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Johnston v. Johnston

Supreme Court of Vermont

May 10, 2019

Douglas S. Johnston
v.
Lorrie Johnston

          On Appeal from Superior Court, Windsor Unit, Family Division Elizabeth D. Mann, J.

          Melvin Fink, Ludlow, for Plaintiff-Appellant.

          Emily S. Davis and Boolie Sluka (On the Brief) of Davis Steadman Ford & Mace, LLC, White River Junction, for Defendant-Appellee.

          PRESENT: Reiber, C.J., Skoglund and Robinson, JJ., and Teachout, Supr. J. and Howard, Supr. J. (Ret.), Specially Assigned

          SKOGLUND, J.

         ¶ 1. This case asks us to examine that strange procedural device, the Qualified Domestic Relations Order (QDRO), and how it intersects with the statute of limitations for actions on judgments. The parties divorced in November 2004. As part of the divorce, the court ordered wife to transfer funds from her retirement account to husband. In 2006, the court approved a proposed QDRO to effectuate the transfer of said funds. The order was never "qualified," however, because there was no money in the retirement account that wife identified. The court approved another proposed QDRO in February 2007 specifying a different retirement account identified by wife. In August 2017, husband filed a motion to enforce, asserting that the owed funds were never transferred to him and that there were no funds in the second retirement account that wife identified. The court denied husband's motion to enforce, finding it barred by the eight-year statute of limitations for actions on judgments. As set forth below, we do not consider husband's attempt to effectuate a transfer of these retirement funds by QDRO to be an action on a judgment, and we therefore reverse and remand.

         ¶ 2. We begin with an overview of the relevant law governing the division of retirement accounts. A court must engage in a two-step process to divide retirement accounts governed by the federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. It first "enters a substantive order which equitably divides and assigns the parties' property." Breslin v. Synnott, 2012 VT 57, ¶ 6, 192 Vt. 79, 54 A.3d 525. It then enters a Domestic Relations Order (DRO) "directing the [retirement] plan administrator to make certain specified payments to the ex-spouse." Id. (citations omitted). We have described a DRO as a "procedural device that enforces an underlying substantive order." Id. ¶ 7; see also 2 B. Turner, Equitable Distribution of Property § 6:20 (4th ed. 2019) (expressing similar sentiment).

         ¶ 3. "The [retirement] plan administrator determines whether the order is qualified- whether a Q can be added to the DRO-subject to the right of either spouse to appeal the decision to a state or federal court." 2 Turner, supra, § 6:20. This results in a QDRO.[1] "A qualified order assures that a spouse receives benefits as an alternate payee." Ochoa v. Ochoa, 71 S.W.3d 593, 596 (Mo. 2002) (citing 29 U.S.C. § 1056(d)(3)(A), (J)).

         ¶ 4. As Turner recognizes, "the requirements for qualification are difficult to meet." 2 Turner, supra, § 6:20; see also Larimore v. Larimore, 362 P.3d 843, 849 (Kan.Ct.App. 2015) (explaining that "valid QDRO must meet the comprehensive requirements of at least three federal acts, as amended: the Internal Revenue Code, [ERISA], and the Retirement Equity Act of 1984" (alteration in original) (quotation omitted). When a plan receives a proposed QDRO, the plan administrator must "promptly notify the participant and each alternate payee of the receipt of such order and the plan's procedures for determining the qualified status of domestic relations orders." 29 U.S.C. § 1056(d)(3)(G)(i)(I). "[W]ithin a reasonable period after receipt of such order," the plan administrator must "determine whether such order is a qualified domestic relations order and notify the participant and each alternate payee of such determination." Id. § 1056(d)(3)(G)(i)(II).

         ¶ 5. "If the administrator refuses to qualify the DRO, the court may amend it to address the source of the problem." 2 Turner, supra, § 6:20 (explaining that "[e]ssentially all jurisdictions" agree, with respect "to revision of DROs and other attempts to draft qualified orders dividing retirement benefits," that "[t]hose orders are subject to future changes without limitation, so long as the modification only enforces the court's previous substantive order, without modifying that order's substantive terms"). As indicated, "the modern rule is that the court may modify its DRO any number of times." Id. This modifiability is a strength of a DRO's "limited status . . . as [a] procedural device[] rather than [a] substantive order[]." Id. "[T]he weakness is that the DRO cannot reach a result inconsistent with the underlying substantive order." Id.

         ¶ 6. "In short," Turner explains:

when dividing retirement benefits, the law of equitable distribution is not playing on its home field. Because of ERISA, pension issues are litigated in material part upon the home field of the plan administrator. . . . Because the plan administrator is not required to play by normal state court rules, normal state court procedures must be adapted to the unique setting of DROs under ERISA.

Id.

         ¶ 7. With this overview in mind, we turn to the facts. The parties here divorced in November 2004 after a twenty-five-year marriage. The court ordered an equal division of the marital assets. Both parties had pensions and various retirement accounts. As relevant here, the court ordered wife to transfer $27, 655 from one or both of ...


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