William H. Rehnquist: We'll hear argument next in No. 87-201, Gerald E. Mansell v. Gaye Mansell Forbes. Mr. Cone, you may proceed whenever you're ready.
Douglas B. Cone: Mr. Chief Justice, and may it please the Court: The question is whether California may divide Major Mansell's VA disability benefits as community property just because he is... was a military retiree as opposed to civil service or some other kind of retiree. And the question arises because of the unique way the Federal government treats military and other uniformed service retirees concerning the VA disability benefits. The military, and other uniformed members, are required to waive a portion of their longevity retirement in order to receive VA disability. In effect, the military retiree is required to purchase his own VA benefits with part of his longevity pay. No other class of federal employees is required to make that selection. So we're dealing with a problem that's unique to the military services here. Concerning the facts of the case, the parties were married in 1954, and Major Mansell was commissioned two years later in '56. They had six children and he retired in 1976. At the time of retirement, he applied for a VA disability rating, and he received that. In 1977, the parties separated and the children remained with Major Mansell but no child support order was made from the mother. Spousal support was ordered and the amount was equal to half the VA and half the retirement amount. Two years later a judgment of dissolution was entered. Once again Major Mansell received custody of the... then one remaining minor child. But once again, the mother was not required to pay any child support. The husband agreed to divide the retirement and VA disability, in essence continuing the same level of spousal support, this time in the form of a property division. The court retained jurisdiction over distribution of those retirement benefits and the VA benefits. After this Court issued the McCarty decision, Major Mansell went back to court with a motion to modify the judgment, to delete the paragraph that referred to division of VA disability and longevity retirement. That motion was denied. The decision was affirmed in the court of appeal. The state supreme court refused to hear the case, and this Court noted probable jurisdiction. The basic heart of the problem in this case is the way California treats military retirement. They can--
Antonin Scalia: Before you even get into that, the, the... the appellee has raised an argument in, in reply to the government's second brief. If I understand it correctly it's that this is res judicata, and that we really don't have to get into what, what the law meant after McCarty or after the statute in response to McCarty was enacted, that the California courts have passed on it before McCarty was decided, and the, the matter's closed. Is, is this the first time that argument's been raised? It wasn't in the principal brief--
Douglas B. Cone: --Well, no it's not. As a matter of fact, Your Honor, the res judicata argument and some associated collateral estoppel arguments as well have been raised by the appellee at every stage, the trial court, the court of appeal, and as a matter of fact the appellee's brief specifically refers to the fact that he did raise these issues in all of the courts below and they were rejected. In other words, the California Court of Appeal for the Fifth District reviewed his collateral estoppel and res judicata claims and determined as a matter of state law that it was required to reach the merits of the case. Under California law, there is a procedural device for a motion for modification... or to vacate and enter a new and different judgment. And that's the procedure that the court of appeals took this case to be. Furthermore, the original judgment reserved jurisdiction over the distribution of the assets we're talking about here, so that the res judicata wouldn't apply because the court had reserved jurisdiction to make further orders on it. California... a law... allows the type of motion we've brought here. And furthermore even, even if this were a final judgment with no jurisdiction reserved, and res judicata would normally apply, it wouldn't apply to this case because we're talking about application of a state law that's preempted by federal law. It's void, it's of no effect, and can be collaterally attacked at any time. Furthermore, this Court's own precedents allow for this kind of case. For example, the Ridgway case, a portion of a stipulated family law judgment was vacated by this Court even after the military retires died. So the res judicata arguments have been raised at every level below, and rejected at every level below, principally relying on state law. And it set out in the jurisdictional statement, in the opinion, I believe, it's pages D5 and D6, where the Court addressed the issue and found that it was required under state law to arrive at the merits of this case. Now, returning, the heart of the problem centers around the way California treats military retirement. They consider military retirement to be deferred compensation for past services, and therefore vested property right, subject to division. And they... they hold this in spite of the fact that this Court, and every other federal court who has ever addressed the issue, has held that military retirement pay is current reduced compensation for current reduced services. The problem is further compounded by the fact that California refuses to recognize the fact that the retirement pay is waived. It no longer exists for... if the veteran is disabled and takes the disability election. So that California is dividing a non-existent asset, giving half of it to the former spouse and forcing the service member to pay it out of whatever assets might be left.
Sandra Day O'Connor: --Well, certainly, under the savings clause of the federal act, the wife's proposed interpretation is certainly an arguable one here. California may indeed have the right, as other states do, to determine the nature of the community property interest and to make a division, even though it can't be garnished out of the disability benefits.
Douglas B. Cone: Well, to, to begin with, number one, it's not a property right, it's income earned after the termination of active service. But the--
Anthony M. Kennedy: Well, California law controls that, I assume. Does California say it's not a property right?
Douglas B. Cone: --I don't think so.
Anthony M. Kennedy: Does California say it's not a property right?
Douglas B. Cone: California says it is a property right--
Anthony M. Kennedy: All right. So then--
Douglas B. Cone: --No federal law--
Anthony M. Kennedy: --So then the question is whether or not it is.
Douglas B. Cone: --That's exactly right. This Court ruled specifically in U.S. v. Tyler that it was current compensation, not deferred compensation for past pay.
