Drexler v. Bruce

• Decision Date: 28 March 2013
• Docket Number: No.12CA0192,No.11CA2202,12CA0192,11CA2202
• Citation: 2013 COA 43
• Parties: In re the Marriage of Regina T. Drexler, Appellee, v. Charles B. Bruce, Jr., Appellant.
• Court: Colorado Court of Appeals

2013 COA 43

In re the Marriage of Regina T. Drexler, Appellee,

v.Charles B. Bruce, Jr., Appellant.

No.12CA0192

No.11CA2202

COLORADO COURT OF APPEALS

Announced March 28, 2013

City and County of Denver District Court No. 09DR2227

Honorable Herbert L. Stern, III, Judge

ORDERS AFFIRMED

Division I

Opinion by JUDGE TAUBMAN

Graham and Hawthorne, JJ., concur

McClain Drexler Matthews, LLC, Michael P. Matthews, Denver, Colorado, for Appellee

Charles B. Bruce, Jr., Pro Se

¶ 1 This appeal is one of several brought by Charles B. Bruce, Jr. (husband) arising out of the dissolution of his marriage to Regina T. Drexler (wife). The present dispute raises the issue whether an obligor spouse’s retirement funds in a plan subject to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (2010), are exempt from assignment under a qualified domestic relations order (QDRO) to satisfy domestic support arrearages. Husband argues that his retirement funds are exempt under both Colorado and federal law. We hold that the funds are not exempt, and we affirm the trial court’s orders for a QDRO assigning the funds to wife, and sanctioning husband for noncompliance with the transfer.

I. Background

¶ 2 The parties’ marriage ended in 2010 and husband was ordered to pay wife $5000 per month in child support and maintenance of $12,000 per month for four years, followed by $8000 per month for two years. Thereafter, husband, who was a tax attorney and partner at a large law firm, did not comply with his obligations, resulting in the accumulation of $101,486 in support arrearages and the suspension of his law license. Wife then moved for a QDRO to collect the arrearages from the funds held in husband’s ERISA retirement plan at the law firm.

¶ 3 Husband objected, contending that Colorado and federal law prohibited assigning his retirement funds to wife to pay the arrearages. The trial court disagreed and ordered him to transfer the funds to wife using a QDRO. After husband did not comply, the court ordered that the QDRO transfer be completed without his signature, that he reimburse wife for her attorney fees incurred because of his noncompliance, and that the suspension of his previous contempt sentence for violating other court orders be lifted. This appeal followed.

II. Use of the QDRO to Satisfy Wife’s Arrearages

A. Standard of Review

¶ 4 We review de novo the legal issue whether Colorado and federal statutes prohibit assignment of husband’s retirement funds to pay wife’s arrearages. See Wolf Ranch, LLC v. City of Colorado Springs, 220 P.3d 559, 563 (Colo. 2009) (statutory interpretation is a question of law subject to de novo review).

B. Federal Law

¶ 5 ERISA was enacted to protect private retirement plan participants and their beneficiaries. See 29 U.S.C. § 1001b(b) (2006); Boggs v. Boggs, 520 U.S. 833, 845 (1997). To this end, the act generally prohibits assignment or alienation of retirement plan funds. 29 U.S.C. § 1056(d)(1) (2006); see People v. Stephenson, 12 P.3d 266, 268 (Colo. App. 1999) (ERISA anti-alienation clause prohibits assignments of retirement benefits, even when done pursuant to court order); see also 26 U.S.C. § 401(a)(13)(A) (2006) (the Internal Revenue Code (IRC) contains a similar anti-alienation provision for retirement plan funds).

¶ 6 Both ERISA and IRC further provide, however, that the anti?alienation provisions do not apply to retirement funds that are assigned to a former spouse under a QDRO. 29 U.S.C. § 1056(d)(3) (2006); 26 U.S.C. § 401(a)(13)(B) (2006); Boggs, 520 U.S. at 846; Hawkins v. Comm’r of Internal Revenue, 86 F.3d 982, 988 (10th Cir. 1996); In re Marriage of LeBlanc, 944 P.2d 686, 688 (Colo. App. 1997).

1. QDRO

¶ 7A QDRO is a mechanism created under ERISA to allow a former spouse to receive all or a portion of the benefits owed to a participant under a retirement plan. See Boggs, 520 U.S. at 846- 47; see also Rafferty-Plunkett v. Plunkett, 910 N.E.2d 670, 672 n.1 (Ill. App. Ct. 2009) (describing QDRO as “a creature of” ERISA); Barnes v. Barnes, 956 A.2d 770, 789-90 (Md. Ct. Spec. App. 2008) (same). A QDRO is defined as a “domestic relations order” that assigns to an alternate payee the right to receive all or a portion of the benefits payable to a participant. 29 U.S.C. § 1056(d)(3)(B)(i) (2006); Boggs, 520 U.S. at 846; see also 26 U.S.C. § 414(p)(1)(A) (2006). A “domestic relations order” in turn is defined as an order made pursuant to state domestic relations law that concerns the provision of child or spousal support, or marital property rights of a former spouse of a plan participant. 29 U.S.C. § 1056(d)(3)(B)(ii) (2006); Boggs, 520 U.S. at 846; see also 26 U.S.C. § 414(p)(1)(B) (2006).

