In the

Supreme Court of the United States

JOHN HOWELL Petitioner,

v.

SANDRA HOWELL, Respondent.

 

BRIEF OF PETITIONER, John Howell

QUESTION PRESENTED

Whether the Uniformed Services Former Spouses' Protection Act preempts a state court's order directing a veteran to indemnify a former spouse for a reduction in the former spouse's portion of the veteran's military retirement pay, where that reduction results from the veteran's post-divorce waiver of retirement pay in order to receive compensation for a service-connected disability.

 

STATUTES INVOLVED

The relevant provisions of the Uniformed Services Former Spouses' Protection Act are codified at:

 10 U.S.C. 1408. 10 U.S.C. 1408(c)(1) provides:

Subject to the limitations of this section, a court may treat disposable retired pay payable to a member for pay periods beginning after June 25, 1981, either as property solely of the member or as property of the member and his spouse in accordance with the law of the jurisdiction of such court.

10 U.S.C. 1408(a)(4) provides, in pertinent part:

The term "disposable retired pay" means the total monthly retired pay to which a member is entitled ... less amounts which--  (B) are deducted from the retired pay of such member ... as a result of a waiver of retired pay required by law in order to receive compensation under ... title 38;

38 U.S.C. 5304(a)(1) provides, in pertinent part:

Except ... to the extent that retirement pay is waived under other provisions of law, not more than one award of pension, compensation, emergency officers', regular, or reserve retirement pay ... shall be made concurrently to any person based on such person's own service

38 U.S.C. 5305 provides, in pertinent part:

... Any person who is receiving pay pursuant to any provision of law providing retired or retirement pay to persons in the Armed Forces, ... and who would be eligible to receive pension or compensation under the laws administered by the Secretary of Veterans Affairs if such person were not receiving such retired or retirement pay, shall be entitled to receive such pension or compensation upon the filing by such person with the department by which such retired or retirement pay is paid of a waiver of so much of such person's retired or retirement pay as is equal in amount to such pension or compensation.

 

STATEMENT

A.        Statutory Framework

The federal government provides a pension for members of the Armed Forces who retire after serving for a minimum period (generally twenty years). This pension is known as Military Retirement Pay ("MRP"). The size of a veteran's pension is determined based on the veteran's length of service and rank at the time of retirement..

Separately, veterans who suffer from service­-connected disabilities are entitled to receive compensation under title 38 of the U.S. Code. The amount of disability pay a veteran may receive for a given disability is based on a scale that reflects "the average impairments of earning capacity resulting from such injuries in civil occupations."

In order to receive disability pay, veterans who are entitled to MRP generally must waive an equivalent portion of their MRP. Veterans in that position often elect to receive disability pay because, unlike MRP, disability pay is exempt from federal, state, and local taxation.

In McCarty v. McCarty, this Court held that federal law did not permit states to treat MRP as divisible property in divorce proceedings. There, a husband and wife had divorced while the husband was still an active-duty member of the Armed Forces. California, where the couple was divorced, was (and still is) a "community property" state, meaning that it "treats all property earned by either spouse during the marriage as community property; each spouse is deemed to make an equal contribution to the marital enterprise, and therefore each is entitled to share equally in its assets." Thus, in accordance with community property principles, the divorce decree ordered the husband, upon retirement, to pay his ex-wife a portion of his MRP based on the number of years the couple was married during his military service.

On appeal, this Court held that the division of MRP in the divorce decree was preempted by federal law. It explained that Congress conferred MRP as a "personal entitlement" of service members and that "Congress intended that military retired pay actually reach the beneficiary." Further, the Court found that states' treatment of MRP as community property had "the potential to frustrate" Congress' two objectives in enacting the military retirement pay system-"to provide for the retired service member" and "to meet the personnel management needs of the active military forces." With respect to the first objective, the Court observed that the wife's asserted community property interest "promised to diminish that portion of the benefit Congress had said should go to the retired service member alone" and that state courts were "not free to reduce the amounts that Congress had determined were necessary for the retired member." With respect to the second, the Court noted that division of MRP in divorce would "diminish" the "inducement for enlistment or re-enlistment" Congress had provided and would therefore "interfere with the goals of encouraging orderly promotion and a youthful military." The Court, however, noted in closing that Congress was free to change the law if it decided that former spouses should be afforded greater protections.

Congress responded by passing the Uniformed Services Former Spouses' Protection Act (USFSPA). The USFSPA overrode McCarty in part: it authorized state courts to treat MRP as divisible property, but it excluded from this authority the power to divide any portion of MRP that a veteran waives to obtain disability pay. Specifically, as relevant here, the Act provided that "a court may treat disposable retired or retainer pay payable to a member ... either as property solely of the member or as property of the member and his spouse," and it defined "disposable retired or retainer pay" as a veteran's "total monthly retired or retainer pay," minus "amounts waived in order to receive compensation under ... title 38 disability pay.

