Marriage of Rush CA3 ( 2014 )

Filed 6/20/14 Marriage of Rush CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Butte)
----
In re the Marriage of VIRGINIA C. and DAVID H. C070841
RUSH.
VIRGINIA C. MOON, (Super. Ct. No. FL004059)
Appellant,
v.
DAVID H. RUSH,
Respondent;
PETERS, RUSH, HABIB & MCKENNA 401(K)
PROFIT-SHARING PLAN,
Respondent.
The marriage of appellant Virginia C. Moon and respondent David H. Rush ended
in September 1995 with a judgment of dissolution and a stipulated order to divide their
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community interest in David’s retirement plan.1 The stipulated order stated on its face
that it was a qualified domestic relations order (QDRO) intended to comply with the
Employee Retirement Income Security Act (ERISA), Title 29 United States Code section
1001 et seq.
More than 15 years later, Virginia’s attorney wrote to the plan administrator at
David’s law firm asking about assets held by the 401(k) profit sharing plan (plan) for the
benefit of Virginia as alternate payee. The plan administrator, David’s law partner Mark
Habib, responded that David had managed Virginia’s assets pursuant to instructions, and
the plan administrator enclosed a written summary of Virginia’s interest in the plan.
More than a year later, however, when Virginia’s attorney asked about formal
qualification of the domestic relations order (DRO) and requested a copy of the plan’s
qualification procedures, the plan administrator indicated for the first time that he had just
determined the DRO was not qualified (was not a QDRO), based on procedures adopted
by the plan nine days earlier.
Virginia filed a complaint in federal court seeking to enforce the QDRO. The plan
then intervened in the long-dormant family court proceeding and requested a declaration
that the DRO was not qualified.
Over Virginia’s objection, the family court declared the DRO was not qualified
because it did not define the term “community interest.” Based on the family court’s
order, David moved to dismiss Virginia’s federal action. The federal court initially
dismissed the action without prejudice, citing “prudential ripeness” concerns arising from
the family court proceedings which were, by that time, on appeal to this court.2 But the
1 We will refer to Virginia and David by their first names for clarity.
2 Respondents requested judicial notice of an order filed on September 10, 2012,
dismissing without prejudice Virginia’s claims before the United States District Court,
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federal court subsequently vacated and withdrew its prior order and denied David’s
motion to dismiss. (Moon v. Rush (E.D. Cal., Aug. 6, 2013, No. 2:11-cv-03102-GEB-
CKD) [2013 WL 4012828] pp. *1, fn. 1, *4.)
On appeal, Virginia contends (1) the DRO is sufficiently specific to be qualified;
(2) David and the plan administrator lacked standing to move for a determination that the
DRO was not qualified, and the family court exceeded its jurisdiction in ruling that the
DRO was not qualified; and (3) the family court abused its discretion in denying
Virginia’s motion to stay the family court proceeding while a federal court case was
pending.
At oral argument, David and the plan urged us to affirm the order disqualifying the
DRO so that a new stipulated order can be negotiated and presented to the family court as
a proposed QDRO. Meanwhile, the parties are pursuing their remedies in federal court
and are scheduled for trial early next year.
We conclude the DRO is presumptively qualified, subject only to modifications
agreed upon by the parties or ordered by the court to save the DRO from being legally
ineffective. Accordingly, we will reverse the family court order filed on May 1, 2012.
Because we reverse on the basis of Virginia’s first appellate contention, we need not
address her other contentions.
BACKGROUND
David and Virginia were married on March 21, 1977, and separated on July 6,
1993. On August 1, 1995, Virginia and David executed a document titled “Stipulation
and Order Dividing Community Interest in Employee Benefit Plan -- Qualified Domestic
Relations Order.” On September 25, 1995, the family court signed the stipulated order,
which was filed September 26, 1995, and contemporaneously signed and entered a
Eastern District of California (Moon v. Rush (E.D. Cal., Sept. 10, 2012, No. 2:11-cv-
03102-GEB-CKD) [2012 WL 3962520]). Respondents’ request is granted.
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stipulated judgment dissolving the marriage. Until late 2011, the last item in the family
court’s file was a notice filed on November 1, 1995, regarding the withdrawal of
Virginia’s attorney.
