[00:00:01] Speaker 00:
The case this morning is Sharon Klein versus OPM 2021-1770.

[00:00:08] Speaker 00:
Ms.

[00:00:09] Speaker 00:
Moorhead, you may proceed.

[00:00:13] Speaker 02:
Good morning, Your Honors.

[00:00:15] Speaker 02:
My name is Bridget Moorhead, and I am here on behalf of Sharon Klein, the Petitioner and the Scanner.

[00:00:22] Speaker 02:
This appeal involved former spouse survivor benefits under 5 U.S.P.

[00:00:29] Speaker 02:
8341.

[00:00:31] Speaker 02:
A little bit of change of pace from the earlier cases that you've been hearing.

[00:00:37] Speaker 02:
There is significant evidence in the record at the time of the divorce to find that Mr. Klein intended to provide a survivor benefit to Sharon Klein in the divorce order.

[00:00:50] Speaker 02:
And the timing here is significant.

[00:00:53] Speaker 02:
The marital settlement agreement that became part of the divorce order was signed in 1987.

[00:00:59] Speaker 02:
And at that time, there was a survivor election in force that had been in force for the entire 33 years of Mr. Klein's postal service career.

[00:01:10] Speaker 02:
Then in 1989, there was a retirement survivor benefit election when Mr. Klein retired in 1989.

[00:01:19] Speaker 02:
And at that time, even though in contemplation of the divorce, he did elect a full survivor benefit for Ms.

[00:01:28] Speaker 02:
Klein.

[00:01:29] Speaker 02:
And then in 1991, the divorce order was signed.

[00:01:34] Speaker 02:
So in addition to the ongoing elected survivor benefits, there was also the language of the grant of benefits that's in the Marital Settlement Agreement.

[00:01:48] Speaker 02:
Under FOX, there has to be a pertinent clause.

[00:01:52] Speaker 02:
And in the grant, which I believe is a pertinent clause, that grants survivor benefits

[00:01:58] Speaker 02:
which is on page 11 of our brief, and then in the marital settlement agreement, which is Appendix 123 through 131, which provides the marital settlement agreement.

[00:02:10] Speaker 02:
The language is that the parties agree that there is a community interest in the husband's retirement plan through his employment by the US Postal Service.

[00:02:20] Speaker 02:
Upon husband's retirement, the US Postal Service shall pay directly to wife,

[00:02:24] Speaker 02:
Each month, so long as the wife shall remain living, one half remains such monthly retirement benefits to which husband is entitled.

[00:02:32] Speaker 00:
But that doesn't provide for a survivor annuity.

[00:02:36] Speaker 00:
That provides for retirement benefits which are different.

[00:02:41] Speaker 02:
I understand the difference, Your Honor.

[00:02:43] Speaker 02:
And the basis for it is, this is a retirement plan.

[00:02:46] Speaker 02:
And if you look at the retirement election on page 137 to 140, it includes survivor benefits.

[00:02:54] Speaker 02:
In addition, the so long as the wife shall remain living is a lifetime benefit that is consistent with language that was allowed to provide a survivor benefit, and several cases have so held, before the 1993 change in the statute.

[00:03:11] Speaker 02:
And if you look at that statute.

[00:03:13] Speaker 04:
Well, I guess this is, I'm sorry to interrupt.

[00:03:14] Speaker 04:
This is Judge Prost.

[00:03:15] Speaker 04:
And I think I'm having the same, can you hear me?

[00:03:18] Speaker 02:
I can hear you just fine.

[00:03:19] Speaker 02:
Are you having trouble hearing me?

[00:03:20] Speaker 04:
No, I can hear you.

[00:03:22] Speaker 04:
I think I'm having the same.

[00:03:24] Speaker 04:
problem that Judge Laurie is having, construing this language.

[00:03:27] Speaker 04:
Granted, so long as the life shall remain living, if you just look at that part of it, it could arguably, in the right context, speak to survivors as well as retirement.

[00:03:39] Speaker 04:
But if you read that phrase in the context

[00:03:42] Speaker 04:
Clearly, this context of benefits that are at issue in this sentence is clearly just dealing with the monthly annuity that the husband is getting and the wife is getting half of that as long as she lives.

[00:03:58] Speaker 04:
And there's no other context.

