Hamilton v. Washington State Plumbing & Pipefitting Industry Pension Plan

Decision Date10 January 2006
Docket NumberNo. 04-35828.,No. 04-35798.,No. 04-35526.,04-35526.,04-35828.,04-35798.
Citation433 F.3d 1091
PartiesDavid HAMILTON; Sarah Hamilton, a minor, Plaintiffs-Appellees, v. WASHINGTON STATE PLUMBING & PIPEFITTING INDUSTRY PENSION PLAN; Plumbers & Pipefitters National Pension Fund; Western Washington U.A. Supplemental Pension Trust, Defendants-Appellants, Mary Hamilton, Defendant-intervenor-Appellant. Linda Oppegaard, guardian of Sarah Hamilton, Plaintiff, and David Hamilton; Sarah Hamilton, a minor, Plaintiffs-counter-defendants-Appellees, v. Plumbers & Pipefitters National Pension Fund, Defendant-cross-defendant, Mary Hamilton, Defendant-intervenor, and Washington State Plumbing & Pipefitting Industry Pension Plan, Local Union # 32, Defendant-cross-defendant-Appellant. Linda Oppegaard, guardian of Sarah Hamilton, Plaintiff, and David Hamilton; Sarah Hamilton, a minor, Plaintiffs-counter-defendants-Appellees, v. Plumbers & Pipefitters National Pension Fund, Defendant-cross-defendant-Appellant, and Mary Hamilton, Defendant-intervenor.
CourtU.S. Court of Appeals — Ninth Circuit

Nicholas P. Scarpelli, Jr., Carney Badley & Spellman, P.S., Seattle, WA; Jerome C. Scowcroft, Scowcroft Law Office, Seattle, WA, for the plaintiffs-appellees.

Jonathan P. Meier, Sirianni Youtz Meier & Spoonemore, Seattle, WA, for the defendant-intervenor-appellant.

Appeal from the United States District Court for the Western District of Washington; Thomas S. Zilly, District Judge, Presiding. D.C. No. CV-03-02438-TSZ.

Before RICHARD D. CUDAHY,* T.G. NELSON, and McKEOWN, Circuit Judges.

McKEOWN, Circuit Judge.

The alphabet soup world of pension benefits has spawned a dizzying array of acronyms, like ERISA, QDRO, and QPSA, and a complex web of interrelated statutory provisions. In a case of first impression, our challenge is to cut through the dense language to figure out what Congress meant in terms of surviving spouse benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 832, as amended, 29 U.S.C. § 1001 et seq.

In the case before us, two ERISA-governed pension funds, the Plumbers & Pipefitters National Pension Fund (National Pension Fund) and the Washington State Plumbing & Pipefitting Industry Pension Plan for Local Union # 32 (State Plan) (collectively the "Plans"),1 and Mary Hamilton, the surviving spouse of plan participant Michael Hamilton, appeal the district court's summary judgment and award of attorneys' fees to Michael's children from a previous marriage, David and Sarah Hamilton (the "Children"). After Michael's pre-retirement death, Mary and the Children claimed competing rights to survivor benefits. The district court found that the marital dissolution order, which required Michael to name the Children as beneficiaries under the Plans, was a valid Qualified Domestic Relations Order ("QDRO") under ERISA that took precedence over Mary's right to a Qualified Preretirement Survivor Annuity ("QPSA").

This scenario requires us to address the intersection between a surviving spouse's statutorily-guaranteed survivor annuity, a QPSA, and a marriage dissolution order, a QDRO, that is silent with respect to surviving spouse rights. Relying on the plain language of the statute, we hold that the purported assignment of pension rights did not meet the strict requirements of a QDRO. Even if the dissolution order is liberally construed as a QDRO, under the statutory language coupled with a complementary interpretation of the plans, the surviving spouse benefit must be explicitly assigned to a former spouse in a QDRO in order to overcome the surviving spouse's right to an annuity under ERISA. Consequently, Mary, the surviving spouse, prevails over the Children in this debate over statutory construction, plain language, and plan language, and we reverse the judgment of the district court.

BACKGROUND

The essential facts are not in dispute. Michael was a participant in the National Pension Fund, the State Plan and the Supplemental Plan. The Plans are defined benefit pension plans subject to the provisions of ERISA. Michael and his first wife, Linda Oppegaard, were divorced in April 1996. A marital dissolution order filed with the state court provided that, with regard to the Plans, Michael "shall name the children of the marriage, David and Sarah, as the beneficiaries under the pension in lieu of life insurance which he is presently unable to obtain, which obligation shall terminate when the youngest child reaches 18 years of age." The dissolution order made no reference to surviving spouse rights nor did it delineate which pension rights were at issue, the amounts to be paid or when the payments were to begin.

