus is a question of federal common law.FN4 See Mohamed v. Kerr, 53 F.3d 911, 913 (8th Cir.), cert. denied, 116 S. Ct. 185 (1995). In the Eighth Circuit, as regards ERISA-governed pension plans, life insurance, and profit sharing plans, it is the law that a former spouse may be divested of a beneficiary interest, notwithstanding a written beneficiary designation naming the former spouse, if the former spouse was designated before the dissolution of marriage and a property settlement agreed to pursuant to the dissolution operates as a waiver of beneficiary rights. See National Auto. Dealers & Assocs. Retirement Trust v. Arbeitman, 89 F.3d 496, 500 (8th Cir.1996); Mohamed, 53 F.3d at 914; Lyman Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989). The language of any such provision in a dissolution decree, while not required to include the term “beneficiary,” nevertheless must be sufficiently specific to convey the intent of the parties to divest one or the other, or both, of a beneficiary interest.

The Court has not been provided with the language of the plan or any cogent explanation as to why the plan administrator waited so long to raise objections as to the lack of a QDRO before terminating benefits, unless the event of divorce was unknown to the plan until recently. However, this case points up the very reason that counsel must be mindful of obtaining QDROs at the time of the decree and certainly before the death of a party..

DISCUSSION

There are two distinct dilemmas posed by the issuance of a QDRO in this case. The first is whether it seeks to add something that is not in the final decree and the second is the impact of death of the petitioner and plan participant before issuance of such a QDRO. Both are red flags. It is obvious that the instant divorce decree does not come close to meeting the specificity requirements of QDRO. See Footnote 1, supra. The respondent's motion also fails to provide the Court with any authority for issuance of a QDRO under these circumstances, requiring the Court to do extensive research into this matter.

If the relief sought is to modify a final judgment, then the only obvious means to do so is K.S.A. 60-260(b). See In re Marriage of Boldridge, 29 Kan. App. 2d 581,582,29 P.3d 454 (2001) (noting motion to reopen division of property assumed to be a reconsideration of issues from a final judgment). Respondent does not cite this statute but maintains only that she seeks a QDRO that expresses the intent of the decree.

I. WHETHER THE RELIEF SOUGHT IMPLICATES RELIEF FROM A FINAL JUDGMENT.

Under K.S.A. 60-260, a final judgment can be set aside or modified because of (1) mistake, inadvertence surprise or excusable neglect; (2) newly discovered evidence; (3) fraud, (4) a void judgment; (5) a judgment that has been satisfied, etc., or (6) the catchall “any other reason justifying relief.” The first three grounds require they be filed within a year of the judgment. The remaining provisions require filing within “a reasonable time.” Id. at 583. In Boldridge, the court held that the trial court had no jurisdiction to modify the divorce decree to allow an award of a lawsuit proceeds to the ex-wife when almost four years had passed. Id. at 584.

Here, however, the motion begs the issue as to whether a modification is sought. In one sense, the detailed QDRO required is adding to the decree information that is not contained in the same and the reason a court cannot modify a final decree to divide property is that it would be acting outside of its jurisdiction, for which there is no equitable discretion. In Gilchrist v. Gilchrist, 2004 WL 1716204, Case No. 91,029 (Kan. Ct. App. July 30, 2004), the court reversed action to set aside a journal entry entered pursuant to K.S.A. 60-260(b)(5) and (6). There, Kathleen and her former husband, Adrian, agreed in the decree to have Adrian relinquish his marital share of their house to pay for Kathleen's van in lieu of child support. The parties divorced in 1998. Kathleen remarried in 1999, gave birth a month later, and then died two days later. Adrian's children returned to live with him and he sought modification of the decree on the ground that it would be inequitable for him to rear three children after giving up equity in a house that was intended to pay for his children's future support. Id. at * 1. Kathleen's widower and estate administrator appealed the district court's determination to impose a judgment against the estate for the home equity.

The court of appeals court reversed, holding no jurisdiction existed to modify the decree. 2006WL 1716204 *1-*2 (citing Wear v. Mizell, 263 Kan. 175, 180, 946 P.2d 1363 (1997)). It further noted that K.S.A. 60-260(b) cannot be used in this fashion because a divorce action is a personal action that abates upon the death of a spouse Id. at *3 (citing Wear, 263 Kan. at 180). Of further significance in Gilchrist was the court's determination that the estate was never a proper party in the action. Id.

In Wear, the court held that the wife, Arilla, had died before any divorce decree was entered which precluded any ownership interest by her husband in the proceeds of a life insurance policy after Arilla had changed him as beneficiary during the pendency of the divorce. 263 Kan. at 179-80.

The difficulty in this case is that respondent cites virtually no legal authority to support issuance of the QDRO other than K.S.A. 60-1802, which provides: “No action pending in any court shall abate by the death of either or both the parties thereto, except an action for libel, slander, malicious prosecution or nuisance.” Respondent argues that because a divorce is not one of the types that is subject to abatement in 60-1802 due to the death of either party, the terms of the decree should be enforced. Brief at 2. This was the dissent in Matter of Marriage of Wilson, 13 Kan. App.2d 291, 294-295, 768 P.2d 835, 838, aff'd, 245 Kan. 178, 777 P.2d 773 (1989), where the majority affirmed setting aside a divorce judgment decree that was docketed before the husband's death:

Appellant argues K.S.A. 60-1802 prevents an action for divorce from abating after the death of one of the parties. This argument ignores the survival of claims statute, K.S.A. 60-1801. In Gross v. VanLerberg, 231 Kan. 401,405, 646 P.2d 471 (1982), the Supreme Court stated that “whether a particular cause of action survives the death of a party is to be determined by K.S.A. 60-1801. K.S.A. 60-1802 simply provides the procedure for the continuation of an action by substitution of parties in cases where the cause of action survives the death of a party.”

