Schwartz v. Bogen
MEMORANDUM OF LAW & ORDER. IT IS HEREBY ORDERED: 1. Defendant's Motion to Dismiss 8 is GRANTED. 2. This matter is DISMISSED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion). Signed by Judge Michael J. Davis on 11/28/17. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
BRUCE G. SCHWARTZ,
MEMORANDUM OF LAW & ORDER
Civil File No. 17-3329 (MJD/TNL)
ARDIS BOGEN f/k/a
Michael D. Schwartz and Brandon M. Schwartz, Schwartz Law Firm, Counsel for
Timothy A. Sullivan and Rebecca A. Chaffee, Best & Flanagan LLP, Counsel for
This matter is before the Court on Defendant’s Motion to Dismiss. [Docket
No. 8] The Court heard oral argument on November 16, 2017. Because this
action is barred by res judicata, the Court grants the motion to dismiss.
The Parties’ Marriage and Divorce
In 1952, Plaintiff Bruce G. Schwartz married Defendant Ardis Bogen.
(Compl. ¶ 15.) In 1953, Schwartz began working for Northwestern Bell
Telephone Company. (Id. ¶ 2.) Eventually, he became the Chief Operating
Officer for Pacific Bell and, then, he became an officer of AT&T. (Id. ¶¶ 3-4.)
Schwartz is a participant or beneficiary under the AT&T Basic Bell System
Management Pension Plan (“Pension Plan”). (Compl. ¶ 5.) The Pension Plan is
subject to ERISA, which became effective in 1974. (Compl. ¶ 6.) The Pension
Plan provides: “Assignment or alienation of pensions under this plan will not be
permitted or recognized unless or otherwise required under applicable law.”
(Compl. ¶ 14.)
On May 5, 1981, Schwartz and Bogen entered into a Marital Property
Settlement Agreement (“MPSA”) in the State of New Jersey, under which both
waived and released all rights to equitable distribution under New Jersey law.
(Compl. ¶ 16; Schwartz Aff. ¶11; Schwartz Aff., Ex. 2, MPSA ¶ 34(v).) Under the
MPSA, Schwartz would pay Bogen alimony on the first day of every month
“until the Husband shall retire from American Telephone & Telegraph
Company, its affiliates or subsidiaries.” (MPSA ¶ 3.)
Upon the Husband’s retirement from American Telephone &
Telegraph Company, or its affiliates or subsidiaries, the amount
payable as alimony and support of the Wife as set forth in paragraph
3 shall cease. In lieu thereof, the Husband shall pay to the Wife, as
and for her alimony and support, a sum equal to fifty (50%) of the
Husband’s basic Bell System Management Pension Plan, at the date
of retirement. Said payment shall be made by Husband by check or
money order at the residence of the Wife or at any place she may
designate, in writing to the Husband. Said payment shall be
payable in monthly installments on the first day of each month.
(MPSA ¶ 4.)
The MPSA further provides: “The Husband’s obligation to pay alimony
and support to the Wife shall cease upon her death, the death of the Husband, or
upon the Wife’s remarriage, whichever event is earlier.” (Id. ¶ 5.)
In 1983, Schwartz and Bogen were divorced in the State of New Jersey.
(Compl. ¶ 17; Sullivan Aff., Ex. 2, Final Judgment of Divorce.) The Final
Judgment of Divorce was entered on July 1, 1983, and incorporated the MPSA, as
modified in the Final Judgment of Divorce. (Final Judgment of Divorce at 2.)
The modification of the MPSA stated, in relevant part:
(A) In the event Wife remarried, the obligations of Husband to pay
Fifty (50%) percent of the Husband’s Basic Bell System Management
Pension Plan shall terminate.
(C) In the event Wife marries after January 1, 1986, but on or before
December 31, 1990, Husband shall pay Wife as equitable
distribution, a yearly sum equal to twenty (20%) percent of
Husband’s Basic Bell System Management Pension Plan, computed
at the value of said Basic Pension Plan on January 1, 1986.
(E) In the event Wife married after December 31, 1995, she shall not
be entitled to any portion of Husband’s Basic Bell System
Management Pension Plan.
