Herinckx v. Sanelle

• Citation: 281 Or.App. 869,385 P.3d 1190
• Decision Date: 26 October 2016
• Docket Number: A159249
• Parties: Dale Robert HERINCKX and Donna Rae Herinckx, as co-personal representatives for the estate of Julianne Lisa Herinckx, deceased, Plaintiffs–Appellants, v. Paul SANELLE; Terlin Patrick; and Stancorp Financial Group, Inc., dba Standard Insurance Company, an Oregon corporation, Defendants–Respondents.
• Court: Court of Appeals of Oregon

281 Or.App. 869

385 P.3d 1190

Dale Robert HERINCKX and Donna Rae Herinckx, as co-personal representatives for the estate of Julianne Lisa Herinckx, deceased, Plaintiffs–Appellants,

v.Paul SANELLE; Terlin Patrick; and Stancorp Financial Group, Inc., dba Standard Insurance Company, an Oregon corporation, Defendants–Respondents.

A159249

Court of Appeals of Oregon.

Argued and submitted May 17, 2016.

October 26, 2016

George W. Kelly, Eugene, argued the cause and filed the briefs for appellants.

Andrew Altschul, Portland, argued the cause for respondent Stancorp Financial Group, Inc. With him on the brief were Margaret Fonberg and Buchanan Angeli Altschul & Sullivan LLP.

No appearance for respondent Paul Sanelle.

No appearance for respondent Terlin Patrick.

Before Armstrong, Presiding Judge, and Egan, Judge, and Shorr, Judge.

SHORR, J.

Plaintiffs appeal from a limited judgment dismissing their claim against defendant Stancorp Financial Group, Inc., dba Standard Insurance Company (Standard). Plaintiffs raise two assignments of error. First, they contend that the trial court erred by granting Standard's motion to dismiss based on its determination, as applied here, that ORS 112.515 (part of Oregon's so-called "slayer statutes") is preempted by the Employee Retirement Income Security Act of 1973 (ERISA). Because, as applied here, ORS 112.515 is "related to" an "employee benefit plan," we hold that ERISA preempts the application of ORS 112.515 in this case.

Consequently, the trial court did not err in granting Standard's motion to dismiss plaintiffs' claim to establish a constructive trust, under ORS 112.515, over Standard's insurance policy proceeds.

Second, plaintiffs contend the trial court erred when it denied plaintiffs' motion to modify the order dismissing plaintiffs' claim against Standard with prejudice. Plaintiffs assert that, even if their state law constructive trust claim was preempted by ERISA, the trial court abused its discretion by dismissing their claim with prejudice because it unjustly denied them the opportunity to amend their complaint to assert an ERISA claim based, in part, on federal common law. We agree with plaintiffs. In accordance with our other cases that have examined a trial court's denial of leave to amend under similar circumstances, we conclude that the trial court erred in denying plaintiffs' motion to modify the trial court's dismissal with prejudice. Accordingly, we reverse the limited judgment and remand for plaintiffs to file an amended complaint.

When reviewing the dismissal of a case under ORCP 21 A(1), we assume the truth of all well-pleaded facts alleged in the complaint. Doe v. Lake Oswego School District , 353 Or. 321, 323, 297 P.3d 1287 (2013). As relevant, plaintiffs allege the following facts. Plaintiffs had a daughter, decedent, who was living with defendants Sanelle and Patrick. Before decedent's death, Standard provided decedent with a life insurance policy through her employer. The policy listed both Sanelle and Patrick as beneficiaries. In an attempt to claim the life insurance policy's proceeds, Sanelle and Patrick killed decedent.¹

Following their daughter's death, plaintiffs filed a two-claim complaint as personal representatives of their daughter's estate. That complaint included a state law claim against Standard to establish a constructive trust over the proceeds of their daughter's insurance policy, and a wrongful death claim against Sanelle and Patrick that is not at issue in this appeal. Based on the application of ORS 112.515(1), plaintiffs' constructive trust claim, if successful, would have passed the benefits of decedent's life insurance policy to plaintiffs as "the personal representative[s] of the estate of the decedent" and would have barred Sanelle and Patrick, as the "slayer[s]" of decedent, from collecting any benefits. Standard responded with an ORCP 21 A(1) motion to dismiss for lack of subject matter jurisdiction, claiming that ERISA preempts the imposition of any state-law constructive-trust remedies on employer-provided employee benefit plans.

