Metropolitan Life Ins. Co. v. Pettit

• Decision Date: 31 December 1998
• Docket Number: 97-2407,Nos. 97-2244,s. 97-2244
• Citation: 164 F.3d 857
• Parties: 22 Employee Benefits Cas. 2207 METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. Betty T. PETTIT, Defendant-Appellant, v. Patricia B. Pettit, Defendant-Appellee. Metropolitan Life Insurance Company, Plaintiff, v. Patricia B. Pettit, Defendant-Appellant, v. Betty T. Pettit, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 857

164 F.3d 857

22 Employee Benefits Cas. 2207

METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. Betty T. PETTIT, Defendant-Appellant, v. Patricia B. Pettit, Defendant-Appellee.

Metropolitan Life Insurance Company, Plaintiff, v. Patricia B. Pettit, Defendant-Appellant, v. Betty T. Pettit, Defendant-Appellee.

Nos. 97-2244, 97-2407.

United States Court of Appeals Fourth Circuit.

Argued Sept. 23, 1998.

Decided Dec. 31, 1998.

ARGUED: Robert Eric Greenberg, Friedlander, Misler, Friedlander, Sloan & Herz, Washington, D.C., for Appellant. Brian Stuart Chilton, Hogan & Hartson, L.L.P., Washington, D.C., for Appellee. ON BRIEF: Glenn W.D. Golding, Friedlander, Misler, Friedlander, Sloan & Herz, Washington, D.C., for Appellant. David G. Leitch, Hogan & Hartson, L.L.P., Washington, D.C., for Appellee.

Before MURNAGHAN and WILLIAMS, Circuit Judges, and BULLOCK, Chief United States District Judge from the Middle District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge WILLIAMS wrote the opinion, in which Chief Judge BULLOCK concurred. Judge MURNAGHAN wrote a separate concurring opinion.

OPINION

WILLIAMS, Circuit Judge:

Upon the death of one of its insured, Tom Pettit (Tom), Metropolitan Life Insurance Company (MetLife) sought to pay life insurance proceeds due under an Employee Retirement Income Security Act (ERISA) qualified plan. The designated beneficiary, Patricia Pettit (Patricia), who was Tom's widow, and Tom's former wife, Betty Pettit (Betty), both claimed a portion of the proceeds. Betty's claim was based on a property settlement agreement that she entered into with Tom in connection with their divorce. Faced with these competing claims, MetLife filed an interpleader action to determine the proper disposition of the insurance proceeds. Betty filed a cross-claim against Patricia seeking to enforce a constructive trust against the disputed proceeds. Both parties to the cross-claim filed competing motions for summary judgment.

Relying on ERISA's preemption clause, the district court held that Betty's claim was preempted because it was based upon state law that related to an employee benefit plan. The district court noted further that Betty had not employed a qualified domestic relations order (QDRO), the method ERISA provided for a divorced spouse to enforce property rights in an ERISA plan. Accordingly, the district court granted Patricia's motion for summary judgment and denied Betty's summary judgment motion. The district court also denied Patricia's motion for attorney's fees and costs.

On appeal, Betty contends that because an ERISA plan administrator should look outside of the plan provisions to allocate benefits properly and that this burden does not conflict with ERISA's policies,her constructive trust claim is not preempted. She also argues that although the district court did not reach the merits of her constructive trust claim, this Court may resolve those issues without remand. Patricia filed a cross-appeal challenging the district court's denial of her attorney's fees and costs. Because we agree that ERISA preempts the constructive trust claim and that no attorney's fees should be awarded in this case, we affirm the judgment of the district court.

I.

During divorce proceedings in 1989, Tom and Betty Pettit divided their marital property through a property settlement agreement, which was incorporated but not merged into their divorce decree, and a separate QDRO that was entered by the Circuit Court of Fairfax County, Virginia. The property settlement agreement provided for a division of personalty and realty, the payment of spousal support, and other general matters. That agreement also specifically required Tom to maintain $200,000 of life insurance benefits in favor of Betty ¹ and to transfer to Betty ownership of several life insurance policies issued by Connecticut Mutual, American Mutual, and Prudential. The transferred policies are not at issue in this appeal. The QDRO transferred to Betty one-half of Tom's interest in his income savings plan, which was maintained through his employer, but it made no mention of life insurance benefits.