(F) The Husband’s obligation under paragraphs A through D,
inclusive, shall terminate upon his death or the death of Wife. . . . .
(Final Judgment of Divorce at 3.)
In 1985, Schwartz retired from AT&T. (Compl. ¶ 18.) Neither Schwartz
nor Bogen made a request for a qualified domestic relations order (“QDRO”) in
In 1989, Bogen remarried. (Compl. ¶ 19.) Neither Schwartz nor Bogen
made a request for a QDRO in 1989. (Id.) After Bogen’s remarriage, she filed tax
returns declaring the payments from Schwartz as alimony. (Id. ¶ 23.)
From 1989 through March 2016, Schwartz made payments to Bogen.
(Compl. ¶¶ 20-21.) Both Schwartz and Bogen reported the payments as alimony
on their federal tax returns. (Id. ¶¶ 22-23.) The payments were sent to Bogen in
Minnesota. (Schwartz Aff. ¶ 19.)
In March 2016, Schwartz contacted Bogen and told her that he realized that
under the terms of the MPSA and the Final Judgment of Divorce he should have
stopped making the alimony and support payments in 1995 because she had
remarried. (Compl. ¶ 24; Schwartz Aff. ¶ 23; Schwartz Aff., Ex. 6.) On August 3,
2016, Bogen, through her attorney, retorted that the alimony payments were not
alimony but rather, were an equitable distribution of the Pension Plan. (Compl.
¶ 24; Schwartz Aff., Ex. 7.) In an August 25, 2016 letter, Bogen opined that,
because the decree and modification of property settlements between Schwartz
and Bogen were negotiated and entered before the Retirement Equity Act of
1984, “the division of the pension was done without a QDRO.” (Id.)
New Jersey Action
On October 11, 2016, Bogen, through counsel, filed a Motion for
Enforcement of Litigant’s Rights in the Superior Court of New Jersey, Chancery
Division, Family Part, requesting that Schwartz be compelled to pay 20% of his
Pension Plan in monthly payments of $1,426.32 per month. (Compl. ¶ 31;
Sullivan Aff., Ex. 4.) Schwartz, through counsel, argued that the anti-alienation
provisions of ERISA prevented Bogen from sharing his pension and entitled him
to a refund of money already paid. (Sullivan Aff., Ex. 5.) He explicitly argued
that there was no QDRO to divide his pension, and, without a QDRO, the
Pension Plan could not be divided. (Id.) He also asserted that ERISA preempted
state law with respect to the pension. (Id.)
On January 27, 2017, the New Jersey court ruled that laches barred
Schwartz’s request for a refund of the money paid to Bogen since 1995. (Sullivan
Aff., Ex. 3, New Jersey Order at 8.) The court further held that the pension plan
payments were an equitable distribution, not alimony. (Id. at 11.)
The court also held:
And Plaintiff’s argument that he was awarded the entirety of
the pension plan pursuant to Paragraph 8 of the PSA is unsupported
by the schedule attached to the PSA. Schedule B reveals that
securities, investment properties, and partnership interests were
included in it, but there was no mention of a pension plan. And
even if the pension plan was listed on the Schedule B, by entering
the subsequent MPSA Plaintiff agreed to pay Defendant a portion of
his pension as equitable distribution, superseding anything to the
contrary in the original PSA.
As to Plaintiff’s ERISA argument, Section 206(d)(1) of ERISA
states that ‘[e]ach pension plan shall provide the benefits provided
under the plan may not be assigned or alienated.’ And Plaintiff’s
pension plan does in fact prohibit assignment or alienation of
pensions or other benefits of his plan. However, pursuant to Biles v.
Biles, 163 N.J. Super. 49, (Ch. Div. 1978), this restriction was not
intended to prevent the assignment to a spouse or former spouse
that is entitled to support. Indeed,
Balancing the interest of a recipient of pension benefits in
keeping those benefits entirely to himself against the interest
of a former spouse in enforcing an order of support leads to
the conclusion that the objective of ERISA is not frustrated by
state laws enforcing support obligations.
