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MAINE SUPREME JUDICIAL COURT                                                            Reporter of Decisions

Decision:          2003 ME 74

Docket:            Oxf-02-527

Argued:             April 8, 2003

Decided:           May 30, 2003

Panel:  SAUFLEY, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, CALKINS,

and LEVY, JJ.

ERICA J. JED-HARBAGE

v.

PETER HARBAGE

LEVY, J.

         [¶1]  Peter Harbage appeals from an order entered in the Superior Court (Oxford County, Cole, J.) rejecting the portion of a referee's report that addressed the postdivorce distribution of Erica Jed-Harbage's share of his 401(k) plan pursuant to a Qualified Domestic Relations Order (QDRO).  Peter asserts that the referee correctly determined that the sum to be distributed to Erica from his 401(k) plan was subject to adjustment for its pro rata share of interest, dividends, expenses, and investment gains and losses from the date of the divorce judgment to the date of the funding of Erica's separate account, and that the court erred by rejecting the referee's report.  We agree and vacate the order.

I.  BACKGROUND

[¶2]  Peter and Erica were divorced pursuant to a divorce judgment of the Superior Court (Gorman, J.) entered in January 2001.  The divorce judgment adopted the report, as amended, of a referee appointed pursuant to M.R. Civ. P. 53 and 19-A M.R.S.A. § 252 (1998).  The referee's initial report included the following provision governing the distribution of Peter's 401(k) plan: 

9. The sum of $250,000.00 shall be transferred to the Plaintiff [Erica] from the Defendant's [Peter's] retirement accounts, by way of a Domestic Relations Order.  The Referee shall retain jurisdiction over this matter for purposes of effectuating [a] Qualified Order.[1]

The referee subsequently amended this provision as follows:

3. Paragraph 9 is amended to provide that the Court shall retain continuing jurisdiction to insure the issuance of a Qualified Domestic Relations Order.  The Defendant shall provide to the Plaintiff's counsel information pertinent to his 401(k) plan and the Plaintiff shall be responsible for the preparation of a Qualified Domestic Relations Order.

         Paragraph 9 is further amended to authorize the Defendant [Peter] to transfer to the Plaintiff [Erica], in addition to the sum set aside to her as her sole and exclusive possession, an additional sum of up to $50,000.00 from his 401(k) (the sum to be transferred being the sole and exclusive decision of the Defendant [Peter]).  The Plaintiff [Erica] shall liquidate the additional sum transferred to her by the Defendant [Peter] and shall give to the Defendant [Peter] 60% of the sum so transferred and liquidated.

After a hearing on Erica's objections to the referee's report, the Superior Court accepted the report, as amended, and adopted it as part of its divorce judgment.

[¶3]  Erica's attorney filed the required QDRO in April 2001, which the Superior Court (Delahanty, J.) accepted.  After the parties realized that the QDRO contained the wrong date for valuation, a corrected QDRO was filed and entered several weeks later.  The corrected QDRO used the date of divorce as the valuation date and stated in pertinent part:

The Plan Administrator shall assign to the Alternate Payee [Erica] from the Participant's [Peter's] entire account balance valued as of January 4, 2001 or the nearest valuation date the sum of $300,000 or the balance of the Participant's [Peter's] account, if less (the "Share"). . . .  The Share shall have allocated to it and transferred from the Participant's [Peter's] account to the Alternate Payee's [Erica's] account its pro rata share of interest, dividends, expenses, and investment gains or losses from the date specified above in this Section 3 until the Alternate Payee's [Erica's] account is funded.

Because of the downturn in the securities market following the entry of the divorce judgment in January 2001, Erica's $300,000 share of the 401(k) account was reduced in value to $272,000 when it was distributed to her in August 2001.  Because she received less than the $300,000 specified in the divorce judgment, Erica did not, in turn, pay $30,000 or a reduced amount to Peter.     

[¶4]  In December 2001, Peter filed a postjudgment motion for the appointment of a referee to address "post-divorce issues" between the parties.  His motion did not set forth the issues or the nature of the relief sought.  Erica did not object to the motion, and the court appointed a second referee "to report on all post-divorce issues currently pending" in the case.  One of the issues the parties presented to the referee was the question of the distribution of Erica's share of the 401(k) account.  Peter contended that the language in the QDRO, requiring that Erica's share shall have allocated to it its pro rata share of interest, dividends, expenses, and investment gains and losses, governed the distribution.  Erica contended that the QDRO was in conflict with the divorce judgment, and that she was entitled to receive $300,000 as referenced in the divorce judgment without any adjustments. 

[¶5]  Following a hearing, the referee issued a report addressing several property related issues, including the distribution of the 401(k) proceeds.[2]  "The QDRO," wrote the referee, "did not state, as one could read the [divorce judgment] that a fixed sum of $300,000, regardless of market influences, be distributed to Erica."  The referee found as follows: 

[T]he realities of plan administration . . . . also created an unavoidable situation