Marriage of Shelstead, In re, No. D021205

CourtCalifornia Court of Appeals
Writing for the CourtHALLER; NARES, Acting P.J., and McDONALD
Citation58 Cal.Rptr.2d 522,50 Cal.App.4th 1579
PartiesPreviously published at 50 Cal.App.4th 1579 50 Cal.App.4th 1579, 96 Cal. Daily Op. Serv. 8457, 96 Daily Journal D.A.R. 14,152, Pens. Plan Guide (CCH) P 23929N In re the Marriage of Janet D. and Gene T. SHELSTEAD. Janet D. SHELSTEAD, Respondent, v. Gene T. SHELSTEAD, Respondent; Carpenters Pension Trust for Southern California, Appellant.
Docket NumberNo. D021205
Decision Date20 November 1996

Page 522

58 Cal.Rptr.2d 522
Previously published at 50 Cal.App.4th 1579
50 Cal.App.4th 1579, 96 Cal. Daily Op. Serv. 8457,
96 Daily Journal D.A.R. 14,152,
Pens. Plan Guide (CCH) P 23929N
In re the Marriage of Janet D. and Gene T. SHELSTEAD.
Janet D. SHELSTEAD, Respondent,
v.
Gene T. SHELSTEAD, Respondent;
Carpenters Pension Trust for Southern California, Appellant.
No. D021205.
Court of Appeal, Fourth District, Division 1, California.
Nov. 20, 1996.
Review Granted Feb. 26, 1997.
Review Transferred Dec. 17, 1997.

Page 524

DeCarlo, Connor & Selvo and Margaret R. Gifford, Los Angeles, for Appellant.

No appearance for Respondent Wife.

No appearance for Respondent Husband.

Stanton, Kay & Watson, James P. Watson, Bruce K. Leigh, Van Bourg, Weinberg, Roger & Rosenfeld, San Francisco, as Amici Curiae on behalf of Appellant.

Michael C. Shea, Stephen Temko, Kim W. Cheatum, Frances L. Harrison, San Diego, Karen L. Handorf, Washington, DC, Paula J. Page, Oakland, and Barbara A. Matthews, Washington, DC, as Amici Curiae.

HALLER, Associate Justice.

Gene Shelstead earned pension benefits in Carpenters Pension Trust for Southern California (CPT), a multi-employer trust fund governed by the Employee Retirement Income Security Act of 1974 (ERISA). 1 In a dissolution action, Gene and his wife, Janet Shelstead, agreed to divide the future pension benefits equally and agreed that Janet had the right to bequeath her interest to a third party if she predeceased Gene. Janet obtained an order requiring CPT to comply with the parties' agreement. CPT appeals from that order.

CPT does not dispute that the parties' agreement and the court order are permissible under California law. CPT argues, however, that ERISA, as amended by the Retirement Equity Act of 1984, preempts our state's community property law and precludes the Shelsteads from agreeing to provide Janet with testamentary control over her community property portion of the pension benefits.

As explained below, the resolution of this issue depends on whether the court order affirming the Shelsteads' agreement is a "qualified domestic relations order" (QDRO). (§ 1056(d)(3)(A).) If the order is a QDRO, state law applies and we must affirm the order. If the order is not a QDRO, state law is preempted and the order is an invalid alienation of pension benefits.

CPT argues the court order is not a QDRO because (1) it provides a type or form of benefit not provided in CPT's plan; and (2) Janet's "successor in interest" is not an "alternate payee" within the meaning of ERISA. Based on our analysis of ERISA's statutory language, legislative history, and underlying public policy, we reject these arguments. We determine, however, the court order is not a QDRO to the extent it does not identify the name or address of Janet's successor in interest or the mechanism for determining an alternate successor. We reverse and remand for proceedings consistent with this decision.

FACTUAL AND PROCEDURAL BACKGROUND

Janet and Gene Shelstead married on June 16, 1973. During the marriage, Gene became a vested participant in CPT. Janet and Gene separated on November 17, 1992. During the subsequent marital dissolution action, the parties joined CPT as a party. The court entered a judgment of dissolution on August 30, 1993. The judgment awarded Janet one-half interest in the community portion of Gene's pension fund with CPT. The court determined the community property benefit reflected Gene's employment from January 16, 1973 through November 17, 1992.

