John VANDERKAM and Gaylyn Dieringer, Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION and Melissa VanderKam, Defendants.
Civil Action No. 09-cv-1907 (RLW).
United States District Court, District of Columbia.
May 7, 2013.
An appropriate Order accompanies this Memorandum Opinion.
Mark R. Snyder, Pension Benefit Guaranty Corporation, Washington, DC, Charles F. Fuller, McChesney & Dale, PC, Bowie, MD, for Defendants.
MEMORANDUM OPINION
ROBERT L. WILKINS, District Judge.
Upon his retirement from the Huffy Corporation in August 1994, John VanderKam began receiving benefits under the Huffy Corporation Retirement Plan in the form of a Joint and 100% Survivor Annuity. At that time, John was married to Melissa VanderKam, whom he had designated as the survivor beneficiary under the Plan. John and Melissa divorced eight years later, and, after remarrying Gaylyn Dieringer in February 2003, John sought to substitute Gaylyn as the survivor beneficiary under his retirement plan through a Domestic Relations Order (“DRO“) entered by a Texas state court.1 The Plan initially approved the DRO as a Qualified Domestic Relations Order (“QDRO“) and substituted Gaylyn as an alternate survivor beneficiary. In 2005, however, the Pension Benefit Guaranty Corporation (“PBGC“) became statutory trustee of the Plan, and in the course of reviewing John‘s benefit payments, PBGC determined that Gaylyn‘s purported substitution as an al
Through this action, John and Gaylyn (collectively, “Plaintiffs“) seek reversal of PBGC‘s determination under
Upon careful consideration of the parties’ briefing and a thorough review of the Administrative Record, and based on the arguments of counsel during the hearing on April 29, 2013, the Court concludes that PBGC‘s decision is both reasonable and reasonably explained, and the Court also finds that Plaintiffs’ claims against Melissa under Texas state common law are preempted by ERISA‘s statutory scheme. As a result, and for the reasons more fully set forth herein, the Court will DENY Plaintiffs’ Motion for Summary Judgment (Dkt. No. 43), and will GRANT PBGC‘S and Melissa‘s Cross-Motions for Summary Judgment (Dkt. Nos. 46, 47).
BACKGROUND
On August 1, 1994, John retired from his employment with the Huffy Corporation
John and Melissa divorced approximately eight years later, in March 2002, and a final decree of divorce was entered in Texas state court. (AR 232). Pursuant to this decree, John was awarded “as his sole and separate property” all rights “related to any ... pension plan ... existing by reason of [his] past, present, or future employment.” (AR 250).
In March 2003, John married Gaylyn, and he sought to designate Gaylyn as an alternate payee for the survivor benefits under the Plan. To this end, John petitioned a Texas state court for a DRO—the substance of which had been drafted by the Plan‘s legal counsel. (AR 24-26, 274). Melissa objected to and opposed John‘s efforts in those proceedings, arguing that she did not disclaim any interest in the Plan as part of the prior divorce decree. The Texas court ultimately approved the DRO, concluding that Melissa “waived her entitlement to the survivor annuity” as part of the divorce decree; that the divorce decree “divested [Melissa] of all interest and rights to [John‘s] Retirement Benefit with the Huffy Corporation, including specifically the survivor annuity portion of the Retirement Benefit“; and that John “wishes to designate a beneficiary with respect to the survivor annuity portion of the Retirement Benefit.” (AR 24). The DRO proceeded to name Gaylyn as an alternative payee, explaining that she “is entitled to the survivor annuity portion of the Retirement Plan distribution in accordance with the provisions of the Plan. The survivor annuity portion of the Retirement Benefit remains unchanged and is calculated based upon the life expectancies of [John] and [Melissa].” (AR 24).
The Plan‘s legal counsel determined that the DRO issued by the Texas state court was a valid QDRO for purposes of ERISA, and the Plan administrator thus designated Gaylyn as an alternate payee with respect to the survivor benefits in August 2003. (AR 43).
In August 2005, the Plan terminated, at which time PBGC became its statutory trustee.3 Around that time, it appears
PBGC policy is as follows: The survivor annuity that becomes payable under this policy to a surviving spouse will only be paid to the spouse if he or she was married to the participant on the participant‘s annuity starting date. The participant‘s spouse continues to be entitled to the survivor annuity even if the participant and that spouse are not married on the date of the participant‘s death. A participant may designate any living person as the beneficiary of an optional joint-life annuity form. The beneficiary may not be changed after the first payment date.
(AR 284).4 In February 2009, John formally requested an “initial determination” from PBGC, under
As mentioned in our previous letter dated 12/11/2008, PBGC is unable to change the designation of beneficiary made by the Participant. At the time of the participant‘s retirement which was 08/01/1994, he elected a Joint and 100% Survivor Annuity with Melissa VanderKam.
A spousal waiver can only occur at the participant‘s date of retirement in order to be a valid waiver. Once the benefit
election is implemented, it cannot be changed or waived after the first payment has been made. Therefore, the Divorce Decree dated 03/15/2002, the Order for Clarification and Modification dated 7/30/2003, all of which are dated after the participant‘s date of retirement have no affect [sic] on Melissa VanderKam‘s entitlement and eventual receipt of the survivor annuity.
(AR 310-311).
