Keen v. Weaver

• Citation: 121 S.W.3d 721
• Decision Date: 19 June 2003
• Docket Number: No. 01-0447.,01-0447.
• Parties: PATSY KEEN, PETITIONER v. DIANA WEAVER, INDEPENDENT EXECUTRIX OF THE ESTATES OF FRANCIS J. WEAVER AND RITA MARIE WILSON WEAVER, RESPONDENT.
• Court: Supreme Court of Texas

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121 S.W.3d 721

PATSY KEEN, PETITIONER v. DIANA WEAVER, INDEPENDENT EXECUTRIX OF THE ESTATES OF FRANCIS J. WEAVER AND RITA MARIE WILSON WEAVER, RESPONDENT.

No. 01-0447.

Supreme Court of Texas.

Argued on October 9, 2002.

Opinion Delivered June 19, 2003.

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE TENTH DISTRICT OF TEXAS.

JUSTICE O'NEILL delivered the opinion of the Court, in which CHIEF JUSTICE PHILLIPS, JUSTICE ENOCH, JUSTICE SCHNEIDER and JUSTICE SMITH joined.

JUSTICE HECHT filed a dissenting opinion in which JUSTICE OWEN, JUSTICE JEFFERSON and JUSTICE WAINWRIGHT joined.

Harriet O'Neill, Justice.

In this case, an ERISA pension plan participant designated his wife as the plan's primary beneficiary. The couple later divorced and, in an agreement incorporated in the divorce decree, the former wife waived any interest in the plan, agreeing that it would be the participant's sole property. When the participant died some thirteen years later without changing his beneficiary designation, the former wife and the participant's alternative beneficiary lodged competing claims to the plan proceeds. We must decide whether ERISA precludes a pension plan beneficiary from waiving an interest in the plan. We conclude that it does not, and hold that the former wife's waiver is effective. Accordingly, we affirm the court of appeals' judgment.

I

Frank Weaver and Patsy Keen married in 1967. During the marriage, Frank purchased two annuity plans as part of his employee benefits — a Teacher's Insurance and Annuity Association Contract and a College Retirement Equities Fund (TIAA-CREF). It is undisputed that these annuity plans are "employee pension benefit plans," as defined by the Employee Retirement Income Security Act (ERISA). 29 U.S.C. § 1002(2)(A). Frank named Patsy as the plans' primary beneficiary and his mother, Rita Weaver, as the contingent beneficiary. Frank and Patsy divorced in 1982. The divorce decree incorporated an agreement incident to divorce that divided the couple's estate and awarded Frank the TIAA-CREF plans as his sole and separate property. Frank never changed the plans' primary beneficiary designations.

Frank married Diana Weaver in 1983, and they remained married until Frank's death in 1995. Relying on the beneficiary designation in the plan documents, the plan administrators paid part of the death benefits to Patsy. Rita Weaver, as the contingent beneficiary, sued Patsy and TIAA-CREF for breach of contract, conversion, and unjust enrichment, claiming that she was entitled to the annuity proceeds because Patsy had waived entitlement to the benefits in the divorce decree. Rita died while the suit was pending, and Diana Weaver, as independent executrix of Frank's and Rita's estates, continued the suit. TIAACREF interpleaded the remaining benefits and obtained an order absolving them from any further liability on the plans other than to pay the benefits according to the final judgment. Patsy counterclaimed, asserting entitlement to the proceeds as the designated beneficiary.

After a bench trial, the district court held that Patsy was entitled to the plan proceeds. The court of appeals reversed, however, holding that the Texas "redesignation statute," although preempted by ERISA, applied as federal common law to revoke Patsy's beneficiary designation after divorce and redesignate Rita Weaver as the plan beneficiary. 43 S.W.3d 537, 544. This holding comports with the court of appeals' decision in Emmens v. Johnson, 923 S.W.2d 705, 707-08 (Tex. App.—Houston [1st Dist.] 1996, writ denied), but conflicts with Heggy v. Am. Trading Employee Ret. Account Plan, 56 S.W.3d 280, 283-85 (Tex. App.—Houston [14th Dist.] 2001, no pet.). Those courts, and the court of appeals here, all agree that ERISA preempts the Texas redesignation statute, but they disagree on what happens given ERISA preemption. Like the court of appeals in this case, the Emmens court adopted the Texas redesignation statute as federal common law and held that a divorce automatically revokes a former spouse's beneficiary designation. Emmens, 923 S.W.2d at 712. In Heggy, on the other hand, the court held that ERISA requires the plan documents to control regardless of the circumstances and precludes a former spouse's contractual waiver of plan proceeds. Heggy, 56 S.W.3d at 283-85. We granted Patsy's petition for review to resolve this conflict among our courts of appeals.

