Guardian Life Ins. Co. of America v. Finch

Citation395 F.3d 238
Decision Date22 December 2004
Docket NumberNo. 04-10212.,04-10212.
PartiesThe GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, Plaintiff, v. Kimberlye FINCH, Defendant-Appellant, v. Eddie Lee Galaway, Administrator, on behalf of Estate of Bradford Wayne Galaway, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Cameron Davis Gray (argued), Law Offices of Cameron D. Gray, Dallas, TX, for Defendant-Appellant.

David C. Turner, Jr. (argued), Law Office of David C. Turner, Jr., Bonham, TX, for Defendant-Appellee.

E. Stratton Horres, Jr., Rebecca Michelle Alcantar, Deanna Lynn Stuemke Wilson, Elser, Moskowitz, Edelman & Dicker, Dallas, TX, for Guardian Life Ins. Co of America, Amicus Curiae.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, Chief Judge, and HIGGINBOTHAM and DAVIS, Circuit Judges.

KING, Chief Judge:

The Guardian Life Insurance Company of America filed this interpleader action in order to determine who should receive the proceeds of a life insurance plan governed by ERISA. Eddie Lee Galaway, the administrator of the decedent's estate, claimed that the estate should receive the proceeds because Kimberlye Finch, the named beneficiary and the decedent's ex-wife, waived her rights to them when she and the decedent divorced. By order of the district court and with the consent of all parties, this case was transferred to a magistrate judge. Applying the federal common law of waiver, the magistrate judge agreed with Eddie Lee Galaway, determining that Finch had waived her rights under the plan. Accordingly, the magistrate judge granted summary judgment in his favor. Finch now appeals this decision, citing Egelhoff v. Egelhoff, 532 U.S. 141, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001), for the proposition that a federal district court must look to the text of ERISA itself, not to federal common law, when identifying the beneficiary of a plan governed by ERISA. For the following reasons, we AFFIRM the judgment of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

Bradford Wayne Galaway ("Galaway") and Kimberlye Finch married on September 22, 2001. On February 1, 2002, the Guardian Life Insurance Company ("Guardian") had issued to Galaway's employer a group life insurance policy covering Galaway. Galaway named Finch as the beneficiary of this policy. All parties to this suit agree that this life insurance policy is an employee welfare benefits plan governed by § 3(21)(A) of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461 (2000).

On June 20, 2002, Galaway and Finch divorced. As part of the divorce proceedings, they voluntarily entered into an Agreed Final Decree of Divorce that awarded Galaway all "right, title, interest, and claim in and to" his life insurance policies. The Agreed Final Decree of Divorce divested Finch of her interest in any such policies.

On November 8, 2002, Galaway died intestate in an airplane accident. At the time of his death, Galaway had not changed the named beneficiary of his life insurance policy.

After Galaway's death, both Eddie Lee Galaway, as administrator of Bradford Wayne Galaway's estate, and Finch claimed sole entitlement to the insurance proceeds. On May 30, 2003, Guardian filed an interpleader action in the United States District Court for the Northern District of Texas, in which it asked the court to identify the proper beneficiary of the insurance proceeds.

In deciding the present case, the magistrate judge, citing Fifth Circuit precedent, applied federal common law to determine that Finch had waived her rights to the insurance proceeds. Accordingly, the magistrate judge granted summary judgment in favor of Eddie Lee Galaway and denied Finch's cross-motion for summary judgment. Finch now appeals this decision.

II. STANDARD OF REVIEW

This court reviews a district court's grant of summary judgment de novo. Martinez v. Schlumberger, Ltd., 338 F.3d 407, 410-11 (5th Cir.2003); Clift v. Clift, 210 F.3d 268, 269-70 (5th Cir.2000). Summary judgment is appropriate when no genuine issue as to any material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

III. ANALYSIS

On appeal, Finch argues that the magistrate judge erred when she relied on federal common law to identify the beneficiary of the life insurance plan. In support of this claim, Finch invites the court's attention to Egelhoff, 532 U.S. at 141, 121 S.Ct. 1322, which she claims undermines this circuit's longstanding practice of looking to federal common law to determine if the named beneficiary of an ERISA-governed benefits plan has effected a valid waiver of her rights. All parties appear to agree that this issue — whether, after Egelhoff, courts can rely on federal common law to determine if the beneficiary of an ERISA plan has waived her rights — is the sole issue before the court. Likewise, all parties appear to agree that this case should be disposed of on summary judgment because the facts of the case are not in dispute.