John and Gaylyn then initiated this lawsuit against PBGC on October 7, 2009. (Dkt. No. 1). About two months later, on December 18, 2009, PBGC formally responded to John‘s request for an “initial determination,” advising that although it “initially declined to issue such a determination, ... upon further consideration, PBGC has decided that your request for issuance of a determination is reasonable.” (AR 27-33). Therein, PBGC explained its conclusion that the domestic relations order issued by the Texas state court did not constitute a valid QDRO under ERISA, and that Melissa‘s purported waiver and disclaimer of the survivor annuity benefit under the Plan was ineffective. (AR 27-33). This action was then stayed while Plaintiffs exhausted their administrative remedies with PBGC, (see Dkt. Nos. 7, 8), until the PBGC Appeals Board ultimately upheld the initial determination in a letter dated November 24, 2010, (AR 2-22). Plaintiffs then filed a First Amended Complaint, (Dkt. No. 10), and PBGC moved to join Melissa as a required party under
Through their Second Amended Complaint, Plaintiffs challenge and seek reversal of the PBGC Appeals Board‘s determination pursuant to
ANALYSIS
This action presents two distinct sets of issues for the Court‘s review. First, the Court must consider Plaintiffs’ challenge to the PBGC Appeals Board‘s decision, determining whether the Appeals Board reasonably and appropriately concluded that Melissa, and not Gaylyn, remains the proper beneficiary of the survivor annuity benefits under the Plan, based on ERISA‘s statutory framework and the terms of the Plan itself. Second, if the Court upholds the Appeals Board‘s determination, the Court must consider whether it can and should impose a constructive trust, under Texas common law, over any benefits received by Melissa pursuant to the Plan. The Court takes each of these issues in turn.
A. The PBGC Appeals Board‘s Determination
Several aspects of the Appeals Board‘s decision are implicated by Plaintiffs’ claims. First, Plaintiffs challenge PBGC‘s determination that the DRO they obtained
1. Standard of Review
Pursuant to its authority as statutory trustee, PBGC is responsible for administering benefits under terminated pension plans, which includes the authority and duty to make determinations with respect to the plan participants’ benefits. See
Under the APA, a court must set aside agency action as unlawful if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
the agency.” Motor Vehicle Mfrs. Ass‘n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The Court must be satisfied that the agency “examine[d] the relevant [issues] and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Id.; Nat‘l Ass‘n of Home Builders v. EPA, 682 F.3d 1032, 1036 (D.C. Cir. 2012). While a reviewing court must conduct a “searching and careful” review, the agency‘s action remains “entitled to a presumption of regularity,” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971), and the Court “will not second guess an agency decision or question whether the decision made was the best one,” C & W Fish Co. v. Fox, 931 F.2d 1556, 1565 (D.C. Cir. 1991). The Court must uphold PBGC‘s decision “so long as the agency ‘engaged in reasoned decisionmaking and its decision is adequately explained and supported by the record.‘” Clark County v. FAA, 522 F.3d 437, 441 (D.C. Cir. 2008) (quoting N.Y. Cross Harbor R.R. v. STB, 374 F.3d 1177, 1181 (D.C. Cir. 2004)).
2. PBGC‘s Finding That Melissa Did Not Waive Her QJSA Benefit And Could Not Transfer Her Survivor Benefit Interest To Gaylyn Through A QDRO
In its decision, the PBGC Appeals Board determined that the DRO issued by the Texas court could not divest Melissa‘s survivor annuity benefit because her rights irrevocably vested upon the annuity starting date. (AR 13-18). For the same reasons, the Appeals Board also rejected Plaintiffs’ arguments that Melissa had waived her right to the survivor annuity benefit, whether through the decree of divorce or the domestic relations order. While PBGC analyzed these issues separately—both in the Appeals Board‘s decision and through its briefing in this case—in the Court‘s view, the two issues turn on the same legal principles for purposes of this decision and will therefore be analyzed together.6
As PBGC explains, the Appeals Board reached its determination by relying upon decisions from the Fourth, Fifth, and Ninth Circuits, all of which “have found that a survivor benefit irrevocably vests in the beneficiary at the [annuity starting date] and cannot be reassigned thereafter by a [domestic relations order].” (PBGC Mem. at 12). See Carmona, 603 F.3d at 1048 (“[W]e hold that QJSA surviving spouse benefits irrevocably vest in the participant‘s spouse at the time of the annuity start date ... and may not be reassigned to a subsequent spouse.“); Rivers v. Cent. & S.W. Corp., 186 F.3d 681, 683 (5th Cir. 1999) (holding that participant‘s “pension benefits irrevocably vested in [his then-spouse] on the date of his retirement and [his subsequent spouse] is forever barred from acquiring an interest in [his] pension plan“); Hopkins v. AT & T Global Info. Solutions Co., 105 F.3d 153, 156 (4th Cir. 1997) (“Surviving [s]pouse [b]enefits vest in the spouse married to the participant on the date of retirement.“). Given the significant precedential weight afforded to these decisions by PBGC, the Court summarizes each case in some detail.