Sandra Day O'Connor: Well, but when, when Congress took another stab at this, and enacted the act that we're asked to interpret here, it certainly was their intention to overrule McCarty and to leave a role for the states in determining marital property questions.
Douglas B. Cone: A couple of responses. In the first place, I, I don't think they overruled the, the decisions of this Court. They may have passed new laws--
Sandra Day O'Connor: They effectively overturned it. They, they enacted this law to overcome what this Court had said in McCarty. Would you concede that much?
Douglas B. Cone: --That was... that was their intent. And I think they accomplished what they intended to accomplish, and that is they intended to allow some portion of the military retirement to be treated as property in certain instances. And, and the act doesn't say anywhere that it is a property right. It says the states may treat. And then they set forth the conditions under which it may treat.
Sandra Day O'Connor: Well, what do you think the savings clause reserved for the states?
Douglas B. Cone: I think that's addressed in the congressional record, where they described the purpose, the section by section analysis, where it says that that is specifically to preserve existing non-preempted remedies. And that's discussed in my brief at some length.
Harry A. Blackmun: We certainly invited Congress to pay attention to the McCarty situation, in the McCarty opinion.
Douglas B. Cone: Yes, you did. And they had some options. There had been some, some other areas of the law where this same kind of question came up. For example, the CIA retirement statute has, has a similar set of problems with retired spouses, and they have their own retirement... spouse's protection plan, if you will. And the system that was chosen for the CIA is described in 50 United States Code Section 403, I believe. In the legislative history, in talking about the enactment, it's very similar to the kinds of problems that were addressed in the McCarty decision, and in the amici and the appellee's brief here. And Congress said about that, concerning specifically the former wife, both their support of the CIA employee spouse and their direct contribution... and Congress was referring to the agency... often prevented the former spouse from acquiring marketable job skills and pension rights and imposed familial pressures and tensions which often contributed to the breakdown of the marriage. Now, their solutions to that problem, which is the same problem we have here, was to enact 50 USC Section 403 that provides a retirement benefit for the former spouse equal to 50 percent of the agent's retirement, but paid for out of the retirement fund, not out of the agent's retirement money. Congress also had another possibility in front of it when it was considering the Former Spouses Protection Act, and that was Senate bill 1453. And the title of that bill was, Non-preemption of State Law. And it was a one-sentence statute. And what it would have said was, in essence, the state law shall be dispositive of all matters pertaining to retirement pay. So it had these two extremes. They could pay the former wife out of the treasury, like they did for CIA agents, or they could pass a one-sentence law that says, the federal government doesn't want to be involved. They didn't pick either one of those options. What they did was design a very precise, carefully managed system for disposable retired income. And they defined disposable to exclude a number of things. And among the things that it excluded is VA and the taxes and a number of other things that I can set out forth a whole list, if you'd like. But, but the answer is that this Court invited Congress to provide more protection, if Congress thought the former spouse should have some. And they had some options in front of them, various ways they'd done things in the past. And they selected this one as opposed to any other. So I think, just reading the plain meaning of the law that they did pass demonstrates that they only meant to allow disposable retired pay to be divided, as opposed to these other things they could have done that were before them at the time. Starting with the language of 3101, which is the... the anti-attachment statute though, I think just analyzing the language of that shows that those benefits can't be reached. In the first place, it says the benefits are not assignable, except to the extent specifically authorized by law. There's nothing in any statute anywhere specifically authorizing VA disability to be attached or in any way levied on or court-ordered allotments like we have in the present case, or for any other purpose. The statute also ways that the benefit shall be exempt from taxation and the claims of creditors. Well, what we have here is a property division claim, not alimony, not child support. So it's just a creditors' claim. The statute says specifically that the benefits are exempt from creditors' claims. The statute also says that the benefits shall not be liable for attachment, levy, or seizure by any process, either legal or equitable. Now, the ex-wife is arguing that California is doing nothing to the VA disability benefits. Nevertheless, the order in the present case requires Major Mansell to initiate an allotment directing the federal government to pay the money directly to the former wife. It's, in essence, a constructive trusts, if you will, and the government is the trustee paying the money directly to the wife. Well, that's a seizure. The court has ordered that--
William H. Rehnquist: We'll resume there at 1:00 o'clock, Mr. Cone.
Douglas B. Cone: --Thank you.
Speaker: We'll resume where we left off, Mr. Cone.
Douglas B. Cone: Thank you, Mr. Chief Justice. Just to clarify what we're talking about, on the veterans' disability benefits, they're based solely on the percentage of disability and have nothing to do with the length of service of the member or his rank. For instance, a, a recruit could be injured on his first day of basic training, so he's got one day in service, and if that injury resulted in some disabling incapacitating type disability, he could be retired that day, with one day in service. So we're not talking about something that you have to get 20 years into service to get. We're talking about a compensation for injuries in the line of duty.
William H. Rehnquist: Do you still have to pay for them, or buy them, so to speak?
Douglas B. Cone: You do have to buy them, if you happen to have served long enough to be entitled to a longevity retirement pay, so that if you serve your 20 years and also have a disability you have to give up a portion of your retirement pay equal to the amount of the disability pay. So in essence, the answer is yes, military retirees have to purchase their disability benefits.
