Court Opinion

ID: 873579
Source: CourtListenerOpinion
Date Created: 2013-06-01 00:01:42.931135+00
Date Added: 2024-06-11T11:23:21.027849
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

              EVELYN M. STEPHENS,
                   Petitioner,

                           v.

     OFFICE OF PERSONNEL MANAGEMENT,
                   Respondent.
             ______________________

                      2013-3049
                ______________________

   Petition for review of the Merit Systems Protection
Board in No. PH0831120106-I-1.
                ______________________

                 Decided: May 31, 2013
                ______________________

    EVELYN M. STEPHENS., of Monroeville, Pennsylvania,
pro se.

    JOSEPH A. PIXLEY, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, for respondent. With him on
the brief were STUART F. DELERY, Principal Deputy Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director,
and KIRK T. MANHARDT, Assistant Director.
                 ______________________
2                                  EVELYN STEPHENS   v. OPM

    Before NEWMAN, CLEVENGER, and WALLACH, Circuit
                       Judges.
PER CURIAM
     Evelyn M. Stephens seeks review of the final decision
of the Merit Systems Protection Board (“Board”), which
affirmed the reconsideration decision of the Office of
Personnel Management (“OPM”) to reduce her Civil
Service Retirement System (“CSRS”) monthly annuity in
order to provide a survivor annuity to her former hus-
band. Stephens v. Office of Personnel Management, Docket
No. PH-0831-12-0106-I-1 (Nov. 9, 2012). The former
spouse, Henry L. Stephens, Jr., intervened in the proceed-
ings before the Board. After Ms. Stephens’s appeal to this
court, on April 13, 2013, this court by Order notified Mr.
Stephens of his right to intervene in this appeal, and gave
him 30 days in which to do so. Mr. Stephens did not
intervene. For the reasons set forth below, we vacate and
remand.
                             I
    Ms. Stephens divorced Mr. Stephens in July 1997 in
the Court of Common Pleas, Family Division, in Alleghe-
ny County, Pennsylvania (“Court of Common Pleas”). On
February 4, 2000, the former couple agreed to an equita-
ble distribution of marital property, each by duly signing
a Qualified Domestic Relations Order (“QDRO”). The
Court of Common Pleas entered those orders. Pursuant
to the QDROs, each spouse granted the other a portion of
the retirement annuity each would enjoy upon retirement.
Mr. Stephens has retirement annuity benefits pursuant to
the Pennsylvania Public School Employees’ Retirement
System (“PSERS”), and Ms. Stephens has retirement
annuity benefits under the CSRS. Ms. Stephens does not
dispute Mr. Stephens’s entitlement to the QDRO-agreed
share of her CSRS retirement annuity, and there is no
indication in the record that Mr. Stephens disputes Ms.
 EVELYN STEPHENS   v. OPM                             3
Stephens’s entitlement to the QDRO-agreed share of his
PSERS retirement annuity.
    Upon her retirement from her position with the In-
ternal Revenue Service, Ms. Stephens began to receive
the share of her CSRS retirement annuity to which she
had agreed in her QDRO. OPM interpreted the QDRO to
also require Ms. Stephens to provide a CSRS survivor
annuity to Mr. Stephens. Based on that interpretation,
OPM began to, and presumably continues to, further
reduce Ms. Stephens’s monthly retirement annuity in
order to fund the survivor annuity for Mr. Stephens.
                            II
    Ms. Stephens complained to OPM that it was improp-
erly further reducing her retirement annuity to fund the
survivor annuity for her former spouse. OPM rejected
Ms. Stephens’s complaint initially and upon reconsidera-
tion. Ms. Stephens appealed to the Board, where initially
an Administrative Judge and later the full Board sus-
tained OPM’s rejection of Ms. Stephens’s request to be
free of reduction of her retirement annuity to fund a
survivor annuity for her former spouse. OPM, the Admin-
istrative Judge, and the full Board interpreted the QDRO
to require a survivor annuity for Mr. Stephens because
Ms. Stephens’s QDRO “nominated” Mr. Stephens “as
beneficiary” for an amount of “death benefits payable by
CSRS.” Ms. Stephens’s view, supported by a written
opinion of her divorce counsel, is that this language was
intended to provide any lump sum benefit payable upon
death, not a survivor annuity. Ms. Stephens’s view was
further supported by PSERS’s interpretation of Mr.
Stephens’s QDRO, which is identical in all material
respects to Ms. Stephens’s QDRO. PSERS interpreted the
“nominated [Ms. Stephens] as beneficiary” for an amount
of “death benefits payable by PSERS” language to relate
only to any lump sum benefit payable upon death, not to a
survivor annuity. Appearing before the Board, Mr. Ste-
4                                   EVELYN STEPHENS   v. OPM
phens asserted that under Ms. Stephens’s QDRO, he is
entitled to a survivor annuity from her, even though
under his QDRO, she is not entitled to a survivor annuity