First, in Hopkins, the Fourth Circuit, describing the question as one of “first impression in the federal courts,” considered whether an ERISA plan participant‘s former wife was entitled to surviving spouse benefits based on a DRO issued by a West Virginia court after the plan participant‘s remarriage to his second wife and subsequent retirement date. 105 F.3d at 154-155. After closely examining ERISA‘s statutory framework, the court answered the question in the negative, concluding that “[s]urviving [s]pouse [b]enefits vest in the participant‘s current spouse on the date the participant retires.” Id. at 156. In so holding, the Fourth Circuit placed particular emphasis on Congress’ enactment of the Retirement Equity Act (“REA“), which amended ERISA‘s requirement that, to qualify for surviving spouse benefits, a spouse must be married to a participant both at the time of the participant‘s retirement and at the time of the participant‘s death. Id. Upon passage of the REA, Congress did away with the latter criterion, such that surviving spouse benefits may now “be paid to a spouse who was married to the participant on the date of the participant‘s retirement, regardless of whether that spouse is married to the participant on the date of the participant‘s death.” Id.7 The court also emphasized that the REA “makes it more difficult to replace a joint and survivor annuity—along with its [s]urviving [s]pouse [b]enefits,” given that such a change can only be accomplished “during the ninety-day period prior to retirement, and only with the written consent of the participant‘s current spouse.” Id. at 156-57.
For all these reasons, the Fourth Circuit held that the appellant‘s DRO did not entitle her to the surviving spouse benefits because those benefits had vested in the participant‘s second wife upon his retirement. Id. at 157. Two years later, the Fifth Circuit was confronted with a nearly-identical set of circumstances in Rivers and expressly adopted the Fourth Circuit‘s rationale in Hopkins. Rivers, 186 F.3d at 683-84. More specifically, the Rivers court held that the surviving spouse benefits at issue had irrevocably vested in the plan participant‘s second wife at the time of his retirement and therefore could not be assigned to his first wife through a DRO:
This Circuit agrees with the Fourth Circuit‘s decision in Hopkins and adopts its rationale. Rivers failed to protect her rights in Franklin‘s pension plan by neglecting to obtain a QDRO prior to Franklin‘s retirement date. Consequently, Franklin‘s pension benefits irrevocably vested in Mrs. Franklin on the date of his retirement and Rivers is forever barred from acquiring an interest in Franklin‘s pension plan.
Recently, the Ninth Circuit was presented with a situation even more analogous to the claims pressed by Plaintiffs in this case. See Carmona, 603 F.3d at 1041.
On appeal, the Ninth Circuit affirmed the dismissal of Judy‘s claims on Rooker-Feldman grounds, but it reversed the district court‘s holding as to the substitution of surviving spouse beneficiaries: “[W]e hold that QJSA surviving spouse benefits irrevocably vest in the participant‘s spouse at the time of the annuity start date—in this case the participant‘s retirement—and may not be reassigned to a subsequent spouse.” Id. at 1047. In reaching this conclusion, the court relied substantially on the Fourth Circuit‘s decision in Hopkins, and was “persuaded by the structure and purpose of ERISA that the rule enunciated in Hopkins is the proper rule for QJSA benefits.” Id. at 1057. The court then specifically outlined several bases for its conclusion. First, the court found significant ERISA‘s statutory restrictions allowing the participant and spouse to opt out of a QJSA benefit only during the limited election period:
It is difficult to see how courts may reassign QJSA surviving spouse benefits at any time given the fact that the statutory scheme so diligently and strictly protects the interests of the participant‘s spouse at the time of the participant‘s retirement by establishing that the only way to avoid QJSA survivor benefits is by opting out in writing before the retirement date.
Id. at 1057 n. 10 (emphasis in original). Second, the Ninth Circuit was convinced, as the Fourth Circuit had been, that the amendments enacted through the REA supported such a result:
The fact that the REA establishes that surviving spouse benefits may now be paid to a spouse who is married on the day of the participant‘s retirement, regardless of whether the participant and spouse are married at the participant‘s
death, suggests that the retirement date is the crucial date for establishing the rights of the surviving spouse. Following this reasoning, we conclude that once a participant retires, the spouse at the time becomes the “surviving spouse” entitled to the QJSA benefits.
Id. at 1057-58. Third, the court believed “that the ultimate objectives of Congress are served by recognizing the rule that a QDRO may not reassign surviving spouse benefits after a plan participant had retired,” noting that ERISA‘s surviving spouse benefits were designed, in part, “to ensure a stream of income to surviving spouses.” Id. at 1058 (quoting Boggs v. Boggs, 520 U.S. 833, 843 (1997)). Finally, the court concluded that “a vesting rule also promotes one of the principal goals underlying ERISA: ensuring that plans be uniform in their interpretation and simple in their application.” Id. at 1059 (internal citation and quotation marks omitted). For all of these reasons, the Ninth Circuit summed up its decision as follows: “Because the retirement of a plan participant ordinarily creates a vested interest in the surviving spouse at the time of the participant‘s retirement, we conclude that a DRO issued after the participant‘s retirement may not alter or assign the surviving spouse‘s interest to a subsequent spouse.” Id. at 1059-60.
With these decisions firmly in mind, the Court turns back to the circumstances of the case at bar. Based on the reasoning of these cases—principally the Ninth Circuit‘s analysis in Carmona—the Appeals Board concluded that Melissa did not waive her right to the survivor annuity benefit and resolved that, even if “Melissa had the authority to disclaim the Plan‘s survivor benefit, that benefit cannot be reassigned to Gaylyn through a QDRO.” (AR 13-18). Because John was married to Melissa at the time of his retirement, and because John and Melissa did not elect to waive the QJSA benefit or elect another benefit option within the 90-day window under applicable provisions of the Plan and ERISA, PBGC concluded that the survivor annuity benefit irrevocably vested in Melissa at the time of John‘s retirement. Consequently, PBGC determined that Melissa did not subsequently waive the survivor benefit or assign the benefit to Gaylyn, whether through the divorce decree or the DRO later entered by the Texas court. In view of the thorough explication that PBGC offered for its determination—including the detailed discussion and application of the above-described cases to the issues presented in Plaintiffs’ appeal—the Court finds that PBGC‘s decision was based upon reasoned decisionmaking and is rationally supported by the record and by applicable law.8
None of Plaintiffs’ arguments compels any contrary conclusion. To begin with, the Court notes that Plaintiffs failed to include so much as a passing reference to Carmona, Rivers, or Hopkins in their opening brief. This approach is telling. Indeed, it is not until Plaintiffs’ responsive brief that they even attempt to distinguish and diffuse the impact of these decisions, but, even then, their efforts are unavailing
These arguments miss the mark in several respects. As PBGC points out, Plaintiffs’ nonforfeitability theory seems to “conflate[] the concepts of a nonforfeitable claim to a survivor benefit and a benefit payment.” (Dkt. No. 57 (“PBGC Reply“) at 3-4) (emphasis in original). ERISA‘s definition of “nonforfeitable” refers to “a claim obtained by a participant or his beneficiary to that part of an immediate or deferred benefit,” and not to the payment of any such benefit, as Plaintiffs’ theory presupposes.
The Court dispatches with Plaintiffs’ remaining arguments on this issue in relatively short order. First, the Court rejects the notion that the Supreme Court‘s decision in Kennedy dictates reversal of
the Appeals Board‘s decision. Plaintiffs repeatedly cite Kennedy for the proposition that “the law certainly is not so absurd to force a man to take an estate against his will.” (See, e.g., Pls.’ Mem. at 15; Pls.’ PBGC Reply at 12). While true, this principle finds no application in the present case. At its core, Kennedy simply held that ERISA‘s antialienation provision,
Similarly, Plaintiffs’ reliance on Treasury Regulation 1.401(a)-20 fails to advance their position. This particular portion of the regulations provides as follows:
If a participant dies after the annuity starting date, the spouse to whom the participant was married on the annuity starting date is entitled to the QJSA protection under the plan. The spouse is entitled to this protection (unless waived and consented to by such spouse) even if the participant and spouse are not married on the date of the participant‘s death, except as provided in a QDRO.
Finally, the Court is unpersuaded by the string-cite of cases Plaintiffs proffer for the proposition that “[f]ederal courts have long held that language in parties’ divorce decrees can serve as federal common-law waivers of their rights to ERISA-plan benefits.” (Pls.’ Mem. at 13-14). As PBGC points out, none of those cases considered
3. PBGC‘s Finding That The DRO Did Not Qualify As A Valid QDRO
The Appeals Board also found that Gaylyn could not be substituted as the beneficiary for the survivor annuity benefits for the separate and independent reason that the DRO issued by the Texas court did not qualify as a QDRO because it would have improperly required “the payment of a type of benefit not otherwise provided under the Plan‘s terms,” in contravention of ERISA section 206(d)(3)(D)(i). (AR 11-13). In reaching this conclusion, the Appeals Board recognized that the DRO did not “change either the total monthly amounts or the timing of the benefit payments that PBGC is required to make,” given that the survivor benefit would only be paid to Gaylyn for the duration of Melissa‘s life. (AR 11). But in PBGC‘s view, these were not the only relevant considerations:
Although the DRO does not change the amount and/or timing of the required payments, it changes the recipient of the payments. If John dies before Melissa, the DRO would require PBGC to pay the survivor benefit to Gaylyn (rather than Melissa) for as long as Melissa lives. The Plan does not contain a provision under which a survivor benefit is paid to one beneficiary based on the remaining lifetime of another individual.
(AR 12) (emphasis added). The Appeals Board also noted the additional administrative burdens the DRO would impose upon PBGC, explaining that it “would need to monitor whether or not Melissa remains alive (even though PBGC is not paying her benefits) because PBGC‘s payments to Gaylyn would end upon Melissa‘s death.” (AR 12). PBGC‘s decision also pointed out the novel issue of what would occur if Gaylyn predeceases Melissa—“a contingency not addressed in the DRO.” (AR 12). For these reasons, the Appeals Board concluded that the DRO issued by the Texas court could not be qualified as a QDRO for purposes of ERISA.10
Plaintiffs take issue with PBGC‘s conclusion, arguing that its “assertion is un
As this issue turns on a question of statutory interpretation, the familiar Chevron framework governs, yet both sides inexplicably fail to approach the argument from a Chevron perspective. See Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). It is well settled that “PBGC generally receives Chevron deference for its authoritative interpretation of ambiguous provisions of ERISA.” Davis v. PBGC, 571 F.3d 1288, 1293 (D.C. Cir. 2009) (citing LTV Corp., 496 U.S. at 651-52; Mead Corp. v. Tilley, 490 U.S. 714, 722 (1989)); see also Page v. PBGC, 968 F.2d 1310, 1315 (D.C. Cir. 1992) (applying Chevron deference to PBGC‘s interpretation of ERISA‘s statutory provisions). Moreover, our Court of Appeals has held that such deference applies with equal force regardless of whether PBGC is acting in its guarantor role or its trustee role. Davis, 571 F.3d at 1293.
