Fox Valley & Vicinity Const. Workers Pension Fund v. Brown

• Decision Date: 29 June 1989
• Docket Number: No. 88-2322,88-2322
• Citation: 879 F.2d 249
• Parties: , 11 Employee Benefits Ca 1282 FOX VALLEY & VICINITY CONSTRUCTION WORKERS PENSION FUND, Plaintiff-Appellee, v. Laurine BROWN (LaMar), Defendant-Appellant, and Dessie Brown, Defendant-Appellee, and All Unknown Claimants, Defendants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 249

879 F.2d 249

58 USLW 2050, 11 Employee Benefits Ca 1282

FOX VALLEY & VICINITY CONSTRUCTION WORKERS PENSION FUND Plaintiff-Appellee, v. Laurine BROWN (LaMar), Defendant-Appellant and Dessie Brown, Defendant-Appellee and All Unknown Claimants, Defendants.

No. 88-2322.

United States Court of Appeals Seventh Circuit.

Argued Jan. 18, 1989.

Decided June 29, 1989.

Gerald L. Morel, Masuda, Funai, Eifert & Mitchell, Ltd., Chicago, Ill., for defendant-appellant Laurine Brown (LaMar).

James Merrill Neuman, Baum & Sigman, Chicago, Ill., Roy Hasseltine, Harris & Hasseltine, Florence, Ala., Nicholas F. Esposito, Esposito & Heuel, Mark A. Schramm, Terence M. Heuel, Chicago, Ill., for defendant-appellee Dessie Brown.

Before WOOD, Jr. and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

HARLINGTON WOOD, Jr., Circuit Judge.

This is an interpleader action filed by the Fox Valley & Vicinity Construction Workers Pension Fund ("Fund") to determine the proper recipient of a death benefit payable because of the death of Fund participant James Brown ("James"). The defendants in the action are Laurine Brown ("Laurine"), James' former spouse, and Dessie Brown ("Dessie"), James' mother. The district court denied Laurine's motion for summary judgment and entered summary judgment against Laurine and in favor of Dessie, ordering the Fund to pay the death benefit to Dessie. Laurine appeals this decision.

The Fund brought this interpleader action under 28 U.S.C. Sec. 1335. The district court had jurisdiction pursuant to 29 U.S.C. Sec. 1132(e). This case raises issues under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461, and we have jurisdiction over this appeal pursuant to 28 U.S.C. Sec. 1291.

I. FACTUAL BACKGROUND

Laurine and James were married on April 14, 1982. James was covered by the Fox Valley & Vicinity Construction Workers Pension Plan ("Plan"), which provided for a Lump Sum Death Benefit ("Death Benefit") payable to the plan participant's designated beneficiary if the participant died before reaching retirement age. The Plan specifies how a participant may designate a beneficiary The Participant's Beneficiary shall be the person or persons he so designates in the last written notice received in the Administrative Office prior to the Participant's death. It shall be the responsibility of the Participant to notify in writing the Administrative Office of his choice of Beneficiary or any change in Beneficiary. A Participant may, without the consent of his then designated Beneficiary, or Beneficiaries, change his Beneficiaries. In the event that the [P]articipant shall fail to name a Beneficiary, or if such Beneficiary shall not be living at the time of the Participant's death, such benefits shall be paid to:

(a) his legal spouse, if living;

(b) if no spouse be living, then to his living children in equal shares;

(c) if no spouse or children be living, then to his parents in equal shares, or the survivor of such parents if only one (1) be living;

(d) if no spouse, children, or parents be living, then to his living brothers and sisters in equal shares;

(e) if no spouse, children, parents, or brothers and sisters be living, then to the estate of such deceased Participant.

In 1986, James executed a Beneficiary Designation Form naming Laurine as his beneficiary. On September 29, 1986, Laurine and James were divorced. They both agreed to a court-approved property settlement that included the following proviso:

The parties each waive any interest or claim in and to any retirement, pension, profit-sharing and/or annuity plans resulting from the employment of the other party.

Even after their divorce, James continued to live with Laurine for much of 1986 and 1987. James made no effort to change his designated beneficiary after the divorce. James died on June 17, 1987.

This dispute arose when Laurine attempted to have the Death Benefit paid to her. The Fund refused, claiming that it was uncertain who should receive the Death Benefit. The Fund then filed this interpleader action, asserting that although Laurine was the designated beneficiary, it was uncertain as to the legal effect of the marital property settlement agreement in which Laurine seemingly waived her right to any benefits from the Fund. The Fund also named Dessie as a defendent since, under the Plan, Dessie would receive the benefit if the court determined that Laurine properly waived her claim.