Id. at 56. 1 Therefore, Plaintiff is not prohibited from assigning any
benefit he may receive to Defendant to satisfy his equitable
distribution obligation against her.
Lastly, at oral argument Defendant asserted that Paragraph
4(F) of the MPSA evidences that these payments were alimony and
not equitable distribution because they terminate at the death of
either party. The Court rejects this argument because there is no bar
on contracting for termination of equitable distribution on death.
See Connor v. Connor, 254 N.J. Super. 591 (App. Div. 1992) and
Moore v. Moore, 114 N.J. 147 (1989) authorizing payment of
equitable distribution in installments and in the case of Connor a
termination upon death.
(New Jersey Order at 11-12.)
The New Jersey court awarded Bogen $15,689.52 in back pension-sharing
payments, ordered Schwartz to continue paying $1,426.32 per month in pensionsharing payments going forward, and awarded Bogen attorneys’ fees and costs.
(New Jersey Order at 12, 14.) Schwartz did not appeal the New Jersey court
Even if the opposite were true our Supreme Court has expressly endorsed the device of a constructive
trust to assure receipt by a party of his/her share of equitable distribution where the payer spouse
possesses the asset. See Thieme v. Aucoin-Thieme, A-51-15 (N.J. Dec. 12, 2016) (slip op. at 32-33).
Parties’ Current Domiciles
Schwartz now resides in Carbondale, Colorado. (Compl. ¶ 1; Schwartz
Aff. ¶ 1.)
According to the Complaint, Bogen resides in Bloomington, Minnesota.
(Compl. ¶ 7.) Schwartz avers that Bogen owns and lives in a home in
Bloomington, Minnesota that she purchased in July 2003. (Schwartz Aff. ¶ 7;
Schwartz Aff., Ex. 1, 2017 Property Tax Statement.) Schwartz avers that, at
Bogen’s direction, he has sent the payments to that residence in Bloomington,
Minnesota, and Bogen has personally signed receipts for those payments
received in Minnesota at that residence. (Schwartz Aff. ¶ 27.) Bogen deposited
the payments from Schwartz in her bank in Minnesota, including payments
made in 2017. (Schwartz Aff. ¶ 29.)
Bogen’s attorney avers: “I have seen Ms. Bogen’s driver’s license which is
from the State of Arizona establishing her residency in that state.” (Sullivan Aff.
On July 26, 2017, Schwartz filed a Complaint against Bogen in this Court.
[Docket No. 1] The Complaint asserts: Count 1: Recovery of Payments in
Violation of ERISA and REA; and Count 2: Declaration of Federal Preemption
under ERISA and REA.
Bogen has now filed a motion to dismiss based on failure to state a claim,
res judicata, collateral estoppel, laches, and abstention. She also asserts improper
Subject Matter Jurisdiction
This matter is in federal court based on a claim of federal question
jurisdiction under ERISA. The Court rejects Bogen’s claim that the Court is
without subject matter jurisdiction due to application of the domestic relations
Standard for Rule 12(b)(1) Motion
“Jurisdictional issues, whether they involve questions of law or of fact, are
for the court to decide.” Osborn v. United States, 918 F.2d 724, 729 (8th Cir.
1990). “In order to properly dismiss for lack of subject matter jurisdiction under
Rule 12(b)(1), the complaint must be successfully challenged on its face or on the
factual truthfulness of its averments.” Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir.
1993) (citation omitted). “In a facial challenge to jurisdiction, all of the factual
allegations concerning jurisdiction are presumed to be true and the motion is
successful if the plaintiff fails to allege an element necessary for subject matter
jurisdiction.” Id. In “a factual attack on the jurisdictional allegations of the
complaint, the court may receive competent evidence such as affidavits,
deposition testimony, and the like in order to determine the factual dispute.” Id.
Domestic Relations Exception
“The domestic relations exception . . . divests the federal courts of
jurisdiction over any action for which the subject is a divorce, allowance of
alimony, or child support, including the distribution of marital property.”
