GERALD E. MANSELL, APPELLANT V. GAYE M. (MANSELL) FORBES

   No. 87-201

   In the Supreme Court of the United States

   October Term, 1988

   On Appeal from the Court of Appeal of California Fifth Appellate
District

   Brief for the United States as Amicus Curiae

            TABLE OF CONTENTS
   Interest of the United States
   Statement
   Summary of argument
   Argument
   Conclusion

                          QUESTION PRESENTED

   The United States will address the following question:  whether the
Federal Uniformed Services Former Spouses' Protection Act, 10 U.S.C.
(& Supp. IV) 1408, precludes the states from treating military
retirement pay that has been waived to receive veterans' disability
benefits as community property divisible by court order upon divorce.

                     INTEREST OF THE UNITED STATES

   The question presented in this case is whether a state, consistent
with the Federal Uniformed Services Former Spouses' Protection Act
(FUSFSPA), /1/ 10 U.S.C. (& Supp. IV) 1408, and 38 U.S.C. (& Supp. IV)
3101(a), may treat military retirement pay that has been waived to
receive veterans' disability benefits as community property divisible
upon divorce.  The United States has an interest in the proper
resolution of the question, both because the military services
branches and the Veterans Administration are charged with the
administration of the statutes that regulate the distribution of
military retirement pay and veterans' disability benefits, and because
of the role that these agencies play in representing the interests of
both active and retired military personnel and their spouses.  At the
invitation of the Court, the United States previously filed a brief
amicus curiae at the jurisdictional stage of this case.

                               STATEMENT

   1. a. As we stated in our earlier brief, this case involves the
relationship between California community property law and two kinds
of federal benefits:  military retirement pay based on length of
service, and veterans' disability benefits.  Under various provisions
of Title 10 of the United States Code, members of the military
services who have served the required length of time may retire from
active duty and receive retirement pay.  10 U.S.C. (& Supp. IV) 3911
et seq. (Army);  10 U.S.C. (& Supp. IV) 6321 et seq. (Navy and Marine
Corps);  10 U.S.C. 8911 et seq. (Air Force);  see generally McCarty v.
McCarty, 453 U.S. 210, 213-215 (1981).  /2/

   In addition, veterans who become partially or totally disabled as a
result of military service may be eligible for disability benefits
from the Veterans Administration (VA) (38 U.S.C. 310 (wartime
disability));  38 U.S.C. 331 (peacetime disability)).  A military
retiree may receive veterans' disability benefits only to the extent
that he or she waives a corresponding amount of military retirement
pay (38 U.S.C. (& Supp. IV) 3104(a)(1), 3105).  Because veterans'
disability benefits, unlike military retirement pay, are exempt from
taxation, such waivers are common.

   Under the Federal Uniformed Services Former Spouses' Protection Act
(10 U.S.C. (& Supp. IV) 1408), "disposable retired or retainer pay"
may be regarded under state law as community property subject to
division upon divorce (10 U.S.C. 1408(c)(1)).  /3/ According to the
statute, "disposable retired or retainer pay" excludes amounts of
retired or retainer pay waived in order to receive veterans'
disability benefits under Title 38 (10 U.S.C. 1408(a)(4)(B)).  FUSFSPA
also provides that the federal government will garnish up to 50% of a
service member's disposable retired or retainer pay to satisfy a court
order dividing the pay as property in a divorce settlement or defining
child support or alimony obligations (10 U.S.C. (& Supp. IV)
1408(d)(1) and (e)(1)).  Finally, FUSFSPA contains a savings clause
(10 U.S.C. 1408(e)(6)) stating that the maximum use of federal
enforcement remedies should not be construed to relieve a service
member of additional unsatisfied obligations that can be enforced by
other legal means.

   This case also involves 38 U.S.C. (& Supp. IV) 3101(a), which
provides that veterans' disability benefits "shall not be assignable
except to the extent specifically authorized by law, and * * * shall
be exempt from taxation, shall be exempt from the claim(s) of
creditors, and shall not be liable to attachment, levy, or seizure by
or under any legal or equitable process whatever, either before or
after receipt by the beneficiary." See Rose v. Rose, No. 85-1206 (May
18, 1987), slip op. 9-15;  see also Bennett v. Arkansas, No. 86-6124
(Mar. 29, 1988) (Social Security Act anti-attachment clause).

   b. California, like seven other States, applies community property
principles to certain property acquired by the spouses during
marriage.  When a marriage is dissolved, the court granting the
divorce decree divides the community assets equally between the
spouses, while each spouse retains full ownership of any property
acquired separately, such as property acquired before marriage.  See
Cal. Civ. Code Section 4800(a) (West 1983 & Supp. 1985);  McCarty v.
McCarty, 453 U.S. at 216-217;  Hisquierdo v. Hisquierdo, 439 U.S. 572,
578-582 (1979) (application of California community property law to
Railroad Retirement Act benefits).

   Under California law, vested or nonvested rights to receive
military retirement payments based on length of service are treated as
community property to the extent that they derive from military
service performed during the marriage.  In re Marriage of Fithian, 10
Cal. 3d 592, 517 P.2d 449, 111 Cal. Rptr. 369, cert. denied, 419 U.S.
825 1974) (vested (right));  In re Marriage of Brown, 15 Cal. 3d 838,
544 P.2d 561, 126 Cal. Rptr. 633 (1976) (nonvested right to receive
pensions divisible as contingent property interest).  Military
retirement pay received after a marriage is dissolved may therefore be
subject to division between the former spouses on the theory that the
right to receive those payments is a community asset that was acquired
during the marriage.  Casas v. Thompson, 42 Cal. 3d 131, 139, 720 P.2d
921, 925, 228 Cal. Rptr. 33, 37, cert. denied, 479 U.S. 1012 (1986).
Where a spouse elects to receive a higher retirement payment because
of disability compensation, California law has considered the amount
received in excess of the nondisability retirement pay he or she would
have received to be the separate property of the disabled spouse.  In
re Marriage of Stenquist, 21 Cal. 3d 779, 785-787, 582 P.2d 96,
100-101, 148 Cal. Rptr. 9, 13-14 (1978).  /4/ However, California law
treats any disability retirement pay or veterans' benefits received in
lieu of retirement pay as community property susceptible to division.
See ibid. (disability retirement pay);  In re Marriage of Daniels, 186
Cal. App. 3d 1084, 231 Cal. Rptr. 169 (1986) (veterans' disability
benefits received after waiver).