from him. Notwithstanding the clear dispute between the
parties as to what the QDROs were intended to accom-
plish, the Board sustained OPM’s decision to compel Ms.
Stephens to fund a survivor annuity for her former
spouse. Ms. Stephens timely sought review of the Board’s
final decision in this court, and, as noted above, we duly
advised Mr. Stephens of his right to intervene. He elected
not to intervene, and consequently has waived his right to
participate in this appeal.
                            III
    We must affirm the Board’s final decision unless we
determine that it is arbitrary, capricious or not in accord-
ance with law. 5 U.S.C. § 7703(c). An agency decision is
not in accordance with law when the agency fails to abide
by its regulations. As we shall demonstrate, the issue in
this case is not whether OPM properly interpreted Ms.
Stephens’s QDRO: because Ms. Stephens’s QDRO was not
acceptable for processing by OPM in the first place, OPM
should have rejected the QDRO without engaging in any
interpretation of it.
     In January 1992, OPM proposed extensive regulations
to govern Court Orders Affecting Retirement Benefits (the
three types of retirement benefits being employee annui-
ties, refunds of employee contributions, and survivor
annuities). See Court Orders Affecting Retirement Bene-
fits, 57 Fed. Reg. 120 (proposed Jan. 2, 1992) (to be codi-
fied at 5 C.F.R. pt. 831 et al.). The proposed regulations
defined as unprocessable by OPM all court orders labeled
“qualified domestic relations order” or issued on ERISA
forms. The reason for this proposed exclusion is that
ERISA created the term QDRO to describe a court order
that divides retirement benefits under ERISA plans.
Those retirement benefits can differ from retirement
 EVELYN STEPHENS   v. OPM                                5
benefits under CSRS. As OPM explained in the final
regulation, “[w]e decided to prohibit use of this label
because we have seen from experience that attorneys
prepare these orders on the assumption that they can
provide any benefits under ERISA to CSRS . . . .” See
Court Orders Affecting Retirement Benefits, 57 Fed. Reg.
33570, 33572 (July 29, 1992) (to be codified at 5 C.F.R. pt.
831, et al.).
    OPM solicited comments on its proposed regulations,
and one commentator objected to the blanket exclusion
from processing of court orders labeled QDRO. OPM
understood that property distribution decrees could
involve both ERISA rights and CSRS rights, and sought a
way to assure itself that it would be involved only distri-
bution of CSRS rights, and that the state courts issuing
property distribution decrees would understand the limits
of OPM’s authority. The final regulations struck a com-
promise: QDRO orders would not be deemed unprocessa-
ble if they met certain exact requirements.          OPM
explained:
   The proposed total ban on QDRO’s is more severe
   than necessary to accomplish its purpose. We
   have revised sections 838.302 and 838.803 to relax
   the total ban on QDRO’s to accept court orders la-
   beled QDRO’s if the court orders expressly state
   that they are written in conformity with our regu-
   lations. . . . Since we can guarantee that the pur-
   pose of the ban – that the court understands that
   we are exempt from ERISA and that the court is
   using the terminology as provided in the regula-
   tions – is satisfied by requiring that any QDRO
   mention our regulations, we will accept QDRO’s
   that expressly acknowledge that they are written
   to conform with our regulation. In addition, we
   have added a model paragraph that could be used
   for this purpose.
6                                    EVELYN STEPHENS   v. OPM
    The requirement that a QDRO expressly state
    that it conforms with the regulations is necessary
    because even if the QDRO’s terminology is ac-
    ceptable, the court’s intent may have been that
    the terms have different meanings than those as-
    signed under these regulations. Abandoning the
    ban on QDRO’s without requiring that QDRO’s
    mention our regulations undermines the reasona-
    bleness of our assumption that the court is using
    our terminology, rather than ERISA terminology.
    That assumption is necessary for our actions to be
    ministerial, rather than having to interpret each
    court order.
57 Fed. Reg. at 33572.
    The final regulations erect the strict requirements
necessary for OPM to have the authority to process a
QDRO in connection with distribution of CSRS retirement
benefits. The regulations are the same today as when
they became effective on August 28, 1992, and were
effective on the date the QDROs in this case were entered
by the Court of Common Pleas. 5 C.F.R. § 838.302 covers
“Language not acceptable for processing” with regard to
court      orders     affecting  employee      annuities.
5 C.F.R. § 838.803 covers “Language not acceptable for
processing” with regard to court orders awarding former
spouse survivor annuities. The language of the two