Under Chevron, the Court must first determine “whether Congress has directly spoken to the question at issue,” Chevron, 467 U.S. at 845—i.e., Chevron Step One. If so, then the Court‘s inquiry ends, and the clear and ambiguous statutory language controls. If not, then the analysis shifts to Chevron Step Two, whereby the Court must consider “whether the agency‘s [interpretation] is based on a permissible construction of the statute.” Id. at 843; Page, 968 F.2d at 1315 (framing the issue as whether “PBGC‘s interpretation of [the statute was] a reasonable one in view of the policies that underlie ERISA“). Here, since ERISA section 206(d)(3)(D)(i) does not clearly define the phrase “any type or form of benefit, or any option, not otherwise provided under the plan“—and since neither side suggests that this language is clear and unambiguous—the Court proceeds to Step Two.
Applying this rubric, the Court concludes that PBGC‘s application of
Plaintiffs fail to mount any compelling argument that calls into question the reasonableness of PBGC‘s interpretation, particularly given their inability to identify any authority or precedent squarely addressing the precise issue presented here. At best, Plaintiffs argue that courts have interpreted this subsection of ERISA to prohibit a DRO from being qualified as a DRO where it “would require benefits to be paid in a specific manner or time frame that is not provided for in the terms of the plan,” such as where a DRO “requires the payment of benefits in a lump sum while the plan only permits payment over the course of several years,” or “requires a plan to pay benefits before they are otherwise payable under the plan.” (Pls.’ PBGC Reply at 3) (citing cases). Maybe so. But none of those cases undermines PBGC‘s interpretation that the change mandated by the DRO in this case—directing that surviving spouse benefits be paid for the lifetime of someone other than the beneficiary—also contravenes this aspect of ERISA. The Court also agrees that the administrative anomalies presented by the DRO—e.g., the “need to monitor whether or not Melissa remains alive (even though PBGC is not paying her benefits) because PBGC‘s payments to Gaylyn would end upon Melissa‘s death,” (AR 12)—support the conclusion that PBGC‘s interpretation is a permissible construction of the statute and should be accorded deference under Chevron Step Two.
Thus, in view of PBGC‘s reasonable interpretation of ERISA section 206(d)(3)(D)(i), and its reasoned application of this statutory provision to the issues presented in this case, Plaintiffs simply fail to establish that PBGC‘s decision was arbitrary or capricious.11
4. PBGC‘s Determination As To The Common-Law Doctrine Of Waiver
As a final theory dispatched against PBGC, Plaintiffs contend that, separate and apart from the merits of the Appeals Board‘s analysis on the above-discussed issues, the common-law doctrine of waiver precludes PBGC from now arguing that the DRO cannot be qualified as a QDRO, or that Gaylyn should not otherwise be recognized as the proper survivor beneficiary under the Plan. As Plaintiffs see it, because the former Plan administrator approved the Texas court‘s DRO as a valid QDRO and substituted Gaylyn as the beneficiary—even going so far as to draft the applicable language for the DRO in the first place—the Plan waived any arguments to the contrary. (Pls.’ Mem. at 23-
At the outset, there is no question that “Congress intended federal courts to fashion a federal common-law under ERISA,” Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 495 (D.C. Cir. 1998), but the D.C. Circuit has never decided whether this body of common law incorporates the principle of waiver. In addition, as the parties’ briefing makes clear, the Courts of Appeals that have addressed the issue are divided. On one end of the spectrum, the Fifth Circuit has expressly and approvingly applied the doctrine of waiver in the ERISA context. See Pitts v. Am. Security Life Ins. Co., 931 F.2d 351, 356-57 (5th Cir. 1991). The Fourth Circuit, by contrast, has held the opposite. See White v. Provident Life & Accident Ins. Co., 114 F.3d 26, 29 (4th Cir. 1997) (“[T]he federal common law under ERISA ... does not incorporate the principles of waiver and estoppel.“). And the Second, Seventh, and Eleventh Circuits have adopted a middle ground and recognize that, on a case-by-case basis, the doctrine of waiver might apply to the specific circumstances of a particular action. See Lauder v. First UNUM Life Ins. Co., 284 F.3d 375, 380-82 (2d Cir. 2002); Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 650 (7th Cir. 1993); Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1347-48 (11th Cir. 1994). On balance, however, the Court need not wrestle with this thorny question to resolve Plaintiffs’ waiver argument in this case. Even assuming that our Court of Appeals would incorporate the principle of waiver as part of ERISA‘s common law, Plaintiffs fail to present any authority that would permit them to take the principle a step further by foisting a former plan administrator‘s purported waiver onto PBGC, as they strive to do here.