William H. Rehnquist: But your hypothetical recruit, injured on the first day, of course, would not have had... be entitled to retirement pay, so he just gets VA benefits.
Douglas B. Cone: That's exactly right, as compensation for the injury. There seems to be a, a feeling--
Antonin Scalia: What's the advantage of taking it in disability benefits instead of taking it in retirement pay? Is there--
Douglas B. Cone: --There are a number of really significant advantages, all of them provided by Congress, and some... all of the major ones, the federal ones by Congress. For example, the disability pay is exempt from federal, state, and local taxation. But that's just the tip of the iceberg. There are a lot of other reasons. Perhaps more--
Antonin Scalia: --Apart from avoiding state... state support payments, that's all--
Douglas B. Cone: --No. As a matter of fact, a person who qualifies for a rating as a disabled veteran is entitled to substantial cash benefits for his children, in his children's own name. And if he happens to still be married there's the spousal benefit as well. Of course, if the marriage has dissolved, the spousal benefit terminates. But the child's benefit does not terminate, so that if you just go on with your longevity benefit the child gets nothing. So there's that incentive. Also, if the disabled veteran is unable to work because of that disability, then there are major educational benefits under the federal law for the child that would not otherwise be available. In California, there's a, a large bundle of state benefits available to the dependent children of disabled veterans. But the key, the qualifying event, is obtaining the VA disability rating. And for example, they get first priority in farm and home loans at way below market interest rates, but you have to have a VA disability rating to get that. Also, children of disabled veterans in California, if they have a VA disability based on unemployability, are entitled to free tuition at the state colleges and universities in California. So there's a lot more to it than just doing your wife out of half the retirement. When all these consequences have--
Speaker: --[inaudible]--
Douglas B. Cone: --No, not necessarily, because remember the retirement is not a property right, it's pay for reduced services. It's not a property right at all. Now, California treats it at a property right, and under the new Former Spouses Protection Act Congress allows the states to do that for the disposable portion of it. However, the statute defines disposable to specifically exclude the VA disability as well as tax on a number of other things. So when all the--
Sandra Day O'Connor: --But the statute does not specifically, in so many words, prevent the states from considering the value of the disability pay in calculating what's owing to the spouse.
Douglas B. Cone: --That's correct. But a statute that was identical to the 3101, word for word identical, was considered in the Wissner case. And what this Court said in Wissner was, whether directed at the very money received from the government, or an equivalent amount, the judgment below nullifies the deliberate choice of Congress, and it cannot stand. Well, that's exactly what we have here. And the statute, 3101, like I say, is identical to that language. Similar language was also considered in your case of Free v. Bland, and what you said was, viewed realistically the state has rendered the award of title meaningless. Therefore it cannot stand.
Anthony M. Kennedy: In... in veterans' disability, statutory provisions that protect the benefit from alienation, generally the rule is the recipient cannot alienate it, subject to execution, et cetera. Here he has the option. What... what's the purpose of giving him the option?
Douglas B. Cone: Frankly, I don't know why the Congress made it optional when at the same time they made it so attractive for not only the veteran but so attractive for his family that no reasonable person would go the other way. I know of no case where anyone has ever not elected it. The cases in--
Antonin Scalia: Well, excuse me, I think the explanation may well be that it was put in terms of an... in terms of an election to solve the problem of people who already had some retirement benefits at the time the law was passed. So, you, you... that is, they'd already earned it, so you say, well, we don't want you to be double-dippers. We don't want to give you retirement benefits plus disability benefits. Instead of just passing a law saying, we're going to cancel your retirement benefits, we will phrase it as a waiver, in order to get the retirement benefits, or the disability benefits, you have to waive. It seems to me that would make a lot of sense. Congress--
Douglas B. Cone: --Perhaps that... that's the way it came along. The earliest versions of the statute, it was an either/or version. If you were receiving any form of disability you could not receive longevity retirement. And so that people wound up with a, with a five percent disability rating were being knocked out of their entire retirement benefits. And so eventually this 3105, which is the dual receipt statute, was passed, and perhaps it was done for just that reason. For the cases interpreting language, both similar and in other statutes identical to the language in this 3101, said that that language clearly prohibits offsets. And that's what we're dealing with here is an offset. And I'd like to reserve the remainder of my time.
William H. Rehnquist: --Thank you, Mr. Cone. We'll hear now from you, Mr. Cornell.
Dennis A. Cornell: Thank you, Mr. Chief Justice, and may it please the Court: I think it is important to understand what this case is and what it is not. There was a stipulated agreement by both sides in 1979, both sides represented by counsel, that resulted in a stipulated judgment, both sides represented by counsel, in 1979. In 1981 this Court rendered its decision in the McCarty case. February 1st of 1983 was the effective date of the new congressional act that we call FUSFSPA. And then after that, Major Mansell brought the motion to modify. The motion to modify was then denied, without statement of reasons in the trial court. Motion for reconsideration was denied without reasons in the trial court. That motion for reconsideration and motion for modification were then appealed to the Court of Appeal of the Fifth District in California, which rendered a decision on the merits. And in that decision on the merits they did not reject the res judicata. What they rejected was the argument that the motion itself was not appealable.
