Kennedy v. Plan Adm'R for Dupont Sav. And Inv.

• Decision Date: 15 August 2007
• Docket Number: No. 05-41851.,05-41851.
• Citation: 497 F.3d 426
• Parties: Kari Ellen KENNEDY, Independent Executrix of The Estate of William Patrick Kennedy, Deceased, Plaintiff-Appellee-Cross-Appellant, v. PLAN ADMINISTRATOR FOR DUPONT SAVINGS AND INVESTMENT PLAN; E.I. DuPont de Nemours & Company, Defendants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

497 F.3d 426

Kari Ellen KENNEDY, Independent Executrix of The Estate of William Patrick Kennedy, Deceased, Plaintiff-Appellee-Cross-Appellant, v. PLAN ADMINISTRATOR FOR DUPONT SAVINGS AND INVESTMENT PLAN; E.I. DuPont de Nemours & Company, Defendants-Appellants-Cross-Appellees.

No. 05-41851.

United States Court of Appeals, Fifth Circuit.

August 15, 2007.

Stacy Lynn Kelly (argued), Erin Elizabeth Eggleston, MacIntyre & McCulloch, David Allen Furlow, Thompson & Knight, Houston, TX, Amber S. Brady, Lubbock, TX, for Kennedy.

Raymond Michael Ripple (argued), Donna L. Goodman, DuPot Legal, Wilmington, DE, Elizabeth Brandes Pratt, Mehaffy & Weber, Beaumont, TX, for DuPont.

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

Before GARWOOD, BARKSDALE and GARZA, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

The issues raised by each side are governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (ERISA). The Plan Administrator for DuPont Savings and Investment Plan and E.I. DuPont de Nemours & Co. (DuPont) contests the summary judgment awarded the estate of William Patrick Kennedy for benefits under a retirement plan. The Estate challenges the denial of attorney's fees. VACATED AND RENDERED IN PART; AFFIRMED IN PART.

I.

Decedent was a DuPont employee and participant in its savings and investment plan (SIP). The SIP is an "employee pension benefit plan", as defined by ERISA. 29 U.S.C. § 1002(2). Pursuant to ERISA, the SIP provided, inter alia: "no assignment of the rights or interests of account holders under this Plan will be permitted or recognized". See 29 U.S.C. § 1056(d)(1) (requiring that "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated") (anti-alienation provision).

In 1971, during his DuPont employment, decedent married Liv Kennedy. Decedent signed a beneficiary-designation form in 1974, identifying Liv Kennedy as the SIP's sole beneficiary. No contingent SIP beneficiaries were named.

Decedent and Liv Kennedy divorced in 1994. Pursuant to the decree, Liv Kennedy agreed to be divested of "all right, title, interest, and claim in and to . . . the proceeds therefrom, and any other rights related to any . . . retirement plan, pension plan, or like benefit program existing by reason of [decedent's] employment". In 1997, an ERISA Qualified Domestic Relations Order (QDRO), pursuant to 29 U.S.C. § 1056(d)(3)(B)(i), was approved. It provided benefit-disbursement instructions for some of decedent's non-SIP employee-benefit plans. No QDRO for the SIP, however, was ever submitted.

Decedent retired from DuPont in 1998 and died in 2001. He never executed any documents replacing or removing Liv Kennedy as the SIP beneficiary.

Kari Kennedy, the daughter of decedent and Liv Kennedy, was appointed executrix of decedent's estate. By letter to DuPont, Kari Kennedy (the Estate) demanded the SIP funds be distributed to the estate, claiming Liv Kennedy's beneficiary designation was invalid pursuant to Texas Family Code § 9.302 (providing, with certain exceptions, a spouse's designation as a retirement-plan beneficiary is invalidated by a subsequent divorce). DuPont refused, relying on the above-described SIP beneficiary-designation. The Estate also requested Liv Kennedy to relinquish her SIP interest. She did not do so; instead, pursuant to requests to DuPont, she collected the SIP balance (approximately $400,000).

Seeking to recover the SIP benefits, the Estate filed this action, presenting an ERISA claim, under 29 U.S.C. § 1132(a)(1)(B), and a state-law breach-of-contract claim. The Estate claimed: Liv Kennedy waived her rights to the SIP benefits through the divorce decree, thus invalidating the SIP beneficiary-designation; and, accordingly, DuPont incorrectly distributed the SIP benefits. (DuPont filed a third-party claim against Liv Kennedy, asserting that, in the event she was not the correct beneficiary, it was entitled to return of the SIP benefits. This claim was settled.)

Following discovery, the parties filed cross-motions for summary judgment. The district court, inter alia, granted summary judgment for the Estate on its ERISA claim, holding it was entitled to the value of the SIP benefits existing at the time of decedent's death, and for DuPont on the Estate's breach-of-contract claim, holding it was preempted by ERISA.