In Mansell v. Mansell, this Court held that the USFSPA "does not grant state courts the power to treat as property divisible upon divorce military retirement pay that has been waived to receive veterans' disability benefits." There, a military retiree had waived a portion of his MRP in favor of disability pay under title 38. When he and his wife divorced in California, they entered into a property settlement that obligated the retiree to pay his wife "50 percent of his total military retirement pay, including that portion of retirement pay waived so that he could receive disability benefits." The retiree later petitioned the state courts to modify the divorce decree to remove this provision, but they refused to do so.

This Court reversed. It explained that "preexisting federal law, as construed by McCarty, completely pre-empted the application of state community property law to military retirement pay" and that "Congress could overcome the McCarty decision only be enacting an affirmative grant of authority giving the States the power to treat military retirement pay as community property." It then held that although the USFSPA "affirmatively grants state courts the power to divide military retirement pay," that grant "is both precise and limited." "Under the Act's plain and precise language, state courts have been granted the authority to treat disposable retired pay as community property; they have not been granted the authority to treat total retired pay as community property." And, because "disposable retired pay" excludes MRP that a retiree has waived to receive disability pay, the USFSPA did not disturb the prior federal rule of non-divisibility with respect to any portion of MRP that a military retiree waives in favor of disability pay..

Only a year after Mansell, Congress revisited the USFSPA's definition of "disposable retired pay." It revised the definition to include amounts withheld for federal, state, and local tax purposes and certain debts of the retiree. But Congress elected to retain, in slightly reworded form, the exclusion of waived MRP. As amended, the definition of "disposable retired pay" requires state courts to take "total monthly retired pay" and deduct "amounts which ... are deducted from ... retired pay ... as a result of a waiver of retired pay required by law in order to receive compensation under       title 38 i.e., disability pay."      The exclusion of waived MRP from the definition of divisible property remains intact today.

When it amended the USFSPA in 1990, Congress' decision to retain this exclusion was not an oversight. The House Report accompanying the legislation stated:

"The USFSPA authorizes state courts to treat 'disposable retired or retainer pay' as property and defines such pay to exclude military retired pay waived in order for the retiree to receive veterans' disability and civil service benefits," as well as "amounts owed by the member to the United States, fines and forfeitures from courts-martial, federal employment taxes, and amounts withheld for income tax purposes." It then noted that "the exclusion of tax withholdings and individual debts of the service member from the computation of disposable retired pay had created unfairness" and that the amendments would modify the definition of "disposable retired pay" to alleviate those concerns. But the Report expressly noted: "Current law provisions that permit the deduction from gross retired pay of amounts waived in order to receive veterans' disability compensation ... would not be changed."

B.        Proceedings Below

In 1991, Petitioner John Howell and Respondent Sandra Howell divorced in Arizona. Like California, Arizona generally treats "all property acquired by either husband or wife during the marriage" as "the community property of the husband and wife." Relevant here, Arizona treats MRP as "a form of deferred compensation" which "belongs to the community." Consistent with that principle, the parties agreed to a divorce decree which provided that "Respondent is entitled to and is awarded as her sole and separate property FIFTY PERCENT (50%) of Petitioner's military retirement when it begins through a direct pay order." Petitioner retired from the Air Force in 1992 after a twenty-year career, and the parties began receiving MRP shortly thereafter.

In 2005, the Department of Veterans Affairs (VA) determined that Petitioner suffers from degenerative joint disease in his shoulder and that this impairment qualifies as a service-connected disability. The VA estimated that Petitioner's disability reduces his earning capacity by twenty percent. Accordingly, he qualifies for monthly payments of tax-­exempt disability pay to replace his lost earnings. In order to obtain this compensation, Petitioner was required to waive an equal portion of his MRP. He therefore executed such a waiver, effective from July 2004. As a consequence, the MRP payments to both Petitioner and Respondent declined.

In 2013, Respondent brought an action to "enforce" the provision of the divorce decree regarding MRP, arguing that it entitled her to half of the full value of the MRP for which Petitioner is eligible, notwithstanding any waiver on his part. The Arizona Superior Court agreed and ordered Petitioner to "ensure Respondent receives her full 50% of the military retirement without regard for the disability." The Arizona Court of Appeals affirmed.