At all relevant times, David was a lawyer practicing with a firm in Chico. His
firm’s 401(k) plan was named in the DRO. Paragraph 1 of the DRO identified Virginia
as alternate payee, and David as participant, in the community property portion of certain
assets within the plan. The DRO directed that any notices to the plan be sent to David as
trustee. The word “administrator” was crossed out.
The DRO provided that the family court reserved jurisdiction as follows:
“24. The court reserves jurisdiction over this asset including but not limited to
jurisdiction to order an alternate disposition of these benefits based upon the spousal
parties’ future agreement.
“25. Should any portion of this order be rendered invalid, illegal, unconstitutional,
or otherwise incapable of enforcement, the court reserves jurisdiction to make such
adjustment in this order as will effect the intent of the parties as manifested herein,
including the equal division of the community portion of this asset.”
In February 2010, counsel for Virginia wrote a letter addressed to the plan
administrator at the law firm’s address asking about assets held by the plan under terms
of the DRO for the benefit of Virginia as alternate payee. David’s law partner, Mark
Habib, responded that the plan had no knowledge of the DRO. In June 2010, Habib,
identifying himself as the plan administrator, acknowledged receiving a copy of the DRO
and wrote to Virginia’s lawyer that he had consulted with David and confirmed that
David had “managed [Virginia’s] assets in accordance with her instructions and wishes.”
Habib offered to transfer the assets held for Virginia to another plan or distribute them to
her or, alternatively, to provide her with annual account statements. Habib enclosed with
the letter a detailed written summary of assets under the heading “Pension Benefits
Statement Regarding Virginia Moon’s Interest in Peters, et al. Profit Sharing Plan, as set
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forth in Paragraph 9 of the Stipulation & Order Dividing Community Interest In
Employee Benefit Plan entered September 26, 1995, in Marriage of Rush, Butte Superior
Court Case No. FL004059.”
Fifteen months later, in October 2011, counsel for Virginia asked Habib about
formal qualification of the DRO and requested a copy of the plan’s DRO qualification
procedures.3 On November 15, 2011, Habib responded that he had just determined the
order was not a QDRO pursuant to procedures adopted by the plan nine days earlier.
On November 21, 2011, Virginia filed a complaint against David and Habib and
another law firm partner/plan trustee in the United States District Court for the Eastern
District of California, seeking enforcement of the DRO and other relief. The parties
named in the federal complaint stipulated to an order extending the time to answer until
early 2012.
However, in December 2011, Habib intervened in the Rush divorce proceeding
and filed a motion asking the family court to determine that the DRO did not qualify as a
QDRO. Habib and David filed supporting declarations alleging that David did not give
Habib a copy of the DRO until 2010 and Habib could not determine what the DRO meant
by “community” interests because David had contributed to the plan before the marriage
but David was not sure how much. David later joined Habib’s motion. Virginia opposed
the motion, arguing that the plan received the DRO when David signed it, not when he
shared it with Habib, so it was too late to declare it unqualified; she also pointed out that
Habib treated the DRO as qualified in 2010 and interpreted the very term he suddenly
claimed was incomprehensible. Virginia asserted the federal court’s pending jurisdiction,
asking the family court for abstention or a stay; in the alternative, she asked the family
3 A plan must maintain such procedures in writing and promptly communicate them to
alternate payees upon notice of a domestic relations order. (29 U.S.C. § 1056(d)(3)(G).)
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court to modify the DRO to incorporate the 2010 pension benefits statement if it found
that the DRO lacked sufficient specificity to be a QDRO.
Late in January 2012, David filed a supplemental declaration stating that, if the
family court found the order not qualified, he would request an order that was qualified.
But in February 2012, he provided evidence that he had a balance of a little over $18,000
in a Keogh retirement account before he married Virginia, and he declared (with no
supporting evidence) that he had rolled over some Keogh funds into the 401(k) plan that
was the subject of the DRO. David provided no dates or amounts for the alleged rollover
and said he was “searching for additional documents” to distinguish his separate assets
from the community property interest shared by Virginia. He did not deny helping to
prepare the 2010 pension benefits statement Habib sent to Virginia’s lawyer, but he
objected to having the summary incorporated into the DRO to identify assets belonging
to Virginia. The pension benefits statement, David claimed, was no more than a
historical record of how he had managed Virginia’s assets during the 15 years before he
told the plan administrator about the DRO.
