Lady Justice behind a chain link fence with a blue sky backgroun

In 2024, the Colorado Court of Appeals continued the trend of not allowing any judicial relief when a military retirement shrinks due to either VA disability or a Chapter 61 disability retirement.

Before the U.S. Supreme Court’s Howell decision in 2017, Colorado was among the majority of states that required a military member to indemnify a former spouse when a military retirement was previously divided in a divorce, then later reduced due to a VA waiver. SCOTUS held that such indemnity provisions violated the federal statute preventing states from dividing retired pay.

Since that unanimous decision, Colorado has held that even an indemnification agreement in a divorce settlement was not enforceable. Most recently, in the 2022 Fisher decision, the court of appeals retroactively voided a judgment that a former spouse had obtained against a military retiree for unpaid VA waiver indemnity payments that were ordered and due even before the Howell decision was issued. See our blog post for more details on this retroactive voiding of judgments for VA waiver indemnity.

Void Order Not Enforceable with Contempt

The court’s reasoning in Fisher was that federal law withheld subject matter jurisdiction from state courts to order indemnity, so therefore, a judgment for indemnity payments was void for lack of jurisdiction, no matter when the payments were due. In that case, however, the retiree had filed a motion to void the judgment, which the court ultimately granted.

In a new decision from May 2024, the Court of Appeals took this principle one logical step further to hold that any agreement or order for payment from VA disability could not be enforced through contempt of court proceedings. The voiding (is that a word?) was automatic, even without a court order explicitly voiding it.

In Lloyd, the parties had a separation agreement from 2011 (i.e. before the 2017 U.S. Supreme Court’s Howell decision) wherein the military member agreed to pay the former spouse 25% of his military retirement, as well as 25% of any VA disability benefits received. (For the sake of simplicity, this post will refer to this clause as an indemnity provision, even though, in that case, the member had an obligation to pay for any VA disability received, even if his disability rating was 50% or higher so there was no VA waiver of retirement).

Paying Share of VA Disability is Dividing Them

Interestingly, the husband had previously filed a motion to set aside the requirement to pay the wife a portion of his VA disability payments because the provision was void for violating federal law. The trial court denied relief on the grounds that an agreement to pay a portion of VA benefits did not constitute an impermissible division of those benefits.

At his contempt hearing, the retiree argued the jurisdiction issue, asserting that the original requirement to pay the former spouse a share of the VA disability benefits was invalid as it was preempted by the Uniformed Services Former Spouses Protection Act (USFSPA), which prohibited dividing VA benefits. The trial court rejected that argument, and the court of appeals reversed:

“Applying the USFSPA here, the district court was preempted from approving the portion of the separation agreement that divided husband’s future military disability benefits. While we recognize that the parties entered into the separation agreement and asked the district court to approve it, the parties cannot confer subject matter jurisdiction on the district court to enter such an order. Thus, the court’s order concerning husband’s military disability benefits was entered without jurisdiction.”

Lloyd, ¶ 34 (Cleaned Up).

Cannot Enforce Unlawful Order

The next issue is whether an order that violates federal law can be enforced. Or, more specifically, can a court find a party “in contempt for violating a court order that was entered without jurisdiction” Lloyd, ¶ 35.

Normally, the answer is that unlawful orders must still be obeyed, and violations can be punished:

“A party generally must comply with even an unlawful order or risk being held in contempt because it is fundamental to our legal system that all orders and judgments of courts must be complied with promptly. If a person to whom a judge directs an order believes that order is incorrect the remedy is to appeal, but, absent a stay, he must comply promptly with the order pending appeal. Persons who make private determinations of the law and refuse to obey an order generally risk criminal contempt even if the order is ultimately ruled incorrect.”

Lloyd, ¶ 37 (Emphasis added) (Cleaned Up).

But not this time, when a trial court lacks jurisdiction over the issue:

“If the issuing court lacks subject-matter jurisdiction over the underlying controversy, then its order may be violated without the imposition of a contempt sanction. In such a case, the original order is deemed a nullity, and the accused contemnor cannot be fairly punished for violating nothing at all.”

Lloyd, ¶ 38 (Cleaned Up).
Dictionary entry for the word "Jurisdiction"

Object to Lack of Subject Matter Jurisdiction at Any Time

The fact that the husband did not timely appeal the original order to share his VA disability benefits was no barrier to objecting to jurisdiction at the contempt hearing – a party can still challenge the lawfulness of the underlying order at a later contempt hearing. Lloyd, ¶ 39.

The Takeaway on VA Disability Indemnity

As the Lloyd case recognizes, a party is normally required to obey even orders that the party believes are unlawful unless the order is timely appealed. Lack of jurisdiction is one of the very limited exceptions to that issue.

But does that mean a retiree can simply ignore an order to indemnify his/her former spouse for a VA waiver? In theory, yes, under the Lloyd ruling. But in reality, Dirty Harry’s question to a perpetrator comes to mind: “Do you feel lucky, punk?”

Rather than hoping that the trial court will agree the order is void and then risking the headaches and legal expenses of a contempt case, a smarter move would be to retain counsel and file a motion asking the court to declare the indemnity provision void first before you start unilaterally withholding court-ordered payments. Trying to interpret an order yourself and unilaterally decide it is unlawful is like playing with fire, and it may not end well.

Finally, I have to note that this decision only prohibits enforcing an order to divide VA disability payments as property. As we have discussed multiple times previously, disability benefits count as income for purposes of calculating child support or spousal maintenance, and those family support payments can be enforced against VA disability payments.

Order to Provide Documents Must be Specific

The Lloyd court also found the retiree in contempt for violating a provision of the separation agreement requiring him to provide “regular reports” of his military retired pay. But the agreement did not define what “reports” had to be provided, nor how “regular” they had to be. At the contempt hearing, the wife testified that she expected annual reports, while the husband testified he had “no idea” what that obligation actually meant.

The trial court held that this meant the retiree was obligated to provide the former spouse with any reports as he received them, but the court of appeals held that this interpretation effectively “supplemented” the written order. Lloyd, ¶ 19. The COA reversed on the grounds that there was no evidence as to what reports the husband was receiving that he failed to provide, nor when any such reports had to be provided.

Additionally, the wife complained that the husband did not provide her with any documents pertaining to his VA disability benefits, but the court of appeals reversed since the separation agreement required military retirement documents, and there were no findings explaining how VA disability documents were included in that definition. Lloyd, ¶ 23. Accordingly, on this portion of the contempt only, the appellate court remanded to the trial court for further findings.

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