Atwater v. Nortel Networks, Inc.

• Decision Date: 06 September 2005
• Docket Number: No. Civ.1:04CV00503.,Civ.1:04CV00503.
• Parties: Caitlin ATWATER, Administratrix of the Estate of Kathleen Hunt Peterson, Plaintiff, v. NORTEL NETWORKS, INC.; Nortel Networks U.S. Deferred Compensation Plan; Nortel Networks Retirement Income Plan; and Nortel Networks Long-Term Investment Plan, Defendants.
• Court: U.S. District Court — Middle District of North Carolina

388 F.Supp.2d 610

Caitlin ATWATER, Administratrix of the Estate of Kathleen Hunt Peterson, Plaintiff, v. NORTEL NETWORKS, INC.; Nortel Networks U.S. Deferred Compensation Plan; Nortel Networks Retirement Income Plan; and Nortel Networks Long-Term Investment Plan, Defendants.

No. Civ.1:04CV00503.

United States District Court, M.D. North Carolina.

September 6, 2005.

COPYRIGHT MATERIAL OMITTED

Jerome P. Trehy, Jr., Twiggs Beskind Strickland & Rabenau, P.A., Raleigh, NC, for Plaintiff.

Mark S. Thomas, Maupin Taylor & Ellis, P.A., Raleigh, NC, for Defendants.

MEMORANDUM OPINION

BULLOCK, District Judge.

Plaintiff Caitlin Atwater ("Plaintiff") brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., against Nortel Networks, Inc. ("Nortel"), Nortel Networks U.S. Deferred Compensation Plan ("Deferred Compensation Plan"), Nortel Networks Retirement Income Plan ("Pension Plan"), and Nortel Networks Long-Term Investment Plan ("LTI Plan") (collectively "Defendants"). Plaintiff is the administratrix of the estate of Kathleen Hunt Peterson. Plaintiff alleges that Defendants wrongly paid plan benefits in early 2002 to Michael Peterson — the named beneficiary, the husband, and the then-indicted and alleged killer of Kathleen Hunt Peterson — and that Defendants wrongly denied the benefit claims of the Estate of Kathleen Hunt Peterson in 2004. Plaintiff asserts her claim for relief under 29 U.S.C. § 1132(a)(1)(B). Before the court are the parties' cross motions for summary judgment.

FACTS

Each of the Defendant Plans is an employee benefit plan under ERISA. Defendant Nortel is the plan administrator and fiduciary for Defendant Deferred Compensation Plan, Defendant Pension Plan, and Defendant LTI Plan ("Defendant Plans"). Kathleen Hunt Peterson participated in the Defendant Plans during the course of her employment with Defendant Nortel. Kathleen Hunt Peterson designated her husband Michael Peterson as the beneficiary under each of the Defendant Plans.

Kathleen Hunt Peterson died on December 9, 2001. By December 14, 2001, Defendants were aware that Kathleen Hunt Peterson's death was being investigated as suspicious and that Michael Peterson was suspected of playing a role in his wife's death. On December 20, 2001, Michael Peterson was indicted for the murder of Kathleen Hunt Peterson.

On December 27, 2001, Plaintiff applied to be the administratrix of the estate of Kathleen Hunt Peterson. Plaintiff was appointed Administratrix of the Estate on January 7, 2002. Plaintiff directed the estate's attorney, David Frankstone ("Mr.Frankstone") to apply for benefits under the Defendant Plans. Mr. Frankstone and his paralegal, Lisa Brola ("Ms.Brola"), subsequently contacted Defendant Nortel several times on Plaintiff's behalf.¹

Ruth Hillis ("Ms.Hillis"), Defendant Nortel's Senior Benefits Counsel, researched the law regarding the propriety of distributing the benefits to Michael Peterson. Ms. Hillis determined that, absent perhaps a conviction for murder, there was no legal justification for denying distribution of benefits to Michael Peterson.

In February 2002, Ms. Hillis learned that Kathleen Hunt Peterson's death benefits were ready for distribution. Ms. Hillis also learned that Mr. Frankstone and Ms. Brola had expressed concerns to Defendant Nortel about the distribution of the benefits to Michael Peterson. Ms. Hillis contacted Mr. Frankstone and informed him that Defendants intended to distribute the plan benefits to the named beneficiary, Michael Peterson. The parties dispute the content of the conversation between Mr. Frankstone and Ms. Hillis,² but Defendants' continued determination to distribute payment to Michael Peterson is undisputed. No further action was taken on behalf of Plaintiff to challenge or oppose distributions until August 23, 2002.³

On February 8, 2002, Defendant LTI Plan distributed the gross amount of $36,700.47 to the designated beneficiary, Michael Peterson. On February 15, 2002, Defendant Pension Plan distributed the gross amount of $124,283.87 to the designated beneficiary, Michael Peterson. On March 25, 2002, Defendant Deferred Compensation Plan issued a check for benefits payable in the gross amount of $212,790.67 to the designated beneficiary, Michael Peterson. On May 31, 2002, Defendant Deferred Compensation Plan issued a check in the amount of $3,683.34, to correct a mistake regarding an earlier distribution,⁴ to the designated beneficiary, Michael Peterson. Defendant Deferred Compensation Plan distributed to Michael Peterson a total of $223,182.46.