While Plaintiffs cite a number of cases that have applied the waiver doctrine in ERISA benefits cases, (see Pls.’ Mem. at 20-22) (collecting cases), in none of those cases did a court apply the insurer‘s waiver against any party other than the original plan insurer. See Pitts, 931 F.2d at 356-57 (applying waiver to preclude insurer from denying coverage under policy provision that required an insured group to consist of at least ten employees, where insurer collected premiums for five months after “learning beyond all doubt” that there was only one employee remaining on the policy); Lauder, 284 F.3d at 380-82 (finding that insurer waived ability to assert defense to liability for long-term disability benefits where insurer “knew of [plaintiff‘s] claim for disability, chose not to investigate it, and chose not to challenge it“); Rhorer v. Raytheon Eng‘rs & Constructors, 181 F.3d 634, 644-45 (5th Cir. 1999) (holding similarly and concluding that insurer waived ability to deny benefits coverage); Burger v. Life Ins. Co. of N. Am., 103 F. Supp. 2d 1344, 1348-49 (N.D. Ga. 2000) (applying waiver against insurer seeking to recalculate benefit amounts after years of payment). Cf. Loyola Univ. of Chi. v. Humana Ins. Co., 996 F.2d 895, 901-02 (7th Cir. 1993) (considering application of waiver doctrine against health insurer, but ultimately finding no waiver of insurer‘s right to require preapproval of surgical procedure); Glass, 33 F.3d at 1341 (similar); Thomason, 9 F.3d at 648-50 (similar). In this case, however, Plaintiffs ask the Court to go beyond the bounds of those decisions, applying the Plan‘s purported waiver against PBGC acting as statutory trustee. In the Court‘s view, this is a significant distinction and
Through its statutory trusteeship role, PBGC is charged with unique and important objectives. Congress created PBGC, in part, “to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants,” and “to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries.”
B. Plaintiffs’ Claims Against Melissa VanderKam
Along with their challenges to the PBGC Appeals Board‘s decision, Plaintiffs alternatively seek relief against Melissa directly, asking the Court to impose a constructive trust under Texas common law. Specifically, Plaintiffs argue that, even if the Court upholds PBGC‘s determination, it should nevertheless issue a declaratory judgment directing that Melissa “will hold in trust and must transfer to John‘s successors any Survivor Benefit payments she received” from PBGC under the Plan, and that she “will owe John‘s successors fiduciary obligations in the handling of any Survivor Benefit payments.” (Pls.’ Mem. at 25-31). Melissa opposes Plaintiffs’ request and seeks the dismissal of all of their claims under Texas common law (Counts III, IV, and V) on the grounds that these state law claims are preempted by ERISA. The Court agrees.
By its terms, ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA.
Applying this framework, Melissa argues that “[t]he Texas state laws cited by the Plaintiffs should be preempted because the method by which a former spouse may secure an interest in plan benefits is provided under ERISA.” (Dkt. No. 46-1 (“MV Mem.“) at 15). She insists that Plaintiffs’ common law claims are an effort to “contravene the plain and unambiguous plan terms that provide to whom QJSA benefits are paid upon John‘s death.” (Id. at 17). For their part, Plaintiffs concede that ERISA preempts state laws and state-law claims relating to ERISA plans, but they argue that Congress did not intend such a sweeping preemptive effect over all aspects of plan benefits. (Dkt. No. 52 (“Pls.’ MV Reply“) at 3-4). Seizing on this distinction, Plaintiffs maintain that
In support of this plan/benefits dichotomy, Plaintiffs rely on the Supreme Court‘s decision in Fort Halifax Packing Co. v. Coyne, in which the Court held that “a Maine statute requiring employers to provide a one-time severance payment to employees in the event of a plant closing” was not preempted by ERISA. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 3 (1987). In Fort Halifax, the petitioner employer argued that, even though the payment was not encompassed by any plan covered by ERISA, the statute was preempted nevertheless simply because it “pertain[ed] to a type of employee benefit listed in ERISA.” Id. at 7. Stated another way, the Court understood the petitioner‘s argument to be that “ERISA forecloses virtually all state legislation regarding employee benefits.” Id. Unsurprisingly, the Court rejected this premise and, in so doing, used language upon which Plaintiffs now seize—that “ERISA‘s pre-emption provision does not refer to state laws relating to ‘employee benefits,’ but to state laws relating to ‘employee benefit plans’ ....” Id. (emphasis in original). But this principle, which Plaintiffs wrest out of context, is not as wide-reaching as they would suggest, and subsequent decisions from the Supreme Court have made clear that statutes interfering with the payment of benefits covered by an ERISA plan are frequently preempted under the statute. See, e.g., Boggs, 520 U.S. at 835 (holding that ERISA preempts “a state law allowing a nonparticipant spouse to transfer by testamentary instrument an interest in undistributed pension plan benefits“) (emphasis added); Egelhoff, 532 U.S. at 150 (“[T]he statute at issue here directly conflicts with ERISA‘s requirement that plans be administered, and benefits be paid, in accordance with plan documents ... and is therefore pre-empted“) (emphasis added).
Nonetheless, this case is a far cry from the circumstances confronting the Supreme Court in Fort Halifax. There is no dispute that the benefits Plaintiffs seek to recover through the requested constructive trust are benefits being paid out by PBGC pursuant to a plan covered by ERISA. Thus, unlike in Fort Halifax, the benefits at the center of the relief Plaintiffs seek indubitably “relate to [an] employee benefit plan” covered by ERISA.
