Yourko v. Yourko, Record No. 22039 (Va. Mar. 30, 2023)
The Supreme Court hands down a major family law case today, reversing the Court of Appeals’ published opinion. The question before the Court was whether federal law bars a spouse from agreeing to indemnify a former spouse if military retirement pay is reduced. TLDR: It doesn’t.
Facts. Wife and Husband negotiated the division of Husband’s military retirement benefits as part of their divorce proceedings. The agreement was memorialized in a Military Pension Division Order (MPDO), which the circuit court entered with the final divorce decree. The MPDO entitled Wife to 30% of Husband’s disposable military retired pay, or about $1,200. It also required Husband to indemnify Wife due to any reduction in this amount. Later, DFAS, the agency in charge of distributing military benefits, determined that Husband’s disposable pay was much smaller than the parties had calculated, and that most of his retirement benefits were disability pay, which is not divisible under federal law. This left Wife with monthly payments of only about $250.
No doubt delighted, Husband moved to reinstate the divorce proceedings, amend the final decree to reflect the lower disposable retired pay calculated by DFAS, and strike the indemnification provision of the MPDO as void and contrary to federal law. The proceedings were reinstated, but the trial court found that more than 21 days had passed since the order was entered, so it had no authority to amend it. Husband appealed.
The Court of Appeals disagreed, holding that because federal law preempted the indemnification provision, it was void ab initio and could be challenged beyond the 21-day deadline of Rule 1:1. Wife appealed.
Issue. Whether a veteran can contract with a former spouse to reimburse the spouse for any reduction in military retirement pay.
Holding. Federal law does not prevent former spouses from entering into an agreement to provide a set level of payments, even if that level is based on military retirement and disability benefits; nor does it prevent courts from enforcing indemnification provisions that ensure those payments are maintained as intended by the parties.
Notes. Some background is helpful. In McCarty v. McCarty, 453 U.S. 210 (1981), the United States Supreme Court ruled that courts could not include military retirement pay as part of judicially divisible property in a divorce proceeding. In response, Congress enacted the Uniformed Services Former Spouses’ Protection Act, 10 U.S.C. § 1408, which allowed courts to divide disposable military retired pay. So, while disposable military retired pay may be included as part of judicially divisible property in a divorce proceeding, disability benefits may not. In Howell v. Howell, 581 U.S. 214 (2017), the United States Supreme Court called out courts for trying to circumvent this rule by requiring veterans to reimburse a former spouse if the veteran opted to waive retired pay to receive the same amount of disability pay. The Court held that ordering reimbursement for a reduction in disposable retired pay is no different than directly dividing disability pay.
While the Virginia Court of Appeals relied on Howell , the Virginia Supreme Court found that Howell did not apply because it did not involve a property settlement agreement. It found that Howell is limited to those cases in which the court orders reimbursement. Here, the parties negotiated the reimbursement as part of a property settlement agreement (the MPDO), which must be treated as a contract. Thus, the court was only enforcing the terms of the parties’ agreement, not deciding itself how to distribute the parties’ property.
Federal law does not bar the parties from negotiating such an indemnification term either. There is no law or other authority that places any limitation on what a veteran can do with disability pay once they receive it. Further, in this case, nothing in the MPDO required that Husband use his disability pay to make up the difference; he had several other sources of income from which he could reimburse Wife.
Read the Opinion