II

Section 9.302 of the Texas Family Code, known as the "redesignation statute," provides that the designation of a spouse as a retirement account beneficiary is rendered ineffective by a subsequent divorce. TEXAS FAM. CODE § 9.302(a).¹ If the statute applied here, it would operate to award Rita's estate the plan proceeds as the alternate beneficiary. Id. § 9.302(b). But the court of appeals held, and the parties acknowledge, that ERISA preempts the redesignation statute. See 43 S.W.3d at 541. We agree.

ERISA's preemption section states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). A state law "relates to" an ERISA plan "if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983). The United States Supreme Court recently held that ERISA expressly preempted a Washington statute similar to our redesignation statute. Egelhoff v. Egelhoff, 532 U.S. 141, 143 (2001). The Court held that the statute had an impermissible connection to ERISA plans for two reasons. First, the statute governed plan administrators' benefit payments and thus "implicate[d] an area of core ERISA concern." Id. at 147. Second, statutes differ among the various states and thus interfere "with nationally uniform plan administration." Id. at 148. For these same reasons, ERISA expressly preempts the Texas statute's application to determine plan beneficiaries. See Manning v. Hayes, 212 F.3d 866, 870 (5th Cir. 2000), cert. denied, 532 U.S. 941 (2001) ("Almost every circuit court to consider the issue . . . has determined that a state law governing the designation of an ERISA beneficiary `relates to' the ERISA plan, and is therefore preempted.").

III

Deciding that ERISA preempts the Texas redesignation statute, however, only raises a harder question. As the Fifth Circuit noted in Manning, "[t]he more difficult issue is whether, having established that the state law is preempted, the federal law governing the resolution of this and similar cases 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. Federal common law is a "`necessary expedient'" that courts resort to when "compelled to consider federal questions `which cannot be answered from federal statutes alone.'" Milwaukee v. Illinois, 451 U.S. 304, 314 (1981) (citations omitted). Thus, the threshold inquiry is whether ERISA's text explicitly resolves the question before us.

Patsy argues that sections 1002(8) and 1104(a)(1)(D) of ERISA mandate the payment of plan proceeds to her, despite her unequivocal agreement in the divorce decree to relinquish her interest in them. Section 1002(8) defines a "beneficiary" as "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." 29 U.S.C. § 1002(8). Section 1104, which delineates the fiduciary responsibilities that ERISA plan administrators owe to plan participants and beneficiaries, requires administrators to discharge their duties "in accordance with the documents and instruments governing the plan . . . ." 29 U.S.C. § 1104(a)(1)(D). According to Patsy, these provisions prohibit plan administrators from looking beyond the plan documents and require them to distribute benefits to designated beneficiaries regardless of the circumstances. In Patsy's view, ERISA prevents the plans' administrator from giving her waiver of plan benefits any force or effect.

While Patsy's interpretation is simple and easy to apply, we do not believe that ERISA's text prohibits a plan administrator from recognizing a beneficiary's waiver, disclaimer, or other repudiation of plan benefits. First, other provisions of ERISA require plan administrators to look beyond beneficiary designations in plan documents to determine entitlement to plan benefits. For example, while ERISA generally prohibits a participant's assignment or alienation of pension benefits, since 1984 ERISA has provided a limited exception if the benefits are the subject of a qualified domestic relations order (QDRO). See 29 U.S.C. § 1056(d)(3)(A).² A plan administrator presented with a QDRO that satisfies ERISA's fairly detailed requirements must pay an alternate payee designated in the QDRO rather than the beneficiary designated in plan documents. Boggs v. Boggs, 520 U.S. 833, 846-47 (1997). And a spouse who is a designated beneficiary of a joint and survivor annuity may waive entitlement to those benefits under certain circumstances. 29 U.S.C. § 1055(c)(1)(A). Furthermore, the Supreme Court has recognized that ERISA welfare plan benefits may be garnished under state procedures. See Mackey v. Lanier Collection Agency & Serv. Inc., 486 U.S. 825, 841 (1988).

In addition, the Supreme Court has directed courts to look to common-law principles and trust law when interpreting ERISA's fiduciary duty provisions. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989); see also Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) (noting that the common law is not just an aid for interpreting ERISA's fiduciary duties, but is even "a starting point"). This is precisely what the majority of circuit courts that have considered the issue have done, holding that federal common law governs disputes between a designated former spouse beneficiary and other claimants to ERISA plan proceeds. See Manning, 212 F.3d at 870-72; Clift v. Clift, 210 F.3d...