In response, plaintiffs argued that ERISA does not preempt their state-law constructive-trust claim and its application of ORS 112.515(1) to prevent Sanelle and Patrick from recovering proceeds from decedent's life insurance policy. Further, plaintiffs requested, both in their response and at the hearing on Standard's motion, that they be granted leave to amend their complaint if the trial court granted Standard's motion to dismiss. However, the trial court granted Standard's motion and dismissed plaintiffs' claim against Standard with prejudice without addressing plaintiffs' request for leave to amend.

Shortly after the trial court granted Standard's motion to dismiss, plaintiffs renewed their argument that they should be granted leave to amend in a motion to modify the order to permit filing of an amended complaint. Plaintiffs argued that, under ORCP 21 A, the trial court had discretion to allow plaintiffs to amend their complaint to delete their state-law constructive-trust claim against Standard, add a pure damages claim under ORS 112.515, and add a new slayer claim under ERISA and federal common law. The trial court denied plaintiffs' motion without explanation.

On appeal, plaintiffs first assign error to the trial court's grant of Standard's motion to dismiss. Plaintiffs reassert their argument that ERISA does not preempt the application of ORS 112.515 to the allegations and claim in this case. ORS 112.515, as relevant here and as discussed further below, prohibits a life insurance beneficiary from collecting on a decedent's life insurance policy if the potential beneficiary is a "slayer" of the decedent. Standard contends, as it did below, that ERISA preempts any state law that would require that a constructive trust be placed on employer-provided employee benefit plans. Here, we need not reach the full extent of Standard's argument. We resolve only whether ORS 112.515 is preempted as applied here.²

Whether federal law preempts a state statute is a question of law, which we review for legal error. Dept. of Human Services v. J. G. , 260 Or.App. 500, 507, 317 P.3d 936 (2014). Federal preemption of state law originates in the United States Constitution. Article VI, clause two, of the United States Constitution states, in part, "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof * * * shall be the supreme Law of the Land * * *." In accordance with that clause, "state laws that conflict with federal law are without effect." Altria Group, Inc. v. Good , 555 U.S. 70, 76, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008) (internal quotation marks omitted). To determine "the scope of a statute's pre-emptive effect," we look to "the purpose of Congress" as "the ultimate touchstone." Id. (internal quotation marks and brackets omitted). Congress may indicate its preemptive intention either "through a statute's express language or through its structure and purpose." Id. In the case of ERISA, Congress indicated its preemptive intention through the act's express text.

ERISA is a series of statutes passed by Congress

"to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts."

29 USC § 1001(b). By its terms, ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 USC § 1144(a). Accordingly, the issue before us on plaintiffs' first assignment of error is whether ORS 112.515, as applied here, is a state law that "relate[s] to any employee benefit plan" as described by 29 USC section 1144(a).

Under ERISA, an "employee benefit plan," or ERISA plan, includes, as relevant, "any plan, fund, or program * * * established or maintained by an employer * * * for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance * * * benefits in the event of * * * death." 29 USC § 1002(1), (3).

Here, decedent's insurance plan is an "employee benefit plan." Decedent's employer established the plan to provide "benefits in the event of * * * death." 29 USC § 1002(1).

A state law "relates to" an "employee benefit plan" if it has "an impermissible connection with ERISA plans." Gobeille v. Liberty Mut. Ins. Co. , ––– U.S. ––––, 136 S.Ct. 936, 943, 194 L.Ed.2d 20 (2016) (internal quotation marks omitted). A state law has an impermissible "connection with" ERISA plans where the law "governs * * * a central matter of plan administration" or "interferes with nationally uniform plan administration." Egelhoff v. Egelhoff , 532 U.S. 141, 148, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001).

In Egelhoff , the United States Supreme Court held that ERISA preempted a Washington statute that "provide[d] that the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce." 532 U.S. at 143, 121 S.Ct. 1322. The Court reasoned that the Washington statute "govern[ed] * * * a central matter of plan administration" because it "govern[ed] the payment of benefits." Id. at 148, 121 S.Ct. 1322. The Court also concluded that the statute "interfere[d] with nationally uniform plan administration" because "[p]lan administrators [could not] make payments simply by identifying the beneficiary specified by the plan documents." Id. Instead, the plan administrators had to "familiarize themselves with state statutes so that they [could] determine whether the named beneficiary's status ha[d] been revoked by operation of law." Id. at 148–49, 121 S.Ct. 1322 (internal quotation marks omitted). As a result, the Court determined that...