About two months after the divorce, Michael married Mary Hamilton. Soon after they were married, Michael named Mary as the beneficiary for death benefits payable under the National Pension Fund and State Plan.2 Mary only asserts her rights to benefits as a result of her status as the "surviving spouse," not as the designated beneficiary. Michael died in a car accident in 2002 at the age of 49. At the time of his death, he was still married to Mary and both Children were under the age of 18. He was a fully vested participant in the Plans, had not yet retired and was not receiving pension benefits.

The Plans provide that if a vested participant dies before retirement, benefits will be paid to a surviving spouse or, in the event that such surviving spouse benefits are not payable, a lump sum death benefit will be paid to another beneficiary designated by the plan participant. Once Mary asserted rights to surviving spouse benefits under the Plans, the Children asserted competing rights on the ground that the marital dissolution order entitled them to benefits. The National Pension Fund and the State Plan denied the Children's claims, reasoning that Mary was entitled to a surviving spouse benefit under ERISA. The Supplemental Plan took no position on the merits of the claims.

In the course of the inevitable litigation over this clash of rights, the district court granted summary judgment to the Children and entered a judgment in their favor in an amount totaling the contributions made to the Plans on Michael's behalf. The district court determined that the Plans' respective denials of the Children's claims were arbitrary and capricious because the dissolution decree was a valid QDRO under ERISA, and the designation of the Children as "alternate payees" in the QDRO took precedence over Mary's right as the surviving spouse. The court also awarded the Children attorneys' fees, costs, and prejudgment interest pursuant to 29 U.S.C. § 1132(g)(1).

ANALYSIS
I. STATUTORY FRAMEWORK

Congress enacted ERISA to ensure the proper administration of employee benefit plans, including pension plans, both during the years of an employee's active service and after retirement. See Boggs v. Boggs, 520 U.S. 833, 839, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997). The principal object of ERISA is to "protect plan participants and beneficiaries." Id. at 845, 117 S.Ct. 1754 (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) ("ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employment benefit plans")); see also 29 U.S.C. § 1001(b) (stating that the policy of ERISA is to "protect . . . the interest of participants in employee benefit plans and their beneficiaries"). To this end, ERISA requires pension plans to conform to a myriad of reporting, disclosure, participation, vesting and funding requirements. See 29 U.S.C. §§ 1021-1031, 1101-1114, 1051-1086.

The Retirement Equity Act of 1984 ("REA"), Pub.L. 98-397, 98 Stat. 1426, amended ERISA in two important ways with respect to surviving spouses. REA first sought to "ensure a stream of income" to surviving spouses by requiring pension plans to provide automatic surviving spouse benefits. Boggs, 520 U.S. at 843, 117 S.Ct. 1754. Section 1055, as amended by REA, provides that if a vested participant dies before the annuity start date, leaving a surviving spouse to whom he has been married for at least one year, "a qualified preretirement survivor annuity [QPSA] shall be provided to the surviving spouse."3 29 U.S.C. § 1055(a)(2). The QPSA is an annuity for the life of the surviving spouse that must be at least fifty percent of the annuity amount which would have been payable during the joint lives of the participant and spouse. Id. at § 1055(e)(2). Provision of the QPSA may be waived by the participant only if the spouse consents in writing to the designation of another beneficiary. Id. at § 1055(c)(2).4 Applying these provisions to the case at hand, it is undisputed that Mary was Michael's "surviving spouse" at the time of his death, and Mary never consented to the designation of another beneficiary.

REA also introduced the QDRO exception, id. at § 1056(d), which "elevates a plan participant's legal obligations, commonly to a former spouse or children of a previous marriage, over the participant's express wishes to provide for other individuals as designated beneficiaries." Trustees of the Directors Guild of America-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 425 (9th Cir.2000). The QDRO is a subset of "domestic relations orders" that recognizes the right of an alternate payee to "receive all or a portion of the benefits payable with respect to a participant under the plan." 29 U.S.C. § 1056(d)(3)(B)(i)(I). If a domestic relations order qualifies as a QDRO, the designated alternate payee— "any spouse, former spouse, child, or other dependent of a participant"—shall be considered "a beneficiary under the plan." Id. at §§ 1056(d)(3)(J)-(K). "Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order." Id. at § 1056(d)(3)(A).

In addition, the statute specifically...

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