Manning v. Hayes

• Decision Date: 19 May 2000
• Docket Number: No. 99-20537,99-20537
• Citation: 212 F.3d 866
• Parties: (5th Cir. 2000) SYLVIA MANNING, EXECUTOR OF THE ESTATE OF HOUGHTON H. WEST, Plaintiff-Appellant, v. AUDREY ALLISON HAYES, ET AL, Defendants, AUDREY ALLISON HAYES, Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 866

212 F.3d 866 (5th Cir. 2000)

SYLVIA MANNING, EXECUTOR OF THE ESTATE OF HOUGHTON H. WEST, Plaintiff-Appellant, v. AUDREY ALLISON HAYES, ET AL, Defendants, AUDREY ALLISON HAYES, Defendant-Appellee.

No. 99-20537

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

May 19, 2000

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Texas

Before EMILIO M. GARZA, DeMOSS, and STEWART, Circuit Judges.

DeMOSS, Circuit Judge:

In this insurance dispute, the estate of a deceased ERISA plan participant and the decedent's ex-wife are battling over the proceeds to an ERISA plan providing life insurance benefits. The district court granted summary judgment in favor of Defendant-Appellee Audrey Allison Hayes, who is both the decedent's ex-wife and the named beneficiary under the policy. Plaintiff-Appellant Sylvia Manning, in her capacity as executor of the estate of Houghton H. West, appeals. We affirm, although for reasons that are substantially different than those employed by the district court.

I.

On February 15, 1993, UNUM Life Insurance Company of America issued a life insurance policy to Houghton H. West through his employer, the Amherst Securities Group. On December 22, 1994, West and Audrey Allison Hayes, in light of their impending marriage, executed a prenuptial agreement titled the Separate Property Preservation and Definition Agreement. As suggested by the title of the document, the primary purpose of the agreement was to define the substantial separate assets held by both West and Hayes, and to memorialize their agreement that neither party had or would have an equitable or legal interest in property separately owned by the other. The agreement provided that, in the event the marriage was terminated, neither party would assert any claim for such things as reimbursement, aid, comfort, or support and maintenance, and further, that neither party would assert any claim in accounts held solely in the name of the other. The agreement recognized that community property would be acquired during the marriage, primarily from earnings, and that such property would be subject to a just and equitable distribution. Finally, the agreement contained representations that each party would attempt to avoid commingling community property with separate property or the proceeds of separate property owned by the other. Although the agreement included a non-exhaustive list of each of the parties assets, the agreement made no mention of employee benefits or insurance proceeds generally, or the Unum policy in particular.

Five days later, on December 27, 1994, West and Hayes were married. Almost one year later, on December 15, 1995, West voluntarily designated Hayes as the beneficiary on the Unum policy. West did not designate any alternative beneficiaries.

Six months later, on June 26, 1997, West and Hayes were divorced. There were no children born to the marriage. The final divorce decree holds that "no community property other than personal effects has been accumulated by the parties," and that such property is "awarded to the party having possession." The decree then states that the foregoing division was "made pursuant to the terms of the Separate Property Preservation and Definition Agreement." The divorce decree does not otherwise refer to the terms of that or any other agreement concerning the division of property or refer specifically to the Unum policy.

Less than one month later, on July 29, 1997, West died of pancreatic cancer. After West's death, Hayes claimed benefits as the named beneficiary of the Unum policy. West's estate disputed Hayes' entitlement to those benefits, arguing that Texas Family Code § 9.301 required the proceeds to be paid to the estate. Texas Family Code § 9.301 provides, in relevant part:

(a) If a decree of divorce or annulment is rendered after an insured has designated the insured's spouse as a beneficiary under a life insurance policy in force at the time of rendition, a provision in the policy in favor of the insured's former spouse is not effective unless:

(1) the decree designates the insured's former spouse as the beneficiary;

(2) the insured redesignates the former spouse as the beneficiary after rendition of the decree; or

(3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a dependant of either former spouse.

The dispute between West's estate and Hayes was not settled, and in February 1998, Manning sued Hayes and Unum on behalf of the estate in Texas probate court, seeking a declaratory judgment that the estate was entitled to the proceeds. Unum removed on the basis of ERISA preemption. See Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. Shortly thereafter, Unum interpleaded the proceeds of the policy into the registry of the district court and was dismissed, leaving only Manning, on behalf of the estate, and Hayes as parties to the suit.