[00:03:59] Speaker 04:
If you read it in the context, that's the beginning and end of its applicability.

[00:04:05] Speaker 04:
Isn't that a fair reading?

[00:04:08] Speaker 02:
I think that could be a fair reading, Your Honor, but I think that there are other ways to read that, and partly because even though the survivor word isn't included in there, if you look at the definition of a survivor, it is anyone who remains living after the death of.

[00:04:24] Speaker 02:
So the key word is remain living.

[00:04:27] Speaker 02:
I mean, I agree with you.

[00:04:32] Speaker 02:
so long as the husband shall remain living, that would have been the clearest way to write this.

[00:04:37] Speaker 02:
And I agree that it's not the most heartfully written document.

[00:04:43] Speaker 01:
But the language that I have a problem with is the language at the very end of that sentence, which says, any such monthly retirement benefits to which the husband is entitled.

[00:04:57] Speaker 01:
The husband is not entitled to survivor benefits after his own death, right?

[00:05:02] Speaker 01:
So a reference to the benefits to which he is entitled seems to me to be, by its terms, limited to the monthly payments during his life.

[00:05:15] Speaker 01:
Isn't that the compelled reading of that language?

[00:05:20] Speaker 02:
That is true.

[00:05:20] Speaker 02:
But if you look at the Thomas case, there was no mention of the word survivor in that.

[00:05:26] Speaker 02:
grant in the Marable Settlement Agreement.

[00:05:29] Speaker 02:
And the court found that because there was an existing election of survivor benefits, which was definitely in place at the time this Marable Settlement Agreement was drafted, that there's existing benefits.

[00:05:43] Speaker 02:
And I really do believe that even though it says retirement benefits, and I do, Your Honor, understand the difference between retirement benefits and survivor benefits, that this provision is more general relating more to a retirement plan

[00:05:56] Speaker 02:
which is set forth in the retirement document that Mr. Klein signed that included a survival election.

[00:06:03] Speaker 01:
But what do you do with that language to which the husband is entitled?

[00:06:08] Speaker 01:
How is that consistent with survivor benefits?

[00:06:12] Speaker 02:
Well, the survivor is true.

[00:06:15] Speaker 02:
You can't receive benefits when you're dead.

[00:06:17] Speaker 02:
Right.

[00:06:17] Speaker 02:
I agree with that.

[00:06:20] Speaker 02:
But also, you can't get around the fact that the wife receives benefits as long as she's

[00:06:26] Speaker 01:
So if she pre-deceases him, her benefits cease, which is what it would seem that clause is directed to, right?

[00:06:38] Speaker 02:
Yes.

[00:06:39] Speaker 02:
I would agree with his title, but I do, again, think that the retirement plan includes those survivor benefits.

[00:06:46] Speaker 02:
I mean, he selects those.

[00:06:47] Speaker 02:
Those are all part of his entire retirement plan.

[00:06:50] Speaker 02:
And so he is giving that benefit.

[00:06:54] Speaker 02:
I mean, it is a benefit to him for his work at the Postal Service.

[00:06:58] Speaker 02:
It does go to the surviving wife, but it is all part of his retirement plan.

[00:07:08] Speaker 00:
There's also a letter, March 30, 1998, from Mr. Klein saying the purpose of this is to

[00:07:18] Speaker 00:
placed my current spouse, that's the second wife, on full annuity benefits.

[00:07:26] Speaker 00:
That plays into the picture too, doesn't it?

[00:07:30] Speaker 02:
Well, I don't believe it plays into the picture with respect to the divorce order, because the evidence has to be contemporaneous at the time of the divorce order.

[00:07:38] Speaker 02:
When that letter is written,

[00:07:40] Speaker 02:
If circumstances have changed, he's obviously married a second wife and has an interest in protecting her.

[00:07:46] Speaker 02:
But that letter wasn't in existence at the time the Marital Settlement Agreement was drafted.

[00:07:53] Speaker 02:
I do not believe it weighs in at all on the interpretation of the Marital Settlement Agreement and the grant of survivor reference.

[00:08:03] Speaker 00:
And OPM was not a party to the Marital Settlement Agreement, correct?

[00:08:13] Speaker 02:
agreement that's part of the divorce order, different from the settlement agreement that I will turn to in a few minutes.