Wallace v. Wallace, 736 F.3d 764, 766 (8th Cir. 2013) (citations omitted).
[A] federal suit is inextricably intertwined with a state domestic
proceeding, thereby depriving the federal court of subject matter
jurisdiction, where the requested federal remedy overlaps the
remedy at issue in the state proceeding. This occurs where the
federal suit involves a remedy which is essentially domestic—
where, in addressing the same conduct involved in a state domestic
proceeding, the effect of a remedy in the federal suit is to modify,
nullify, or predetermine the domestic ruling of the state proceeding.
Id. at 767 (citation omitted).
Subject matter jurisdiction exists in this case based on federal question
jurisdiction because this lawsuit is based on ERISA, a federal statute. This is not
a diversity case; therefore, the domestic relations exception does not apply. See,
e.g., United States v. Crawford, 115 F.3d 1397, 1401–02 (8th Cir. 1997) (holding
that the domestic relations “exception is irrelevant to federal prosecutions under
the CSRA because the district courts’ jurisdiction in such cases does not rest
upon diversity, but rather is based upon 18 U.S.C. § 3231 (“The district courts of
the United States shall have original jurisdiction, exclusive of the courts of the
States, of all offenses against the laws of the United States.”)); Rosenbrahn v.
Daugaard, 61 F. Supp. 3d 862, 867 (D.S.D. 2015) (“But the domestic relations
exception only applies to this court’s diversity jurisdiction, not its federal
question jurisdiction.”), aff’d, 799 F.3d 918 (8th Cir. 2015); Grazzini-Rucki v.
Knutson, No. 13-CV-2477 (SRN/JSM), 2014 WL 2462855, at *12 (D. Minn. May 29,
2014) (“The Court, however, concludes that the domestic relations exception
does not apply because it is a limitation on diversity jurisdiction, and there is no
diversity here.”) aff’d (8th Cir. Mar. 31, 2015).
In her opening memorandum, Bogen briefly argues that venue is improper
because Schwartz is a citizen of Colorado and Bogen is a resident of Arizona.
The Court concludes that venue is proper in this case.
Under 28 U.S.C. § 1406(a), “[t]he district court of a district in which is filed
a case laying venue in the wrong division or district shall dismiss, or if it be in
the interest of justice, transfer such case to any district or division in which it
could have been brought.”
Where an action under this subchapter is brought in a district court
of the United States, it may be brought in the district where the plan
is administered, where the breach took place, or where a defendant
resides or may be found, and process may be served in any other
district where a defendant resides or may be found.
29 U.S.C. § 1132(e)(2). And “for purposes of § 1132(e)(2), a defendant ‘may be
found’ in any federal district with which the defendant has sufficient ‘minimum
contacts’ to permit a court of that state to exercise personal jurisdiction under
International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny.”
Schoemann ex rel. Schoemann v. Excellus Health Plan, Inc., 447 F. Supp. 2d 1000,
1003 (D. Minn. 2006).
“A two-step inquiry is employed when determining whether a federal
court has jurisdiction over a non-resident party: (1) whether the facts presented
satisfy the forum state’s long-arm statute, and (2) whether the nonresident has
‘minimum contacts' with the forum state, so that the court’s exercise of
jurisdiction would be fair and in accordance with due process.” Soo Line
Railroad Co. v. Hawker Siddeley Canada, Inc., 950 F.2d 526, 528 (8th Cir. 1991)
(citation omitted). “The Minnesota long-arm statute extends jurisdiction to the
fullest extent permitted by the due process clause.” Id.
The due process clause requires there be minimum contacts between
the defendant and the forum state before the forum state may
exercise jurisdiction over the defendant. Sufficient contacts exist
when the defendant’s conduct and connection with the forum State
are such that he should reasonably anticipate being haled into court
there, and when maintenance of the suit does not offend traditional
notions of fair play and substantial justice. In assessing the
defendant’s reasonable anticipation, there must be some act by
which the defendant purposefully avails itself of the privilege of
conducting activities within the forum State, thus invoking the
benefits and protections of its laws.
Id. at 528–29 (citations omitted).
