IN THE
SUPREME COURT OF TEXAS
_______________________________
CAUSE
NO. 01-0447
_______________________________
PATSY
KEEN,
Petitioner,
v.
DIANA
WEAVER, INDEPENDENT EXECUTRIX OF THE ESTATE
OF
FRANCIS J. WEAVER AND RITA MARIE WILSON WEAVER,
Respondent.
_______________________________
BRIEF
FOR THE SECRETARY OF LABOR, UNITED STATES
DEPARTMENT
OF LABOR, AS AMICUS CURIAE SUPPORTING PETITIONER
_______________________________
TABLE OF CONTENTS
ISSUE PRESENTED
INTEREST OF THE SECRETARY OF LABOR
STATEMENT OF THE CASE
SUMMARY OF THE ARGUMENT
ARGUMENT
CONCLUSION
ISSUE
PRESENTED
The
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et
seq., preempts a Texas statute that terminates a designation of a spouse
as beneficiary of a pension plan upon divorce absent redesignation in the
divorce decree or thereafter. Egelhoff
v. Egelhoff, 121 S. Ct. 1322 (2001). The question presented is whether, as a matter of federal common
law, either the Texas rule of constructive waiver or one recognizing actual
waiver under a particular divorce decree should be applied to petitioner, who
is designated as the primary beneficiary of pension benefits under her deceased
ex-husband's ERISA pension plans.
INTEREST
OF THE SECRETARY OF LABOR
As the
federal agency with primary enforcement authority for Title I of ERISA, the
Department of Labor has a significant interest in how ERISA is construed to
provide for beneficiary determinations under an ERISA plan. In the interest of giving faithful adherence
to the language and purposes of the statute, the Secretary of Labor argued for
ERISA preemption of state redesignation rules and against application of a
common law waiver rule in Egelhoff, both before the United States
Supreme Court and the Washington Supreme Court. Although the Supreme Court in Egelhoff settled the
preemption question, it did not directly address whether the same result --
revocation upon divorce of an ex-spouse's designation as a plan beneficiary --
may be achieved under federal common law, either by a wholesale adoption of the
state redesignation rule or by finding and giving effect to a waiver by the
ex-spouse in her beneficiary interest in the divorce proceeding. Because the Secretary believes that
application of federal common law under either rationale conflicts with the
statutory scheme and the reasoning of Egelhoff, and because there is
some disagreement in the courts on these issues, the Secretary submits this
amicus brief to help this Court decide this recurring issue.
STATEMENT OF THE CASE
Francis (Frank) Weaver and petitioner Patsy
Keen were married from 1967 until 1982.
During some of this time, Frank was employed at Baylor College of
Medicine, which, as an employee benefit, made contributions to two Teacher's
Insurance and Annuity Association and College Retirement Equities Fund
(TIAA-CREF) annuity contracts in Frank's name.
Weaver v. Keen, 43 S.W.3d 537, 539 (Tex. Ct. App. 2001).
These contracts are ERISA-governed pension plans. Frank named Patsy the primary beneficiary, and his mother, Rita
Weaver, the contingent beneficiary of a death benefit under the plans. Ibid. In 1982 Frank and Patsy divorced, and as part of the property
settlement and dissolution decree Frank was granted the annuity contracts as
his "sole and separate property."
Ibid.
Frank married respondent
Diana Weaver in 1983 and remained married to her until his death in 1995. 43 S.W.3d at 539. At no time, however, did he change his designation of beneficiary
on the annuity contracts. Thus, at the
time of Frank's death, Patsy remained designated as the primary beneficiary on
the annuities. Ibid. Relying on this designation, the plan paid
part of the death benefits to Patsy. Ibid.
Rita Weaver, Frank's
mother, brought suit as contingent beneficiary against Patsy and the plan
administrators to recover the benefits already paid and to prevent the payment
of the remaining death benefits. When
Rita died shortly after filing the suit, the second wife, Diana, as executrix
of both Frank's and Rita's estates, continued the suit, which proceeded to
bench trial. 43 S.W.3d at 539. The trial judge held that Patsy, as
designated beneficiary, was entitled to the benefits, and awarded her benefits
under both contracts. Ibid.