William H. Rehnquist: Did they speak of res judicata in that opinion?
Dennis A. Cornell: No. Let's make it very clear that what Major Mansell is seeking to protect here is not his disability benefits, but the rest of his estate. California law does not allow the attachment of disability benefits. California law does not allow the alienation or in any way affecting the receipt of disability benefits. What California law does allow is a calculation of longevity benefits to include that portion that is waived. The reason for that is very simple. They're not going to let one spouse take what is otherwise a community asset, and then through that spouse's sole control change the asset into something else to deny the rights of the out spouse.
Antonin Scalia: Of course, that would happen if there were no waiver provision here, if Congress simply gave somebody a disability, or the, the military person who's injured the first day on the job. He would waive nothing.
Dennis A. Cornell: That... that's correct.
Antonin Scalia: And the law would be clear that California couldn't get the rest of his estate, in, in, in... just set off the disability benefits against the rest of his estate.
Dennis A. Cornell: That's correct. That is a correct statement of California law. California law does not seek to divide disability benefits, whether before or after you've reached a longevity portion.
Antonin Scalia: So it's, it's not an absurd situation that, that you're painting that someone who has disability benefits should have the guaranteed cushion that California allows, plus his disability benefits. That would normally be the case, if, if, if he hadn't waived something in order to get the disability benefits.
Dennis A. Cornell: If the guaranteed cushion that you're speaking of... yes, you're correct. If the guaranteed cushion you're speaking of is the disability benefits themselves, because they're guaranteed to the recipient. And we cannot get those. However, if the person has another estate of non-exempt assets, then we are entitled to get them to satisfy the complete community property estate. Let me give you an example of, of, I think, something that will make it very clear. If there's a community property automobile, and one of the spouses takes that automobile and sells it, and takes the proceeds and sticks it into a separate property account, can that person now say that the out spouse is not entitled to consider that separate property account available when determining the nature and extent of the community estate? Of course they can.
William H. Rehnquist: So you're saying that when a military retiree converts part of his longevity benefits to disability benefits, the same principle applies?
Dennis A. Cornell: Yes. That's exactly the way California law interprets--
William H. Rehnquist: But I... here you've got a problem, it seems to me, with federal law.
Dennis A. Cornell: --Well, the problem... we don't have a problem with federal law, because in this particular case there was no attempt to try to do anything that contravenes 3101. And in fact that was brought out by the Solicitor General in both briefs, that that particular argument should fall by the wayside, is that we're not attempting to attach or do anything of that nature. What we're attempting to do is when we determine the nature and extent of the community estate, we commit... we consider only the longevity benefits, not the disability. But we consider all of the longevity benefits to which the person is entitled to receive, not just those longevity benefits left over after the person has unilaterally converted them to their own estate. So the protection that Congress thought of... let's look at exactly what the policy of Congress is thinking about at this point.
Antonin Scalia: Why didn't... why didn't we reject that in Wissner?
Dennis A. Cornell: You didn't reject it in Wissner because in Wissner there was a claimed property right in the insurance benefits, and there was an offset. This is not an offset, because there is no claimed property right in the disability benefits. This is not an offset, because we're not saying that you're entitled to all your disability benefits and then we get everything else. That's not what's happening. What we're saying is, here's the community estate, including the car and the proceeds from the car. Okay, you cut off a corner of this, but we still consider this the community estate. Now we're going to satisfy the obligations to pay the portion of the community estate through state law. We're not going to seek to attach any federal benefits. Let me give you the, the extreme example which will show you how much protection the veteran has. Let's say that the only estate the veteran has is a disability benefits, and it's achieved through receiving disability benefits on a complete waiver of a longevity retirement. So there's no longevity retirement left. And under my facts, the out spouse is out. Well, under those facts, then the out spouse would get nothing, because under California law we can't divide the, the disability benefits, you can't execute on disability benefits, you can't do anything to get to them. So the veteran is still protected. And the governmental interest that Congress set up when they established veterans' benefits was to try to compensate the veteran who has been injured, and as a result of that injury is now less employable, less able to earn an income. That is still guaranteed under the approach of California law, because the money is still guaranteed to him. The only thing we get is if there's other wealth. And the fact that Congress did not intend to protect the other wealth is reflected by the fact that they require a waiver of a longevity pension. It was not expected when you got a disability pension that you would have another pension. When the person applied for disability benefits they did not expect to have other wealth. Congress, when they created the system, did not expect that there would be other wealth. They were trying to compensate for the lack of the ability to get other wealth.
Antonin Scalia: Well, they only eliminated other federal wealth. I think it's a double dipping provision, rather than saying we're not going to give you disability benefits if you have other wealth. There's, there's no means test for the disability benefits. You're entitled to them even if you're a millionaire, aren't you?
Dennis A. Cornell: That's correct. But if that other estate is there, then shouldn't the out spouse be entitled to go after those assets to try to satisfy what was the community estate before it was dipped into and converted?
Anthony M. Kennedy: So, so under your example, if you have two different cases, in one veteran spouse has no property, and the other he has $50,000. In case number two, I take it, if the community property were that much, the wife could get the full $50,000?