In awarding summary judgment to the Estate, the district court concluded, inter alia: federal common law applied to determine whether Liv Kennedy's executing the divorce decree waived her right to the SIP benefits; and, as a matter of law, that decree constituted a valid waiver.

DuPont's subsequent motion for judgment as a matter of law or, alternatively, a new trial, was denied. Also denied was the Estate's ERISA-based motion for attorney's fees.

II.

At issue, under ERISA, are: did Liv Kennedy's divorce decree constitute a waiver of her rights as an SIP beneficiary; and were attorney's fees correctly denied to the Estate? (The Estate does not contest the adverse summary judgment on its state-law claim.)

A.

A summary judgment is reviewed de novo, applying the same standards as the district court. E.g., Keelan v. Majesco Software, Inc., 407 F.3d 332, 338 (5th Cir. 2005). Such judgment is proper when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law". FED.R.CIV.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where, as here, an ERISA plan administrator's benefits decision is nondiscretionary, that decision is reviewed de novo. See Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1324 (5th Cir.1994).

1.

In granting summary judgment to the Estate, the district court relied on a series of cases from our court holding: when ERISA preempts state law, federal common law applies to determine whether the named beneficiary for an ERISA plan has waived his rights (federal-common-law waiver approach); and the waiver is valid if it is explicit, voluntary, and made in good faith. See Guardian Life Ins. Co. of Am. v. Finch, 395 F.3d 238, 240-41, 243 (5th Cir.2004); Manning v. Hayes, 212 F.3d 866, 874 (5th Cir.2000); Clift v. Clift, 210 F.3d 268, 270-72 (5th Cir.2000); Brandon, 18 F.3d at 1326-27. Several of these cases concerned whether a divorce decree constituted a waiver of a beneficiary's right to proceeds under an ERISA plan. See, e.g., Brandon, 18 F.3d at 1322-24 (holding a decedent's ex-wife, who was the named beneficiary of an ERISA-governed life-insurance plan, was not entitled to the proceeds of the plan because she waived them through a divorce decree). The Estate asserts these cases control, dictating application of the federal-common-law waiver approach.

These cases are inapposite, however; they concerned ERISA-governed life-insurance policies, which are "welfare plan[s]", as defined by ERISA. 29 U.S.C. § 1002(1) (defining "welfare plan" as one providing "medical . . . benefits, or benefits in the event of sickness, accident, disability, death or unemployment" for plan participants or their beneficiaries "through the purchase of insurance or otherwise"); see also Brandon, 18 F.3d at 1324 (characterizing employer-provided life-insurance policy as "welfare plan"). Accordingly, ERISA's anti-alienation provision was not at issue. As quoted supra, that provision expressly applies not to "welfare plan[s]", but to ERISA "pension plan[s]", as defined in 29 U.S.C. § 1002(2)(A) (defining "pension plan" as one that "provides retirement income to", or "results in a deferral of income by", employees). See, e.g., Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 836-37, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988); Brandon, 18 F.3d at 1324 (noting that anti-alienation provision "applies only to pension plans"). "According to the Supreme Court, the absence of . . . anti-alienation protection with respect to ERISA welfare . . . plans must mean . . . the benefits of those plans are freely alienable." Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 893 (5th Cir.2003) (citing Mackey, 486 U.S. at 837, 108 S.Ct. 2182).

The SIP's being an ERISA "pension plan", the anti-alienation provision applies. Because ERISA preempts state law for the issue at hand, e.g., Brandon, 18 F.3d at 1325, the relevant inquiry is whether, in the light of the anti-alienation provision, "the federal law governing the resolution of [this action] may be reasonably drawn from the text of ERISA itself, or must instead be developed as a matter of federal common law". Manning, 212 F.3d at 870.

For the following reasons, contrary to the district court, the anti-alienation provision controls. Accordingly, the federal-common-law waiver approach is not applicable.

2.

The SIP complied with ERISA's earlier-quoted anti-alienation provision which states: "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated". 29 U.S.C. § 1056(d)(1). The Estate contends, erroneously, that "waiver" differs from "assignment" or "alienation" and, therefore, a beneficiary's waiver is not prohibited by the anti-alienation provision. See Estate of Altobelli v. Int'l Bus. Machs. Corp., 77 F.3d 78, 81 (4th Cir.1996) ("the anti-alienation clause does not apply to a beneficiary's waiver"); Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 279 (7th Cir.1990) (en banc) (anti-alienation provision "focus[es] on the assignment or alienation of benefits by a participant, not the waiver of a right to payment of benefits made by a designated beneficiary" (emphases added)).

An "assignment or alienation" is defined by regulation as

[a]ny direct or indirect arrangement . . . whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment...