Does the Uniformed Services Former Spouses’ Protection Act preempt state domestic relations law when a veteran waives part of his military retirement pay in order to receive veterans’ disability benefits and an ex-spouse seeks to collect reimbursement for the resultant decrease in her court-ordered half of his retirement pay, as ordered at the time of divorce?
In this case, the Supreme Court will decide whether the Uniformed Services Former Spouses’ Protection Act (“USFSPA”) overrides state domestic relations law. In deciding this matter, the Court will determine whether a divorced veteran, who waives a portion of the total allocated military retirement pay (“MRP”) in order to receive disability benefits, must reimburse an ex-spouse for lost MRP when there exists a divorce decree ordering the equal division of the full MRP between the parties. Petitioner John Howell argues that the USFSPA overrides an Arizona divorce court order granting fifty percent of his MRP to his ex-wife, Respondent Sandra Howell, as the parties agreed during their divorce, without regard for Mr. Howell’s subsequent disability waiver. Mr. Howell contends that, because the court order directly conflicts with the USFSPA and its objectives, the court order is not legally valid. Respondent Sandra Howell counters that the divorce court’s order is valid because there is no direct conflict between the order and the USFSPA. This case will clarify the scope of the Military Powers Clauses and the Supremacy Clause for cases involving veterans’ benefits and domestic relations issues that have been traditionally left to the states to regulate, such as divorce. This case will also address the effects on retired and active-duty military personnel as well as their ex-spouses in navigating disability payments, partially-waived MRPs, and divorce decrees that allocate a portion of pre-waiver MRP to the ex-spouse.
Questions as Framed for the Court by the Parties
Whether the Uniformed Services Former Spouses’ Protection Act preempts a state court’s order directing a veteran to indemnify a former spouse for a reduction in the former spouse’s portion of the veteran’s military retirement pay, where that reduction results from the veteran’s post-divorce waiver of retirement pay in order to receive compensation for a service-connected disability.
Petitioner John Howell and Respondent Sandra Howell, residents of Arizona, divorced in 1991. Mr. Howell, who was anticipating retiring from the Air Force shortly after the divorce, came to an agreement with Ms. Howell to equally divide with her his military retirement pay (“MRP”). Consistent with the Howells’ agreement, the divorce decree stated that “[Ms. Howell] is entitled to and is awarded as her sole and separate property FIFTY PERCENT (50%) of [Mr. Howell’s] military retirement when it begins through a direct pay order.” Mr. Howell and Ms. Howell started to receive MRP following Mr. Howell’s retirement in 1992.
In 2005, the Department of Veteran Affairs (“VA”) determined that Mr. Howell qualified for tax-exempt disability payments, issued on a monthly basis and increasing yearly, due to a disease incurred as a result of his time in the military. Complying with 38 U.S.C. §§ 5304 and 5305 that prohibit veterans from collecting both MRP and disability payments, Mr. Howell chose to offset his total MRP by an amount equivalent to his disability pay. As a result, Ms. Howell’s MRP share decreased by $127.55 per month, a portion equal to 50% of what Mr. Howell waived in order to receive the disability pay.
In 2013, Ms. Howell filed a motion in Arizona state court requesting equal distribution of the total MRP as ordered in the divorce decree. Ms. Howell argued that she had a claim to 50% of Mr. Howell’s full MRP regardless of the amount that Mr. Howell waived as disability pay. In opposition, Mr. Howell contended that, under Arizona Revised Statute § 25-318.01, he did not have to compensate Ms. Howell for loss of her MRP share due to his disability claim. The family court granted Ms. Howell’s motion, holding that Ms. Howell had a vested interest in the MRP. The family court ordered that Ms. Howell receive compensation for her decrease in MRP since December of 2011, as far back as the doctrine of laches would allow, and maintained that Mr. Howell must ensure that Ms. Howell receives her “full” 50% share on all future MRP disbursements. The court of appeals affirmed on the grounds that Ms. Howell’s claim is a post-decree enforcement proceeding and thus not barred under A.R.S. § 25-318.01.
On appeal, the Arizona Supreme Court affirmed. The court found that there is a presumption against preemption and that no federal case or statute, including the Uniformed Services Former Spouses’ Protection Act (“USFSPA”) or Mansell v. Mansell, 490 U.S. 581 (1989), preempts the family court’s decision to allow Ms. Howell to be compensated for her missing MRP shares due to “a post-decree waiver of MRP made to obtain disability benefits.” The court further concluded that A.R.S. § 25-318.01 does not bar Ms. Howell’s vested property right in receiving her MRP. The United States Supreme Court granted certiorari on December 2, 2016.
DOES THE PRESUMPTION AGAINST PREEMPTION APPLY IN THIS CASE?
Mr. Howell argues that the Court need not consider whether the presumption against preemption applies in this case. To support this argument, Mr. Howell notes that in Hillman v. Maretta, 133 S. Ct. 1943 (2013), the Court stated that family law is not insulated from preemption and that “state laws governing the economic aspects of domestic relations must give way to clearly conflicting federal enactments.” According to Mr. Howell, because the Arizona divorce court’s order stands in clear conflict with the Uniformed Services Former Spouses’ Protection Act (“USFSPA”), the USFSPA must preempt the order. However, Mr. Howell also asserts that if the Court does consider the presumption against preemption, it should hold that it does not apply in this case for four reasons. First, Mr. Howell argues that the presumption does not apply here because the Court held in Mansell v. Mansell, 490 U.S. 581 (1989), that federal law completely preempts all state law unless a federal statute affirmatively confers power on state divorce courts, and the USFSPA does not provide this power. Second, Mr. Howell claims that the presumption does not apply in areas of strong federal interest and he asserts that there is a strong federal interest in regulating military benefits and veterans’ rights. Third, Mr. Howell contends that the presumption does not apply in areas where there is a history of significant federal presence, and he notes a number of federal statutes regulating military benefits to support his claim that there is significant federal presence in this area. Fourth, Mr. Howell argues that the presumption does not apply in this case because it is based on the incorrect assumption that Congress does not intend to regulate family law.
In contrast, Ms. Howell argues that the presumption against preemption does apply in this case because the USFSPA does not expressly preempt state law and because Mansell did not hold that all federal law preempts all state law unless a federal statute confers power on state divorce courts. Instead, Ms. Howell contends that Mansell stands for the narrower rule that the USFSPA does not grant states the power to treat the military retirement pay (“MRP”) that a veteran waives to receive disability benefits as property divisible upon divorce. Thus, Mansell leaves room for the Court to apply other aspects of domestic relations law, including the rule that regulation of such relations is primarily left to the states, Ms. Howell asserts. Given this rule, Ms. Howell argues that there is a strong presumption against federal preemption of state law governing domestic relations. Ms. Howell also asserts that the Court’s deference to Congress in matters regarding the military and the history of significant federal presence in military disability and retirement benefits does not negate the presumption against preemption of state domestic relations laws.
DOES THE USFSPA PREEMPT THE DIVORCE COURT’S ORDER?
Mr. Howell argues that the USFSPA preempts the Arizona divorce court’s order under either of two legal standards for preemption—first, whether the state law directly contradicts the federal statute, or second, whether the state law is an obstacle to the accomplishment and execution of Congress’s purposes and objectives. Mr. Howell first asserts that when the USFSPA authorizes a divorce court to treat disposable MRP as community property divisible upon divorce, it excludes amounts of MRP that a veteran waived to receive disability pay. Mr. Howell then contends that the divorce court’s order directly contradicts the USFSPA when it orders him to “ensur[e] [Ms. Howell] receive[s] her full 50% of the military retirement without regard for the disability waiver.” Further, Mr. Howell claims that the divorce court’s requirement that he reimburse Ms. Howell for the MRP waiver is the same thing as dividing waived MRP. Mr. Howell also maintains that Ms. Howell’s analysis regarding her vested interest in the MRP does not overcome federal preemption because the Court held in Mansell that federal law prohibits the creation of such a vested interest.
Alternatively, Mr. Howell argues that the divorce court’s order conflicts with the purposes and objectives of the USFSPA. Mr. Howell states that “it is beyond dispute” that Congress’s purpose and objective was to prevent state courts from dividing waived MRP. Mr. Howell contends that even if there is a technical distinction between an order dividing waived MRP and an order to reimburse an ex-spouse for waived MRP, these two orders accomplish the same thing, and thus they both defeat the USFSPA’s purpose and objectives. Mr. Howell also points to what he claims is a second, related purpose for the USFSPA—to ensure that after a divorce, disabled veterans keep all of their disability pay. Mr. Howell then argues that the Arizona divorce court’s reimbursement order defeats this purpose because it is the economic equivalent of dividing Mr. Howell’s disability pay.
However, Ms. Howell argues that the USFSPA does not preempt the Arizona divorce court’s order because the order does not directly contradict the USFSPA. Ms. Howell contends that the standard for determining whether there is a direct contradiction is more stringent than Mr. Howell asserts. Ms. Howell looks to precedent to claim that a mere conflict in words between federal and state law is not sufficient, and instead, “[s]tate family and family-property law must do ‘major damage’ to ‘clear and substantial’ federal interests” before there is preemption. Ms. Howell then argues that there is no conflict in this case because the USFSPA authorizes agreements between spouses to divide MRP and it authorizes state courts to enforce and modify these agreements. Further, Ms. Howell contends that earlier cases regarding USFSPA did not affect contracts between spouses and the application of state law to them or the creation of a spouse’s vested interest in MRP under state law. Ms. Howell then argues that because the USFSPA lacks a positive provision compelling the extension of the statute’s protection of waived MRP to MRP that has vested in the veteran’s spouse before any waiver, a court cannot extend this protection to the latter form of MRP. Thus, there is no conflict between the USFSPA and the divorce court’s order requiring Mr. Howell to reimburse Ms. Howell for her vested interest in the pre-waiver MRP, Ms. Howell contends.
Ms. Howell also argues that the divorce court’s order does not conflict with the purposes and objectives of the USFSPA. Ms. Howell looks to legislative history and other provisions of the statute to contend that the primary purpose of the USFSPA is to benefit the veteran’s spouse. Further, Ms. Howell claims that the protection of a veteran’s disability benefits was not an expressly stated objective of the USFSPA. Thus, Mr. Howell is wrong when he states that the statute’s purpose is to ensure that veterans keep all of their disability pay, Ms. Howell asserts. Given the purposes that Ms. Howell advances, she argues that requiring a veteran to honor an agreement to divide MRP with an ex-spouse does not conflict with the USFSPA. Further, Ms. Howell claims that the divorce court’s order does not do major damage to the clear and substantial federal interest in providing for retired military members. According to Ms. Howell, even if a purpose of the USFSPA was to ensure that veterans keep all of their disability pay, the divorce court’s order does not conflict with this purpose because it does not require reimbursement from any particular source of funds, such as disability benefits.
DOES THE USFSPA DISTINGUISH BETWEEN PRE-DIVORCE AND POST-DIVORCE MRP WAIVERS?
Mr. Howell argues that the USFSPA does not distinguish between MRP waivers that occur before a divorce and those that occur after. Mr. Howell supports this argument by noting that nothing in the statute’s text suggests that these waivers are different. In addition, Mr. Howell contends that there is no practical distinction between a prohibited division of waived MRP in an original order and division of waived MRP in a modified order.Mr. Howell also claims that distinguishing between a veteran who waives MRP before a divorce and one who waives MRP after a divorce does not further the USFSPA’s purpose of ensuring that veterans keep all of their disability pay.
Ms. Howell counters that the USFSPA does distinguish between pre-divorce and post-divorce waivers. Ms. Howell notes that the statute allows courts to divide two distinct categories of MRP—total MRP and total MRP less the amount waived to receive disability benefits. Ms. Howell contends that the use of the past tense in the second category means that the statute only applies to waived MRP when the waiver occurred before the divorce. Ms. Howell then claims that the timing of the waiver is relevant because under Arizona law, when MRP is divided before a waiver, a veteran’s spouse has a vested right to receive his or her share of MRP.