The Texas appellate court
reversed, holding that, under federal common law, the divorce automatically
terminated Patsy's designation as the primary beneficiary under the annuity
contracts. 43 S.W.3d at 544. In fashioning this federal common law rule,
the court noted that it was adopting, without modification, a Texas
redesignation statute, which it had held was itself preempted. Id. at 541, 544. As an alternative ground for its ruling, the
court reasoned that the property settlement agreement signed by Patsy and
approved by the divorce court waived her rights under the plan, even if a
divorce does not automatically waive such rights. Id. at 543-544.
The court of appeals therefore held that the contingent beneficiary
under the annuity contracts, Rita, was entitled to the benefits under the
plans, and thus awarded the proceeds to Diana as executrix of Rita's
estate. Id. at 544.
The
appeals court reaffirmed these holdings in an opinion denying a motion for
rehearing that was filed after the Supreme Court granted review in Egelhoff. 43 S.W.3d at 544-546. The court stated that Egelhoff, which
by that time had been decided, "does not affect the analysis applicable to
this case" because the Texas court was fashioning and applying a federal
common law rule, rather than directly applying the Texas redesignation
provision. Id. at 544.
SUMMARY
OF THE ARGUMENT
ERISA requires
that employee benefit plans be administered "in accordance with the
documents and instruments governing the plan," 29 U.S.C. 1104(a)(1)(D),
and specifically defines beneficiaries as those "designated by a
participant or by the terms of an employee benefit plan." 29 U.S.C. 1002(8). Moreover, ERISA prohibits pension plan benefits from being
"assigned or alienated" from participants and their designated
beneficiaries except in specific enumerated situations inapplicable here. Because ERISA itself provides the applicable
rules governing payments to beneficiaries, it leaves no gap for federal common
law to fill.
The
decision below is therefore incorrect.
Whether under a theory of constructive waiver as embodied in the Texas
redesignation law or under a rule that allows particular divorce decrees to
defeat a designated beneficiary's pension rights, the court of appeals'
application of federal common law is inconsistent with the scheme enacted by
Congress. So long as the designation of
Patsy was never revoked according to the method provided in the plans, it
remains valid under ERISA and must be given effect, and federal common law
cannot be invoked to render it invalid.
This conclusion is strongly supported by
the reasoning of the United States Supreme Court in its recent decision in Egelhoff. In that case, the Court held that ERISA
preempts a Washington State redesignation law; like the Texas law adopted as
federal common law here, it automatically revoked a spousal designation upon
dissolution of a marriage. The Court
reasoned that a state law that requires plan benefits to be paid to anyone
other than the beneficiary as specified in the plan documents conflicts with
ERISA and is thus preempted. Given this
rationale, the Washington Supreme Court dismissed the case on remand, although
the defendants there were making the same waiver argument that respondent Diana
Weaver makes here. Likewise, this Court
in Barnett v. Barnett, No. 99-0313, 2000 WL 33651828 (Dec. 6,
2001), recently held that a preempted action for "fraud on the
community" could not be recast as federal common law to defeat a valid
beneficiary designation under ERISA.
For similar reasons, this Court should reject the argument that the
valid designation of Patsy Keen under the ERISA-governed annuity contracts is overridden,
as a matter of federal common law, either by the fact of her divorce or by the
terms of her divorce decree.
ARGUMENT
THE
TERMS OF ERISA AND THE PENSION PLAN DOCUMENTS THEMSELVES GOVERN AND CLEARLY
PROVIDE THAT BENEFITS MUST BE PAID TO THE DESIGNATED BENEFICIARY, PATSY KEEN
ERISA
is a "comprehensive statute designed to promote the interest of employees
and their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 90 (1983). To this end,
ERISA provides detailed standards regarding the rights of plan participants and
beneficiaries, and the obligations of plans with respect to the payment of
benefits. For instance, under ERISA,
"beneficiary" is defined as the "person designated by a
participant, or by the terms of an employee benefit plan." 29 U.S.C. 1002(8). Moreover, ERISA provides that, unless inconsistent with other
ERISA provisions, plans are to be administered "in accordance with the
documents and instruments governing the plan." 29 U.S.C. 1104(a)(1)(D). Additionally, ERISA contains an anti-alienation
provision that, subject to specific, limited exceptions, prohibits pension
plans from "assign[ing]" or "alienat[ing]" pension
benefits. 29 U.S.C. 1056(d)(1). This provision, applicable only to pension
plans, is designed "to safeguard a stream of income for pensioners (and
their dependents)" by ensuring that pension benefits are not diverted to
others. Guidry v. Sheet Metal
Workers Nat'l Pension Fund, 493 U.S. 365, 376 (1990); see also H.R. Rep.
No. 807, 93d Cong., 2d Sess. 67-68 (1974).
These provisions establish that Congress plainly
contemplated in ERISA itself that the plan documents setting forth the
"terms of [the] employee benefit plan," 29 U.S.C. 1002(8), and the
participant's beneficiary designation would determine whether a person was entitled
to receive benefits as a beneficiary under the plan, and that pension
administrators would not apply other law to "assign[]" or
"alienat[e]" the beneficiary's pension benefits. 29 U.S.C. 1056(d)(1). The determination of who is a beneficiary is
thus not to be decided by reference to state family or estate law, whether
directly or as a matter of federal common law.
Significantly,
ERISA deviates from the designated-beneficiary rule in a few specified
circumstances. However, where Congress
intended plan fiduciaries to look beyond the participant's beneficiary
designation to determine the proper recipient of plan benefits, it expressly so
provided. Thus, under one of the two
exceptions to ERISA's anti-alienation provision applicable to pensions, the plan
must pay an "alternate payee," rather than the designated
beneficiary, in accordance with a state "domestic relations order" if
the order is submitted to the plan and found to meet ERISA's detailed
requirements for a "qualified domestic relations order" (QDRO).
29 U.S.C. 1056(d)(3)(A); see also Boggs v. Boggs, 520 U.S. 833,
846-847 (1997); Guidry, 493 U.S. at 376. If a domestic relations order meeting the requirements of Section
206(d)(3) is determined by a plan fiduciary to be "qualified," then
the payee under the QDRO becomes a beneficiary, whether or not otherwise
designated by a participant. 29 U.S.C.
1056(d)(3)(J), (K).
Although
ERISA thus accommodates state domestic relations orders, the orders are not
self-executing in their effect on ERISA pension plans. The determination whether a state domestic
relations order meets the requirements of a QDRO rests with the plan
administrator and benefits are not provided to the alternate payee of pension
plan benefits until the order is determined to be qualified. 29 U.S.C. 1056(d)(3)(G), (H). The QDRO provisions in Section 206(d)(3)
thus confirm that the effect of divorce on ERISA beneficiary designations is a
matter addressed expressly in ERISA.
Cf. Boggs, 520 U.S. at 854 ("[w]hen Congress has chosen to depart
from this framework, it has done so in a careful and limited manner").
The
annuity contracts in this case provided that death benefits were to be paid to
the "[b]eneficiary . . . as designated by the [p]articipant in the
application," and further provided that the "[p]articipant may
designate or change the beneficiary by giving written notice to [the plan
administrator]." Plan Docs. ¶ 9;
see also id. ¶ 18. Frank Weaver
designated his first wife, Patsy, as the primary beneficiary and never changed
that designation by written notice to the plan administrator or otherwise. Moreover, the settlement agreement does not
qualify as a QDRO because, among other deficiencies, it does not specifically
identify an alternate payee on Frank's death, but instead merely makes Frank
Weaver the sole owner of the annuities. In any event, the estate does not claim to
have sought a QDRO. Thus, creating
federal common law that awards benefits pursuant to a divorce decree, but in
derogation of the plan documents, would "reduce the QDRO provisions to a
meaningless footnote." Metropolitan
Life Ins. Co. v. Pettit, 164 F.3d 857, 864 (4th Cir. 1998). Because
it is clear under ERISA and the governing plan documents that Patsy is entitled
to the benefits, there is simply no gap here
occasioning the need to create federal common
law. See Mertens v. Hewitt
Assocs., 508 U.S. 248, 259 (1993) ("[t]he authority of courts to
develop a 'federal common law' under ERISA . . . is not the authority to revise
the text of the statute").