Pursuant to K.S.A. 60-1801, it must be determined whether at common law a divorce action survived the death of one of the parties. In both Adamson v. Snider, 131 Kan. 284,291 P. 744 (1930), and Craig v. Craig, 110 Kan. 13, 202 P. 594 (1921), the Kansas Supreme Court stated that, where the only issue is the marital status of the parties, an action for divorce does not survive the death of one of the parties.

(Emphasis added.) The supreme court affirmed the court of appeals in Wilson and expressly rejected the argument raised here, which would tend to suggest that a division of property is divisible from the marital status of the parties. Id. at 181. Recently, the supreme court has reaffirmed the view that 60-1802 must be considered with reference to 60-1801. Valadez v. Emmis Communications, - Kan. -,229 P.3d 389,396 (2010) (citing Gross v. VanLerberg, 231 Kan. 401,405,646 P.2d 471 (1982)).

Nowhere in K.S.A. 60-1801 is a divorce action listed as among those which is not subject to abatement.

The Court finds, however, that the question which should be framed is not whether a divorce action survives, because it is not subject to attack as a final order, but whether the judgment survives and is enforceable after the death of a party. In this respect, however, the judgment is not being executed against a party, rather, it is being provided to a third party in format typically accepted by the same in order to effectuate the judgment.

The question remains whether any Court, after a divorce decree is finalized and a party dies, can issue supplemental orders to effect the an intent of the final decree that does not meet the standards of a QDRO,[FN4] as opposed to creating a garnishment device to give effect to other aspects of the final decree. See Baird v. Baird, 843 S.W.2d 388 (Mo. Ct. App. 1992) (holding that QDRO could be used to enforce a delinquent maintenance and child support obligation in divorce decree when husband had been awarded retirement account in decree).

FN4. Other courts have viewed QDROs as an enforcement mechanism for collecting a judgment which does not interfere with ERISA:

Since ERISA does not provide an enforcement mechanism for collecting judgments, state law methods for collecting money generally remain undisturbed by ERISA; otherwise there would be no way to enforce a judgment won against an ERISA plan. Mackey v. Lanier Collection Agency, 486 U.S. 825, 833-34, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988). We find the Hogle QDRO, like those approved in the Baird and Bruns decisions, to be an appropriate mechanism for enforcement of Shirley's support arrearage judgment, and we affirm the trial court's entry of a QDRO for that purpose.

Hogle v. Hogle, 732 N.E.2d 1278, 1284 (Ind. Ct. App. 2000).

II. THE DETERMINATION OF FEDERAL LAW IN ISSUANCE OF A QDRO.

The existence and scope of a QDRO is a creature of federal law, containing many potentially dangerous areas of professional liability for the unwary practitioner, a point our courts have noted:

The federal statutes as they apply to state divorce practice and the adoption of a QDRO are extremely complex, detailed, and difficult to reconcile. A valid QDRO must meet the comprehensive requirements of at least three federal acts, as amended: the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, and the Retirement Equity Act of 1984.

In the Matter of the Marriage of Cray, 254 Kan. 376, 390, 867 P.2d 291,301 (1994). In Jordan v. Jordan, 147 S.W.3d 255, 260 (Tenn. Ct. App. 2004), the court observed that there is no time limitation for the issuance of a QDRO a deliberate omission by Congress. Id. (citing 29 U.S.C. § 1056(d)(3)(B)(ii)(I) which only defines a QDRO as a judgment, decree or order which relates to marital property). Jordan cited our own court of appeals decision in Cray, 18 Kan. App. 2d 15, 20-21, 846 P.2d 444 (1993) (reversed on other grounds), which, in turn, commented on the interplay between the power of a trial court to issue a decree a dividing a pension plan, and the role of a plan administrator in determining whether a proposed QDRO meets federal law.

A. Characterizing the Request for a QDRO.

Here, the Court observes that it is not being asked to change the decree; rather, it is being asked to effect the same.[FN5] As the Jordan court stated, a motion to require the issuance of a QDRO could be termed an action to compel a mere ministerial task that is necessary to distribute funds previously allocated by the parties' own binding agreement (or decree). 147 S.W.2d at 262 (citing Duhamel v. Duhamel, 194 Misc. 2d 100, 101, 753 N.Y.S.2d 673 (N.Y. Sup. Ct. 2002)). Jordan ultimately concluded that the trial court's decree could not be enforced against the plan administrator or “holder of the purse strings” and that an attempt to obtain a proposed QDRO ten years after a divorce with the approval of the plan administrator “is not an action to enforce the divorce judgment” but essentially is “an act to bring to fruition the trial court's decree.” Id. at 263. It reversed the trial court which set aside the QDRO on limitation grounds.

FN5. The Court is providing in the QDRO a lacking specificity that is required by federal law.

Whether viewed as a compulsory process or a supplementary process consistent with a court's continuing jurisdiction, such as in hearing in aid of execution, it is clear that Kansas courts have long recognized that a trial court has continuing jurisdiction to effect its own judgments: