Schwartz v. Bogen, Civil File No. 17-3329 (MJD/TNL)

• Decision Date: 28 November 2017
• Docket Number: Civil File No. 17-3329 (MJD/TNL)
• Parties: BRUCE G. SCHWARTZ, Plaintiff, v. ARDIS BOGEN f/k/a Ardis Schwartz, Defendant.
• Court: U.S. District Court — District of Minnesota

BRUCE G. SCHWARTZ, Plaintiff, v. ARDIS BOGEN f/k/a Ardis Schwartz, Defendant.

Civil File No. 17-3329 (MJD/TNL)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

November 28, 2017

MEMORANDUM OF LAW & ORDER

Michael D. Schwartz and Brandon M. Schwartz, Schwartz Law Firm, Counsel for Plaintiff.

Timothy A. Sullivan and Rebecca A. Chaffee, Best & Flanagan LLP, Counsel for Defendant.

I. INTRODUCTION

This matter is before the Court on Defendant's Motion to Dismiss. [Docket No. 8] The Court heard oral argument on November 16, 2017. Because this action is barred by res judicata, the Court grants the motion to dismiss.

II. BACKGROUND

A. Factual Background

1. The Parties' Marriage and Divorce

In 1952, Plaintiff Bruce G. Schwartz married Defendant Ardis Bogen. (Compl. ¶ 15.) In 1953, Schwartz began working for Northwestern Bell Telephone Company. (Id. ¶ 2.) Eventually, he became the Chief Operating Officer for Pacific Bell and, then, he became an officer of AT&T. (Id. ¶¶ 3-4.)

Schwartz is a participant or beneficiary under the AT&T Basic Bell System Management Pension Plan ("Pension Plan"). (Compl. ¶ 5.) The Pension Plan is subject to ERISA, which became effective in 1974. (Compl. ¶ 6.) The Pension Plan provides: "Assignment or alienation of pensions under this plan will not be permitted or recognized unless or otherwise required under applicable law." (Compl. ¶ 14.)

On May 5, 1981, Schwartz and Bogen entered into a Marital Property Settlement Agreement ("MPSA") in the State of New Jersey, under which both waived and released all rights to equitable distribution under New Jersey law. (Compl. ¶ 16; Schwartz Aff. ¶11; Schwartz Aff., Ex. 2, MPSA ¶ 34(v).) Under the MPSA, Schwartz would pay Bogen alimony on the first day of every month "until the Husband shall retire from American Telephone & Telegraph Company, its affiliates or subsidiaries." (MPSA ¶ 3.)

Upon the Husband's retirement from American Telephone & Telegraph Company, or its affiliates or subsidiaries, the amount payable as alimony and support of the Wife as set forth in paragraph 3 shall cease. In lieu thereof, the Husband shall pay to the Wife, as and for her alimony and support, a sum equal to fifty (50%) of the Husband's basic Bell System Management Pension Plan, at the date of retirement. Said payment shall be made by Husband by check or money order at the residence of the Wife or at any place she may designate, in writing to the Husband. Said payment shall be payable in monthly installments on the first day of each month.

(MPSA ¶ 4.)

The MPSA further provides: "The Husband's obligation to pay alimony and support to the Wife shall cease upon her death, the death of the Husband, or upon the Wife's remarriage, whichever event is earlier." (Id. ¶ 5.)

In 1983, Schwartz and Bogen were divorced in the State of New Jersey. (Compl. ¶ 17; Sullivan Aff., Ex. 2, Final Judgment of Divorce.) The Final Judgment of Divorce was entered on July 1, 1983, and incorporated the MPSA, as modified in the Final Judgment of Divorce. (Final Judgment of Divorce at 2.) The modification of the MPSA stated, in relevant part:

(A) In the event Wife remarried, the obligations of Husband to pay Fifty (50%) percent of the Husband's Basic Bell System Management Pension Plan shall terminate.

* * *(C) In the event Wife marries after January 1, 1986, but on or before December 31, 1990, Husband shall pay Wife as equitable distribution, a yearly sum equal to twenty (20%) percent of Husband's Basic Bell System Management Pension Plan, computed at the value of said Basic Pension Plan on January 1, 1986.

* * *

(E) In the event Wife married after December 31, 1995, she shall not be entitled to any portion of Husband's Basic Bell System Management Pension Plan.

(F) The Husband's obligation under paragraphs A through D, inclusive, shall terminate upon his death or the death of Wife. . . . .

(Final Judgment of Divorce at 3.)

In 1985, Schwartz retired from AT&T. (Compl. ¶ 18.) Neither Schwartz nor Bogen made a request for a qualified domestic relations order ("QDRO") in 1985. (Id.)

In 1989, Bogen remarried. (Compl. ¶ 19.) Neither Schwartz nor Bogen made a request for a QDRO in 1989. (Id.) After Bogen's remarriage, she filed tax returns declaring the payments from Schwartz as alimony. (Id. ¶ 23.)

From 1989 through March 2016, Schwartz made payments to Bogen. (Compl. ¶¶ 20-21.) Both Schwartz and Bogen reported the payments as alimony on their federal tax returns. (Id. ¶¶ 22-23.) The payments were sent to Bogen in Minnesota. (Schwartz Aff. ¶ 19.)

In March 2016, Schwartz contacted Bogen and told her that he realized that under the terms of the MPSA and the Final Judgment of Divorce he should have stopped making the alimony and support payments in 1995 because she had remarried. (Compl. ¶ 24; Schwartz Aff. ¶ 23; Schwartz Aff., Ex. 6.) On August 3, 2016, Bogen, through her attorney, retorted that the alimony payments were not alimony but rather, were an equitable distribution of the Pension Plan. (Compl. ¶ 24; Schwartz Aff., Ex. 7.) In an August 25, 2016 letter, Bogen opined that, because the decree and modification of property settlements between Schwartz and Bogen were negotiated and entered before the Retirement Equity Act of 1984, "the division of the pension was done without a QDRO." (Id.)

2. New Jersey Action

On October 11, 2016, Bogen, through counsel, filed a Motion for Enforcement of Litigant's Rights in the Superior Court of New Jersey, Chancery Division, Family Part, requesting that Schwartz be compelled to pay 20% of his Pension Plan in monthly payments of $1,426.32 per month. (Compl. ¶ 31; Sullivan Aff., Ex. 4.) Schwartz, through counsel, argued that the anti-alienation provisions of ERISA prevented Bogen from sharing his pension and entitled him to a refund of money already paid. (Sullivan Aff., Ex. 5.) He explicitly arguedthat there was no QDRO to divide his pension, and, without a QDRO, the Pension Plan could not be divided. (Id.) He also asserted that ERISA preempted state law with respect to the pension. (Id.)

On January 27, 2017, the New Jersey court ruled that laches barred Schwartz's request for a refund of the money paid to Bogen since 1995. (Sullivan Aff., Ex. 3, New Jersey Order at 8.) The court further held that the pension plan payments were an equitable distribution, not alimony. (Id. at 11.)

The court also held:

And Plaintiff's argument that he was awarded the entirety of the pension plan pursuant to Paragraph 8 of the PSA is unsupported by the schedule attached to the PSA. Schedule B reveals that securities, investment properties, and partnership interests were included in it, but there was no mention of a pension plan. And even if the pension plan was listed on the Schedule B, by entering the subsequent MPSA Plaintiff agreed to pay Defendant a portion of his pension as equitable distribution, superseding anything to the contrary in the original PSA.

As to Plaintiff's ERISA argument, Section 206(d)(1) of ERISA states that '[e]ach pension plan shall provide the benefits provided under the plan may not be assigned or alienated.' And Plaintiff's pension plan does in fact prohibit assignment or alienation of pensions or other benefits of his plan. However, pursuant to Biles v. Biles, 163 N.J. Super. 49, (Ch. Div. 1978), this restriction was not intended to prevent the assignment to a spouse or former spouse that is entitled to support. Indeed,Balancing the interest of a recipient of pension benefits in keeping those benefits entirely to himself against the interest of a former spouse in enforcing an order of support leads to the conclusion that the objective of ERISA is not frustrated by state laws enforcing support obligations.

Id. at 56.¹ Therefore, Plaintiff is not prohibited from assigning any benefit he may receive to Defendant to satisfy his equitable distribution obligation against her.

Lastly, at oral argument Defendant asserted that Paragraph 4(F) of the MPSA evidences that these payments were alimony and not equitable distribution because they terminate at the death of either party. The Court rejects this argument because there is no bar on contracting for termination of equitable distribution on death. SeeConnor v. Connor, 254 N.J. Super. 591 (App. Div. 1992) and Moore v. Moore, 114 N.J. 147 (1989) authorizing payment of equitable distribution in installments and in the case of Connor a termination upon death.

(New Jersey Order at 11-12.)

The New Jersey court awarded Bogen $15,689.52 in back pension-sharing payments, ordered Schwartz to continue paying $1,426.32 per month in pension-sharing payments going forward, and awarded Bogen attorneys' fees and costs. (New Jersey Order at 12, 14.) Schwartz did not appeal the New Jersey court order.

3. Parties' Current Domiciles

Schwartz now resides in Carbondale, Colorado. (Compl. ¶ 1; Schwartz Aff. ¶ 1.)

According to the Complaint, Bogen resides in Bloomington, Minnesota. (Compl. ¶ 7.) Schwartz avers that Bogen owns and lives in a home in Bloomington, Minnesota that she purchased in July 2003. (Schwartz Aff. ¶ 7; Schwartz Aff., Ex. 1, 2017 Property Tax Statement.) Schwartz avers that, at Bogen's direction, he has sent the payments to that residence in Bloomington, Minnesota, and Bogen has personally signed receipts for those payments received in Minnesota at that residence. (Schwartz Aff. ¶ 27.) Bogen deposited the payments from Schwartz in her bank in Minnesota, including payments made in 2017. (Schwartz Aff. ¶ 29.)

Bogen's attorney avers: "I have seen Ms. Bogen's driver's license which is from the State of Arizona establishing her residency in that state." (Sullivan Aff. ¶ 2.)

B. Procedural History

On July 26, 2017, Schwartz filed a Complaint against Bogen in this Court. [Docket No. 1] The Complaint asserts: Count 1: Recovery of Payments inViolation of ERISA and REA; and Count 2: Declaration of Federal Preemption under ERISA and REA.

Bogen has now filed a motion to dismiss based on failure to state a claim, res judicata, collateral estoppel,...