Dennis A. Cornell: No. Yes and no. If the full $50,000 is owed, they could get the full $50,000. But under the facts you would first--
Anthony M. Kennedy: So isn't... so isn't that a penalty being paid by reason of receiving your disability?
Dennis A. Cornell: --No, it is not a penalty. And I will explain. What it is is if the entire estate is $50,000, plus a longevity pension, and let's say the longevity pension waives $1,000, there's a $2,000 longevity pension, and they waive $1,000, leaving $500, what California would do would divide the $50,000 in half, each would get $25,000. Then they would divide the longevity pension of $2,000. Now, you come up short $500 a month, because $1,000 of that has gone to disability benefits, all of that is exempt from attachment. So out of the remaining $25,000 of the community estate, the out spouse would be attempting to try to collect the $500 a month that the out spouse is losing. There would be no attempt to try to award all of the rest of the property, because there's a waiver of longevity to get the disability. Now, again, back to the concerns of Congress, they're met most ably by finding for--
Anthony M. Kennedy: But you still have... you still have disparate... disparate treatment of veterans, depending on the amount of property in the community property estate. Because if there's nothing, if there's no community property, the veteran gets 100 percent of his disability.
Dennis A. Cornell: --Yes. The disparate treatment is of the out spouse, because then the in Spouse gets the disability retirement while the out spouse's ability to collect his or her portion of the longevity pension has been stopped. And that's solely within the control of the person who is entitled to receive a longevity pension and then waives a portion of that right to get some disability pay. The only person that's going to get guaranteed payments under that fact situation is the disabled veteran. The out spouse will get nothing. Now, again, returning to the governmental interests that are involved here. What if Gaye Mansell prevails? Well, first, Congress' intent to provide for the disabled veteran has been met. The disabled veteran will still read... receive his or her disabled retirement benefits. Those guaranteed payments will go to someone who apparently, or presumably, has less earning power, less employability. What is the second interest? Well, the second interest is interest expressed by Congress in FUSFSPA, and that is of the out spouse. By ruling in favor of Gaye Mansell you will have met that concern, because she will have considered in the property division, as set forth by the states, the longevity pension completely, regardless of how much that longevity pension has been converted.
Byron R. White: xxx this would be the same argument if in a case when a husband and wife get divorced and prior to that time he's given up part of his retirement pay to get disability.
Dennis A. Cornell: I'm sorry, I don't quite understand the question.
Byron R. White: Well, suppose there was a divorce today and the, the officer, the retired officer, had been getting... had been getting retirement pay but he had already given up part of it in order to get disability, so he's getting both disability and retirement at the time of the divorce.
Dennis A. Cornell: Yes.
Byron R. White: The wife would be able to get one half of his retirement pay just as though he hadn't given up any of it?
Dennis A. Cornell: She would be entitled to get one half of the longevity pay--
Byron R. White: Right.
Dennis A. Cornell: --Of the net longevity pay still available, and then she would have to seek to collect the remainder of her one half of the longevity pay through other assets. The veteran would get all of his disability benefits, because that cannot be detached.
Byron R. White: Yes, I understand, I understand. But... so as far as... he just doesn't get his... he just wouldn't get his child support payments, or the... he just wouldn't benefit from the... he just couldn't get reduced, his wife's half of her... of the estate.
Dennis A. Cornell: That's my argument, that he should not be entitled to reduce her half of the estate through something solely within his action. Yes, that is my position in this case.
Byron R. White: So that... this case really doesn't turn on the fact that there has already been a settlement and they've... things like that?
Dennis A. Cornell: I think it does turn on it, because what I'm speaking about generally is a law of the state of California. But in this particular case we have a final judgment that was adjudicated four years before there was any attempt to set it aside. And we have a final judgment that--
Byron R. White: Well, should we decide that... if we just decided the case on that ground, we wouldn't be deciding the case I just described to you.
Dennis A. Cornell: --That's correct.
William H. Rehnquist: When you say it was, it was... gee a final judgment, are those... are the matters such as the one in question not subject to being reopened under California law?
Dennis A. Cornell: They are not subject to being reopened under California law. And in fact that reservation of jurisdiction over distribution is an enforcement clause, and it's common to many judgments. And in fact the first time that particular argument was raised by appellant here was in the final brief filed before this Court. It was not raised in the trial level, it was not raised in the court of appeal or before the California Supreme Court. That was an enabling statute. And so if the... for example, if you rule in favor of Major Mansell you will not only be guaranteeing him his disability benefits, because the relief he is specifically requesting is that that entire enabling paragraph be eliminated. So Gaye Mansell would receive nothing. No longevity, no disability. And he is asking that you do this four years, now ten years after the entry of the agreement and the judgment.
William H. Rehnquist: But why... there doesn't seem to be anything in the California decision saying that this can't be reopened.
Dennis A. Cornell: There was nothing in the California decision on... yes, that said it could be reopened. There was nothing there that said it could or could not be reopened. What the California Court of Appeal did was rule on the appeal. They didn't say that it was barred by res judicata. They didn't say it would not be barred by res judicata.
Byron R. White: You're really saying that there is a way that you could win this case but on a ground the court below didn't use.
