Foster v Foster: A Major Shift in Veterans Benefits in Divorce Law

By Kanika Ferency posted 09-16-2020 11:47

​ICLE's Temporary Staff Lawyer, Nick Van Erp, drafted this blog prior to his departure. We wish him the best of luck in his future endeavors! 

Recently, the Michigan Supreme Court issued its opinion in Foster v Foster, No 157705, ___ Mich ___, ___ NW2d ___ (Apr 29, 2020). Although the core ruling revolved around the constitutional issue of federal preemption of state law, the implications of Foster will primarily impact divorce cases.

In Foster, defendant originally agreed to pay plaintiff 50 percent of his military retirement benefits under the consent judgment of divorce. Defendant later applied for an increased disability benefit under combat-related special compensation (CRSC), resulting in a reduction in defendant’s military retirement pay. Anticipating this, the parties included an indemnification clause in the consent judgment that required defendant to reimburse plaintiff for the difference in his military retirement payments if he elected to waive retirement benefits and receive increased CRSC. The Michigan Supreme Court held that the trial court was prohibited from requiring defendant to indemnify plaintiff or make reimbursement payments to compensate for reductions in defendant’s military retirement pay. Federal law establishing CRSC preempted the state court’s power over the service member’s disability benefits, even in a consent judgment of divorce.

At first glance, this ruling seems harsh to non-service-member spouses, who may now be subject to a type of bait and switch in which a previous agreement to receive a percentage of pension benefits may now be modified after the fact by the service member.

However, the Michigan Supreme Court, acknowledging this harshness in footnote 44, suggested a couple of remedies that may be available to litigants:

  • Increased spousal support. State courts may account for the waiver of pension pay in favor of disability pay when calculating the need for spousal support. If federal law preemption results in an inequitable property division, a state court may consider remedying that inequity through increased spousal support.
  • Jurisdictional challenges. In addition, the Michigan Supreme Court remanded Foster back to the court of appeals to examine whether the trial court retained subject-matter jurisdiction and to address whether defendant had the ability to challenge the now unenforceable indemnification clause on collateral review.
Because this area of law is currently unsettled, attorneys should watch carefully for developments that may change it in the coming months. For more information on this topic, see chapter 27 of Michigan Family Law, “Military Legal Matters Involving Family Law Practice.”