Finch's claim that the magistrate judge improperly applied federal common law when deciding this case fails. In this circuit, we have applied federal common law to determine whether the named beneficiary of a plan governed by ERISA has waived her rights under the plan. See Manning v. Hayes, 212 F.3d 866 (5th Cir.2000), cert. denied, 532 U.S. 941, 121 S.Ct. 1401, 149 L.Ed.2d 345 (2001). For the reasons set forth below, Egelhoff does not undermine this approach.

A. Fifth Circuit Precedent

In a series of cases, this court has held that when ERISA preempts state law, we apply federal common law to determine whether a beneficiary like Finch has effected a waiver. See Manning, 212 F.3d at 866; Clift, 210 F.3d at 268; Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir.1994). Following this line of precedent, a waiver is valid if it is "explicit, voluntary and made in good faith." Manning, 212 F.3d at 871; see also Clift, 210 F.3d at 269-71; Brandon, 18 F.3d at 1325-27. In Brandon, a case quite similar to the present one, we held that a decedent's ex-wife, who was the named beneficiary of a life insurance plan governed by ERISA, was not entitled to the proceeds of the plan because she waived them in a settlement agreement. Specifically, in Brandon, this court found that ERISA preempted a Texas state law that would have automatically nullified upon divorce the decedent's previous designation of his then-wife as the plan's beneficiary. Brandon, 18 F.3d at 1325. After making this finding, this court then sought to "ascertain the law that is applicable to the controversy" by looking to the "statutory language or, finding no answer there, to federal common law...." Id. (internal quotation marks omitted). Similarly, in Manning, this circuit followed the same approach. See Manning, 212 F.3d at 870. Specifically, it asked "whether, having established that the state law is preempted, the federal law governing the resolution of [the case] may be reasonably drawn from the text of ERISA itself, or must instead be developed as a matter of federal common law." Id. Thus, in a series of cases, this court has consistently applied federal common law to determine the proper beneficiary of plans governed by ERISA.

Outside of this circuit, the majority of courts that have considered whether federal common law governs disputes between an ex-spouse who is an ERISA plan's designated beneficiary and other claimants to the plan's proceeds have reached the same conclusion that this court has reached. Specifically, most courts have: (1) concluded that ERISA does not preempt a waiver by a named beneficiary of her interest in the plan's proceeds; and (2) relied on federal common law principles in order to determine if the named beneficiary effected a valid waiver of her rights under the plan. See Hill v. AT&T Corp., 125 F.3d 646, 648 (8th Cir.1997); Estate of Altobelli v. Int'l Bus. Machs. Corp., 77 F.3d 78, 81-82 (4th Cir.1996); Mohamed v. Kerr, 53 F.3d 911, 914 (8th Cir.1995), cert. denied, 516 U.S. 868, 116 S.Ct. 185, 133 L.Ed.2d 123 (1995); Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 280 (7th Cir.1990) (en banc), cert. denied, 498 U.S. 820, 111 S.Ct. 67, 112 L.Ed.2d 41 (1990); Metro. Life Ins. Co. v. Flinkstrom, 303 F.Supp.2d 34, 39-43 (D.Mass.2004); John Hancock Mut. Life Ins. Co. v. Timbo, 67 F.Supp.2d 413, 419-20 (D.N.J.1999). Only the Sixth Circuit has clearly gone the other way, finding that the text of ERISA forecloses employing federal common law to determine a plan's beneficiary. Metro. Life Ins. Co. v. Pressley, 82 F.3d 126, 129-30 (6th Cir.1996) (concluding that "[t]he Sixth Circuit takes a different view [from the majority of other circuits] and holds that ERISA itself supplies the rule of law."). Hence, the majority of circuits that have considered the issue presently before this court have concluded, as we have done in the past, that it is appropriate to apply federal common law to determine if the named beneficiary of an ERISA plan has waived her rights.

B. Finch's Arguments

In her appellate brief, Finch argues that Egelhoff effectively overrules this circuit's decisions looking to federal common law to identify the beneficiary of an ERISA plan. Instead, according to Finch, Egelhoff requires courts to look solely to the text of ERISA and to the plan documents—not to federal common law—in order to determine the proper beneficiary of a life insurance policy governed by ERISA. In support of this claim, Finch cites a passage in Egelhoff in which the Supreme Court stated that "ERISA's pre-emption section, 29 U.S.C. § 1144(a), states that ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA." Egelhoff, 532 U.S. at 146, 121 S.Ct. 1322 (internal quotation marks omitted). Finch also notes that the Supreme Court held that a "fiduciary shall administer the plan `in...

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