In order to determine whether the exercise of jurisdiction comports with
due process, the Court examines five factors:
(1) the nature and quality of the contacts with the forum state; (2) the
quantity of contacts with the forum; (3) the relation of the cause of
action to these contacts; (4) the interest of the forum state in
providing a forum for its residents; and (5) the convenience of the
Stanton v. St. Jude Med., Inc., 340 F.3d 690, 694 (8th Cir. 2003) (citation omitted).
The first three factors are primary, while the last two factors are secondary. Id.
Under ERISA, venue is proper in any state in which a defendant may be
found, and a defendant may be found in any state that has personal jurisdiction
over that defendant. Here, Minnesota has personal jurisdiction over Bogen. The
monetary payments at issue were sent to Minnesota, at Bogen’s request, while
she resided in Minnesota from 1989 to at least 2016, and she deposited the checks
in a Minnesota bank account. Also, while Bogen now claims to no longer live in
Minnesota, she does not dispute that she did live here for a substantial period of
time and still owns her residence in Minnesota. Thus, personal jurisdiction over
Bogen is proper, and, by extension, venue in Minnesota is proper.
Res Judicata and Collateral Estoppel
Rule 12(b)(6) Standard
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may
move the Court to dismiss a claim if, on the pleadings, a party has failed to state
a claim upon which relief may be granted. In reviewing a motion to dismiss, the
Court takes all facts alleged in the complaint to be true. Zutz v. Nelson, 601 F.3d
842, 848 (8th Cir. 2010).
To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is
plausible on its face. Thus, although a complaint need not include
detailed factual allegations, a plaintiff’s obligation to provide the
grounds of his entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of
action will not do.
Id. (citations omitted).
In deciding a motion to dismiss, the Court considers the complaint and
“materials that are part of the public record or do not contradict the complaint, as
well as materials that are necessarily embraced by the pleadings. For example,
courts may consider matters of public record, orders, items appearing in the
record of the case, and exhibits attached to the complaint.” Greenman v. Jessen,
787 F.3d 882, 887 (8th Cir. 2015) (citations omitted).
Res Judicata and Collateral Estoppel Standards
“The law of the forum that rendered the first judgment controls the res
judicata analysis.” Schaefer v. Putnam, 827 F.3d 766, 769 (8th Cir. 2016) (citation
omitted). Thus, New Jersey law governs the preclusive effect of a prior New
Jersey state court judgment.
The doctrine of claim preclusion, or res judicata, prohibits a
plaintiff from re-litigating the same claim against the same parties,
provided the claims have previously been fairly litigated and
determined. Res judicata only serves to bar a claim when:
(1) the judgment in the prior action must be valid, final, and on the
(2) the parties in the later action must be identical to or in privity
with those in the prior action; and
(3) the claim in the later action must grow out of the same
transaction or occurrence as the claim in the earlier one.
Acosta v. A.C.E. Restaurant Group, Inc., No. CV 15-7149, 2017 WL 2539387, at *5
(D.N.J. June 12, 2017) (citations omitted).
The doctrine of issue preclusion, or collateral estoppel, is a
branch of the broader law of res judicata that bars re-litigation of any
issue actually determined in a prior action between the same parties
involving a different claim or cause of action. The doctrine of
collateral estoppel will bar subsequent re-litigation of an issue only
(1) the issue to be precluded is identical to the issue decided in the
prior proceeding; (2) the issue was actually litigated in the prior
proceeding; (3) the court in the prior proceeding issued a final
judgment on the merits; (4) the determination of the issue was
essential to the prior judgment; and (5) the party against whom the
doctrine is asserted was a party to or in privity with a party to the
Acosta, 2017 WL 2539387, at *6 (citations omitted).
The New Jersey’s Court’s Jurisdiction
Schwartz claims that res judicata cannot apply because the New Jersey
court was without jurisdiction to determine whether Bogen was entitled to a
portion of his pension. Schwartz asserts that only federal courts may determine
whether an order is a QDRO. A QDRO is a domestic relations order “which
creates or recognizes the existence of an alternate payee’s right to, or assigns to
an alternate payee the right to, receive all or a portion of the benefits payable
with respect to a participant under a plan.” 29 U.S.C. § 1056(d)(3)(B)(i)(I).