On February 28, the family court heard oral argument. David’s counsel
contended, “Nobody is talking about staying the federal action, to have it all happen here.
We just want this one little issue decided here quickly, and then the federal court action
will go on, and no ruling by this court is going to hamper [Virginia’s] rights in the federal
court.” Virginia’s lawyer again urged the family court’s abstention.
On March 13, 2012, the family court determined the DRO was not qualified
because it did “not provide a basis for determining what is [David’s] separate interest in
the plan and what is the community interest.” A formal order to that effect was filed on
May 1. There is no evidence in the record that David ever presented an alternative
proposed QDRO or offered evidence from which the family court might have modified
the DRO to reflect the parties’ 1995 intent. David and his law partners promptly moved
to dismiss Virginia’s federal action.
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DISCUSSION
ERISA generally prohibits the assignment or alienation of retirement benefits, but
it includes an exception for QDRO’s designed to safeguard the financial security of
nonemployee spouses and dependents. (Ablamis v. Roper (9th Cir. 1991) 937 F.2d 1450,
1453.) State laws relating to pension benefits are preempted by ERISA, and thus a
nonemployee spouse may enforce a community interest in an employee spouse’s
retirement benefits only if the interest is transferred by a QDRO. (In re Marriage of Rich
(1999) 73 Cal.App.4th 419, 423.) A transfer of plan benefits is ineffective unless the
order satisfies ERISA’s QDRO criteria. (In re Marriage of Shelstead (1998) 66
Cal.App.4th 893, 899.)
A domestic relations order that grants marital property rights to a spouse of a
participant in a plan (an “alternate payee”) is qualified only if it meets criteria not at issue
in this case and also specifies “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.” (29 U.S.C. § 1056(d)(3)(B)-(C)(ii).) These
requirements are not to be construed in an overly narrow manner. (Hamilton v. WA State
Plumbing Pension Plan (9th Cir. 2006) 433 F.3d 1091, 1097.) The “pivotal question” is
whether the dissolution order contains enough information for the plan administrator to
make an informed decision about distribution. (Ibid.) Substantial compliance with the
requirements is sufficient. (Metropolitan Life Ins. Co. v. Marsh (6th Cir. 1997) 119 F.3d
415, 422.)
The order at issue granted Virginia, among other things, “[a]ll of the community
interest in” a piece of real property held by the pension plan on behalf of David, but
Habib claimed the DRO was not qualified because he could not identify what interest in
the property was “community.” Inclusion of the term “community interest” in a DRO
does not render a DRO unqualified. (Stewart v. Thorpe Holding Co. Profit Sharing Plan
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(9th Cir. 2000) 207 F.3d 1143, 1150.) The wording may create some ambiguity in this
case, but not enough to render the plan unqualified at such a late date.
Community property interests are those acquired during marriage. (Fam. Code,
§ 760.) David declared that he could not distinguish contributions he made to the plan
during his marriage to Virginia from those he made beforehand. However, both David
and Habib had access to the plan’s records, including the dates and amounts for David’s
contributions to the plan. Neither claimed to have made an attempt to identify or trace
David’s separate property interest. (See Fam. Code, § 2640 [separate property can be
traced to purchase of community asset].)
Before the dissolution, David and Virginia were required by law to disclose to one
another and to the family court “[a]ll material facts and information regarding the
characterization of all assets and liabilities.” (Fam. Code,§ 2105, subd. (b)(1).) When
parties divide pension assets, the party with better access to information about the assets
“must acquire and disclose such information to the other spouse.” (In re Marriage of
Brewer & Federici (2001) 93 Cal.App.4th 1334, 1348.) In this case, David necessarily
had superior (and perhaps exclusive) access to information about his own pension assets,
including the extent to which his pension fund’s investment in the disputed real property
was traceable to separate rather than community property. He had an affirmative duty to
discover and disclose the facts to Virginia before they dissolved their marriage and he
offers no explanation for not disclosing the same facts to his law partner, the plan
administrator, in order to identify and segregate any separate property interests.
Tellingly, David did not ask the family court to characterize some or all of the disputed
property interest as separate; he asked the family court to declare the order he had
negotiated unqualified and ineffective.