Dennis A. Cornell: Yes.
Byron R. White: Please affirm on the grounds of res judicata.
Dennis A. Cornell: Yes. And if this Court rules contrary to me, I believe I can return to that court and have a ruling on that. The fact that they did not rule on that basis doesn't mean--
Byron R. White: Well, the court below disposed of it on... disposed of it on this other ground, though, that, that California can... can... needn't take that... car disregard the waiver of the retirement pay.
Dennis A. Cornell: --Yes.
William H. Rehnquist: Which really is a ruling on the merits. You would think that, if the California Court of Appeal thought that res judicata were appropriate, they would not have reached the merits.
Dennis A. Cornell: I don't know. I can't speculate as to why they did or did not.
Anthony M. Kennedy: Does California have a rule that they do not reach federal or Constitutional questions unless there's a necessity to do so?
Dennis A. Cornell: I'm not aware of such a rule. There is a clear rule in California, the judgments final before the effective date of McCarty are not reopened and are subject to res judicata. And I have cited those in the briefs.
Antonin Scalia: In any case, that's a state law question. Why should we decide the state law question of whether this is res judicata or not? Why can't we just decide the federal law question and, as you say, if it is res judicata, the California court will say so, when it's sent back.
Dennis A. Cornell: If there's an express reservation to that effect in the opinion of the Court, then I think it would be appropriate. However, if there isn't, then what you've done is say that all of the judgments that were entered prior to the McCarty decision are now wide open and subject to relitigation, and all agreements are set aside.
Byron R. White: xxx if we decide on the merits, you may win.
Dennis A. Cornell: I would certainly hope so, Your honor. That's why I'm here.
John Paul Stevens: Did you argue res judicata to the California Court of Appeal?
Dennis A. Cornell: Yes, I did.
John Paul Stevens: And they said nothing about it?
Dennis A. Cornell: They said nothing about it. Now, what is the third interest here that's before you in these issues? And if you rule in Gaye Mansell, how will it be treated? The third interest, of course, is the governmental interest. And that interest was very eloquently set forth in the decision in McCarty. And every one of those particular concerns were addressed by the Armed Services Committee of the United States Senate. And that body found evidence that none of them were going to be violated by passing FUSFSPA. For example, they found no evidence that there was any impuning of the ability to retain or recruit, that there was any problem whatsoever with the personnel management of the military. And in order to deal with the other specific things, they crafted the law in such a way as to make sure that it would be dealt with. Now what if Major Mansell prevails? What do you have? Well, you're going to have a situation where couples that are identical in their property and in their estate and in their facts are going to end up with different estates divided on divorce and different results. That is an unequal treatment. For example, the person with a disability pension of ten percent will have... if Major Mansell prevails then the out spouse will receive five percent less of the longevity pension. Whereas if a person has a 15 or 20 percent disability then the out spouse will receive 7.5 or 10 percent. People in identical situations get different results.
Byron R. White: Well, if you win on the merits, how much... for how much can you ask the federal government to pay you?
Dennis A. Cornell: The maximum amount that the federal government will allow to be garnished is 50 percent of the disposable retired longevity pay.
Byron R. White: So that's... so the only disposable longevity payment that's left here is the original amount less what was waived?
Dennis A. Cornell: Less the applicable taxes and other matters, yes.
Byron R. White: So you won't be able to levy, to garnish the federal government for all that you think you're entitled to?
Dennis A. Cornell: That's correct. And prior to the enactment of FUSFSPA I couldn't attach anything. So we had to satisfy solely out of other means and other estates.
Byron R. White: I understand it. So where... so where are you going to get the... the rest?
Dennis A. Cornell: I would hope to find some... part of an estate somewhere that I could get something out of.
Byron R. White: Yes. But you can't... you can't get it out of the remaining retirement pay.
Dennis A. Cornell: I cannot get it out of the remaining retirement pay, because there's not enough left.
Byron R. White: Yes.
Dennis A. Cornell: Especially with the--
Byron R. White: Well, you can't... the most that you can... the most that you could garnish the federal government for would be 50 percent of what's left.
Dennis A. Cornell: --Fifty percent of the disposable retired pay, yes.
Antonin Scalia: Mr. Cornell, you're, you're obviously quite right that you'll have different results in two different estates where the assets are the same. But the, the issue is whether there was not intended to be two different results. What is your explanation for the fact that in the definition of disposable retired or retainer pay, Congress specifies... specifically excludes amounts that are required by law to be and are deducted from the retired or retainer pay?
Dennis A. Cornell: That statute--
Antonin Scalia: And amounts waived? Why did Congress make that exception?
Dennis A. Cornell: --Because they wanted to be consistent and guarantee to the disabled veteran that he would actually receive those benefits. I think that's entirely consistent with the scheme that's been set up under FUSFSPA.
Antonin Scalia: But you're saying he doesn't receive it. You're saying that they'll be taken away from him just the way retirement pay would have been taken away from him?
Dennis A. Cornell: No, that's not--
Antonin Scalia: So long as he has other assets.
Dennis A. Cornell: --If he has an estate.
Antonin Scalia: So long as he has other assets.
Dennis A. Cornell: But the actual pay will not be taken away from him.
