NMSC: Veteran Not Required to Indemnify Ex-Spouse for Waived Military Retirement Pay

When Angela Russ (Spouse) and Jeffery Russ (Veteran) divorced, they agreed to divide Veteran’s military retirement pay as part of the community property. However, about eight years after their divorce, Veteran waived his retirement pay in order to receive a disability benefit from the federal government. At issue in this case was whether Veteran was required to continue to pay Spouse her half of the benefits. In Russ v. Russ, the Court held that he was not.

In 2006, Spouse and Veteran entered into a marital settlement agreement whereby Spouse would receive half of Veteran’s retirement benefits. In 2014, Veteran waived his right to retirement payment in order to receive combat related special compensation, a disability benefit. The government notified Spouse she would no longer receive her half of the benefits. Spouse then filed a motion to enforce the MSA and require Veteran to reimburse her for the unpaid benefits.

The district court ruled in favor of Spouse, finding that he “could not escape responsibility” for the payments. This ruling was contrary to established federal caselaw. Nevertheless, the court of appeals affirmed, holding that under New Mexico law, the applicable federal cases did not apply retroactively.

In a short opinion, the New Mexico Supreme Court reversed. The key question was whether Howell v. Howell, a 2018 U.S. Supreme Court case, applied retroactively to Veteran’s 2014 decision to waive his retirement pay. Howell had clarified that even if the waiver of the retirement pay in order to receive nontaxable disability benefits occurs long after the divorce, a state may not subsequently increase, pro rata, the amount the divorced spouse receives each month from the veteran’s retirement pay in order to indemnify the divorced spouse for the loss caused by the veteran’s waiver. Applying New Mexico law on retroactivity, the court of appeals concluded that Howell did not apply retroactively.

The Supreme Court disagreed. Under the Supremacy Clause of the United States Constitution, the courts are required to apply federal law (not state law) to determine the retroactivity of a federal rule announced by the U.S. Supreme Court. And under federal law:

When [the United States Supreme 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 [the Court’s] announcement of the rule.

Harper v. Virginia Dep’t of Tax’n, 509 U.S. 86, 97 (1993).

Applying Harper, the Court concluded that the court of appeals had erred in holding that Howell did not apply retroactively.

The ruling was not all bad news for the Spouse, however. In the final paragraphs, the Court explained that although the district court could not require Veteran to indemnify spouse for the lost payments, it could look at the reduction in payments when it reconsiders the need for spousal support. Depending on the circumstances, that might require the Veteran to make additional payments. The district court was free to consider that issue on remand.

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