This appeal concerns the life insurance policy that Tom carried through his employer, the National Broadcasting Company (NBC), which was administered by MetLife. This life insurance policy was subject to the provisions of ERISA; it was not specifically mentioned in the property settlement agreement. Tom also owned and privately maintained other life insurance policies. The beneficiary designations on the policies were changed frequently, but at Tom's death, Betty was not named as the beneficiary of either the MetLife policy or any other policy that would fulfill the property settlement agreement's $200,000 insurance obligation. ² Unbeknownst to Betty, Tom had designated his then wife, Patricia, as the beneficiary of the MetLife plan.

Seeking to enforce the property settlement agreement, Betty presented a claim to MetLife for a portion of the life insurance proceeds. Faced with competing payment obligations because Betty's claim clearly conflicted with the plan's beneficiary designation, MetLife filed an interpleader action in the United States District Court for the Eastern District of Virginia naming Betty Pettit and Patricia Pettit as defendant-claimants. Betty then filed a counterclaim against MetLife, which she later dismissed via consent order, and a cross-claim against Patricia to enforce a constructive trust against the MetLife proceeds. Upon cross motions for summary judgment, the district court granted Patricia's motion and denied Betty's. Subsequently, the district court denied Patricia's motion to obtain attorney's fees and costs from Betty. This appeal followed.

II.

The threshold question in this case is whether ERISA preempts the enforcement of a property settlement agreement against life insurance benefits paid through an ERISA-governed plan. Betty asks that we impose a constructive trust upon the life insurance proceeds if we find that ERISA does not preempt her claim.

We review the district court's grant of Patricia's motion for summary judgment de novo. See M & M Med. Supplies & Serv. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 163 (4th Cir.1992) (en banc). If there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law, then summary judgment is appropriate. See Fed.R.Civ.P. 56(c); M & M Medical, 981 F.2d at 162-63. As the district court found and the parties agree, there are no material facts in dispute. Our inquiry, therefore, necessarily extends only to the application of the law in this case.

In any inquiry involving statutory construction, we begin with the language of the statute itself. Commonly known as ERISA's preemption provision, 29 U.S.C.A. § 1144(a) 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.A. § 1144(a) (West 1985). This provision is supplemented by two statutory definitions. The first broadly defines state law as "all laws, decisions, rules, regulations, or other State action having the effect of law." 29 U.S.C.A. § 1144(c)(1)(West 1985). The second defines employee benefit plan as a welfare or pension benefit plan. See 29 U.S.C.A. § 1002(3) (West Supp.1998). ERISA also states that life insurance plans qualify as welfare plans. See 29 U.S.C.A. § 1002(1) (West Supp.1998) (defining welfare plan as "any plan, fund or program ... established or maintained by an employer to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance ... benefits in the event of ... death").

From the statute's text, it is clear that the life insurance policy qualifies as a welfare plan, and it is thus an employee benefit plan. The parties agree, at least on this point. We also have no trouble determining that the constructive trust claim, which is based upon the terms of a property settlement agreement entered to effect a property division upon divorce, meets the ERISA definition of state law. This Court has often held such claims to be within state law and thus subject to preemption. See, e.g., Stiltner v. Beretta U.S.A. Corp., 74 F.3d 1473, 1480 (4th Cir.1996) (holding that state tort law and contract claims related to ERISA plan administration are preempted), cert. denied, 519 U.S. 810, 117 S.Ct. 54, 136 L.Ed.2d 18 (1996); Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir.1994) (en banc) (noting the preemption of, inter alia, state law contract claims against an ERISA plan). Having concluded that state law is at issue and that we are dealing with an ERISA-defined employee benefit plan, the only remaining question is whether they "relate to" each other as that term is used in § 1144(a).

Unfortunately, that term is not so clearly defined and, not surprisingly, this is not the first time the courts have faced difficulty in applying it. Taken at its face value, the term "relates to" has no logical boundary. See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 1677, 131 L.Ed.2d 695 (1995). In one way or another, everything relates to everything else. See id. As the United States Supreme Court has stated, "We simply must go beyond the unhelpful text and the frustrating difficulty of defining [relates to]...." Id.

Section 1144(a), however, makes one thing clear, and that is that Congress intended to preempt state law. See 29 U.S.C.A. § 1144(a). "Where, as here, Congress has included in legislation a specific provision addressing--and indeed, entitled--pre-emption, the Court's task is one of statutory interpretation--only to identify the domain expressly pre-empted by the provision." Cipollone v. Liggett Group, Inc., 505 U.S. 504, 532, 112 S.Ct. 2608, 120...