Laurine moved for summary judgment on October 21, 1987, arguing that James, who was unrepresented at their divorce hearing, never read or understood the terms of the marital property settlement, which had been prepared by her lawyer. Laurine also asserted that even after the divorce, James intended for her to receive benefits from the Fund. The district court denied Laurine's motion for summary judgment. 684 F.Supp. 185 (N.D.Ill.1988). The court then entered summary judgment against Laurine and in favor of Dessie, finding that Laurine had waived her right to the Death Benefit. In this appeal, Laurine finds fault with the district court's use of the marital property settlement agreement. Laurine claims the court erred when it allowed the marital property settlement to affect Laurine's right under the Plan.

II. DISCUSSION

Summary judgment should be granted only when there are no genuine issues of material fact and when the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 50(c). There were no disputed facts in this case and the district court found that, as a matter of law, the death benefit should be paid to Dessie. We review that decision de novo. EEOC v. Sears, Roebuck & Co., 839 F.2d 302, 354 (7th Cir.1988).

As the district court noted, this is a case of first impression under ERISA. We must determine whether a divorced spouse who was designated as a beneficiary prior to the divorce will still receive the Death Benefit despite a provision in the divorce settlement waiving any rights to the benefit. Because ERISA preempts state pension benefit laws, 29 U.S.C. Sec. 1144(a), we must find the answer to this issue within ERISA itself or in the federal common law interpreting ERISA. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987) (state law relating to employee benefit plans preempted); Mutual Life Ins. Co. of New York v. Yampol, 840 F.2d 421, 425 (7th Cir.1988) (uniform remedies are fundamental to ERISA). In this case, our attention is focused on ERISA's anti-alienation provisions. 29 U.S.C. Sec. 1056(d)(1), (d)(3)(A).

ERISA provides that a pension plan must prohibit the alienation or assignment of benefits. 29 U.S.C. Sec. 1056(d)(1). These "spendthrift" provisions are designed to prevent unwise alienation or assignment. AT & T v. Merry, 592 F.2d 118, 124 (2d Cir.1979). ERISA was amended in 1984 to clarify the effect of these spendthrift provisions on family support obligations such as alimony, child support, and separate maintenance. Retirement Equity Act of 1984, Pub.L. 98-397, 98 Stat. 1433 (1984). See S.Rep. No. 575, 98th Cong., 2d Sess. 18-19, reprinted in 1984 U.S.Code Cong. & Admin.News 2547, 2564-65. Prior to the enactment of these amendments, some courts tentatively exempted state domestic relations orders from the ERISA anti-alienation provisions. See, e.g., Operating Engineers' Local # 428 Pension Trust Fund v. Zamborsky, 650 F.2d 196, 200 (9th Cir.1981) (order assigning benefits for alimony not in conflict with ERISA); AT & T v. Merry, 592 F.2d at 124-25 (ERISA provisions do not alter traditional support obligations); Cody v. Riecker, 594 F.2d 314, 317 (2d Cir.1979) (ERISA does not prevent garnishment for support obligations).

The 1984 amendments removed most uncertainties by creating a limited exception to the anti-alienation provisions for a state domestic relations order if the order is a "qualified domestic relations order" ("QDRO"). 29 U.S.C. Sec. 1056(d)(3)(A). A domestic relations order must meet certain technical requirements to be recognized as a QDRO under ERISA. 29 U.S.C. Sec. 1056(d)(3)(B)-(E). All parties to this case agree that the property settlement does not meet the requirements of a QDRO.

Laurine argues that since the settlement is not a QDRO, the anti-alienation provisions nullify the property settlement. She claims that the settlement can have no effect on the designation of beneficiary. ERISA prohibits the assignment or alienation of benefits and, according to Laurine, ERISA makes an exception only for a QDRO. Laurine claims that if a marital property settlement does not qualify, ERISA benefits must be paid pursuant to the original designation of beneficiary.

Laurine is correct when she states that ERISA preempts any attempt to alienate or assign benefits by a domestic relations order if that order is not a QDRO. However, the marital property settlement at issue in this case was not an assignment or alienation of benefits by James. In the settlement, James made no attempt to dispose of his interest. Instead, Laurine disclaimed any right she had to the benefits. Laurine, a non-participant in the Plan, waived her right to any benefit, just as James waived any right to benefits from Laurine's pension. Such a waiver is not preempted by ERISA's spendthrift provisions.

In arguing that her waiver is preempted by ERISA, Laurine misinterprets the purpose behind the spendthrift provisions and the intended effect of a QDRO. The spendthrift provisions of ERISA are designed to "ensure that the employee's accrued benefits are actually available for retirement purposes," by preventing unwise assignment or alienation. H.R.Rep. No. 807, 93d Cong., 2d Sess.1974, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4670, 4734. These provisions focus 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. The QDRO exception is also...