A number
of cases have held that federal common law may be applied to trump a designated
beneficiary of a pension plan, as the court below emphasized. Weaver v. King, 43 S.W.3d 537,
542 (Tex. Ct. App. 2001). See e.g., Estate of Altobelli
v. IBM Corp., 77 F.3d 78, 81 (4th Cir. 1996) (giving effect to domestic
relations order by construing it as a waiver of pension benefits); Fox
Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897
F.2d 275, 278-279 (7th Cir.) (recognizing federal common law waiver in pension
plan context but holding that language in divorce decree was not sufficiently
express to constitute waiver) (en banc), cert. denied, 498 U.S. 820 (1990); Lyman
Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989) (same in
context of profit-sharing plan).
Because ERISA itself provides the applicable rules governing payments to
beneficiaries, these courts' recognition of federal common law is misguided;
ERISA simply leaves no room for a judge-made creation of additional special
ERISA rules in derogation of existing rules expressly provided by the
statute. See McMillan v. Parrott,
913 F.2d 310, 310-312 (6th Cir. 1990)
(rejecting a federal common law of waiver in this context and holding
that written designation controls).
Moreover,
whatever the viability of decisions applying federal common law in this context
before the Supreme Court's decision in Egelhoff v. Egelhoff, 121
S. Ct. 1322 (2001), they cannot withstand scrutiny after Egelhoff. Egelhoff involved a contest for life
insurance proceeds and pension benefits under two employee benefit plans
between a decedent's divorced spouse, who was the designated beneficiary under
both plans, and his children through a previous marriage, who were the
decedent's statutory heirs under state law.
Id. at 1326. The United
States Supreme Court held that ERISA preempts a Washington state law that
operated, like the Texas law adopted as federal common law by the appellate
court here, to automatically revoke a spousal designation upon dissolution of
the marriage. Id. at 1326, 1330.
Although
the Supreme Court in Egelhoff decided only the preemption issue, the
Court's reasoning clearly undercuts the argument made here that courts may
apply federal common law to give effect to presumptive or explicit waivers by
divorcing spouses where the participant had not changed beneficiaries. For instance, the Court pointed out that
ERISA specifies that plan administrators look to the plan documents to
determine the appropriate beneficiary.
121 S. Ct. at 1329. The Court
concluded that any state law that requires a plan benefit be paid to anyone
else conflicts with ERISA and accordingly is preempted. Id. at 1329 n.4.
In so
holding, the Court rejected the argument, advocated there by the respondents
and the dissent, see 121 S. Ct. at 1331-1332, that "one c[ould] escape the
conflict between the plan documents (which require making payments to the named
beneficiary) and the statute (which requires making payments to someone else)
by calling the statute an 'invalidation' of the designation of the named
beneficiary, and by observing that the plan documents are silent on whether
'invalidation' is to occur upon divorce."
Id. at 1328 n.1. The
Court found further support for preemption of such state laws in the fact that
the payment of benefits is a central matter of plan administration, and one on
which ERISA sought national uniformity.
Id. at 1327-1329 (citing 29 U.S.C. 1002(8), 1102(b)(4),
1104(a)(1)(D)); see also New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 657 (1995) (the
designation of beneficiaries and the payment of benefits are two areas in which
Congress, through ERISA, sought "to avoid a multiplicity of [state]
regulation in order to permit the nationally uniform administration of employee
benefit plans").
Like
Diana Weaver in this case, the Egelhoff children made the same common-law
waiver argument on remand to the Washington Supreme Court. That court dismissed the case without
comment, but presumably agreed with the Secretary's argument that preemption of
the state law cannot be so easily circumvented through adoption of the
preempted (and conflicting) state law as federal common law.
