In 2017, the U.S. Supreme Court unanimously held that, because federal law prohibits state courts from dividing VA disability payments, states are similarly prohibited from ordering retirees to indemnify former spouses when those disability payments result in a waiver of military retirement (aka a “VA Waiver”). Howell.1Howell vs. Howell, 137 S.Ct. 1400 (2017). For a comprehensive discussion of VA disability and the VA waiver, see our article “VA Disability in a Divorce” in the Military Divorce Guide.
Family law attorneys and courts have applied the Howell decision to cases which followed, and orders to indemnify which were common prior to Howell are now gone. But the question left unanswered by Howell and the military retirement decisions which followed is whether Howell should apply retroactively to orders to indemnify which were issued prior to that decision.
Trial Court Ordered Indemnity for VA Waiver, then Set Aside Order
And now the Colorado Court of Appeals, in an unpublished decision, has held that Howell applies retroactively to indemnity for a VA waiver of retirement. In Fisher,2In re: Marriage of Fisher (Colo.App. 2022) (Unpublished decision) the wife was awarded a 37% share of the husband’s military retirement at dissolution in 1997.
The same year, the husband began receiving veterans administration disability payments, resulting in a VA waiver of a portion of his military retirement. He did not repay the wife for the reduction in the retirement payments to her as a result of the VA waiver, and in 2014 the trial court granted the wife’s motion for indemnity to enforce the retirement division.
The husband still did not pay the indemnity ordered, and in 2017 the trial judge granted the wife’s motion for a $62,000 judgment against the husband for the missing indemnity. In 2018, after the wife sought to enforce the judgment, the husband submitted a pro se letter objecting, and in 2020, he finally retained counsel and moved to set aside the 2017 judgment as a violation of Howell.
The trial court granted the husband’s motion, setting aside the order, and the wife appealed. The Court of Appeals upheld the trial court’s order, in a ruling which has potentially major implications for thousands of cases in Colorado.
No Deadline for Motion when Order to Indemnify is Void
The first issue in Fisher was whether or not Howell voided pre-existing orders for indemnity for a VA waiver, or simply rendered those orders erroneous under the changed law. This distinction is important – normally under Colo. R. Civ. P. 60(b), a motion to set aside a judgment must be made within a “reasonable time” and given that the husband waited almost three years from the date of the judgment to filing his motion, he likely did not satisfy that requirement (for more information about the grounds, and deadlines, to modify a property settlement, see our article in the Colorado Family Law Guide).
However, “a judgment that is void for lack of subject matter jurisdiction may be challenged at any time.” Fisher.3In re: Marriage of Fisher, ❡ 9 (Colo.App. 2022) (Unpublished decision) This means, in effect, that there is no deadline for a party to file a motion alleging that an order should be set aside as void pursuant to Colo. R. Civ. P. 60(b)(3).
The Court of Appeals rejected the wife’s argument that the indemnity order was merely erroneous, as opposed to void:
“Thus, Howell holds that state courts are “completely” preempted from dividing such waived retirement benefits and from ordering a spouse to reimburse or indemnify the other spouse for the waived benefits….
Because an order dividing military disability benefits or requiring indemnification or reimbursement for waived retirement benefits is preempted by federal law, a state court lacks subject matter jurisdiction to enter or enforce such an order.”Fisher.4In re: Marriage of Fisher, ❡❡ 12-13 (Colo.App. 2022) (Unpublished decision).
The Uniformed Services Former Spouses Protection Act limits how states may divide military retirements upon divorce. While some states view this as a mere limitation, which means challenges must be timely, Colorado has long held that the statute limits the court’s subject matter jurisdiction.
Howell Retroactively Voids Indemnity Orders
OK, so an order to indemnify for a VA waiver is void. Does that mean a military retiree can set aside the judgment years later, simply because of court decisions issued years after the divorce? In other words, does Howell apply retroactively?
The Fisher court held that Howell‘s prohibition on indemnity for a VA waiver does apply retroactively to orders issued before Howell:
“Even if Howell changed Colorado law, however, because it constitutes a controlling interpretation of federal law, it applies retroactively. See Harper v. Va. Dep’t of Tax’n, 509 U.S. 86, 97 (1993) (“When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.”)”Fisher.5In re: Marriage of Fisher, ❡ 21 (Colo.App. 2022) (Unpublished decision).
Impact on Pre-Howell VA Waiver Indemnity Orders
So where do we go from here? If you are a retiree or former spouse in a divorce which has a pre-Howell indemnity order for a VA waiver, is that order now void?
First, it is worth noting that Fisher was not a published decision. So while it’s binding on the specific litigants involved in the case, it’s not binding precedent on trial courts throughout Colorado. Instead, it is persuasive authority, much like an out-of-state decision. Patterson.6Patterson v James, 2018 COA 173. So a military retiree who is paying indemnity for a VA waiver to a former spouse based upon a pre-Howell order cannot simply count on Fisher and decide the order is void and need not be followed, unless he really doesn’t mind facing contempt of court charges.
If a retiree files a motion to set aside an indemnity order, relying upon Fisher, if the court follows that decision, then it appears certain that the trial court is required to cancel any future indemnity payments owing.
But what about the indemnity payments already made, potentially for a number of years? While enforcement of judgments is outside my area of expertise, in Fisher the court set aside 20 years of indemnity payments. However, in that case the payments had not yet been collected, so with the stroke of a pen, the court could void the judgment and declare that no money should change hands.
But Fisher does not explicitly limit its ruling to indemnity judgments which are still outstanding – although a potentially plausible interpretation of Fisher is that it only voids outstanding judgments, i.e. at the time a party seeks to enforce it, Fisher provides a defense against paying the judgment. However, if an order is void, and therefore no indemnity should have been paid, there does not seem to be a principled reason why Fisher should only reward retirees who violated indemnity orders by setting aside money they owe, without similarly rewarding the law-abiding retirees who complied with indemnity orders.
And that means Fisher arguably provides authority for a retiree who has already paid indemnity to recoup tens of thousands of dollars from the former spouse, leaving the former spouse financially destitute unless she could persuade a judge to deny recoupment on an equitable basis rather than a legal one.
Potentially interesting times lie ahead, as attorneys may find themselves litigating indemnity for a VA waiver which was ordered ordered years, or even decades ago.
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