“ERISA recognizes QDROs as an exception to the general rule that pension plan
benefits may not be assigned or alienated.” Alberici Corp. v. Davis, No. 4:04 CV
545 CEJ, 2005 WL 3307299, at *2 (E.D. Mo. Dec. 6, 2005), aff’d, 186 F. App’x 690
(8th Cir. 2006).
The Court holds that the New Jersey state court did have jurisdiction to
determine whether the Final Judgment of Divorce constituted a QDRO and to
enter the January 2017 order. Case law overwhelmingly holds that state and
federal courts have concurrent jurisdiction to make a QDRO determination. See,
e.g., Mack v. Kuckenmeister, 619 F.3d 1010, 1019 (9th Cir. 2010) (holding state
and federal courts have concurrent jurisdiction to determine if a domestic
relations order is a QDRO); Geiger v. Foley Hoag LLP Ret. Plan, 521 F.3d 60, 67
(1st Cir. 2008) (holding that state courts have concurrent jurisdiction to determine
if a domestic relations order is a QDRO and noting “the one-sidedness of the
caselaw” on this point). See also Langston v. Wilson McShane Corp., 776 N.W.2d
684, 693 (Minn. 2009) (holding “that state and federal courts have concurrent
jurisdiction to review a plan administrator’s determination of whether a
domestic relations order is ‘qualified’ for purposes of ERISA”).
Here, as implicitly determined by the New Jersey court, Bogen was a
“beneficiary” seeking “to recover benefits due to h[er] under the terms of h[er]
plan, to enforce h[er] rights under the terms of the plan, or to clarify h[er] rights
to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B).
Moreover, Schwartz also brought a motion before the New Jersey court seeking
to obtain repayment of the pension payments and a determination that he owed
no future payments; thus, he was seeking to enforce his rights under the Pension
Plan and to clarify his rights to future benefits under the terms of the Pension
Plan. The New Jersey court had jurisdiction to determine these issues, and it did
so by holding that the Final Judgment of Divorce entitled Bogen to an ongoing
equitable distribution of the Pension Plan and that ERISA’s anti-assignment
provision did not bar that distribution. Whether or not the New Jersey court
correctly determined that the prior order was an enforceable QDRO is not
relevant to the application of res judicata.
Res Judicata Factors
The Court holds that res judicata applies and this Complaint must be
dismissed. First, the New Jersey state court’s judgment is valid, final, and on the
merits. Schwartz does not dispute that he failed to appeal the judgment. Nor
does he dispute that the New Jersey court squarely determined that Bogen was,
and continues to be, entitled to a portion of his pension. The New Jersey court
further heard and rejected Schwartz’s argument that the Final Judgment of
Divorce was not a QDRO. Second, the parties to the New Jersey action and this
action are identical: Schwartz and Bogen. Third, the claims in the federal case
grew out of the same transaction or occurrence as the claims in the New Jersey
case: namely, Schwartz’s demand for repayment of the pension-sharing
payments and assertion that he is not required to continue payments going
forward. The issues of whether the Final Judgment of Divorce entitled Bogen to
an equitable distribution of the Pension Plan and whether ERISA barred such
equitable distribution were explicitly argued to the New Jersey court and
decided by the New Jersey court. Deciding these issues was essential to the New
Jersey court’s judgment. Thus, res judicata applies. See Geiger, 521 F.3d at 68
(affirming district court’s dismissal on res judicata grounds because “Geiger
rejected the opportunity to challenge the QDROs at both the state trial and
appellate levels. That he did so on the mistaken belief that the federal courts had
exclusive jurisdiction over those challenges does not alter the finality of those
judgments, nor their preclusive effect.”).
Accordingly, based upon the files, records, and proceedings herein, IT IS
Defendant’s Motion to Dismiss [Docket No. 8] is GRANTED.
This matter is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: November 28, 2017
s/ Michael J. Davis
Michael J. Davis
United States District Court
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