   2. The parties to this appeal were married in 1954 and have six
children.  They separated in 1977.  On May 29, 1979, the Merced
County, California, Superior Court entered an interlocutory judgment
dissolving the marriage.  The dissolution order became final on June
4, 1979.  J.S. App. D2.  At the time of the divorce, appellant Mansell
was retired from the Air Force on nondisability retirement, having
served the requisite time.  He was also eligible for veterans'
disability based on a service-connected disability.  He was then, and
is now, receiving both Air Force retirement pay and, pursuant to a
waiver of a portion of that pay, veterans' disability benefits.  Ibid.
 /5/

   On May 25, 1979, in preparation for the divorce, the parties
entered into a property settlement agreement (J.S. App. D1).  The
agreement provided (id. at D2-D3) in part:

         (Appellant) shall make an allotment to (appellee) in an
      amount equalling fifty percent (50%) of the gross retirement pay
      and compensation from the Veterans' Administration accrued
      through (appellant's) employment with the United States Air
      Force, and shall increase such allotment from time to time in an
      amount necessary to equal fifty percent (50%) of the gross
      amount of any and all increases in such retirement pay and
      compensation from the Veterans' Administration that may occur in
      the future until the death of either party.

   The interlocutory divorce decree incorporated the property
settlement agreement by reference (id. at A2), and also specifically
required appellant to make the specified allotment of his gross
retirement pay and veterans' disability benefits as provided for by
the property settlement (id. at A3).  The court that granted the
divorce expressly reserved jurisdiction over the distribution of
appellee's share of these benefits (ibid.).  In addition, the decree
noted that appellee had waived her right to receive any money or
property from appellant as spousal support (id. at A2).

   In 1983, appellant requested the Merced County Superior Court to
modify the decree by removing the provision that required him to make
the allotment of retirement pay and disability benefits (J.S. App.
D2-D3).  The superior court denied that request without opinion on
August 10, 1983 (id. at B2).

   Appellant appealed that decision to the California Court of Appeal,
Fifth Appellate District, arguing that under FUSFSPA and 38 U.S.C. (&
Supp. IV) 3101(a), California could not include the portion of
retirement pay that he receives in the form of veterans' disability
benefits in the total retirement payments to be divided between him
and appellee as community property.  The Court of Appeal rejected the
argument based on FUSFSPA, relying on the decision of the Supreme
Court of California in Casas v. Thompson, supra (J.S. App. D8-D11).
Casas held that after the enactment of FUSFSPA there was no federal
preemption of state community property law as it applies to "gross"
military retirement pay, and that FUSFSPA's limited federal
enforcement remedy did not imply any limits on the State's ability to
subject "gross" military retirement pay to community property rights
and to enforce those rights through remedies other than federal
enforcement (42 Cal. 3d at 143-151, 720 P.2d at 928-933, 228 Cal.
Rptr. at 40-46).  The Court of Appeal did not discuss the preemptive
effect of 38 U.S.C. (& Supp. IV) 3101(a).  It affirmed the superior
court's judgment on January 30, 1987 (J.S. App. D1-D14).

   Appellant sought review of the Court of Appeal's decision in the
Supreme Court of California.  Review was denied without opinion on
April 29, 1987 (J.S. App. E1).

                          SUMMARY OF ARGUMENT

   This brief will address only the issue of federal preemption raised
by FUSFSPA:  whether the states may characterize "gross" military
retirement pay, that is, military retirement pay including those
portions waived to receive veterans' disability benefits, /6/ as
community property susceptible to division in a divorce settlement.

   Because family law is traditionally a realm of state law (In re
Burrus, 136 U.S. 586, 593-594 (1890)), this Court has held that state
family law is preempted only if that result has been "'positively
required by direct enactment'" (Hisquierdo v. Hisquierdo, 439 U.S.
572, 581 (1979), quoting Wetmore v. Markoe, 196 U.S. 68, 77 (1904)),
and if the conflicting state law does "'major damage' to 'clear and
substantial' federal interests" (ibid., quoting United States v.
Yazell, 382 U.S. 341, 352 (1966)).  We believe that FUSFSPA can be
read two ways, each of which suggests a different answer to the
preemption inquiry required by Hisquierdo.

   According to the first reading, Section 1408(c)(1) of the Act is
the operative provision that grants the states the right to treat
military retirement pay as community property, thereby overcoming the
holding of McCarty v. McCarty, 453 U.S. 210 (1981), that federal law
preempts any attempt by the states to treat military retirement pay as
community property.  Section 1408(c)(1), however, is a limited grant
of authority.  It permits the states to treat only the "disposable
retired or retainer pay" as community property.  The definitional
provision of the statute (10 U.S.C. (& Supp. IV) 1408(a)(4)) defines
"(d)isposable retired or retainer pay" to exclude amounts waived to
receive veterans' disability benefits.  Therefore, under the first
reading, Congress has "positively required by direct enactment" that
states not be allowed to characterize amounts of retirement pay waived
to receive veterans' disability benefits as community property.

   The second reading interprets FUSFSPA as incorporating a more
sweeping rejection of the McCarty decision, one meant to eliminate
altogether any federal preemption of state courts' treatment of
military retirement pay and related benefits.  This view holds that
Section 1408(c)(1) serves only to define those benefits subject to the
limited federal enforcement remedy contained in the Act (10 U.S.C. (&
Supp. IV) 1408(d)(1)).  Moreover, according to this view, FUSFSPA's
savings clause -- which provides that FUSFSPA's limited federal
enforcement remedies (10 U.S.C. (& Supp. IV) 1408(e)(1) and (4)(B))
/7/ do not prohibit claimants from enforcing "unsatisfied
obligation(s)" that remain "by any means available under law other
than the means provided under this section" (10 U.S.C. 1408(e)(6)) --
expressly disclaims that FUSFSPA has any preemptive effect.

   Although in our initial brief we endorsed the second of these
readings (U.S. Br. 6, 10-12), we have since concluded that the weight
of the evidence better supports the first reading.  First, the
structure and language of the Act indicate that Section 1408(c)(1) is
the only provision that affirmatively grants the states the power to
treat military retirement pay as community property.  The savings
clause, while sweeping in its language, is actually limited by
reference, insofar as property rights in military pay are concerned,
to the same restrictive definition of "disposable retired or retainer
pay" that limits Section 1408(c)(1).  Second, the legislative history
of the Act supports the conclusion that Congress deliberately
restricted its grant of power to the state courts.  For example,
Congress enacted FUSFSPA instead of an alternate Senate bill (S. 1453,
97th Cong., 1st Sess. (1981)), that clearly would have eliminated any
federal preemption of state property awards.

   The conflict between FUSFSPA and the state law treatment of waived
retirement pay as community property is an important one that does
"major damage" to "clear and substantial federal interests." We
therefore conclude that the operation of state law on the amount of
pay at issue here is preempted.

                               ARGUMENT

   1. This Court has scrutinized claims that federal law preempts
state family law with special care because of its recognition that
domestic law is preeminently a state concern.  See In re Burrus, 136
U.S. 586, 593-594 (1890).  Thus, the Court has found that the
Supremacy Clause requires that state family law be overridden only if
two conditions are met.  First, Congress must have "'positively
required by direct enactment'" that the state law be preempted.
Hisquierdo v. Hisquierdo, 439 U.S. 572, 581 (1979) (quoting Wetmore v.
Markoe, 196 U.S. 68, 77 (1904)).  Second, application of state family
law must "do 'major damage' to 'clear and substantial' federal
interests" before preemption will become necessary.  Ibid. (quoting
United States v. Yazell, 382 U.S. 341, 352 (1966)).

   Despite the strictness of the preemption test where state family
law is at issue, the Court has on several occasions found the
requisite federal intent to override state property law.  In
Hisquierdo v. Hisquierdo, supra, the ex-wife of a railroad employee
claimed a portion of the expected value of the employee's retirement
benefits as community property.  The Court held that her claim
conflicted with provisions of the Railroad Retirement Act of 1974
(RRA) (45 U.S.C. (& Supp. III) 231 et seq.) that, by specifying the
employee as the Act's individual beneficiary and by protecting RRA
benefits from attachment or anticipation, reflected a congressional
determination that RRA benefits should reach the railroad retiree
alone.  Similarly, the Court has held that state community property
laws could not obstruct the operation of the survivorship rules of
federal savings bond and military life insurance programs.  See
Yiatchos v. Yiatchos, 376 U.S. 306 (1964);  Free v. Bland, 369 U.S.
663 (1962);  Wissner v. Wissner, 338 U.S. 655 (1950).  And, in McCune
v. Essig, 199 U.S. 382 (1905), the Court refused to allow state
inheritance laws to supercede a federal homestead law in determining
the path of succession federal land was to follow after the death of a
settler.  /8/

   The Court's most recent decision finding federal preemption of
state community property law bears directly on this case.  In McCarty
v. McCarty, 453 U.S. 210 (1981), the ex-wife of a service member
claimed a portion of his nondisability military retirement pay as
community property in a divorce settlement.  After thoroughly
reviewing the statutory context, the Court concluded that Congress
intended military retirement pay to be a personal entitlement (id. at
223-232);  that treating military retirement pay as community property
would frustrate the protective and personnel management objectives
underlying that congressional intent (id. at 232-235);  and that the
state application of community property law to such compensation was
therefore preempted (id. at 235).  The Court invited the Congress to
act, should it wish to modify the Court's conclusion (id. at 235-236
(citations omitted)):

         We recognize that the plight of an ex-spouse of a retired
      service member is often a serious one.  * * * Congress may well
      decide, as it has in the Civil Service and Foreign Service
      contexts, that more protection should be afforded a former
      spouse of a retired service member.  This decision, however, is
      for Congress alone.  * * * (I)n no area has the Court accorded
      Congress greater deference than in the conduct and control of
      military affairs.

   In 1982, Congress responded to the decision in McCarty by passing
the Federal Uniformed Services Former Spouses' Protection Act (10
U.S.C. (Supp. IV) 1408).  As explained above, the Act authorized the
states to treat nondisability military retirement pay as community
property under state law and provided a federal enforcement remedy for
ex-spouses seeking to effectuate court-ordered property settlements,
child support and alimony awards.  Congress made clear that it
intended FUSFSPA to "revers(e) the decision of the United States
Supreme Court in the case of McCarty v. McCarty." H.R. Conf. Rep.
97-749, 97th Cong., 2d Sess. 165 (1982).

   2. The McCarty decision and the enactment of FUSFSPA shape the
federal preemption inquiry required in this case.  In our view, two
readings of the McCarty decision and its "reversal" by Congress are
possible.  Each indicates a different answer to the question of
whether Congress has "positively required by direct enactment" that
state community property laws should give way to federal rules
regarding the treatment of amounts of retirement pay waived so that a
service member may receive veterans' disability benefits.

   First, Congress, in enacting FUSFSPA, may have intended to carve
out an exception to the preemption recognized in McCarty, but, outside
the area of that exception, to continue the preemption of any
application of state community property law.  In this view, by
specifically authorizing state courts to treat "disposable retired or
retainer pay" as community property (10 U.S.C. 1408(c)(1)), Congress
meant to allow those parts of military retirement pay that meet the
definition of "disposable retired or retainer pay" to be treated as
community property, but only those parts.  Because Section 1408(a)(4)
defines "disposable retired or retainer pay" as "the total monthly
retired or retainer pay to which a member is entitled" less certain
other amounts, including, inter alia, amounts waived in order to
receive veterans' disability benefits (see 10 U.S.C. 1408(a)(4)(B)
("amounts waived in order to receive compensation under * * * title
38")), /9/ the states on this reading would be precluded from treating
gross retirement pay, including amounts waived to receive veterans'
disability benefits, as community property susceptible to division in
a divorce settlement.

   Alternatively, it is possible to read Congress's reaction to
McCarty a different way.  Under this alternative reading, Congress
intended to reject the preemption analysis of McCarty altogether,
thereby removing any significant federal constraint on the states'
ability to treat military retirement pay as community property.
According to this reading, the Act focuses on "disposable retired or
retainer pay" only because the federal enforcement remedy provided in
the Act (10 U.S.C. (& Supp. IV) 1408(d)(1)) is limited to amounts
defined by application of that term (see Casas, 42 Cal. 3d at 147-151,
720 P.2d at 931-933, 228 Cal. Rptr. at 43-46).  But the federal
enforcement remedy would not be construed to restrict the authority of
the states to treat gross retirement pay as community property.  This
reading of the Act relies for support on FUSFSPA's savings clause,
which provides that (10 U.S.C. 1408(e)(6) (emphasis added)):

         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 federal enforcement remedies available under FUSFSPA (10
      U.S.C. (& Supp. IV) 1408(d)(1)) and the Social Security Act (42
      U.S.C. (& Supp. IV) 659)) * * * have been made in the maximum
      amount permitted under * * * (the provisions in Section 1408(e)
      limiting the amount recoverable under the federal enforcement
      remedies).  Any such unsatisfied obligation of a member may be
      enforced by any means available under law other than the means
      provided under this section in any case in which the maximum
      amount permitted under * * * (the federal enforcement remedies)
      has been paid.

   There is evidence to support both readings, and we originally
concluded (U.S. Br. 6, 10-12) that the second reading more accurately
describes the congressional action.  Under this view, the state courts
would be free to characterize income waived to receive veterans'
disability benefits as community property.  /10/ After further
research and reflection, however, we believe the weight of the
evidence better supports the first reading.  We have come to that
conclusion for a number of reasons.

   a. Although it is clear from the legislative history of FUSFSPA
that Congress intended to "reverse" this Court's decision in McCarty
(see e.g., H.R. Conf. Rep. 97-749, 97th Cong., 2d Sess. 165 (1982);
S. Rep. 97-502, 97th Cong., 2d Sess. 1-3, 16 (1982)), here as
elsewhere it is important to begin by examining the actual language of
the statute to determine how Congress sought to accomplish that
result.  The statute itself does not mention McCarty or federal
preemption of state community property rules.  Nevertheless, Congress
was legislating against the understanding that this Court had
authoritatively construed preexisting federal law as precluding the
states from treating federal military retirement pay as community
property divisible upon divorce.  Consequently, in order to overcome
the holding of McCarty, it was necessary for Congress to enact an
affirmative grant of authority giving the states the power to treat
military retirement pay as community property.  /11/

   The only section of FUSFSPA that can reasonably be read as
conferring such a grant of authority on the states is Section
1408(c)(1).  That section provides (10 U.S.C. 1408(c)(1)):

         Subject to the limitations of this section, a court may treat
      disposable retired or retainer pay payable to a member for pay
      periods beginning after June 25, 1981, either as property solely
      of the member or as property of the member and his spouse in
      accordance with the law of the jurisdiction of such court.

   This clearly gives state courts the authority to treat military
retirement pay as community property, i.e., "property of the member
and his spouse," if such treatment is "in accordance with the law of
the jurisdiction of such court." Thus, Section 1408(c)(1) would appear
to serve as the grant of authority required to overcome the holding of
McCarty.  Section 1408(c)(1), however, is limited on its face.  It
authorizes state courts only to treat "disposable retired or retainer
pay" as property in accordance with the law of the jurisdiction.
"Disposable retired or retainer pay" is in turn defined elsewhere in
the statute (10 U.S.C. (& Supp. IV) 1408(a)(4)).  That definition
specifically excludes retired or retainer pay "waived in order to
receive compensation under * * * title 38" (10 U.S.C. 1408(a)(4)(B))
-- the amount of veterans' disability benefits at issue here.  Thus,
if Section 1408(c)(1) constitutes the source of authority for allowing
states to treat military retirement pay as community property, that
authority does not extend to amounts of military retirement pay waived
to receive veterans' disability benefits.  Such waived retirement pay,
along with the other amounts of gross retirement pay excluded from the
definition of "disposable retired or retainer pay," would continue to
be subject to the rule of federal preemption announced in McCarty.
/12/

   The only other provision of FUSFSPA that could even arguably be
said to confer authority on the states to treat military retirement
pay as community property is the savings clause, Section 1408(e)(6).
But although the savings clause is written in quite broad terms, it
does not purport, as does Section 1408(c)(1), to confer authority upon
the states.  Instead, it is written so as to preserve existing state
authority from any inference that it has been displaced by the new
remedial mechanism established by Section 1408(d)(1).  Because
Congress legislated with the understanding that McCarthy had
eliminated any authority on the part of the states to treat military
retirement pay as community property, such a savings clause would do
nothing to accomplish what Congress intended:  to overcome the holding
in McCarty.  Thus, the savings clause's reference to "alimony, child
support, or other payments" (10 U.S.C. 1408(e)(6) (emphasis added))
must be construed to refer to payments that the states had the
authority to mandate prior to the enactment of FUSFSPA -- including
"payments" in satisfaction of community property awards from assets
other than military retirement pay (see 10 U.S.C. (& Supp. IV)
1408(d)(5);  H.R. Conf. Rep. 97-749, supra, at 166) -- but not to
include payments that the states had no authority to compel under the
rationale of McCarty.  /13/

   Moreover, by its own terms, Section 1408(e)(6) preserves only an
ex-spouse's right to collect alimony, child support, or other payments
"required by a court order" (10 U.S.C. 1408(e)(6) (emphasis added)).
"Court order" is also a term that is specifically defined for the
purposes of the Act (10 U.S.C. (& Supp. IV) 1408(a)(2)).  As amended
in 1984 (see Department of Defense Authorization Act, 1985, Pub. L.
No. 98-525, Tit. VI, Section 643(a), 98 Stat. 2547), that definition
refers to a final decree issued by any court that, "in the case of a
division of property," specifically provides for the payment of an
amount "from the disposable retired or retainer pay of a member" (10
U.S.C. (& Supp. IV) 1408(a)(2)(C)).  The requirement that a "court
order" specify "disposable" retired or retainer pay as the source of a
community property award is consistent with the inference drawn from
10 U.S.C. 1408(c)(1) that courts have authority to treat only
"disposable" retired or retainer pay as community property, and no
more.  /14/ More importantly, the savings clause's limitation to
additional property awards made out of "disposable retired or retainer
pay" leaves no other language in the savings clause that could serve
as a possible source of authority for state courts to characterize
gross retired or retainer pay as community property susceptible to
division (see 10 U.S.C. 1408(e)(6)).

   b. The complete legislative history is also, on balance, more
consistent with the view that Congress meant to limit the community
property authority of the states to "disposable" rather than gross
military retirement pay.  First, the section-by-section analysis of
FUSFSPA's predecessor bill (S. Rep. 97-502, supra, at 12-28),
incorporated by reference into the conference report on FUSFSPA (H.R.
Conf. Rep. 97-749, supra, at 168) discusses (S. Rep. 97-502, supra, at
16-17) the Senate's intent to overcome the McCarty decision in the
course of its analysis of Section 1408(c)(1), implying that the
drafters of the report considered Section 1408(c)(1) the provision
that accomplished that result.  By contrast, the Senate merely
restated (S. Rep. 97-502, supra, at 22) the savings clause (10 U.S.C.
1408(e)(6)) in its explication of that section.  It did not intimate
that the savings clause had any wide-ranging implications.  The final
conference report also describes the approach of the Act as one that
"would permit disposable military retired pay to be considered as
property in divorce settlements under certain specified conditions"
(H.R. Conf. Rep. 97-749, supra, at 165 (emphasis added)).  /15/

   Second, Congress specifically considered an alternative to FUSFSPA
sponsored by Senator DeConcini that clearly could have given the
states broad authority to treat gross military retirement pay as
community property.  See Uniformed Services Former Spouses Protection
Act:  Hearings on S. 1453, S. 1648, and S. 1814 Before the Subcomm. on
Manpower and Personnel of the Senate Comm. on Armed Services, 97th
Cong., 1st and 2d Sess. (1981-1982) (hereinafter Hearings).  Senate
Bill 1453 (S. 1453, 97th Cong., 1st Sess. (1981)) would have added to
Title 10 of the United States Code a one-paragraph provision generally
entitled "Nonpreemption of State Law." The proposed section provided
that (ibid.):

         * * * the law of the State in which the dissolution of
      marriage proceeding was instituted shall be dispositive on all
      matters pertaining to the division of any retired, retirement,
      or retainer pay to which such member or former member is
      entitled or will become entitled.

   Congress, however, rejected the DeConcini bill in favor of the
carefully targeted and more limited authorization contained in
FUSFSPA.  /16/

   Third, there is every indication that Congress realized that the
exclusions it built into the Act's definition of "(d)isposable retired
or retainer pay" (10 U.S.C. (& Supp. IV) 1408(a)(4)) could work to
reduce the size of the "pie" of military retirement pay susceptible to
division by the state courts.  In successive hearings held by the
Senate Subcommittee on Manpower and Personnel, the effects of
excluding "amounts waived in order to receive compensation under title
5 (Civil Service compensation) or title 38 (Veterans' disability
benefits)" (10 U.S.C. 1408(a)(4)(B)), from "disposable retired or
retainer pay" were discussed (see Hearings 131-132, 133-134, 147-148,
166-167).  American Bar Association (ABA) witnesses confirmed that
under the statute, a service member who accepted employment in the
Civil Service and waived military retirement pay to receive Civil
Service compensation could "effectively deprive() (his spouse) of her
property while the former military member (would) suffer() no
diminution in income" (id. at 131).  /17/ See also id. at 133-134
(discussing incentive to service members to seek out "sheltered
civilian employment");  id. at 147-149 (noting problems presented to
service members in dual compensation situations);  /18/ id. at 166-167
(suggesting waived-pay exclusions were inserted by drafters in order
to resolve problems of service members in dual compensation
situations).  /19/ See also H.R. Rep. 100-563, 100th Cong., 2d Sess.
256-257 (1988) (discussing ability of service members to shield
military income by increasing amounts withheld for tax purposes).
/20/ The interpretations of the ABA witnesses was not challenged
during the hearings, nor was the bill changed in any way with respect
to the definition of "disposable retired or retainer pay."

   Finally, it is significant that for purposes other than division as
community property, Congress has deliberately included amounts equal
to retirement pay waived for veterans' disability benefits in amounts
subject to federal garnishment.  In particular, under 42 U.S.C. (&
Supp. IV) 659, the provision allowing garnishment of federal pay for
child support and alimony obligations, "remuneration for employment"
is specifically defined to include veterans' benefits received after a
waiver of retirement pay (42 U.S.C. (& Supp. IV) 662(f)(2)).  The
deliberate inclusion of disability benefits received in lieu of
retirement pay under 42 U.S.C. (& Supp. IV) 659 suggests that the
exclusion of amounts equal to such benefits under 10 U.S.C.
1408(a)(4)(B) was equally deliberate.

   3. The protection afforded federal payments to disabled veterans
reflects a long-held congressional concern for the needs of those
service members.  Congress has carefully defined the extent of that
protection.  Compare 38 U.S.C. (& Supp. IV) 3101(a) (prohibiting
creditors' attachment of disability benefits) with 42 U.S.C. (& Supp.
IV) 659, 662(f)(2) (allowing federal garnishment of veterans' benefits
received after waiver for support obligations).  By its enactment of
FUSFSPA, Congress continued to define the balance of protection it
felt appropriate.  It expressly distinguished the strength of the
claim represented by support obligations from the strength of the
claim represented by community property law.  Compare 10 U.S.C. (&
Supp. IV) 1408(a)(2)(B)(i)-(ii), 1408(d)(1) (making FUSFSPA federal
enforcement remedy available to court-ordered child support and
alimony claims generally) with 10 U.S.C. (& Supp. IV) 1408(a)(2)(C)
and (d)(1) (making FUSFSPA federal enforcement remedy available only
for those community property claims contained in court orders
stipulating "disposable retired or retainer pay" as source of award).
Cf. Rose, slip op. 1-4 (O'Connor, J., concurring) (recognizing
distinction between community property and support obligations);
Hisquierdo, 439 U.S. at 586-587 (same).  Against this background, it
is not surprising that Congress declined to authorize the states to
treat as community property amounts of retirement pay waived in order
to receive veterans' disability benefits.

   The difficult question of statutory construction presented by this
case comes about because of the intersection of two different sources
of entitlement:  military retirement pay and veterans' disability
benefits.  Congress in FUSFSPA clearly indicated its policy judgment
that a former spouse should be allowed to share in military retirement
pay.  Equally clearly, Congress has indicated in 38 U.S.C. (& Supp.
IV) 3101(a) that a former spouse should not be allowed to share, at
least directly, in veterans' disability benefits.  The difficulty
arises because Congress has not allowed these two entitlements to be
entirely cumulative:  to get the full measure of disability benefits a
service member must give up some of his or her military retirement
pay.  In these circumstances, Congress could with equal logic have
directed either that the full amount of the spouse's claim to military
retirement pay be attributed to what the service member obtains in the
veterans' disability benefits, or it could have embraced the opposite
conclusion.  The task is to discern which of these two possible
solutions Congress chose.  The legislative materials we have discussed
point with greater certainty to the choice that more completely guards
the veterans' disability benefits.

   As the Court found in Hisquierdo, 439 U.S. at 585, "(i)t is for
Congress to decide how these finite funds are to be allocated.  The
statutory balance is delicate." To allow the states to enforce
property law that upsets the balance of protection that the Congress
has established would work "major damage" to "clear and substantial
state interests" (see Hisquierdo, 439 U.S. at 581).  We therefore
submit that the state court action here -- the characterization of
military retirement pay waived to receive veterans' disability
benefits as community property -- is preempted by federal law.

                              CONCLUSION

   The decision of the California Court of Appeal should be reversed
and remanded for any further proceedings that may be necessary.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   JOHN R. BOLTON

      Assistant Attorney General

   THOMAS W. MERRILL

      Deputy Solicitor General

   CHRISTINE DESAN HUSSON

      Assistant to the Solicitor General

   OCTOBER 1988

   /1/ The parties refer to the Uniformed Services Former Spouses'
Protection Act as the "Federal Uniformed Services Former Spouses'
Protection Act" or "FUSFSPA." For consistency, we will do the same.

   /2/ Separate provisions, not at issue in this case, govern
retirement for disability.  10 U.S.C. (& Supp. IV) 1201 et seq.  A
member of the military service may become eligible for disability
retirement before he or she is eligible to receive retirement pay
based on length of service (see, e.g., 10 U.S.C. 1201(3)(B)).

   /3/ Section 1408(c)(1) authorizes state courts to "treat disposable
retired or retainer pay payable to a member * * * either as property
solely of the member or as property of the member and his spouse in
accordance with the law of the jurisdiction of such court." Because
this case concerns a community property law state, we will, when
convenient, simply refer to Section 1408(c)(1) as authorizing the
states to treat disposable retired or retainer pay as community
property.

   /4/ In our previous brief (U.S. Br. 3-4), we cited to In re
Marriage of Jones, 13 Cal. 3d 457, 531 P.2d 420, 119 Cal. Rptr. 108
(1975), for the proposition that California law treats disability
payments received after the dissolution of a marriage as the disabled
member's separate property.  The practical vitality of Jones has been
curtailed, however, by subsequent California decisions (see U.S. Br.
14 n.9).  The holding in Jones depended in part on the "nonvested"
nature of the disability payments at issue.  "Nonvested" benefits are
now treated like vested benefits under California law (see In re
Marriage of Brown, 15 Cal. 3d at 846-847, 544 P.2d at 566, 126 Cal.
Rptr. at 638).  The California Supreme Court has therefore held (In re
Marriage of Stenquist, 21 Cal. 3d at 785, 789 n.11, 582 P.2d at 100,
102 n.11, 148 Cal. Rptr. at 13, 15 n.11) that Jones's premise has been
undermined insofar as nonvested disability benefits may be treated as
community assets if they are based on a disability that occurred
during the marriage and if they displace vested or nonvested
nondisability benefits (id. at 99-102).

   /5/ The VA informs us that appellant receives approximately $482
per month in VA disability benefits and approximately $1,200 per month
in Air Force retirement benefits.

   /6/ Appellant refers to the states' power to divide "(veterans')
disability benefits" as community property (e.g., Appellant's Br. 14).
 We believe veterans' disability benefits are shielded from any such
direct division by 38 U.S.C. (& Supp. IV) 3101(a) (see U.S. Br. 15).
The issue that actually divides the parties is whether FUSFSPA
restricts the states' power to divide that portion of retirement pay
waived to receive veterans' disability benefits as community property.
 Although the waiver of retirement pay is dollar-for-dollar equal to
the veterans' disability benefits received (except where all
retirement pay is waived for a greater total of disability benefits),
no claim is made in this case that appellee should be allowed to
divide as community property actual monies received by appellant as
veterans' disability benefits.

   /7/ FUSFSPA contains two limitations on the amount recoverable
under federal enforcement remedies.  If an application for payment is
made under FUSFSPA alone, the military secretary concerned may pay out
a maximum of 50% of a service member's disposable retired or retainer
pay (10 U.S.C. 1408(e)(1)).  If application for payment is made under
both FUSFSPA and the Social Security Act's garnishment provision (42
U.S.C. (& Supp. IV) 659), the secretary may pay out a maximum of 65%
of the service member's disposable pay (10 U.S.C. 1408(e)(4)(B)).

   /8/ In Rose v. Rose, No. 85-1206 (May 18, 1987), the Court
concluded that various federal provisions protecting veterans'
disability benefits from invasion, including the anti-attachment
clause, 38 U.S.C. (& Supp. IV) 3101(a), did not warrant a finding that
federal law preempted child support obligations defined by state law.
The Court found that the disability benefits were intended for both
the veteran and his dependents;  thus, state law allocating a portion
of the payments to the dependents worked no injury to federal
interests (Rose, slip op. 13).  The plurality in Rose recognized,
though it did not rely upon, the special status traditionally accorded
family support obligations as opposed to community property claims of
a more "amoral business" nature (id. at 11-13 (citing Wissner, 338
U.S. at 660)).  Two justices relied on the distinction to find that 38
U.S.C. (& Supp. IV) 3101(a) did not preempt state law (Rose, slip op.
1-4 (O'Connor, J., with whom Stevens, J., joined, concurring)).

   /9/ Other amounts excluded from the definition of "disposable
retired or retainer pay" are amounts owed by the service member to the
United States (10 U.S.C. 1408(a)(4)(A));  amounts withheld for federal
employment taxes, and for fines and forfeitures ordered by
courts-martial (10 U.S.C. 1408(a)(4)(B));  federal, state and local
income taxes withheld (10 U.S.C. 1408(a)(4)(C));  taxes withheld under
26 U.S.C. (& Supp. IV) 3402(i) (10 U.S.C. (& Supp. IV) 1408(a)(4)(D));
 amounts received as disability military retirement pay (10 U.S.C. (&
Supp. IV) 1408(a)(4)(E));  and amounts deducted towards an annuity for
the spouse or ex-spouse (10 U.S.C. 1408(a)(4)(F)).

   /10/ Concerns about the anti-attachment provision that protects
veterans' disability benefits, 38 U.S.C. (& Supp. IV) 3101(a), would
have to be addressed separately, as we did in our opening brief (U.S.
Br. 12-17).  We concluded there (id. at 15) that Section 3101(a) would
operate to protect from attachment the amount received as veterans'
disability benefits after a waiver.  Thus, although a state court
could calculate the community property award due an ex-spouse on the
basis of a service member's "gross" retirement income, that award
could only be satisfied so far as possible out of the member's
"disposable" retirement income (U.S. Br. 15-16).

   /11/ The California Supreme Court in Casas concluded (42 Cal. 3d at
144, 720 P.2d at 929, 228 Cal. Rptr. at 41) that no such affirmative
grant of authority is necessary because McCarty's finding was one of
"implied preemption," based on a contextual analysis of "all relevant
facts and circumstances" (42 Cal. 3d at 145, 720 P.2d at 929, 228 Cal.
Rptr. at 41), and those facts and circumstances changed by reason of
the enactment of FUSFSPA.  As the court put it, the appropriate
question to ask was "(whether,) were McCarty to be decided after
FUSFSPA, would the Supreme Court imply preemption?" Casas, 42 Cal. 3d
at 145, 720 P.2d at 929, 228 Cal. Rptr. at 41.  In our view, however,
the relevant question is not what this Court would decide in a
hypothetical situation not presented, but rather what Congress
intended when it enacted FUSFSPA.  Congress clearly legislated against
the understanding that preexisting federal law, as authoritatively
construed by this Court, preempted the application of community
property law to military retirement benefits.  See, e.g., S. Rep.
97-502, supra, at 2-3.  Congress sought to modify that conclusion, but
it could not do so by declaring that McCarty was overruled, as an
appellate tribunal would;  nor could it, by changing the "relevant
facts and circumstances" relied upon in McCarty, overrule the Court's
judgment.  The only way Congress could overcome the ruling in McCarty
was by enacting legislation specifying a different legal rule than the
one announced by this Court in that decision.  Congress clearly
understood that to be the case, and legislated accordingly.

   /12/ Although McCarty dealt with military retirement pay received
by a service member, under its rationale state law treatment of
military retirement pay waived to receive veterans' disability
benefits would also be preempted by federal law.  A number of state
courts had come to the same or similar conclusion before McCarty
because of the specially protected status of veterans' disability
benefits, as indicated by the anti-attachment clause (38 U.S.C. (&
Supp. IV) 3101(a)).  See, e.g., Rickman v. Rickman, 124 Ariz. 507, 605
P.2d 909 (Ct. App. 1980);  Ex parte Burson, 615 S.W.2d 192 (Tex.
1981);  Arrambide v. Arrambide, 601 S.W.2d 197 (Tex. Ct. App. 1981);
Ex parte Johnson, 591 S.W. 453 (Tex. 1979);  see also Miller v.
Miller, 96 N.M. 497, 632 P.2d 732 (1981) (applying pre-McCarty Texas
law).  But see Stroshine v. Stroshine, 98 N.M. 742, 652 P.2d 1193
(1982) (post-McCarty);  In re Marriage of Kittleson, 21 Wash. App.
344, 585 P.2d 167 (1978).

   /13/ For example, an ex-spouse may have been awarded 50% of a
service member's disposable retired pay as community property and an
additional amount equal to 20% of the disposable retired pay as child
support or alimony.  Applying under both 10 U.S.C. (& Supp. IV)
1408(d)(1) and 42 U.S.C. (& Supp. IV) 659, the ex-spouse could recover
a maximum of 65% of the member's disposable retired pay (10 U.S.C.
1408(e)(4)(B)).  However, the ex-spouse could, according to Section
1408(e)(6), bring a contempt action in a state court to recover the
remaining 5% owed.

   /14/ The 1984 amendments underscore the importance Congress
attaches to the restrictive definition of a "court order" where
property rights are concerned.  The definition of "court order" in
Section 1408(a)(2) as originally passed had required all court orders
recognized by the Act, including those awarding child support and
alimony, to stipulate the source of the award as the "disposable
retired or retainer pay" of the service member (10 U.S.C. (& Supp. IV)
1408(a)(2)(C)).  In 1984, however, Congress amended the statute to
provide that the limitation does not apply to court orders awarding
child support and alimony (S. Rep. 98-500, 98th Cong., 2d Sess. 220
(1984)).  But it deliberately retained this requirement for court
orders directing divisions of property (10 U.S.C. (Supp. IV)
1408(a)(2)(C)).  See S. Rep. 98-500, supra, at 220.

   /15/ On the other hand, a Senate report contains several references
to the Congress's intent to "return to the States the authority to
treat military pensions in the same manner as they treat other
retirement benefits" (S. Rep. 97-502, supra, at 10) and "to remove the
federal pre-emption found to exist by the United States Supreme Court
and permit State and other courts * * * to apply pertinent State or
other laws in determining whether military retired or retainer pay
should be divisible" (id. at 16).  The report's tone generally
emphasizes "the intent of section 1408 * * * to give the (state)
courts * * * great latitude in dealing with uniformed service retired
or retainer pay" (id. at 17 (emphasis added)).  These statements lend
some support for a broader view of the authority Congress intended to
confer on the states.  The bill that was the subject of S. Rep.
97-502, supra (S. 1814, 97th Cong., 2d Sess. (1981)) was modified by
the House and Senate into the current form of FUSFSPA and attached as
a House amendment to a Department of Defense authorization statute
(Department of Defense Authorization Act, 1983, Pub. L. No. 97-252,
Tit. X, Section 1002(a), 96 Stat. 730).  The conference report on the
Defense bill (H.R. Conf. Rep. 97-749, supra, at 168) incorporates by
reference those portions of the section-by-section analysis in S. Rep.
97-502, supra, that describe provisions similar to those ultimately
adopted.

   /16/ As would be consistent with a broader rejection of McCarty,
Senator DeConcini recommended (Hearings 23) that his bill operate
retroactively.  The enforcement remedy of FUSFSPA as ultimately
adopted operated prospectively, although FUSFSPA did not prohibit
courts from reopening divorce decrees for modification in light of the
Act.  See Section 1006(a)-(b), 10 U.S.C. (Supp. IV) 1408 note;  H.R.
Conf. Rep. 97-749, supra, at 167-168;  S. Rep. 97-502, supra, at
27-28;  128 Cong. Rec. 18317 (1982) (remarks of Representative
Schroeder, sponsor of FUSFSPA House amendment).

   /17/ If the discussion had referred only to waivers made to receive
veterans' disability benefits, it would be possible to read this
statement as referring to the protection provided by 38 U.S.C. (&
Supp. IV) 3101(a), the anti-attachment clause protecting veterans'
benefits.  This is not possible where the discussion concerns Civil
Service compensation, which is protected by no similar flat
prohibition against attachment.

   /18/ This discussion during the Hearings suggests that Senate
drafters were thinking in part of problems created by dual
compensation regulations when they excluded waived military retirement
pay from the definition of disposable retired or retainer pay.  Under
federal law at that time, dual compensation regulations put service
members who began work for the Civil Service in a "Catch 62." At
retirement, military service years could be credited towards civilian
length-of-service requirements if the worker waived receipt of his or
her military retirement pay (see 5 U.S.C. (1976 ed.) 8332(c) and
(d)(2)).  However, because the worker had contributed to the Social
Security fund during his or her military service years, the military
service years also entitled a worker to Social Security at age 62.
Thus, a worker who retired at age 60 would draw a Civil Service
annuity based on the full length of federal service for two years.  At
age 62, the worker's entitlement to Social Security would begin;  it
could not be waived, nor could military service years be credited
towards both types of retirement compensation.  Thus, the worker's
years of military service were dropped for purposes of calculating the
size of the civilian retirement pay (see 5 U.S.C. (& Supp. V 1981)
8332(j)), which was then lowered.  As presented at the Hearings
(Hearings 147-149), if an ex-spouse's interest in waived military pay
continued and was satisfied out of the now-lowered civilian retirement
pay, a worker would be left with a greatly reduced income.  Federal
law has now been amended to allow continued Civil Service credit for
years of military service if a service member makes back contributions
towards a Civil Service annuity for all periods of military service
(see Omnibus Budget Reconciliation Act of 1982, Pub. L. No. 97-253,
Sections 306-307, 96 Stat. 795-798;  5 U.S.C. 8332(c)(1) and (j)(2)).

   Although there were expressions of concern that protecting service
members against the "Catch 62" could in turn unfairly deprive
ex-spouses, these concerns were offset in part by the recognition that
state courts generally could adjust property awards for equitable
reasons.  See S. Rep. 97-502, supra, at 10-11 (discussing factors
state courts could consider in making equitable property awards,
including needs, skills, other income).

   /19/ See note 18, supra.

   /20/ The Committee report suggests (ibid.) that ex-spouses may
claim tax credits to regain portions of the tax withheld by service
members.