Page 525

On February 1, 1994, the court signed a document entitled "Qualified Domestic Relations Order." The order stated the parties agreed that each would receive 50 percent of the community portion of Gene's CPT pension benefits. Paragraph 5 stated that:

"Commencing with the effective date of [Gene's] pension benefit, ... [CPT] shall pay to [Janet] each month [Janet's] share of pension benefit. The share payable to [Janet] shall continue to be paid to [Janet], or her designated successor in interest should [Janet] predecease [Gene], until terminated by [Gene's] death. [CPT] shall not be liable to [Gene] for any payments made to [Janet] before Trust receives written notice of [Janet's] death." (Italics added.)

After Janet served the order on CPT, CPT advised Janet that the order was not a QDRO since it required CPT to pay Janet's designated successor if she predeceased Gene. (See § 1056(d)(3)(G)(i)(II).) 2

Janet petitioned for an order to show cause, asking the trial court to order CPT to comply with the February 1 order. After a hearing, the court found the February 1 order was a QDRO and that the order "[did] not impose an excessive burden on [CPT]." The court awarded attorney fees of $2,000 against CPT.

CPT appeals, asserting the court erred in determining the February 1 order was a QDRO and in awarding attorney fees to Janet. Janet did not file a respondent's brief.

Because the issues raised by CPT are of first impression, we invited amicus curiae briefs from several family law and appellate organizations. The San Diego County Certified Family Law Specialists 3 responded and filed an amicus curiae brief supporting Janet's position below that the February 1 order is a QDRO. Two other organizations filed amicus curiae briefs: the United States Department of Labor (DOL) and a group of pension funds (Pension Funds). 4 The Pension Funds maintained that the February 1 order is not a QDRO. The DOL expressed its opinion that CPT's plan administrator should have qualified the February 1 order as a QDRO, but urged us to dismiss the appeal, asserting the trial court had no jurisdiction over the matter.

DISCUSSION

I. The February 1 Order is Proper Under California Law

Under California law, pension benefits earned through labor during a marriage are community property. (In re Marriage of Powers (1990) 218 Cal.App.3d 626, 635, 267 Cal.Rptr. 350.) Before 1986, the terminable interest rule governed the division of community property pension benefits in California. (Id. at p. 634, 267 Cal.Rptr. 350.) Under this rule, a nonparticipant spouse's interest in community property pension benefits did not extend to benefits payable after the death of either spouse. (Id. at p. 635, 267 Cal.Rptr. 350.) Thus, if the employee spouse died first, the nonemployee spouse could not claim an interest in the remaining community property pension benefits if the employee spouse designated a third party to receive the benefits after his or her death. (Ibid.) If the nonemployee spouse died first, his or her interest in the pension benefits terminated and the nonemployee spouse could not bequeath these benefits by will. (Ibid.)

Courts and commentators criticized the terminable interest rule as unfair because it resulted in an unequal division of community property benefits, depriving the nonparticipant spouse of his or her earned rights and

Page 526

creating an unfair windfall profit to the employee. (In re Marriage of Powers, supra, 218 Cal.App.3d at pp. 635-636, 267 Cal.Rptr. 350; In re Marriage of Taylor (1987) 189 Cal.App.3d 435, 440, 234 Cal.Rptr. 486; In re Marriage of Peterson (1974) 41 Cal.App.3d 642, 656, 115 Cal.Rptr. 184, [["Husband's] pension rights constitute a bundle to which [wife], as a partner in the community during the years of marriage contributed her equal share. Why should she be deprived of her right to any single stick in the bundle? [Citation.]"].)