PREEMPTION AND THE SCOPE OF THE MILITARY POWERS CLAUSES
Mr. Howell argues that the Uniformed Services Former Spouses’ Protection Act (“USFSPA”) preempts state domestic relations law. As a result, Mr. Howell contends that the family law court in Arizona overstepped its authority when it ordered Mr. Howell to give 50% of his total pre-waiver MRP, essentially 50% of his disability payments, to Ms. Howell. Mr. Howell claims that it would be a burden on disabled veterans to require them to reimburse ex-spouses from the veterans’ own assets, since the Department of Veteran Affairs (“VA”) will not subdivide and recalculate post-waiver MRPs and disability to send to the ex-spouses directly. The Veterans of Foreign Wars (“VFW”) and Operation Firing for Effect (“OFFE”) suggest that the Military Powers Clauses in Article I of Section 8 of the U.S. Constitution grant Congress full discretion to regulate MRP and disability for veterans. The VFW and OFFE further argue that Arizona violated the Supremacy Clause when it failed to defer to Congress’ war powers and ignored USFSPA preemption of state domestic relations law.
In contrast, Ms. Howell argues that the states should be left to regulate domestic relations issues, including those involving military matters. She argues that the regulation of domestic relations lacks federal interest and does not include any unique federal characteristics, which together favor a “strong” presumption against federal preemption of state domestic relations law. Ms. Howell maintains that this presumption against preemption withstands Congress’ interest in regulating military matters, suggesting that Congress has allowed states “to treat MRP as community property” and has not “expressly” preempted any “related family property laws.” She further argues that any preemption by USFSPA over agreements between spouses as to the division of property, falling under contract law which has been traditionally left to the states, would undermine the unique “policies and values” characteristic of community property states such as Arizona. She argues that application of the USFSPA would undermine the freedom of spouses to form a contract dividing property, and any subsequent deprivation of a spouse’s vested property interests as a result of the contract would violate the spouse’s due process protections.
EFFECT ON RETIRED AND ACTIVE-DUTY MILITARY PERSONNEL & THEIR FORMER SPOUSES
Mr. Howell argues that, following the Arizona Supreme Court’s decision distinguishing MRP waivers prior to divorce from those post-divorce, active-duty military personnel would not be protected under the USFSPA. Mr. Howell suggests that, by not applying the USFSPA, Arizona has left open a loophole that would allow courts to order active-duty military personnel in divorce proceedings to give ex-spouses a portion of any future MRP. Mr. Howell argues that, upon retirement, the veteran would be vulnerable to MRP reimbursement claims brought by the ex-spouse if the veteran later claims disability and waives a portion of the MRP. Mr. Howell contends that hinging claims based on the timing of the divorce and the MPR waiver request would create a system of perverse incentives and results, to include: relying on the “famously dysfunctional nature of the VA benefits process,” favoring ex-spouses from shorter marriages, favoring ex-spouses whose spouse was not on disability during the marriage, and encouraging spouses to divorce quickly in order to take advantage of the MRP loophole. The VFW and OFFE also argue that disabled veterans, who voluntary served their country and were wounded as a result of their military service, deserve protection under the Necessary and Proper Clause and should not have their disability payments or potential for a comfortable future jeopardized because of the USFSPA loophole.
In contrast, Ms. Howell argues that MRP, as a type of “deferred compensation” that is earned throughout the course of the marriage, constitutes marital property. Ms. Howell contends that MRP waivers made after a divorce cannot divest the non-military ex-spouse from receiving what had become a vested property interest at the time of the divorce. Ms. Howell suggests that, regardless of the spouse’s status as a veteran or on active-duty, Arizona state law furthers the interests of USFSPA in ensuring ex-spouses get continual MRP as ordered by the divorce decree. Likewise, the United States argues that Arizona law is beneficial to the parties and promotes the interests of the state, namely to “improve certainty, maintain equity, and promote finality” during and after the divorce.
- Amy Bushatz, Supreme Court May Change Divorce Pension Payments, Military.com (Dec. 8, 2016).
- Damien McKinney, The United States Supreme Court Agrees to Review a Military Retirement Issue in a Divorce Case: What Does This Mean for Your Military Retirement?, McKinney Law Group: Blog (Jan. 19, 2017).
- Christopher Hildebrand, Division of Military Retirement and Disability Payments in an Arizona Divorce, Hildebrand Law: Blog (Dec. 22, 2015).