[00:08:24] Speaker 02:
So Your Honor, when you ask that question, you're referring to the mayoral settlement agreement as part of the divorce or the settlement agreement during this proceeding?

[00:08:38] Speaker 00:
I see it was part of the order of the Superior Court.

[00:08:44] Speaker 00:
Why don't you proceed as you intend.

[00:08:56] Speaker 02:
And I just wanted to direct the court, too, on this issue of the settlement order is, if you look at

[00:09:05] Speaker 02:
5 CFR 838.803b.

[00:09:09] Speaker 02:
This was a provision that in this statute changed or militated the language that had to be in a divorce order after 1993.

[00:09:18] Speaker 02:
All of this transpired before 1993.

[00:09:22] Speaker 02:
And that language, there were several languages that were suggested that would be acceptable before 1993 that wouldn't be acceptable after 1993.

[00:09:31] Speaker 02:
And those provisions are very similar.

[00:09:34] Speaker 02:
that the former spouse will continue to receive benefits for his or her lifetime, or that benefits will continue after the death of, or that why you remain living takes into consideration that to remain living means that somebody has died.

[00:09:52] Speaker 02:
And that even though there's no listing of survivor annuity death benefit for a former spouse community in the grant in the marital settlement agreement, that the court could still find that there was a grant of survivor benefits.

[00:10:07] Speaker 02:
And again, I mentioned there were survivor benefits that were in place at the time all of this was taking place, both pre-existing and then continuing with the retirement election.

[00:10:19] Speaker 02:
I wanted to switch gears.

[00:10:20] Speaker 02:
The other basis for this, and regardless of what the court would find on the interpretation of the divorce order and the marital settlement agreement, during these proceedings and before the administrative court rule, the parties, the real parties in interest, both spouses entered into a settlement agreement.

[00:10:44] Speaker 02:
And that's down on appendix 249 to 250.

[00:10:49] Speaker 02:
Throughout the whole proceeding, there was an incredible amount of pressure put on me and OPM, but mostly me, to try to settle this case.

[00:10:59] Speaker 02:
I've been a litigator for almost 30 years, and always the goal is to try to settle if you can save judicial resources.

[00:11:08] Speaker 02:
So I worked with the second spouse, and we were able to come to a settlement agreement.

[00:11:16] Speaker 02:
The only reason that, you know, the only way she would do it, though, was if OPM admitted the payments.

[00:11:23] Speaker 02:
And that was mostly because of the tax liability.

[00:11:27] Speaker 02:
The second spouse is a relatively wealthy woman, and she did not want an additional tax liability for getting the entire amount of the payments and then paying share incline half of the benefits that she was receiving.

[00:11:42] Speaker 02:
And the other issue, too, is the... Wait, wait, wait.

[00:11:45] Speaker 04:
So what was the deal?

[00:11:46] Speaker 04:
So let me understand what the deal was.

[00:11:48] Speaker 04:
So your client would receive all of the payments and bear the tax liability for that, and then your client would give half of it to the other side without incurring a tax liability?

[00:12:02] Speaker 04:
Is that what the deal was predicated on?

[00:12:04] Speaker 04:
I'm not understanding it.

[00:12:06] Speaker 02:
It's the reverse, actually, because the second spouse is currently receiving the survivor benefits.

[00:12:11] Speaker 02:
And so the agreement was, well, the agreement was she's getting them now.

[00:12:16] Speaker 02:
But if she just privately paid my client half of what she was getting, she would incur the tax liability on the entire amount.

[00:12:25] Speaker 02:
And that was something that she could not agree to do, which I understood.

[00:12:29] Speaker 02:
And so it was a very important term in this settlement agreement that OPM would issue the two checks just like they've been doing before Mr. Klein died when they issued the retirement benefits and split them.

[00:12:41] Speaker 02:
That was the nature of the agreement, and the administrative court was very happy that the parties had reached an agreement, but OPM just refused to participate in any of the settlement discussions.

[00:12:57] Speaker 02:
I mean, you can see from the agreement that OPM is not a party.

[00:13:02] Speaker 02:
I saw this, and in talking to the administrative judge, if this was more administrative, to administer, just to make the payments,

[00:13:09] Speaker 02:
I mean, an OPM does not really have a dog in this fight, so to speak, in the sense that they would pay off these benefits fully to somebody, either to the second's spouse or my client, the former's spouse.