regulations is the same:
     (a) Qualifying Domestic Relations Orders. (1) Any
    court order labeled as a “qualified domestic rela-
    tions order” . . . is not a court order acceptable for
    processing unless the court order expressly states
    that the provisions of the court order concerning
    CSRS . . . benefits are governed by this part.
    (2) When a court order is required by paragraph
    (a)(1) of this section to state that the provisions of
    a court order concerning CSRS . . . benefits are
 EVELYN STEPHENS   v. OPM                                7
   governed by this part the court order must ex-
   pressly –
       (i) Refer to part 838 of Title 5, Code of
       Federal Regulations, and
       (ii) State that the provisions of the court
       order concerning CSRS . . . benefits are
       drafted in accordance with the terminolo-
       gy used in this part.
   (3) Although any language satisfying the require-
   ment of paragraph (a)(2) of this section is suffi-
   cient to prevent a court order from being
   unacceptable under paragraph (a)(1) of this sec-
   tion, OPM recommends the use of the language
   provided in ¶ 001 in Appendix A to subpart F of
   this section to state that the provisions of the
   court order concerning CSRS . . . benefits are gov-
   erned by this part.
    OPM’s recommended language is as follows: “The
court has considered the requirements and standard
terminology provided in part 838 of Title 5, Code of Fed-
eral Regulations. The terminology used in the provisions
of this order that concern benefits under the Civil Service
Retirement System are governed by the standard conven-
tions established in that part.” 5 C.F.R. § 838app. A
                            IV
    Ms. Stephens’s Court of Common Pleas property dis-
tribution agreement is labeled “QUALIFIED DOMESTIC
RELATIONS ORDER.” In order to be processed by OPM,
her QDRO must satisfy the requirements of
5 C.F.R. § 838.803.
    Ms. Stephen’s QDRO does not expressly refer to part
838 of Title 5, Code of Federal Regulations, and does not
expressly state that the provisions of the court order
concerning CSRS benefits are drafted in accordance with
8                                    EVELYN STEPHENS    v. OPM
the terminology used in Part 838. The references in the
QDRO to CSRS do not satisfy the requirements of
§ 838.803(a)(2), and nothing remotely resembling OPM’s
recommended language can be found in Ms. Stephens’s
QDRO. In short, Ms. Stephens’s QDRO does not qualify
for processing by OPM. OPM’s conclusion that it could
process the QDRO violated its own regulations and thus
is not in accordance with law. The Board’s final decision
perpetuated that legal error.
    OPM’s Federal Register notice in support of its final
regulations noted that “[t]hese final regulations assure
that the dispute-resolution role rests in the hands of the
State courts as was originally intended by Congress.” 57
Fed. Reg. at 33570. Further, the notice states that “[t]he
regulations are very detailed as to what constitutes a
court order that is acceptable for processing” and “because
the regulations prescribe in detail what is and is not
acceptable for processing, OPM can now assume the
appropriate role for itself, which is a ministerial role,
rather than a mediator in marital property disputes.” Id.
at 33570-71. Importantly, the notice recognized that “[i]f
a court order is so flawed that it is not sufficiently clear to
satisfy our requirements, the appropriate action is for the
parties to return to the State court to correct the prob-
lem.” Id. at 33571.
                              V
    OPM, the Administrative Judge, and the full Board
overlooked the fact that Ms. Stephens’s QDRO plainly
does not qualify for processing by OPM, and hence over-
looked the legal error committed by OPM. The remedy for
the error is for OPM to take corrective action to unwind
its mistake. The only dispute presented by Ms. Stephens
is the reduction of her monthly retirement annuity to
fund a survivor annuity for her former spouse. Precisely
how OPM and the parties, with further possible participa-
tion by the Court of Common Pleas, will unwind its error
 EVELYN STEPHENS   v. OPM                              9
is not for this court to dictate. The record is clear that
there is room for doubt as to what the parties intended by
the QDRO beyond the sharing of each other’s retirement
annuity and that OPM erred by interpreting the QDRO
rather than instructing the parties to return to the Court
of Common Pleas. By failing to enforce its own strict
regulations, OPM fell into the interpretative morass
which the regulations are designed to prevent. We pre-
sume that the true intent of the parties can be memorial-
ized by mutual agreement in a QDRO that satisfies
OPM’s own strict requirements for processing.
   The final decision of the Board is therefore vacated,
and the case is remanded for corrective action by OPM.
               VACATED AND REMANDED
                            COSTS
   No costs.