Minnesota Lawyer
On Sept. 6, the Minnesota Court of Appeals issued its nonprecedential decision in Probst v. Probst. Despite the guidance it offers concerning the division of retirement benefits, the parties should have called it a day long ago.
In Probst, Wife and Husband divorced in 2016 through a stipulated judgment and decree. The judgment and decree called for Wife to receive “a transfer of $30,000.00” from Husband’s deferred compensation plan through a qualified domestic relations order (QDRO). Said amount was to be “computed as of May 25, 2016.”
Upon entry of the judgment and decree, the parties agreed to the QDRO language. The district court adopted the draft in its entirety.
The QDRO provided that Wife was assigned $30,000.00 from Husband’s deferred compensation account, which “shall not include any contributions, gains or losses to the [p]lan that occur.” The district court retained jurisdiction “to amend this Order and to enter such further orders as are necessary to enforce the assignment of [Husband’s Minnesota Deferred Compensation Plan] account to [Wife] as set forth herein.”
Despite entry of the qualified domestic relations order in July 2016, no party or attorney provided the QDRO to the Minnesota State Retirement System for approximately 4½ years.
Wife moved to amend the QDRO in June 2021. She included proposed revisions that included “any investment gains or losses” since 2016 be “prorated” between Husband and Wife.
Wife’s lawyer suggested to the district court that he had never received the signed QDRO in 2016. Nevertheless, he argued, the terms of the judgment and decree (not the QDRO) control.
As a result, Wife took the position that she was entitled to her share of the deferred compensation account “together with interest” as anticipated in the judgment and decree. Consequently, she believed she was entitled to “interest” in the form of “gains attributable to her $30,000.00.”
Husband objected, arguing it would be improper for the district court to amend the qualified domestic relations order to provide Wife with anything beyond $30,000.00. He pointed out the QDRO specifically provided Wife’s share “shall not include any … gains.”
Husband also suggested that a modification of the QDRO to provide gains to Wife constituted an unlawful modification of the parties’ final property-division agreement.
The district court granted Wife’s motion to modify the QDRO, opining that Husband would be “unjustly enriched” if he were to retain the investment returns on Wife’s $30,000.00 share of the deferred compensation account.
Husband appealed, challenging the district court’s decision to amend the QDRO on four grounds.
First, Husband argued the QDRO directed that Wife receive a “lump sum” award, depriving the district court of jurisdiction to amend.
Second, Husband argued Wife failed to bring her motion to amend under the purview of the statutory grounds to reopen a judgment and decree.
Third, Husband asserted the QDRO constituted a binding contract that unambiguously provided that Wife was not entitled to investment returns.
Finally, Husband argued he was not unjustly enriched because Wife’s “loss of interest” in the plan was purely due to Wife’s inaction.
Judge Jeanne M. Cochran, writing for the three-judge appellate panel, noted that a “central premise” of Husband’s arguments involves the claim that an amended QDRO constitutes an unlawful modification of the parties’ property division. Concurrently, she suggested the district court did not address that issue in its order, requiring reversal.
Citing the 2016 decision in Knapp v. Knapp, Judge Cochran suggested a dissolution judgment and decree is final when entered, unless a party establishes a statutory basis to reopen. Absent one of those statutory grounds, the district court may not modify a division of property.
Moreover, Judge Cochran reiterated that while the district court may not “modify” a final property division, it may “implement, enforce, or clarify” a provision within the decree — so long as it does not change the parties’ substantive rights.
Accordingly, Judge Cochrane opined that the validity of the district court’s QDRO amendment required examination of the original division of property outlined in the judgment and decree. Questions of contract interpretation abound, including: (1) the intent of the parties; (2) plain meaning; and (3) whether an ambiguity exists.
Judge Cochrane noted that if the language within the judgment and decree is open to “diverse constructions,” the district court may “clarify.” In doing so, the district court may examine the whole record (including parol evidence) and adopt the construction that properly reflects the intended effect.
The problem is that the district court “did not interpret either the language of the judgment and decree or the language of the original QDRO.” Instead, the district court merely applied the unjust enrichment standard. Judge Cochran reiterated that “equitable relief cannot be granted where the rights of the parties are governed by a valid contract.”
The Probst situation is littered with difficulties.
As an initial matter, the division language in the underlying judgment and decree doesn’t tend to support either party’s position, as “gains and losses” or “interest” is not mentioned at all.
As you draft settlement agreements, be very specific and scrutinize the verbiage you include to ensure it matches with the intent of the parties at that moment in time. “At that moment” is key, because market forces can persuade argument one way or the other after the fact. Suppose, for example, the account value plummeted, rather than increased, between 2016 and 2020. The Probst parties could easily have found themselves swapping arguments in court.
Most often, in my experience, the division of a retirement account does involve gains or losses realized since the valuation date. However, that does not make it so by default. If a lump sum is contemplated, you might consider “said amount is not subject to gains and losses and constitutes a static award from said account” type language.
The second challenge involves the fact that the QDRO wasn’t submitted for over four years following entry of the judgment and decree. Post-decree work isn’t the most entertaining. Still, have a system in place to ensure items, large or small, don’t get lost in the cracks. At the very least, it’s good client service.
Finally, Probst begs for a settlement.
No one disputes Wife was entitled to at least $30,000.00 from the deferred compensation account. The stock market basically doubled between 2016 and 2021, leaving (at best) another $30,000 in gains at stake. Tax effect the $30,000, and we’re talking about $22,000.
What do you suppose each side spent on motions and the appeal? There was room for each side to split the difference and move on. Sometimes, the candle isn’t worth the fight.
Jason Brown is a shareholder with Barna, Guzy & Steffen, Ltd. in Coon Rapids, Minnesota. In addition to his work as a divorce lawyer, he provides mediation services for family court litigants. Jason can be reached at [email protected].
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