Speaker: Well--
Dennis A. Cornell: And should he be entitled to then convert the car to a bank account? Is that what you're saying, is that he should be allowed to do that? I don't think that's what Congress intended when they enacted FUSFSPA. I don't think that carries cut the purpose of Congress to protect the non-military spouse. That is a wrong approach.
Antonin Scalia: --Well, you acknowledge that that would be the case with pure retirement pay, with pure disability pay. If he hadn't waived anything, that would be precisely the result, wouldn't it? You wouldn't say, well, he's converted the, the, the disability pay into other assets and I can get the other assets. You'd say no, despite the fact that he has other assets he's entitled to keep that disability pay.
Dennis A. Cornell: That's exactly what I would say. Because disability pay is not community property, but longevity pay is, and the ability to convert it should not be allowed. Now, getting back to the federal Uniform Services Former Spouse Protection Act, which Justice Scalia referred to, I think the clearest indication of what the intent of Congress was when they enacted that can be found in the analysis that was contained in the House conference report by reference to the Senate Armed Service Committee report, which says specifically at... as follows or page 16. The purpose of this provision is to place the courts in the same position that they were in on January 26th, 1981, the date of the McCarty decision, with respect to the treatment of non-disability military retired or retainer pay. The provision is intended to remove the federal preemption found to exist by the United States Supreme Court and permit state and other courts of competent jurisdiction to apply pertinent state or other laws in determining whether or not military retired or retainer pay should be divisible. However, there is no limit or a spouse's or former spouse's right to deal with a portion of a member's retired or retainer pay after the spouse, or former spouse, receives that pay. That is a quote. That is a clear indication of congressional intent.
Antonin Scalia: And it all talks about retirement pay and none of it talks about disability pay.
Dennis A. Cornell: That's correct. But what the significance of that section is is that it was an intention to reflect that there was never an intention on the part of Congress to preempt the state courts in dealing with retirement pay in family law matters. And once the state courts have started to do that, preemption has been taken away, they should be able to deal with it as they have always. And the law in California, prior to the McCarty decision, was, as I have explained it to you. And it has been for a number of years. And there was a return to that after the passage of FUSFSPA. That is that a person who has a unique control of a community property asset might not dissipate that asset at the expense of the other spouse. And that is what we're asking this Court to find, that states should have the right to return to pre-McCarthy law, based on the enactment by Congress showing a congressional intent, to allow the states then to divide the benefits as the states feel are appropriate under family law rules of the particular states involved. I think the entire scheme of FUSFSPA reflects an intent on the part of Congress to make it a garnishment statute and not merely to limit the abilities of the state courts to divide pensions. And in this respect, the second brief filed by the Solicitor General shows that there are two reasonable interpretations. However, there are a couple of provisions that the attorney... Solicitor General in the second brief failed to, I think, take into account properly. And I think that they are found at the general provision of allowing payments on judgments entered June 25th, 1981, and earlier, to be enforced. Well, the Solicitor General reflects that that was merely an attempt to allow the garnishment, and was not a... reflective of an intent by the part of Congress to show that there was never any preemption. That doesn't make sense because the effective date of the act was February 1st, 1983. If it was intended to be, as the Solicitor General indicated, then how can you apply it to pay that had already been paid almost two years earlier? That pay has come and gone. It cannot be garnished. The only reason for that particular reflection of a date in the statute was to show that Congress specifically intended to remove the preemptive effect of McCarty. There can be no other reason for it. Also, I think there are specific provisions contained in the act itself, one of which was referred to by Justice O'Connor, and they can be found at Section 1408, subsection (e)(5) and (6). Basically what they say is that if a person submits a court order that is irregular on its face, or shows that it should be paid more than the 50 percent limit, that order will not be deemed in violation of the act, and will still be followed and still be allowed. And there will still garnishment go into effect, to the extent of the limits of the act. So that in essence saying that an appropriate order, even if it says more than 50 percent of the disposable retired pay, is still a valid state court order, and in fact the rest of the act shall... indicates that--
Byron R. White: Let me get this right now as to what you... suppose there hasn't been... suppose the routine is this, a retired officer and his wife are married, he has $100 a month in retirement pay. He then... he then waives 20 to get disability. That leaves a net of 80. They then get divorced. Now, does she get 50 or 40?
Dennis A. Cornell: --She would get... in California she would be entitled to receive $50 a month. However, she would only be able to collect 40 of that through the federal mechanism.
Byron R. White: All right.
Dennis A. Cornell: The remaining 10 she would--
Byron R. White: And you think then under the... under the... you should be able to collect the balance out of, under state law, out of any other assets?
Dennis A. Cornell: --Yes.
William H. Rehnquist: But that was the kind of claim that was rejected in Hisquierdo and McCarty, wasn't it?
Dennis A. Cornell: No, it wasn't, because there there was a property right claimed, in a particular asset, and then there was a direct offset. For example, you get your retirement, you get the house. And the person arguing Hisquierdo stood right on front of this Court and said, that's exactly what he wanted to wife to give, the house. That is not what we're seeking here. We're not seeking an over one half division of the remaining assets. What we're seeking--
William H. Rehnquist: But you seek a covert--
Dennis A. Cornell: --What we're seeking is the ability to... to garnish the remaining assets to satisfy. But once--
Anthony M. Kennedy: --To satisfy a property settlement?