Egelhoff thus
all but forecloses resort to federal common law in this context and instead
strongly bolsters what the language of ERISA provides: plan administrators are
to follow plan documents to determine beneficiary status under an
ERISA-governed pension plan. In light
of Egelhoff's rationale, to allow an undesignated party to claim benefits
by recasting preempted state law as federal common law would create a gaping
hole in a comprehensive scheme that Congress
intended to be controlled by written designations or written instructions in
plan documents. The appellate court's
conclusion that a divorce automatically revokes a spouse's designation is
therefore contrary to ERISA.
Furthermore
it is no more sensible or consistent with ERISA to fashion a federal common law
rule that would allow particular divorce decrees or other such agreements to
defeat a designated beneficiary's pension rights. Given ERISA's requirements that plans follow their own
beneficiary-designation requirements, a purported waiver by the parties should
not be given effect if they have not obtained a QDRO or if one of ERISA's other
express provisions such as those providing for a spousal annuity and allowing
waiver of that interest, does not apply.
29 U.S.C. 1055(c)(1)(A). Additionally, application of such a
federal common-law waiver rule to pension plans would conflict with ERISA's
anti-alienation provision by "assign[ing]" or
"alienat[ing]" pension benefits away from the beneficiary, i.e.,
the "person designated by [the] participant or by the terms of [the]
employee benefit plan." 29 U.S.C.
1002(8), 1056(d)(1); see Boggs, 520 U.S. at 851-852 (relying, in part,
on anti-alienation provision to hold state community-property law preempted by
ERISA).
Although there is some appeal to honoring a
clearly expressed waiver, it is more important to maintain ERISA's bright-line
anti-alienation and beneficiary-designation rules. Under these rules,
redesignations may easily be accomplished according to the plan terms, if that
is what the participant wants, but cannot otherwise be defeated. Here, in any event, it is far from clear what
the parties intended should happen to the annuities on Frank's death. The agreement between Frank Weaver and Patsy
Keen makes the disposition of the annuities in a section entitled
"Community Property," thus presumably disposing of Patsy's community
interest in the pensions in this community-property state, but not addressing
her interest as beneficiary. For this reason, the settlement agreement is not
sufficiently express to constitute a waiver.
Under
the terms of the plan, Plan Docs. ¶¶ 9, 18, Frank
Weaver could have redesignated the beneficiary at any time if the parties'
intent were that the pension benefits go to his mother Rita as the contingent
beneficiary on his death (or, for that matter, to his second wife Diana). The fact that he did not should be
dispositive under ERISA. As in Egelhoff,
it is only a sleight-of-hand that allows one to say that ERISA and the plan
documents were silent on waiver; by providing a written-designation
requirement, they rule out waiver by other means and leave no gap for the
federal common law to fill.
Finally,
this conclusion is bolstered by this Court's recent decision in Barnett
v. Barnett, No. 99-0313, 2000 WL 33651828, at *11 (Dec. 6, 2001). In Barnett, this Court held that
ERISA preempts an action to recover ERISA-governed life insurance benefits
under a theory of "fraud on the community," and that such a cause of
action could not be recast as federal common law, at least absent actual
fraud. So too the Court in this case
should not uphold the court of appeals' use of the Texas redesignation statute
to invent a federal common law of constructive waiver. Nor should even an actual waiver control
over ERISA's express provisions on designated beneficiaries (and against alienations)
for the reasons we have discussed.
CONCLUSION
The
decision of the Texas Court of Appeals, holding that under federal common law
the dissolution of the marriage and the divorce settlement decree terminated
Patsy's designation as the primary beneficiary under the annuity contracts,
should be reversed.
Respectfully
submitted.
EUGENE
SCALIA
Solicitor of Labor
ALLEN H. FELDMAN
Associate Solicitor for
Special Appellate and
Supreme Court Litigation
NATHANIEL I. SPILLER
Deputy Associate Solicitor
ELIZABETH HOPKINS
Senior Appellate Attorney
U.S. Department of Labor
Room N-2700
200 Constitution Ave., N.W.
Washington, D.C. 20210
(202) 693-5760
FEBRUARY 2002