On October 10, 2003, Michael Peterson was convicted of the first-degree murder of Kathleen Hunt Peterson. On November 18, 2003, Plaintiff tendered a formal written claim to each of the Defendant Plans seeking plan benefits. Defendant Plans reviewed and denied Plaintiff's claims. Plaintiff appealed through the Defendant Plans' respective administrative appeal processes, and the denials were upheld.

DISCUSSION

I. Summary Judgment Standard

Summary judgment must be granted when the pleadings, responses to discovery, and the record show that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of persuasion on all relevant issues. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the non-moving party must come forward with specific facts demonstrating a genuine issue for trial. See Fed.R.Civ.P. 56(e); see also Cray Communications, Inc. v. Novatel Computer Sys., Inc., 33 F.3d 390, 393-94 (4th Cir.1994) (moving party on summary judgment may simply argue the absence of evidence by which the non-moving party can prove her case). The non-moving party may survive a motion for summary judgment by producing "evidence from which a [fact finder] might return a verdict in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering the evidence, all reasonable inferences must be drawn in favor of the non-moving party. Id. at 255, 106 S.Ct. 2505. However, "the mere existence of a scintilla of evidence in support of the [non-moving party's] position [is] insufficient; there must be evidence on which the [fact finder] could reasonably find for the [non-moving party]." Id. at 252, 106 S.Ct. 2505. Factual disputes about immaterial matters are irrelevant to a summary judgment determination. Frank v. U.S. West, Inc., 3 F.3d 1357, 1361 (10th Cir.1993) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

II. Slayer-Beneficiaries Cannot Benefit from their Wrongdoing in the ERISA Context

Although ERISA does not include a slayer provision, it reasonably follows that "Congress could not have intended ERISA to allow one spouse to recover benefits after intentionally killing the other spouse." Connecticut Gen. Life Ins. Co. v. Riner, 351 F.Supp.2d 492, 497 (W.D.Va.2005). There is some debate about whether federal common law regarding slayers preempts state slayer law in the ERISA context. See, e.g., Ruark v. Bd. of Trs. of Boilermaker-Blacksmith Nat'l Pension Trust, 2003 WL 23305154, *2 (D.Md.2003) ("There exists a divergence of opinion as to whether federal common law under ERISA recognizes the `slayer's rule,' ... or whether, instead, the `slayer's rule' recognized by the various states at common law (or by statutory enactment) simply survives as non-preempted"). Dicta in the Supreme Court's decision in Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001), indicates that state slayer statutes are not preempted and are applicable in the ERISA context. In Egelhoff, the Court stated that "[i]n the ERISA context, ... [state] `slayer' statutes could revoke the beneficiary status of someone who murdered a plan participant.... [T]he principle underlying the statutes — which have been adopted by nearly every State — is well established in the law and has a long historical pedigree predating ERISA." Id. at 152, 121 S.Ct. 1322.

In North Carolina, a slayer may be barred from receiving a monetary benefit from the killing of another person by two means: (1) the slayer statute, N.C. Gen.Stat. §§ 31A-3 et seq., under which a person convicted of killing is barred from acquiring any property or receiving any benefits resulting from the victim's death; and (2) the common law rule that no one may profit from their own wrongdoing. See Quick v. United Benefit Life Ins. Co., 287 N.C. 47, 56-57, 213 S.E.2d 563, 569 (1975); State Farm Life Ins. Co. v. Allison, 128 N.C.App. 74, 76-77, 493 S.E.2d 329, 330-31 (1997). The civil standard of proof by a preponderance of the evidence is all that is necessary to prevent a person from receiving proceeds as a slayer. See, e.g., Jones v. All Am. Life Ins. Co., 68 N.C.App. 582, 585, 316 S.E.2d 122, 125 (1984) ("Although plaintiff does not fit the statutory definition of `slayer' because she has not been convicted of killing Hilliard, ... she nonetheless is barred by the common law from receiving the proceeds" after having been determined to be the slayer by a civil jury according to the "preponderance of the evidence" standard).

The federal common law rule regarding slayers derives from the common law principle that "[n]o person should be permitted to profit from his own wrong." Prudential Ins. Co. v. Tull, 690 F.2d 848, 849 (4th Cir.1982) (citing Shoemaker v. Shoemaker, 263 F.2d 931, 932 (6th Cir.1959); United States v. Foster, 238 F.Supp. 867, 868 (E.D.Mich.1965); United States v. Kwasniewski, 91 F.Supp. 847, 851 (E.D.Mich.1950); Restatement of Restitution §§ 187, 189 (1937)). Equitable in nature, the rule prevents slayers from receiving the financial benefits from their victims' deaths. See generally Addison v. Metro. Life Ins. Co., 5 F.Supp.2d 392, 393-94 (W.D.Va.1998).

Here, Michael Peterson was...