In Carmona, the Ninth Circuit soundly rejected the very same type of fallback argument that Plaintiffs present here, holding that “a state law constructive trust cannot be used to contravene the dictates of ERISA.” Carmona, 603 F.3d at 1061. In so holding, the court disagreed with the plaintiff‘s assertion that “a state law created constructive trust is too attenuated to fall within the mandatory preemption provision,” and noted that the constructive trust was “explicitly an attempt to avoid ERISA‘S QDRO, preemption, and antialienation provisions.” Id. at 1062. Consequently, the Carmona court concluded that:
[A] court cannot achieve through a constructive trust on the proceeds of a pension plan what ... it cannot achieve through a QDRO. Any alternative rule would allow for an end-run around ERISA‘s rules and Congress‘s policy objective of providing for certain beneficiaries, thereby greatly weakening, if not entirely abrogating, ERISA‘s broad preemption provision.
Id. at 1061. Other courts have reached the same conclusion. In Melton v. Melton, 324 F.3d 941, 944-45 (7th Cir. 2003), the Seventh Circuit held that a state law constructive trust claim was preempted by ERISA. And in circumstances very similar to those in the case at bar, the Fourth Circuit rejected an attempt by a participant‘s spouse to impose a constructive trust over benefits paid from an ERISA-governed plan. See Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857, 863-64 (4th Cir. 1998). In deeming the claim preempted, the Pettit court explained that:
[The] constructive trust claim, which is based upon a property settlement agreement, if allowed to stand, would directly conflict with ERISA‘s goal of providing a nationally uniform plan administration and reduce the QDRO provisions to a meaningless footnote in the preemption context. Undoubtedly, this claim would also reduce the certainty of plan administration and increase litigation, along with the associated costs that Congress sought to decrease. There could hardly be a more striking example of a state claim hindering the full accomplishment of congressional objectives. Because the claim interferes with Congress‘s clear objectives and conflicts with the plain language of ERISA, it must fall victim to the ERISA preemption provision.
Id. at 864; see also Metropolitan Life Ins. Co. v. Cline, 388 F. App‘x 690, 692 (9th Cir. 2010) (“The imposition of a constructive trust simply cannot be used to circumvent ERISA preemption except in the limited circumstances when a valid QDRO exists.“).15 While the D.C. Circuit has not
addressed this issue, this Court adopts the reasoning espoused by the Fourth, Seventh, and Ninth Circuits in these decisions. Because Plaintiffs’ claims for a constructive trust under Texas state law would circumvent the carefully-crafted statutory scheme implemented by Congress through ERISA, those claims are preempted and cannot stand.16
Finally, the Court finds unavailing Plaintiffs’ arguments that the doctrines of res judicata and collateral estoppel “bar[] Melissa from re-litigating the issue of whether the Survivor Benefits were awarded to John as part of the divorce” and that “she never intended to waive her interest in the Survivor Benefit.” (Pls.’ Mem. at 28 n.10).17 In effect, Plaintiffs argue that the divorce decree and the DRO entered by the Texas state court constitute final judgments that bind Melissa on the waiver issue. But this theory essentially just repackages Plaintiffs’ earlier arguments and claims—both with respect to the decision of the PBGC Appeals Board, and also with respect to Plaintiffs’ alternative state law claims—and the Court rejects those arguments for the reasons stated. Plaintiffs cannot simply tee up these issues with a slightly different label and expect a different result.
CONCLUSION
For the foregoing reasons, the Court concludes that Plaintiffs’ Motion for Summary Judgment is DENIED, and that PBGC‘s Cross-Motion for Summary Judgment and Melissa VanderKam‘s Cross-Motion for Summary Judgment are both GRANTED. An appropriate Order accompanies this Memorandum Opinion.
ROBERT L. WILKINS
UNITED STATES DISTRICT JUDGE
Kwaku ATTAKORA, Plaintiff, v. DISTRICT OF COLUMBIA, et al., Defendants.
Civil Action No. 12–1413(CKK).
United States District Court, District of Columbia.
May 8, 2013.
Notes
As the Ninth Circuit has succinctly explained:
ERISA provides for two types of survivor annuity benefits. If a vested participant dies before the annuity start date and the participant is survived by a spouse, the surviving spouse is entitled to a qualified preretirement survivor annuity (“QPSA“).... QJSA benefits arise when the participant does not die before the annuity start date. These benefits are payable to the plan participant for his lifetime after the annuity start date and, if the plan participant dies before his spouse, the surviving spouse will receive no less than 50 percent of the amount of the annuity for the remainder of her lifetime.
Carmona v. Carmona, 603 F.3d 1041, 1053 (9th Cir. 2010) (amended opinion). Here, because John did not die prior to the annuity starting date—i.e., his retirement from Huffy—the applicable benefit is a QJSA.
PBGC serves a unique and important role in ensuring the integrity of pension plan benefits in the United States. As the Supreme Court has explained:
PBGC is a wholly owned United States Government corporation, modeled after the Federal Deposit Insurance Corporation.... The PBGC administers and enforces Title IV of ERISA. Title IV includes a mandatory government insurance program that protects the pension benefits of over 30 million private-sector American workers who participate in plans covered by the Title. In enacting Title IV, Congress sought to ensure that employees and their beneficiaries would not be completely deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans. When a plan covered under Title IV terminates with insufficient assets to satisfy its pension obligations to the employees, the PBGC becomes trustee of the plan, taking over the plan‘s assets and liabilities. The PBGC then uses the plan‘s assets to cover what it can of the benefit obligations. The PBGC must then add its own funds to ensure payment of the most of the remaining “nonforfeitable” benefits, i.e., those benefits to which participants have earned entitlement under the plan terms as of the date of termination.