Dennis A. Cornell: --Yes. Let's go one step further.
Antonin Scalia: Read McCarthy, or McCarty... I took McCarty to be an elimination of the distinction between garnishment and whether you can get... whether you can get, and, and I didn't agree with that in particular. But it seems to me, all of your descriptions have been talking about what the federal government allowed to be garnished under the new statute. But the fact is, by reason of McCarty, what can't be garnished can't be divided either. Wasn't that... wasn't that the lesson of McCarty?
Dennis A. Cornell: Yes, it was.
Antonin Scalia: And wasn't Congress proceeding on the basis that that was the lesson of McCarty?
Dennis A. Cornell: Yes.
Speaker: Well--
Dennis A. Cornell: Then they enacted FUSFSPA in which they expressly said that we're overruling McCarty to the extent they can. They didn't use that language. They used the language--
Antonin Scalia: --They didn't say that in the statute. All they did was change the rules about garnishment. And to the extent they changed the rules about garnishment, they also changed the rule about division.
Dennis A. Cornell: --And the only way that that particular statute makes any sense is if you read it as a complete removal of the holding of McCarty. Because it doesn't... the parts of the statute make no sense, if you find it be a pure garnishment statute. Why would there be reference to June 25, 1981, the day before McCarty?
Antonin Scalia: I agree with that.
Dennis A. Cornell: And I think in order to try to clear up some of those things you have to look to the congressional intent as expressed by the reports that were issued. And there's nothing specifically in the act that indicates that state courts are limited to the disposable retired pay when they treat it as property. And in fact there's language in the act that say just the opposite. For example, the savings clause as mentioned by Justice O'Connor. Nothing in this section shall be construed to relieve a member of liability for the payment of alimony, child support, or other payments required by a court order on the grounds that payments made out of disposable retired or retainer pay under the section have been made in the maximum amount permitted.
Antonin Scalia: Disposable retirement pay, which... which is carefully defined to exclude any amounts that have been waived.
Dennis A. Cornell: Yes. And as a garnishment statute, that's appropriate, because that particular asset is one that is inviolate by the United States government, and we are not seeking to divide it. But I think an important distinction should also be made on the ruling of the offsets in Hisquierdo--
Byron R. White: You say you're not... suppose in my example, there hasn't been any divorce yet but there's a... he had 100, now he's got 80 in retirement pay. Now, you say that if there's then a divorce California courts may, may divide it on, on the basis of 100?
Dennis A. Cornell: --Yes.
Byron R. White: Well, aren't you then dividing something Congress says you can't divide?
Dennis A. Cornell: No. Because what we're dividing is the military retired pay of $100. That's what was there before the in spouse converted it.
Byron R. White: Well, I know. But if you do that it seems to me you're flatly contrary to the statute, says that your disposable pay is, is... excludes any disability.
Dennis A. Cornell: That's presuming you're reading that particular statute as being just a garnish... excuse me--
Byron R. White: No, no, no.
Dennis A. Cornell: --Not just a garnishment statute.
Byron R. White: This is the time where you're sitting there and saying, how much, how much, how much do I divide? You say you divide 100. Well, he hasn't got 100 anymore because the statute says he hasn't.
Dennis A. Cornell: Yes--
Byron R. White: He's just got 80.
Dennis A. Cornell: --Yes. And that's all we're entitled to get, is one half of that, on the garnishment basis. Reading the statute itself indicates that there are other property rights which are entitled to be received.
Antonin Scalia: xxx statute as just a garnishment statute. What we said in McCarty is that to prohibit garnishment is to prohibit division. And now you want us to, having adopted that in McCarty, and the Congress was well aware that that's what we did, you say that they didn't foresee that when they enacted this statute we would say, what you can't garnish you can't get? I would think that that's what they would have... would have expected us to do.
Dennis A. Cornell: I'm not going to speculate because I think the other language in the rest of the statute and their statements, as reflected by their, their reports, show that their intention clearly was to restore the states to the condition they were in before the McCarty decision. Let me give you a practical example of the results that's going to occur here, is that if you allow a person to take longevity pay and convert it into disability pay and thereby exempt from not only division but consideration, which is what Major Mansell is seeking, you're going to have a situation where the out spouse may have a retirement of his or her own, through some other method. And then when the divorce occurs, he's going to get all of his retirement. He or she is only... and he's going to get half of the other one's. That's not the result that Congress--
Antonin Scalia: All of his disability?
Dennis A. Cornell: --Yes, if he's converted it. And if it's 100 percent he'll get all of that, and half of the other person's retirement. So in essence, he gets 75 percent of the available retirement. That's not the intent that Congress was trying to do. That's not what they were trying to protect. That's not the interest of the spouse that they were trying to protect when they enacted FUSFSPA. Thank you.
William H. Rehnquist: Thank you, Mr. Cornell. Mr. Cone, you have eight minutes remaining.
Douglas B. Cone: Yes, I'm going to waive the remainder, Your Honor.
William H. Rehnquist: Very well. The case is submitted.