A plan administrator may make an initial determination “within a reasonable
period after receipt” whether a DRO is specific enough for the plan to be able to enforce
it, that is, whether it is qualified. (29 U.S.C. § 1056(d)(3)(G)(i)(II) & (H)(i).) Congress
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contemplated that further proceedings might be necessary after a retirement plan is
divided if a plan administrator finds the terms of a DRO unclear. Thus, ERISA includes
an 18-month period for the plan to segregate accounts and allow an alternate payee to
cure defects and obtain an enforceable QDRO. (Trustees of Directors Guild of America
v. Tise (9th Cir. 2000) 234 F.3d 415, 422, opn. mod. 255 F.3d 661.) But “[t]here is no
reason it should take any plan administrator 18 months to puzzle over” a DRO, and
“Congress did not intend to sanction such administrative lassitude” by recognizing the
need for adequate time to address defects. (Ibid.)
California law allows a plan to move to set aside or modify a DRO within the
divorce proceeding itself, provided that the plan acts promptly. (Fam. Code, § 2073
[enforcement of order affecting employee benefit plans are stayed for 30 days so plan can
be served and file objections; the parties and the court are expected to promptly address
any challenges asserted by the plan].) If a plan administrator fails to timely object to a
DRO, however, “it makes no sense to punish a spouse for a plan’s dereliction.” (In re
Williams (C.D.Cal. 1999) 50 F.Supp.2d 951, 964.) Rather, a DRO may be declared a
QDRO based on the plan administrator’s inaction. (Id. at p. 963.) And the plan need not
be a party to a dissolution proceeding to be bound by the terms of a QDRO. (In re
Marriage of Baker (1988) 204 Cal.App.3d 206, 218.)
The plan’s request for a declaration that the DRO was not qualified -- brought 16
years after David signed the DRO as party and trustee, and 18 months after the plan
administrator acknowledged it in writing -- was unreasonable and untimely. (See In re
Williams, supra, 50 F.Supp.2d at p. 963 [“even the strictest cases” requiring actual receipt
by the plan administrator “have not made a claimant's rights dependent upon the
administrator taking further action once it is aware of the terms”].) The plan’s reliance
on In re Marriage of Levingston (1993) 12 Cal.App.4th 1303, is misplaced because the
retirement plan administrator in that case acted promptly (within months after execution
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of the DRO) to notify the parties that the administrator believed the DRO was not
qualified. (Id. at pp. 1304-1305.)
In any event, the DRO is presumptively qualified. A family court’s role with
respect to pension assets is to make “whatever orders are necessary or appropriate to
ensure that each party receives the party’s full community property share in any
retirement plan.” (Fam. Code, § 2610, subd. (a).) And its role in interpreting a stipulated
order is to make it an enforceable statement of the parties’ intent. (Chacon v. Litke
(2010) 181 Cal.App.4th 1234, 1252.)
Family court jurisdiction over a QDRO is intended to “clarify and fix any
technical defects in the original DRO.” (Carmona v. Carmona (9th Cir. 2010) 603 F.3d
1041, 1056; accord, In re Marriage of Oddino (1997) 16 Cal.4th 67.) A QDRO does not
create a new property interest, but renders enforceable an already existing interest, so the
alternate payee’s right to an enforceable QDRO is presumed during any period of DRO
refinement. (Trustees of Directors Guild of America v. Tise, supra, 234 F.3d at p. 421; In
re Gendreau (9th Cir. 1997) 122 F.3d 815, 818 [right to QDRO established under state
law at time of divorce decree].) Here, the DRO was clearly intended by David and
Virginia, and by the family court in 1995, to effectively transfer the entire community
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share of the disputed property to Virginia.4 The family court’s ruling on qualification
was erroneous.
DISPOSITION
The family court order filed on May 1, 2012 (declaring that the DRO is not
qualified) is reversed. Virginia shall recover her costs on appeal. (Cal. Rules of Court,
rule 8.278 (a)(1), (2).)
MAURO , J.
We concur:
BUTZ , Acting P. J.
HOCH , J.
4 Paragraph 9 of the DRO transferred “[a]ll of the community interest” in two assets and
“[o]ne-half of the community interest” in two other assets to Virginia; at oral argument,
the parties reported that three of the four assets were transferred without dispute.
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