Kesting v. Kesting

• Citation: 370 P.3d 729,160 Idaho 214
• Decision Date: 23 March 2016
• Docket Number: No. 42875.,42875.
• Court: United States State Supreme Court of Idaho
• Parties: Linda C. KESTING, Plaintiff–Appellant, v. James A. KESTING, Defendant–Respondent.

160 Idaho 214

370 P.3d 729

Linda C. KESTING, Plaintiff–Appellant,

v.James A. KESTING, Defendant–Respondent.

No. 42875.

Supreme Court of Idaho, Boise, February 2016 Term.

March 23, 2016.

Rehearing Denied April 26, 2016.

Cosho Humphrey LLP, Boise, for appellant. Matthew B. Schelstrate argued.

Arkoosh Law Offices, PLLC, Boise, for respondent. Nikeela R. Black argued.

J. JONES, Chief Justice.

Appellant, Linda Kesting ("Linda"), obtained a judgment against Respondent, James Kesting ("James"), for breach of an alimony/spousal support agreement entered into during their divorce. When that judgment was returned without recovery, the magistrate judge issued a Judgment of Qualified Domestic Relations Order ("QDRO"). The subsequent judgment was intended to allow recovery of the unpaid spousal support and associated attorney fees from James' pension plan. James appealed to the district court, which reversed. The district court concluded that the QDRO was not valid because the spousal support agreement was not merged into the divorce decree and, therefore, the QDRO was not issued pursuant to the State's domestic relations law as required under the Employee Retirement Income Security Act ("ERISA"). Linda timely appealed.

I.FACTUAL AND PROCEDURAL BACKGROUND

Linda filed suit alleging that James breached a spousal support agreement entered into by the parties during their divorce. The support agreement was a separate agreement not merged into their divorce decree or approved by the court in that proceeding. The agreement in question dealt only with James' obligation to pay alimony to Linda. The agreement is titled "Alimony/Spousal Support Agreement" and makes repeated reference to "alimony/spousal support." James admitted that he had not paid Linda support he owed under the agreement, and the magistrate court entered judgment awarding Linda $8,000 in delinquent support and $1,227.80 in attorney fees and costs. Linda obtained a writ of execution, which was returned unsatisfied. Linda then obtained a QDRO from the magistrate which provided that the judgment for unpaid spousal support and associated attorney fees be satisfied out of James' Terteling Employees Profit Sharing and Thrift Savings Plan 401(k). The QDRO was thereafter approved by the administrator of James' 401(k).

James appealed to the district court, alleging that the magistrate court erred in issuing the QDRO because the QDRO was not issued pursuant to Idaho's domestic relations law as required under ERISA. Both parties also sought an award of attorney fees. The district court agreed with James and issued an opinion reversing the QDRO. Neither party was awarded fees. Linda timely appealed.

II.ISSUES ON APPEAL

1. Whether the district court erred in reversing the QDRO.

2. Whether the district court erred in denying James' request for attorney fees under Idaho Code section 12–121.

3. Whether either party is entitled to attorney fees on appeal.

III.STANDARD OF REVIEW

"When this Court reviews a decision rendered by a district court acting in its appellate capacity, it considers the decision of the district court. This Court exercises free review of the legal issues analyzed by the district court acting in its appellate capacity." Baruch v. Clark, 154 Idaho 732, 736, 302 P.3d 357, 361 (2013) (citations omitted). Whether the magistrate court's judgment constitutes a valid QDRO under ERISA is a question of law for this court to review de novo. See Stewart v. Thorpe Holding Co. Profit Sharing Plan, 207 F.3d 1143, 1150 n. 5 (9th Cir.2000). The Court reviews a district court's decision of whether to award attorney fees under Idaho Code section 12–121 for abuse of discretion. Burns v. Baldwin, 138 Idaho 480, 486, 65 P.3d 502, 508 (2003).

IV.ANALYSIS

1. The district court erred in reversing the QDRO.

ERISA prohibits the alienation or assignment of pension plan benefits. 29 U.S.C. § 1056(d)(1). "This so-called ‘spendthrift’ provision of ERISA was intended to ‘protect an employee from his own financial improvidence in dealings with third parties.’ " Hawkins v. C.I.R., 86 F.3d 982, 988 (10th Cir.1996) (quoting Am. Tel. & Tel. Co. v. Merry, 592 F.2d 118, 124 (2d Cir.1979) ). A divergence of opinion emerged among courts as to whether ERISA's anti-assignment provisions prevented states from attaching pension benefits to enforce family support obligations. S. REP. NO. 98–575 at 18–19 (1984). This divergence prompted Congress to amend ERISA by enacting the Retirement Equity Act ("REA") in 1984, creating an exception to ERISA's anti-assignment provision for QDROs. Id.; 29 U.S.C. § 1056(d)(3)(A). The Ninth Circuit has found that "[t]he QDRO exception was specifically enacted to protect the financial security of ex-spouses." Stewart, 207 F.3d at 1149.

