Stephens v. Alliant Techsystems Corp., 714 F. App’x 841 (10th Cir. 2017) (unpublished)
(a) Facts: A husband divorced in Utah. A Utah state court entered at least two DROs dividing retirement benefits, each time reserving jurisdiction to amend the order in the future. The plan qualified the DROs.
The husband retired, and the plan administrator, Fidelity Investments, started sending him checks. “But rather than cash the checks, Stephens returned the unopened envelopes to Fidelity” on the ground that a QDRO “entered in his Utah divorce case rendered him liable for any amounts intended for his ex-wife (who was awarded a portion of the benefits) but accidentally mailed to him.” 714 F. App’x at 843.
Fidelity kept sending checks, and the husband kept returning them. Finally, Fidelity sent a large check for $152,890.38 for all benefits due up to that point. Fidelity also sent a 1099-R Form reporting the payment to the IRS as income. The husband returned the check and filed a pro se action against Fidelity in federal court, seeking to cancel the 1099-R Form on the basis that no money had been distributed to him.
The husband further asked the federal court to hold that the most recent Utah QDRO violated ERISA and “to adopt a prior QDRO (with certain modifications) and enter various orders to implement it.” Id. at 846.
The District Court entered summary judgment against the husband, and the husband appealed.
(b) Issues: (1) Was the 1099-R Form void, and (2) was the husband entitled to the orders he sought?
(c) Answer to Issues: No on both points.
(d) Summary of Rationale: The court lacked jurisdiction to rule on whether the1099-R Form was void, as a declaratory judgment action is not proper to determine a party’s tax liability. See also Sterling Consulting Corp. v. United States, 245 F.3d 1161, 1166 (10th Cir. 2001) (reaching the same result).
The order requested by the husband could not be entered, as a federal court lacks jurisdiction to enter DROs:
Stephens’ proposed amendment raised an additional claim that parts of the QDRO violated ERISA. To remedy this violation, Stephens asked the district court to adopt a prior QDRO (with certain modifications) and enter various orders to implement it. The district court found it could not give Stephens the relief he sought because (1) the Utah state court that entered the QDRO explicitly reserved jurisdiction to modify it, see R. Vol. I at 357, and (2) QDROs are not subject to ERISA’s preemption provision, see 29 U.S.C. § 1144(b)(7).
Stephens does not meaningfully contest either point. Additionally, the QDRO was part of Stephens’ divorce decree, see R. Vol. I at 353, and Stephens fails to explain why the “domestic relations exception” to federal jurisdiction did not prevent the district court from modifying and reissuing a part of his divorce decree, see Leathers v. Leathers, 856 F.3d 729, 756 (10th Cir. 2017) (“The domestic relations exception divests federal courts of the power to issue [or modify] divorce . . . decrees.”).
Stephens, 714 F. App’x at 846.
Observation: It seems doubtful that the husband in Stephens can avoid liability under state law for the wife’s share of his pension simply by refusing to accept checks. But that issue is outside the scope of this outline.
Question: Stephens is an odd case brought by a pro se litigant, who was quickly denied relief. But it is worth asking a deeper question about the case.
The husband in Stephens argued expressly that parts of a QDRO violated ERISA. This is exactly the same argument made by the plan in Garcia-Tutupu. The argument worked in Garcia-Tutupu; it failed in Stephens. Why?
More specifically, Stephens held that the QDRO was a matter for the Utah state courts, and the husband must raise his concerns there. But the wife in Garcia-Tutupu made the same argument, claiming that the QDRO there was a matter for the Massachusetts state courts. Why was the federal court so quick to accept jurisdiction in Garcia-Tutupu and so quick to give away jurisdiction in Stephens?
The answer is most likely found in comparing the orders. There is no suggestion in Stephens that any Utah QDRO was at all problematic. The opinion does not say exactly why the husband claimed that the order violated ERISA, but it is a fair inference from the lack of detail, combined with the fact that the husband was a pro se litigant, that his argument was probably weak. By contrast, the DRO in Garcia-Tutupu was both procedurally and substantively irregular, and the arguments against it were very strong.
If the reasoning of Garcia-Tutupu is applied vigorously in future cases, it is going to be a lot harder to resolve much weaker claims, such as the claim made in Stephens. The author agrees with the results in both cases; they are both at opposite poles of the QDRO spectrum. Garcia-Tutupu is a case that warranted careful review; Stephens is a case that did not. But it is important that the searching review of Garcia-Tutupu not be applied too broadly.