In November 1998, both Manning and Hayes moved for summary judgment. Manning argued that this Court's opinion in Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir. 1994), which dealt with similar facts, adopted Texas Family Code § 9.301 for purposes of the federal common law applicable in similar ERISA actions. Manning therefore argued that both Brandon and § 9.301 dictated a result in favor of the estate. Hayes argued that Brandon was both wrongly decided at the time, because inconsistent with ERISA provisions governing competing claims for life insurance proceeds, and subsequently undermined by the Supreme Court's decision in Boggs v. Boggs, 117 S. Ct. 1754 (1996), which applied an expansive preemption analysis. Alternatively, Hayes argued that Brandon did not purport to adopt the rule codified in Texas Family Code § 9.301 for similar ERISA actions, and that the facts at issue in Brandon were distinguishable, such that Brandon did not dictate a result in favor of the estate in this case.

The district court considered these motions, eventually concluding that Hayes, as the named ERISA beneficiary, was entitled to the proceeds of the life insurance policy. Manning timely appealed. We review the district court's grant of summary judgment de novo. Clift v. Clift, 210 F.3d 268, at 269-70 (5th Cir. 2000).

II.

Congress passed ERISA in 1974 to establish a comprehensive federal scheme for the protection of the participants and beneficiaries of employee benefit plans. See 29 U.S.C. § 1001; see also Pilot Life Ins. Co. v. Dedeaux, 107 S. Ct. 1549, 1551 (1987); Shaw v. Delta Air Lines Inc., 103 S. Ct. 2890, 2896 (1983). ERISA broadly preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). A law "relates to" an employee benefit plan when the law has "a connection with or reference to such a plan." Shaw, 103 S. Ct. at 2900. The scope of the ERISA preemption provisions is "deliberately expansive," and they are consistently construed to accomplish the congressional purpose of insuring certain minimum standards in the administration of employee benefit plans. See Pilot Life Ins., 107 S. Ct. at 1552.

There is no doubt that Manning's claim on behalf of the estate is preempted, to the extent that it relies upon the Texas beneficiary redesignation statute. Almost every circuit court to consider the issue, including this one, has determined that a state law governing the designation of an ERISA beneficiary "relates to" the ERISA plan, and is therefore preempted. See Dial v. NFL Player Supplemental Disability Plan, 174 F.3d 606, 611 (5th Cir. 1999); Brandon, 18 F.3d at 1325; see also Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857, 862 (4th Cir. 1998); Mohamed v. Kerr, 53 F.3d 911, 913 (8th Cir. 1995); Krishna v. Colgate Palmolive Co., 7 F.3d 11, 15 (2d Cir. 1993); Metropolitan Life Ins. Co. v. Hanslip, 939 F.2d 904, 906 (10th Cir. 1991); Brown v. Connecticut General Life Ins. Co., 934 F.2d 1193, 1195 (11th Cir. 1991); McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir. 1990); Fox Valley & Vicinity Constr. Workers Pension Fund, 897 F.2d 275, 278 (7th Cir. 1989). But see Emard v. Hughes Aircraft Co., 153 F.3d 949, 961 (9th Cir. 1998) (holding that ERISA does not preempt California constructive trust or community property law in a dispute between a surviving and former spouse over life insurance benefits), cert. denied sub nom., 119 S. Ct. 903 (1999).

The more difficult issue is whether, having established that the state law is preempted, the federal law governing the resolution of this and similar cases may be reasonably drawn from the text of ERISA itself, or must instead be developed as a matter of federal common law. There is presently a circuit split on this issue. A majority of the circuit courts to have considered the issue have recognized that ERISA does not expressly address the circumstances, if any, in which a non-beneficiary may avoid the payment of life insurance benefits to the named beneficiary. For that reason, these courts have held that the issue is governed by federal common law. See, e.g., Clift, 210 F.3d at 268; Brandon, 18 F.3d at 1325-26; see also Hill v. AT&T Corp., 125 F.3d 646, 648 (8th Cir. 1997); Mohammed, 53 F.3d at 913.

With respect to a former spouse's claim as a designated beneficiary, this Court has specifically held that the former spouse may waive his or her beneficiary status in a subsequent divorce decree or agreement, provided the waiver is explicit, voluntary and made in good faith. Clift, 210 F.3d 268, at 270-71; Brandon, 18 F.3d at 1326-27. In Brandon, we held that the former spouse effectively waived her beneficiary status by virtue of explicit language in the divorce decree depriving her of any interest in the participant's employee benefit plans. See id. at 1323, 1327. Thus, in this Circuit, the determination of who is entitled to the proceeds of an ERISA plan providing life insurance benefits may...