[00:13:23] Speaker 04:
Well, they have to pay.

[00:13:24] Speaker 04:
But they have a legal obligation to only pay out benefits to one who is legally entitled to those benefits.

[00:13:33] Speaker 04:
Right?

[00:13:34] Speaker 04:
I mean, they do have that obligation, right?

[00:13:37] Speaker 02:
They absolutely do have that obligation, and they are meeting that obligation to the second spouse, notwithstanding the arguments that I'm making here.

[00:13:46] Speaker 02:
But the issue is that if the administrative judge is going to ask us to settle, and I mean, when this discussion came up, OPM's counsel said, oh, the administrative judges, they just say that.

[00:14:00] Speaker 02:
It's totally illusory.

[00:14:01] Speaker 02:
There's no way to settle this.

[00:14:04] Speaker 02:
And maybe I'm misunderstood, but there

[00:14:07] Speaker 02:
There's been no authority cited either by the administrative judge in the underlying proceeding or by the government in this appeal that states why the parties can't, you know, can't settle and why OPM

[00:14:23] Speaker 02:
cannot, as an administrative function, issue two checks.

[00:14:27] Speaker 01:
Well, this ship may have sailed, but I can't understand why it wouldn't have been a fairly simple matter for the second Mrs. Klein upon getting the full check to have given an amount of money to the first Mrs. Klein that would have reduced

[00:14:46] Speaker 01:
that amount by the amount of extra tax that the second business client had to pay.

[00:14:51] Speaker 01:
And therefore, it's a wash.

[00:14:52] Speaker 01:
Everybody comes out in the same position they would be if each of them was getting half of the money.

[00:14:58] Speaker 01:
Why wouldn't that be a simple way to solve the problem without involving OPM?

[00:15:05] Speaker 01:
OPM just sends one check.

[00:15:07] Speaker 01:
You send it to the second business client.

[00:15:09] Speaker 01:
The second business client

[00:15:10] Speaker 01:
takes splits the money, takes the additional incremental tax that she would have had to pay out of the check that she sends to the first Mrs. Klein.

[00:15:21] Speaker 02:
That was a term of the agreement to which only the second Mrs. Klein would agree to.

[00:15:28] Speaker 02:
she would not agree

[00:15:45] Speaker 02:
You know, we had hoped that, we really thought that this was the Ferris resolution, and both spouses agreed to it.

[00:15:52] Speaker 02:
But for the fact that the second Mrs. Klein would not agree to just accept all of the money from OPM and then pay out half of it herself, it needed to be administered by OPM.

[00:16:05] Speaker 00:
Council, your time has been consumed.

[00:16:09] Speaker 00:
Plus, we'll give you two minutes for a bottle of time, and let's hear from the government at this point.

[00:16:17] Speaker 02:
Thank you, Your Honor.

[00:16:28] Speaker 00:
Good morning, Ms.

[00:16:29] Speaker 00:
Murphy.

[00:16:31] Speaker 03:
Good morning, Your Honor.

[00:16:33] Speaker 03:
May it please the court?

[00:16:35] Speaker 03:
Your Honor, the question presented by this appeal, as you know, is whether petitioner Sharon Klein is entitled to survivor's benefits for her deceased ex-husband who remarried and elected to have his new wife placed on full benefits.

[00:16:49] Speaker 03:
After a careful review of the evidence, the MSPB properly determined that Mrs. Klein is not entitled to a survivor's annuity for a late husband.

[00:16:57] Speaker 03:
And substantial evidence supports the MSPB's decision.

[00:17:00] Speaker 03:
I think the court has well covered the marital settlement agreement and why it doesn't provide for survivors of nudity.

[00:17:07] Speaker 03:
But I wanted to give the court one additional citation or reference to help with that decision.

[00:17:12] Speaker 03:
And that is a letter from OPM found at appendix 136 through 137.

[00:17:18] Speaker 03:
That letter was sent to Mr. Klein at the point where Mrs. Klein, the first Mrs. Klein, began to receive the retirement annuity.

[00:17:26] Speaker 03:
And it made clear that the annuity was seized upon Mr. Klein's death.

[00:17:30] Speaker 03:
Further support that the annuity was indeed a retirement annuity distinct from survivor's annuity and intended to end Mr. Klein's death.

