Stewart v. Thorpe Holding Co.

• Decision Date: 04 November 1999
• Docket Number: No. 98-55746,98-55746
• Parties: (9th Cir. 2000) SHIRLEY W. STEWART, Plaintiff-Appellant, v. THORPE HOLDING COMPANY PROFIT SHARING PLAN, THOMAS A. CARPENTER, THORPE HOLDING COMPANY, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1143

207 F.3d 1143 (9th Cir. 2000)

SHIRLEY W. STEWART, Plaintiff-Appellant, v. THORPE HOLDING COMPANY PROFIT SHARING PLAN, THOMAS A. CARPENTER, THORPE HOLDING COMPANY, Defendants-Appellees.

No. 98-55746

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Submitted November 4, 1999¹

Decided March 31, 2000

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Lawrence D. Rohlfing, Santa Fe Springs, California, for the plaintiff-appellant.

Donna D. Melby, Yvonne D. Arvanitis, Kirk C. Jenkins, Sedgwick, Detert, Moran & Arnold, San Francisco, California, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California James M. Ideman, District Judge, Presiding. D.C. No.CV-97-02030-JMI

Before: Harry Pregerson, John T. Noonan, and Diarmuid F. O'Scannlain, Circuit Judges.

Opinion by Judge Pregerson; Dissent by Judge O'Scannlain

PREGERSON, Circuit Judge:

This case arises under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Retirement Equity Act of 1984 ("REA"). The REA was designed to protect the financial security of ex-spouses and dependants after divorce. See Boggs v. Boggs, 520 U.S. 833, 845 (1997); Ablamis v. Roper, 937 F.2d 1450, 1453 (9th Cir. 1991). When Appellant Shirley Stewart divorced Richard Nielsen in 1989, a California court issued a Marital Dissolution Order, which,inter alia, awarded Stewart her community property share in Nielsen's interest in an ERISA profit sharing pension plan ("the ERISA Plan"). At that time, Nielsen was not only a participant in the ERISA Plan, but also one of the Plan's four trustees, with fiduciary responsibility for its administration.

Despite Stewart's right to receive her community property share in Nielsen's interest in the ERISA Plan, defendants Thorpe Holding Company (Nielsen's former employer), Thorpe Holding Company Profit Sharing Plan (the ERISA Plan), and Thomas A. Carpenter (one of four trustees of the ERISA Plan with fiduciary responsibility for its administration) failed to distribute to Stewart her share in Nielsen's interest in the ERISA Plan. Instead, they distributed to Nielsen his entire interest in the ERISA Plan.

Stewart brought this action, seeking her share of Nielsen's interest in the ERISA Plan. The district court granted summary judgment for the defendants. The court summarily ruled that Stewart lacked standing to bring her ERISA claim because her Marital Dissolution Order purportedly did not satisfy some of the requirements of a "Qualified Domestic Relations Order" (QDRO) under ERISA.

Because we conclude that Stewart does have standing to bring her claim under the facts of this case, we reverse the district court's grant of summary judgment. Any arguable defects in the Marital Dissolution Order's language were not fatal. The Marital Dissolution Order does qualify as a QDRO as a matter of law. Even assuming that the Marital Dissolution Order failed to qualify as a QDRO, Stewart nevertheless has standing to bring this action because, by failing to perform their fiduciary duties under ERISA, defendants denied Stewart the opportunity to protect her rights and interests as an alternate payee under 29 U.S.C. S 1056(d)(3)(G), (H).

I. BACKGROUND

On July 24, 1989, Shirley Stewart² divorced Richard C. Nielsen pursuant to a Marital Dissolution Judgment and Order of the Los Angeles County Superior Court. The Marital Dissolution Order incorporated the executory terms of the Marital Settlement Agreement signed by Nielsen and Stewart. It awarded Stewart, inter alia, a one-half community property share in Nielsen's interest in the ERISA Plan.³ At the time of the divorce, Nielsen was an employee of Defendant Thorpe Holding Company ("Thorpe Holding"), a participant in Thorpe Holding's ERISA Plan, and one of the Plan's four trustees, with fiduciary responsibility for its administration.

Two months after the Marital Dissolution Order was filed in state court, Defendant Thomas A. Carpenter ("Carpenter"), one of the Plan's other trustees, wrote a letter to Kemper Financial Services (the mutual fund holder for the Plan) at Nielsen's request, asking Kemper to transfer 9,225.197 shares (or half of the shares in the ERISA pension account) from Nielsen's pension account to Stewart. Carpenter's letter included Stewart's current mailing address of 8109 Michigan Avenue, Whittier, CA 90602. This mailing address corresponded to the address of the family residence awarded to Stewart by the Marital Dissolution Order. For reasons unknown, the transfer was never made. Stewart apparently had no knowledge of Carpenter's letter to Kemper. Moreover the record suggests that the defendants had no further contact with Stewart until, at the earliest, April of 1990.

In March 1991, Stewart contacted Carpenter concerning the transfer of her community property interest in the ERISA Plan. On May 8, 1991, Carpenter wrote Stewart a letter informing her that she needed to complete "an application" before the transfer could be made. Carpenter's letter made no reference to the Marital Dissolution Order, to the requirements under ERISA for a valid QDRO, or to the Plan's procedures for determining whether it constituted a valid QDRO.

In early 1992, Nielsen retired from Thorpe Holding and requested that his pension account be liquidated. On December 14, 1992, Carpenter directed the ERISA Plan's portfolio manager to transfer half of the shares in Nielsen's ERISA pension account to Nielsen's personal I.R.A. account and to "liquidate the remaining shares" and distribute the proceeds to Nielsen directly. Defendants thus distributed to Nielsen the entire ERISA pension account, including those shares awarded to Stewart by the Marital Dissolution Order, despite their knowledge of her adjudicated right to those shares.

Stewart filed an action in district court on March 28, 1997, seeking her community property share in Nielsen's interest in the ERISA plan pursuant to the Marital Dissolution Order. Thorpe Holding filed a motion for summary judgment, alleging, inter alia, that the Marital Dissolution Order was not a QDRO within the meaning of ERISA and that Stewart lacked standing to assert her claim in federal court. The district court granted summary judgment in favor of Thorpe Holding and dismissed Stewart's action for lack of standing. Stewart timely appeals. We have jurisdiction over the final decision of the district court under 28 U.S.C. S 1291.

II. STANDARD OF REVIEW

Standing is a question of law reviewed de novo. See Schultz v. PLM Int'l, Inc., 127 F.3d 1139, 1141 (9th Cir. 1997). Summary judgment is also reviewed de novo. See Robi v. Reed, 173 F.3d 736, 739 (9th Cir. 1999). "Viewing the evidence in the light most favorable to the nonmoving party,[we] determine[ ] whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Id. The district court's "interpretation of ERISA is a question of law reviewed de novo." Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 189 F.3d 1160, 1163 (9th Cir. 1999). The district court's findings of fact are reviewed for clear err. See Fed. R. Civ. P. 52(a); Lawyer v. Department of Justice, 521 U.S. 567, 580 (1997).

III. DISCUSSION

A. Historical Overview of ERISA

A brief overview of ERISA's design is necessary to put Stewart's and the defendants' contentions in the proper context.

Congress enacted the Employee Retirement Income Security Act of 1974 to establish a comprehensive federal scheme for the protection of pension plan participants and their beneficiaries. See American Tel. & Tel. Co. v. Merry, 592 F.2d 118, 120 (1979). Its "most important purpose" was to "assure American workers that they may look forward with anticipation to a retirement with financial security and dignity, without fear that this period of life will be lacking in the necessities to sustain them as human beings within our society." Smith v. Mirman, 749 F.2d 181, 182 (quoting from S. Rep. No. 93-127, 93d Cong., 2d Sess. (1974), reprinted in U.S.C.C.A.N., at 4639, 4849 (1974)) (internal quotation marks omitted). To ensure that an employee's accrued benefits would be available upon retirement, ERISA requires all plans to include anti-assignment provisions. See 29 U.S.C. S 1056(d)(1) (1990).

Further, ERISA's preemption provision specifically provides that ERISA supercedes any state law regarding employee benefit plans. See 29 U.S.C. S 1144(a) (1985). In light of ERISA's preemption and anti-assignment provisions, the question initially arose whether ERISA prevented state courts from entering domestic relations orders that sought to garnish retirement benefits to enforce alimony or child support obligations. See generally Tenneco, Inc. v. First Virginia Bank of Tidewater, 698 F.2d 688 (4th Cir. 1983). The majority of courts addressing this issue concluded that ERISA did not prevent such assignments. See, e.g., Operating Engineers, etc. v. Zamborsky, 650 F.2d 196, 198 (9th Cir. 1981); Stone v. Stone, 632 F.2d 740, 743 (9th Cir. 1980) (holding that a former spouse has standing to bring a claim to enforce a state community property division).

Congress resolved any uncertainty concerning the authority of state courts to adjudicate marital dissolutions and to affect ERISA pension plan benefits, when it enacted the Retirement Equity Act of 1984, Pub. L. 98-397, 98 Stat. 1426 (codified as amended 26 U.S.C. S 417). The REA amended ERISA by creating an exception to its anti-assignment provisions for state "domestic relations orders" (commonly known as marital dissolution orders) that meet the requirements of a "qualified domestic relations order" or QDRO. See 29 U.S.C. S 1056(d)(3)(A).

The QDRO exception was specifically enacted to protect the financial security of ex-spouses. See Ablamis, 937 F.2d at 1453 (so holding). In creating the QDRO mechanism, Congress was careful to provide that an ...