State Judges Can Rule on QDRO Cases

Ruling in a divorce proceeding from Nevada, the 9^th U.S. Circuit Court of Appeals rejected claims that a Nevada Supreme Court decision in the case should be disregarded because the state court had no business deciding a benefits issue under the Employee Retirement Income Security Act (ERISA).  The appellate panel asserted that under ERISA’s QDRO provision, all courts of “competent jurisdiction” can determine whether a DRO is a QDRO and that since state courts meet that standard, they have the authority to make QDRO determinations.

The appellate jurists rebuffed an argument that allowing state judges to decide whether a DRO qualifies as a QDRO would often put them in the position of interpreting ERISA’s anti-alienation provision even though issues of statutory interpretation are typically left to the federal courts.

“Determining whether or not a DRO falls within the QDRO exception to ERISA’s anti-alienation provision requires no more than interpretation of ERISA than determining whether a state law cause of action falls to ERISA’s preemption provision, something that state courts are called on to do regularly,” Circuit Judge Sidney R. Thomas wrote for the appellate panel.

The 9^th Circuit further found that ERISA plan administrators need not be given the opportunity to determine if a DRO is a QDRO before the issue can be decided by a state court.

According to the appellate ruling, the case started as a Nevada divorce suit between Darren and Charla Mack. Before a final divorce decree was filed, Darren Mack killed his wife and tried to kill the judge overseeing the case, according to the ruling.

Before Mrs. Mack’s death, the divorce judge ruled verbally that her husband would be required to pay $500,000 of his 401(k) benefits to Charla Mack, but the decision was not issued as a DRO until after Mrs. Mack died. The husband appealed to the Nevada Supreme Court, arguing that there was no QDRO that would have required him to pay the benefits to his wife.

A U.S. District Court judge eventually threw out a resulting federal court suit and the case was appealed to the 9^th Circuit.  Shortly after the lower court’s dismissal, the Nevada Supreme Court ruled the DRO was a QDRO under ERISA.

The appellate judges sent the case back to the district court with instructions that the benefits be paid to Charla Mack’s estate. The case is Mack v. Kuckenmeister, 9th Cir., No. 09-15290.