[00:17:38] Speaker 04:
Can I just ask you an aside question?

[00:17:40] Speaker 04:
Because I'm really not sure how this works.

[00:17:44] Speaker 04:
If you have a survivor's annuity coming at the end of the game, that reduces your retirement annuity by a certain portion, correct?

[00:17:53] Speaker 03:
It reduces your annuity overall.

[00:17:56] Speaker 03:
Yes, Your Honor.

[00:17:57] Speaker 04:
Yes.

[00:17:57] Speaker 04:
So under this retirement plan, the first Mrs. Klein was getting half of the retirement.

[00:18:04] Speaker 04:
But her half was reduced because there was payment all of these years that goes to the survivor annuity portion.

[00:18:15] Speaker 03:
Well, Mr. Klein.

[00:18:16] Speaker 03:
I'm not 100% sure, Your Honor, how that works administratively.

[00:18:20] Speaker 03:
But what I can tell you is that the election for retirement annuity was for the first Mrs. Klein.

[00:18:27] Speaker 04:
The other thing you were saying is that, I mean, I just want to understand.

[00:18:30] Speaker 04:
I think survivors, you start paying it.

[00:18:32] Speaker 04:
I mean, the money, a portion of your retirement benefits

[00:18:36] Speaker 04:
are reduced by, I don't know, I have no idea what the amount would be if you elect to do a survivor's annuity at the end of the game.

[00:18:44] Speaker 03:
Right, but I already got Mr. Klein's portion was then decreased.

[00:18:48] Speaker 03:
I mean, it looks like they're each going to get half.

[00:18:52] Speaker 04:
So it seems to, I mean, this may be neither here nor there in terms of the legal ramifications.

[00:18:58] Speaker 04:
Maybe it's just a question of kind of, but it seems to me that it's quite clear that she was getting, her half of it under this retirement plan would have been reduced as his half was by a payment into the survivor's annuity portion.

[00:19:13] Speaker 03:
Right.

[00:19:15] Speaker 04:
I'm just curious.

[00:19:16] Speaker 04:
Do you assume that's correct?

[00:19:17] Speaker 03:
I assume that's correct, Your Honor, but I don't know.

[00:19:21] Speaker 03:
What I do know, though, is that it was clear even from this letter when her retirement annuity kicked in in 1995, I believe, that what she would receive would pay until Mr. Klein's death.

[00:19:33] Speaker 03:
He was only eligible, as we pointed out in the Marital Settlement Agreement, to give to her retirement

[00:19:39] Speaker 03:
annuity until his death.

[00:19:40] Speaker 03:
Once he passed away, it then kicked into survivor's annuity, which, as the court has referenced, he intended for his retirement annuity or his survivor's annuity to go to his second wife, pursuant to the letter he sent to OPM.

[00:19:53] Speaker 04:
What about this change that your friend referred to?

[00:19:56] Speaker 04:
And we've seen it come up in other cases when the regime changed and the government required more specificity.

[00:20:04] Speaker 04:
And this, I think you agree, this preceded that.

[00:20:07] Speaker 03:
It did.

[00:20:08] Speaker 03:
It preceded that.

[00:20:09] Speaker 03:
But even the regulations before 1993 made clear that this language, so long as you should live or forever, was not enough standing alone to grant a former spouse a survivor's annuity if the agreement, like the marital settlement agreement here, didn't also contain language like death benefit or survivor's annuity.

[00:20:29] Speaker 03:
And here, as we know, the marital settlement agreement did not contain such language.

[00:20:32] Speaker 03:
It only referred to a retirement plan.

[00:20:35] Speaker 03:
So even under the pre-1993,

[00:20:37] Speaker 03:
regulations, and that would be back then at 5 CFR 838J.

[00:20:44] Speaker 03:
That language, for so long as you shall live, was not enough standing alone to grant a survivor's annuity if there was not also language death benefits, some language that referred to benefits that you receive when someone deceases.

[00:20:59] Speaker 03:
So that language alone wouldn't cut it, Your Honor.

[00:21:01] Speaker 03:
And with respect to the settlement agreement, I wanted to bring your attention to that as well.

[00:21:08] Speaker 03:
And since that came up earlier in the argument, OPM is prohibited, as you mentioned, Judge Proce, from paying out proceeds except in accordance with law.