The Arizona Supreme Court affirmed, rejecting Petitioner's contention that the divorce court's order was preempted by the USFSPA. The court acknowledged that Mansell barred state courts from "dividing MRP that has been waived to receive disability benefits." But the court stated that this case presents the distinct question of "how the family court should proceed when a veteran elects a VA waiver to receive disability benefits after entry of a dissolution decree, thereby reducing the ex-spouse's share of previously awarded MRP." The court concluded that although "the family court cannot divide MRP that has been waived to obtain disability benefits either at the time of the decree or thereafter," the court was free to order Petitioner to indemnify Respondent for the reduction in her share of MRP. It stated:

The 2014 Order did not divide the MRP subject to the VA waiver, order Petitioner to rescind the waiver, or direct him to pay any amount to Respondent from his disability pay. Under these circumstances, the family court did not violate the USFSPA or Mansell because it did not treat the MRP subject to the VA waiver as divisible property .... Nothing in the USFSPA directly prohibits a state court from ordering a veteran who makes a post-decree VA waiver to reimburse the ex-spouse for reducing his or her share of MRP.

The court also rejected Petitioner's alternative argument under state law that the indemnification order violated Arizona Revised Statute 25-318.01, a 2010 statute that provides that a state court "shall not" "indemnify the veteran's spouse or former spouse for any prejudgment or post judgment waiver or reduction in military retired or retainer pay related to receipt of ... disability benefits." The court noted that although the Arizona statute does not apply in enforcement proceedings, it does apply in actions to modify decrees, and this was such an action because the divorce court's order modified the original divorce decree. The court nonetheless found that the state constitution's due process guarantee precluded application of the statute in the present case. It stated that once the dissolution decree dividing MRP was finalized in 1991, Respondent had a vested property interest in one-half of Petitioner's MRP, and a subsequently enacted state statute could not deprive Respondent of a remedy for a deprivation of that interest.

SUMMARY OF ARGUMENT

A state law is preempted when it directly contradicts a federal statute, or when it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." The divorce court's order is preempted under either of these two legal standards.

First, the divorce court's order directly contradicts the USFSPA. The USFSPA "does not grant state courts the power to treat as property divisible upon divorce military retirement pay that has been waived to receive veteran's disability benefits." In this case, the divorce court ordered Petitioner to "ensure Respondent receives her full 50% of the military retirement without regard for the disability waiver." That order constituted a division of Petitioner's waived military retirement pay. It directed Petitioner to pay Respondent an amount equal to half of his waived military retirement pay, which is the very definition of treating waived military retirement pay as divisible property.

Alternatively, the divorce court's order frustrates the purposes and objectives of Congress. Congress' purpose and objective was to ensure that divorced, disabled veterans keep all of their disability pay, even if they waive a portion of their military retirement pay in order to receive that disability pay. Yet, as a result of the divorce court's order, Petitioner must pay an amount equal to half of his disability pay to Respondent every month. As several of this Court's family law cases have made clear, such an order is preempted because it frustrates Congress' purpose to ensure that the veteran's disability pay reach the veteran alone.

The arguments of the Arizona Supreme Court and Respondent in defense of the divorce court's order are unpersuasive. The Arizona Supreme Court attempted to distinguish Mansell on the ground that Petitioner's waiver occurred after the divorce, rather than before the divorce as in Mansell. But the USFSPA does not distinguish between pre-divorce waivers and post-­divorce waivers. Nor does the USFSPA suggest that modified divorce decrees need not comply with federal law.

In addition to being irreconcilable with the statutory text, the Arizona Supreme Court's distinction between pre-divorce and post-divorce waivers makes little sense. The court's decision would strip the USFSPA's protections from any active-duty service member who gets a divorce, and would lead to arbitrary distinctions depending on the timing of the VA's decision to award disability pay.

The Arizona Supreme Court also cited the presumption against preemption as a justification for the divorce court's order. But that presumption cannot save the order. The order so clearly violates federal law that any presumption against preemption would be overcome. And, in any event, the presumption against preemption should not apply in this case. Such a presumption would be inconsistent with Mansell, which recognized that state law was completely preempted in this area and that state courts could only act if Congress affirmatively granted them the power to do so. Such a presumption would also be inconsistent with the strong federal interest in regulating the disposition of military benefits, as well as the long history of federal legislation in this area. Finally, presuming that Congress did not intend to preempt state divorce law would be unwarranted given that the USFSPA is a statute that specifically deals with divorce.

The Arizona Supreme Court's conclusion-as part of its state-law analysis-that Respondent had a "vested right" to half of Petitioner's waived military retirement pay cannot defeat federal preemption. The whole point of Mansell is that federal law prohibits the creation of such a vested right.

Finally, at the certiorari stage, Respondent relied on the Mansell dissent for the proposition that the USFSPA's "saving clause" authorizes the divorce court's order. The majority opinion in Mansell, however, rejected Respondent's interpretation of the savings clause, and its reasoning is equally applicable here.

There is no meaningful distinction between this case and Mansell.

 

CONCLUSION

The judgment of the Arizona Supreme Court should be reversed.