Under ERISA, a "domestic relations order" means "any judgment, decree, or order (including approval of a property settlement agreement)" that "(I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (II) is made pursuant to a State domestic relations law (including a community property law)." 29 U.S.C. § 1056(d)(3)(B)(ii). To be "qualified," the domestic relations order must "create[ ] or recognize [ ] the existence of an alternate payee's right to, or assign[ ] to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan" and must meet specific form requirements. 29 U.S.C. § 1056(d)(3)(B)(i). James did not challenge the QDRO in this case on the basis that it was not "qualified" under ERISA. Rather, James contends that the QDRO was not valid because there was no court order awarding alimony. Additionally, James argues that the QDRO was not made pursuant to Idaho's "domestic relations law" because, in Idaho, a non-merged spousal support agreement is only enforceable under contract law.

Both parties agree that while a QDRO is usually used to divide a retirement plan upon divorce, a QDRO may be used enforce a judgment to collect delinquent support payments. We have not previously addressed this issue, but we agree with other courts that have concluded that a QDRO may be entered to enforce a prior support obligation. See Stinner v. Stinner, 520 Pa. 374, 554 A.2d 45, 48 (1989) (holding that a QDRO may be entered to enforce a judgment for breach of an alimony agreement); Rohrbeck v. Rohrbeck, 318 Md. 28, 566 A.2d 767, 774 (1989) (expressly recognizing the ability of a party entitled to a QDRO to obtain one to enforce a previously entered judgment); In re Marriage of Thomas, 339 Ill.App.3d 214, 273 Ill.Dec. 647, 789 N.E.2d 821, 831 (2003) ("[W]e hold that ERISA permits a trial court's entry of a QDRO to assign pension and other retirement benefits to a former spouse to satisfy a judgment for past-due maintenance and child support payments."); Hogle v. Hogle, 732 N.E.2d 1278, 1281 (Ind.Ct.App.2000) ("It is well-established that, under certain circumstances, a pension may be attached or garnished as a means of satisfying a support arrearage."); Baird v. Baird, 843 S.W.2d 388, 392 (Mo.Ct.App.1992) ("ERISA permits QDRO's to be used to enforce an earlier entered support judgment and collect delinquent maintenance and child support payments against a pension fund.").

James contends that the QDRO in this case is not an order that relates to the provision of alimony because there was no court order awarding alimony or approving the spousal support agreement. However, ERISA provides that a domestic relations order may be any judgment, order, or decree that relates to the provision of support, including alimony. 29 U.S.C. § 1056(d)(3)(B)(ii). That requirement is met in this case. Although the support agreement was not incorporated into the divorce decree, Linda brought an action for breach of that agreement and obtained a judgment against James for unpaid support. It is uncontested that the judgment for breach of contract related solely to the provision of spousal support. The QDRO was, therefore, issued to enforce a judgment related to the provision of alimony. The closer question in this case is whether the QDRO was made pursuant to a state domestic relations law.

Here, the district court held that the QDRO was not issued pursuant to Idaho domestic relations law because, in Idaho, non-merged spousal support agreements are governed by contract law. Linda contends that the district court's strict interpretation of "domestic relations law" to exclude enforcement of a support agreement is not in keeping with the purpose behind the QDRO exception—to protect the financial interests of former spouses.

Linda argues that this Court should follow the reasoning in Stinner, where the Pennsylvania Supreme Court held that a QDRO issued to enforce an alimony agreement was made pursuant to domestic relations law. 554 A.2d at 47–48. In Stinner, The Pennsylvania Supreme Court reversed the superior court's holding that the QDRO was not issued pursuant to domestic relations law because the support agreement was only enforceable under contract law. Id. at 48–49. The Pennsylvania Supreme Court reasoned that:

In holding that Mrs. Stinner's right to alimony was based solely on contract and not on the domestic relations law of this Commonwealth, the Superior Court took a myopic view of the word law. According to Black's Law Dictionary, law is derived either from judicial precedents, from legislation or from custom. The custom in Pennsylvania before June 30, 1980, was that it was common to induce spouses to forego divorce contests by entering into support agreements. Moreover, section 514(c) of ERISA, as amended by the Retirement Equity Act of 1984, defines the term "State law" to include "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c)(1) (1982 & Supp. III 1985) (emphasis added). Prior to June 30, 1980, although there was no statutory right to

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