PBGC v. LTV Corp., 496 U.S. 633, 636-38 (1990) (internal citations and quotation marks omitted).
PBGC‘s reasoning at that time is further elucidated by an internal “Service Request Details” form, which summarizes the history as follows:
A letter dated 12/11/2008 was sent to [John VanderKam] explaining that his designation of beneficiary was made at the time of his election and being put into pay. He elected his ex wife Melissa as beneficiary on J & S 100% survivor annuity. His benefit calculation was based on the ages of both of them and according to the provisions of the plan cannot be changed after he goes into pay. He has been in pay for several years and this election cannot be rescinded by any divorce decree, Order on Motion of Clarification or QDRO. The initial election must be upheld by PBGC....
(AR 285-286).
At oral argument, however, counsel for Plaintiffs suggested otherwise and argued that a de novo standard of review applies as to some issues presented in this case, citing as support the following cases: Dycus v. PBGC, 133 F.3d 1367 (10th Cir. 1998); Burgin v. OPM, 120 F.3d 494 (4th Cir. 1997); and Air Line Pilots Ass‘n, 193 F. Supp. 2d 209. But these decisions do not dictate that a de novo standard governs the review of a PBGC Appeals Board decision, as the Court undertakes here; at most, these cases stand for the proposition that “a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (cited with approval in Dycus, 133 F.3d at 1369). And Plaintiffs concede that, for purposes of this case, “the Plan gives the Plan Administrator discretion to construe and interpret the Plan‘s terms.” (Pls.’ Mem. at 12). Moreover, Burgin did not even involve claims under ERISA or the actions of PBGC, see generally 120 F.3d 494, and in Air Line Pilots Ass‘n, the court did not raise the issue of de novo review whatsoever and actually applied the APA‘s arbitrary and capricious standard to the PBGC decision at issue, see 193 F. Supp. 2d at 220.
It also bears noting that, in addition to the decisions discussed above, courts in other jurisdictions have similarly concluded that a surviving spouse‘s benefits vest upon the plan participant‘s retirement and cannot thereafter be divested, altered, or assigned. See, e.g., Anderson v. Marshall, 856 F. Supp. 604, 607 (D. Kan. 1994); Montgomery v. AGC-Int‘l Union of Operating Eng‘rs Local 701 Pension Trust Fund, 2010 WL 1406566 (D. Or. Apr. 5, 2010); Walsh v. Woods, 371 S.C. 319, 638 S.E.2d 85, 90-91 (S.C. Ct. App. 2006). But see Torres v. Torres, 100 Hawai‘i 397, 60 P.3d 798 (2003) (holding that surviving spouse benefits did not vest in the then-current spouse upon the participant‘s retirement).
It also appears that Plaintiffs never advanced this particular line of attack before the Appeals Board, which means that they may well have waived the argument altogether. See, e.g., Nuclear Energy Inst., Inc. v. EPA, 373 F.3d 1251, 1297-98 (D.C. Cir. 2004) (“It is a hard and fast rule of administrative law, rooted in simple fairness, that issues not raised before an agency are waived and will not be considered by a court on review.“). However, since PBGC does not urge such a result—and since the Ninth Circuit‘s amended opinion in Carmona postdated Plaintiffs’ appeal letter—the Court will not deem the issues waived. Of course, Carmona aside, Plaintiffs’ nonforfeitability argument could have been mounted just as easily against the Hopkins and Price decisions, which were longstanding precedent at the time of Plaintiffs’ appeal. To the extent that Plaintiffs thought that those courts got it wrong, they could and should have raised this argument with the PBGC Appeals Board. But at the administrative level, Plaintiffs argued only that the relevant holding in the original Carmona opinion was abrogated by the Supreme Court‘s decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009), without any mention of Hopkins or Price, let alone that those decisions wrongly failed to account for ERISA‘s “nonforfeitability provisions.” (See AR 312-317, 354-355).
On April 26, 2013, Plaintiffs filed a Notice of Supplemental Authority (Dkt. No. 62), proffering two additional decisions they deem supportive of their claims: US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013), and Andochick v. Byrd, 709 F.3d 296 (4th Cir. 2013). In the Court‘s view, however, neither of these cases lends any considerable strength to Plaintiffs’ position. First, in McCutchen, the Supreme Court held that equitable defenses cannot override the terms of an ERISA plan, but went on to explain that where a plan is “silent on the allocation of attorney‘s fees ... the common-fund doctrine provides the appropriate default.” Id. at 1548-49. The Court fails to glean how Plaintiffs perceive the McCutchen decision as relevant to this case, let alone beneficial to their cause. The Fourth Circuit‘s decision in Andochick provides somewhat of a closer analogue, but a crucial distinction remains: the court held that “ERISA does not preempt post-distribution suits against ERISA beneficiaries.” Id. at 300-01 (expressly distinguishing claims to “undistributed plan benefits“) (emphasis in original). By contrast, the tug-of-war over