¶ 8 Here, the QDRO was entered expressly as a means to satisfy husband’s unpaid obligations relating to the dissolution, including those for child support, maintenance, and attorney fees under section 14-10-119, C.R.S. 2012. Thus, the QDRO originated under Colorado domestic relations law, as required by ERISA, and not, as husband contends, under Colorado collections law.¹

2. Support Arrearages

¶ 9 A QDRO is not only a mechanism to divide retirement benefits between spouses under the marital property provisions of a dissolution decree; it may also be used, under ERISA, to enforce maintenance and child support obligations imposed under the decree. See LeBlanc, 944 P.2d at 688-89. A QDRO issued for this purpose does not result in an improper modification of the property division provisions of the decree. See Hogle v. Hogle, 732 N.E.2d 1278, 1284 (Ind. Ct. App. 2000); In re Marriage of Bruns, 535 N.W.2d 157, 161-62 (Iowa Ct. App. 1995); Baird v. Baird, 843 S.W.2d 388, 391-92 (Mo. Ct. App. 1992); Nichols v. Nichols, 891 P.2d 1303, 1306 (Okla. Civ. App. 1995).

¶ 10Further, the decree need not expressly provide that support payments will be paid from retirement funds. See In re Marriage of Thomas, 789 N.E.2d 821, 831-32 (Ill. App. Ct. 2003) (rejecting obligor husband’s argument that parties’ settlement agreement, under which wife waived any right to his retirement benefits, precluded the court from assigning his benefits under a QDRO to satisfy maintenance and child support arrearages); Baird, 843 S.W.2d at 391-92 (reversing trial court order dismissing QDRO as to pension funds that were awarded solely to the obligor spouse under the decree).

¶ 11On this issue, we decline to follow Hoy v. Hoy, 510 S.E.2d 253, 254-55 (Va. Ct. App. 1999), which held that using a QDRO to collect unpaid spousal support from the obligor spouse’s retirement funds constituted an improper modification of the dissolution decree. See Thomas, 789 N.E.2d at 831 (agreeing with the “quantum of persuasive authority” permitting use of a QDRO to assign retirement benefits to satisfy past due maintenance and child support obligations); Hogle, 732 N.E.2d at 1283-84 (rejecting Hoy in favor of other authorities holding that a QDRO is an appropriate mechanism for enforcing support arrearages); see also Michael P. Boulette, Collecting Child Support and Maintenance: A New Role for QDROs, 69 Bench & Bar of Minn. 20, 22 (Oct. 2012) (noting that the use of QDROs to enforce past due support has “received increasing approval across the country” and that “the reasoning employed by the Virginia court in Hoy does not appear to have gained wide acceptance”); Laura W. Morgan, Using QDROs to Enforce Spousal and Child Support, 13 No. 1 Divorce Litig. 7 (Jan. 2001) (“Congress has made it clear that QDROs may be used to enforce spousal and child support obligations. To do so is not an impermissible modification of a property division award, but only a means of enforcement of an obligation. It is time Virginia reversed the Hoy decision and got with the program.”).

¶ 12Accordingly, the trial court did not violate the anti-alienation provisions of ERISA and IRC by issuing the QDRO here to enforce husband’s unpaid support obligations.

C. ERISA Preemption of State Law

¶ 13Husband also argues that regardless of the QDRO exception to ERISA’s anti-alienation clause, his retirement benefits are exempt under Colorado law because section 13-54-102(1)(s), C.R.S. 2012, exempts pension or retirement plan funds, including those subject to ERISA, “from levy and sale under writ of attachment or writ of execution.” See LeBlanc, 944 P.2d at 687. Wife contends that the ERISA exception for QDRO transfers applies here, which we construe as an argument that section 13-54-102(1)(s) is preempted by ERISA. We address this issue and hold that the statute is preempted by ERISA because it imposes limitations not imposed by ERISA.

¶ 14Three types of preemption may apply when federal law preempts a particular state statute: (1) direct or conflict preemption, which occurs when a state statute directly conflicts with a federal statute; (2) statutory or express preemption, which occurs when a federal statute expressly states that it preempts state laws; and (3) field preemption, which occurs when federal law occupies a legislative field such that no room is left for state law to supplement it. See In re Estate of MacAnally, 20 P.3d 1197, 1201 (Colo. App. 2000).

¶ 15ERISA contains an express preemption provision as to “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. 29 U.S.C. § 1144(a) (2006); see also MacAnally, 20 P.3d at 1201. ERISA further provides an exception to preemption specifically for QDROs. See 29 U.S.C. § 1144(b)(7) (2006). Under this provision, state courts are not preempted from issuing QDROs to transfer retirement benefits that are held in plans governed by ERISA. See Boggs, 520 U.S. at 846-48. State laws may not conflict with ERISA provisions governing such QDROs, however. See United States v. Taylor, 338 F.3d 947, 951 (8th Cir. 2003) (“ERISA provides a mechanism for enforcing QDROs, and this mechanism supersedes any contrary state law.”).

¶ 16Under conflict preemption, a state law directly conflicts with ERISA, and...