To rectify the perceived injustice, in 1986 the California Legislature enacted former Civil Code section 4800.8 (section 4800.8), providing a "court shall make whatever orders are necessary or appropriate to assure that each party receives his or her full community property share in any retirement plan, whether public or private, including all survivor and death benefits...." In an uncodified section, the Legislature stated it intended to "abolish the terminable interest rule ... in order that retirement benefits shall be divided in accordance with Section 4800." (Stats.1986, ch. 686, § 2, p. 2313; see In re Marriage of Nice (1991) 230 Cal.App.3d 444, 451, 281 Cal.Rptr. 415; In re Marriage of Powers, supra, 218 Cal.App.3d at p. 636, 267 Cal.Rptr. 350.)

Under section 4800.8, a court had the authority to provide a nonparticipant spouse with testamentary control over his or her community property pension benefits. (In re Marriage of Powers, supra, 218 Cal.App.3d at pp. 634-646, 267 Cal.Rptr. 350; In re Marriage of Taylor (1987) 189 Cal.App.3d at pp. 440-441, 234 Cal.Rptr. 486.) In re Marriage of Powers applied section 4800.8 retroactively and affirmed a trial court's order directing the employer to pay to the wife's estate the wife's community interest in the husband-employee's non-ERISA retirement plan. (In re Marriage of Powers, supra, at pp. 634-646, 267 Cal.Rptr. 350; see In re Marriage of Nice, supra, 230 Cal.App.3d at p. 452, 281 Cal.Rptr. 415.) 5

Effective 1994, the Legislature repealed section 4800.8, but continued the code section in Family Code section 2610 without substantive change. Although Family Code section 2610 governs California law with respect to a nonparticipant spouse's right to testamentary control over his or her community portion of a pension benefit, this code section does not resolve the issue before us. That is because, as explained below, our federal government has preempted state law with respect to the division of community property pension benefits in an ERISA plan.

II. ERISA Preemption

ERISA is a comprehensive federal statutory scheme designed to promote the interests of employees and their beneficiaries in employee benefit plans. (Burch v. George (1994) 7 Cal.4th 246, 288, 27 Cal.Rptr.2d 165, 866 P.2d 92.) As originally enacted, ERISA contained a broad preemption clause, providing that ERISA provisions preempt any state law relating to an employee benefit plan. (§ 1144(a).) ERISA also contained an anti-alienation or spendthrift provision, stating "[e]ach...

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2 practice notes
  • Marriage of Shelstead, In re, No. S058114
    • United States
    • United States State Supreme Court (California)
    • December 17, 1997
    ...Respondent, v. Gene T. SHELSTEAD, Appellant. No. S058114. Supreme Court of California. Dec. 17, 1997. Prior report: Cal.App., 58 Cal.Rptr.2d 522. The above-entitled review is hereby transferred to the Court of Appeal, Fourth Appellate District, Division One, with directions to vacate its de......
  • Marriage of Shelstead, In re, No. S058114
    • United States
    • United States State Supreme Court (California)
    • February 26, 1997
    ...Respondent, v. Gene T. SHELSTEAD, Respondent. No. S058114. Supreme Court of California. Feb. 26, 1997. Prior report: Cal.App., 58 Cal.Rptr.2d 522. Petition for review Further action in this matter is deferred pending consideration and disposition of a related issue in Marriage of Oddino (S0......
2 cases
  • Marriage of Shelstead, In re, No. S058114
    • United States
    • United States State Supreme Court (California)
    • December 17, 1997
    ...Respondent, v. Gene T. SHELSTEAD, Appellant. No. S058114. Supreme Court of California. Dec. 17, 1997. Prior report: Cal.App., 58 Cal.Rptr.2d 522. The above-entitled review is hereby transferred to the Court of Appeal, Fourth Appellate District, Division One, with directions to vacate its de......
  • Marriage of Shelstead, In re, No. S058114
    • United States
    • United States State Supreme Court (California)
    • February 26, 1997
    ...Respondent, v. Gene T. SHELSTEAD, Respondent. No. S058114. Supreme Court of California. Feb. 26, 1997. Prior report: Cal.App., 58 Cal.Rptr.2d 522. Petition for review Further action in this matter is deferred pending consideration and disposition of a related issue in Marriage of Oddino (S0......

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