[00:21:17] Speaker 03:
So OPM could not administer or facilitate

[00:21:20] Speaker 03:
a private settlement agreement between the two Mrs. Clines.

[00:21:24] Speaker 03:
It has to pay out in accordance with law.

[00:21:26] Speaker 03:
And here, it is operating with an election that Mr. Klein made before he passed that those survivor's benefits go to the second Mrs. Klein, Ms.

[00:21:35] Speaker 03:
Elizabeth Klein.

[00:21:36] Speaker 04:
But the government doesn't have a dog in the fight if the parties

[00:21:40] Speaker 04:
independently reach a settlement and divvy the money up as long as, obviously.

[00:21:45] Speaker 04:
Well, the IRS has a dog in that fight, but be that as it may.

[00:21:49] Speaker 03:
But that is correct, Your Honor.

[00:21:50] Speaker 03:
And OPM said that.

[00:21:51] Speaker 03:
We can't administer this agreement.

[00:21:53] Speaker 03:
OPM did not object to the settlement agreement, but for the fact that it could not administer such agreement.

[00:21:58] Speaker 03:
It could only pay in accordance with law.

[00:22:01] Speaker 03:
So it could only pay the second Mrs. Klein, Ms.

[00:22:04] Speaker 03:
Elizabeth Klein, who was entitled to receive the survivor's annuity.

[00:22:10] Speaker 04:
Was she an intervener here at some point?

[00:22:12] Speaker 03:
So she intervened in the second MSPB appeal, Your Honor, and then he or she was served with a copy of the petition for review but did not appear.

[00:22:26] Speaker 03:
So the court doesn't have any further questions.

[00:22:29] Speaker 03:
I ask you to respectfully affirm the decision of the Merit System Protection Board, which was based on substantial evidence.

[00:22:36] Speaker 00:
Thank you, counsel.

[00:22:44] Speaker 02:
I would like a short rebuttal.

[00:22:46] Speaker 00:
You will have up to two minutes for a bottle, Ms.

[00:22:48] Speaker 00:
Morehead.

[00:22:50] Speaker 02:
Thank you very much, Your Honor.

[00:22:52] Speaker 02:
I just wanted to refer back to the letter that she pointed out, the 1995 letter.

[00:22:58] Speaker 02:
I mean, that's not just positive.

[00:22:59] Speaker 02:
I mean, if the court finds that the interpretation, the OPM's interpretation of the Maryland settlement of Reming Brandt is wrong, I mean, all of the cases look at what the language is.

[00:23:12] Speaker 02:
And so the fact that OPM issued that letter saying that it ended up on the death is not as positive, because there's no interpretation or court interpretation of that language.

[00:23:23] Speaker 02:
I would agree with your honor with the one half reduced.

[00:23:30] Speaker 02:
It's no question that my client's half was reduced, and not just for a short period of time.

[00:23:36] Speaker 02:
It was for the entire 33 years of his professional career, which ended actually before the divorce.

[00:23:42] Speaker 02:
And then there was an election that was still in force because of the notice issue.

[00:23:48] Speaker 02:
So the government has conceded on the notice issue.

[00:23:51] Speaker 02:
I don't believe that's an issue before the court.

[00:23:53] Speaker 02:
So that retirement election in 1989 continued in force because the notice was deficient.

[00:24:00] Speaker 02:
So then she continued to get, even for another 10 years, her retirement that was reduced for purposes of the survivor benefit.

[00:24:09] Speaker 02:
And it was always a maximum.

[00:24:11] Speaker 02:
retirement benefits.

[00:24:13] Speaker 02:
So even 10 years after, we're talking about 43 years of survivor election that she had during that whole period of time.

[00:24:22] Speaker 02:
I don't think there's any question that had Mr. Klein die during that time, even after the divorce, that that retirement election would still be in force.

[00:24:32] Speaker 02:
So based on all of the arguments before, and especially with respect to the grant in the marital settlement agreement, we would ask the court to grant survivor benefits to Sharon Klein going back to 2016, or enforce the settlement agreement between the two wives.

[00:24:55] Speaker 00:
Thank you, counsel.

[00:24:55] Speaker 00:
We appreciate both arguments, and the case is submitted.