Mohamed v. Kerr

• Decision Date: 27 April 1995
• Docket Number: No. 94-2953,94-2953
• Citation: 53 F.3d 911
• Parties: Pens. Plan Guide P 23907Y Joan Valentine MOHAMED, formerly known as Joan Valentine Kerr, Appellee, v. Kevin Scott KERR; Ivan S. Kerr, Estate of, Appellants. UNUM Life Insurance Company, of America, a Maine corporation, Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 911

53 F.3d 911

Pens. Plan Guide P 23907Y

Joan Valentine MOHAMED, formerly known as Joan Valentine Kerr, Appellee, v. Kevin Scott KERR; Ivan S. Kerr, Estate of, Appellants UNUM Life Insurance Company, of America, a Maine corporation, Defendant.

No. 94-2953.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 15, 1995.

Decided April 27, 1995.

Robert B. Fine, Minneapolis, MN, argued, for appellant.

Mark C. McCullough, Minneapolis, MN, argued, for appellee.

Before BOWMAN, BEAM, and HANSEN, Circuit Judges.

BOWMAN, Circuit Judge.

The estate of Ivan S. Kerr and its personal representative, Kevin Scott Kerr (collectively, the estate), appeal from the decision of the District Court granting Joan Valentine Mohamed's motion for summary judgment and denying the estate's motion for summary judgment. We reverse.

Mohamed and Ivan Kerr were married on March 1, 1985. In December 1986, Mohamed completed an enrollment form for Kerr's participation in his employer's flexible benefits plan. On that form, Mohamed was designated as beneficiary of the $265,000.00 in group life insurance benefits; ¹ no contingent beneficiary was named and the form was unsigned. On January 9, 1987, Kerr was terminated from his job. In February 1988, he was diagnosed with presenile dementia, Alzheimer's disease.

In June 1988, Mohamed petitioned the probate court for appointment of a general conservator for Kerr and his estate. In July, she began proceedings to dissolve the marriage, and in August a conservator was appointed. The dissolution was final in December 1988. In paragraph 7 of the Marriage Termination Agreement, ² Mohamed and Kerr stipulated as follows:

That each of the parties shall be awarded full right, title, interest and equity in and to the bank accounts, stocks, bonds, savings accounts, pensions, retirement plans, combined IRAs, mutual funds, life insurance policies with any cash value thereon, limited and general partnership interests, and any other assets which are held in their name or for their benefit as of the date of this Marriage Termination Agreement, free and clear of any claim by the other party.

It is undisputed that Mohamed remarried soon after her divorce from Kerr was final, and she apparently did not visit Kerr between the time she left him and his death on January 8, 1992.

After Kerr died, Mohamed sued UNUM Life Insurance Corporation of America, the employer's group life insurance carrier, in state court seeking to compel UNUM to pay the insurance proceeds to her. Because Kerr's estate also claimed the policy benefits, UNUM removed the action to federal court, brought a motion for judgment in interpleader, and deposited the insurance proceeds with the court. ³ The estate and Mohamed filed cross-motions for summary judgment. Judgment was granted to Mohamed, and the estate appeals.

We review a decision to grant summary judgment de novo. We will affirm only if we agree that there are no genuine issues of material fact and that Mohamed is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).

The estate raises seven "issues" on appeal, which are more properly characterized as arguments that can be distilled into one issue, the resolution of which will dictate the result: Did paragraph 7 of the Marriage Termination Agreement entered into by Mohamed and Kerr operate to nullify the earlier designation, made when the couple was married, of Mohamed as beneficiary of Kerr's group life insurance policy? ⁴

Before we proceed to the merits, it is necessary for us to resolve the question of what law controls. The estate challenges the District Court's decision "for failure to apply current Minnesota law," Appellants' Brief at 11A, and Mohamed says the court "correctly applied federal and state law," Appellee's Brief at 2. (The District Court itself said that it was applying federal common law.) Neither party has demonstrated a clear understanding of how a federal court determines the law to apply in a case such as the one before us.

Although it seems logical that state law would control, the interpretation of a marital termination agreement ordinarily being a matter of state law, that is not the case here. The group life insurance policy at issue is an employee welfare benefit plan, and the case is in federal court because the plan is regulated by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001-1461 (1988 & Supp. V 1993). See American Airlines, Inc. v. Wolens, --- U.S. ----, ----, 115 S.Ct. 817, 825, 130 L.Ed.2d 715 (1995) (noting in dicta that ERISA "does channel civil actions into federal courts under a comprehensive scheme, detailed in the legislation, designed to promote 'prompt and fair claims settlement' ") (citation omitted) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556-57, 95 L.Ed.2d 39 (1987)). In this case, no cause of action was stated under an ERISA provision, and the parties are not claiming that a particular ERISA section expressly governs the issue before us. Therefore, we are compelled to look to federal common law. See Pilot Life Ins. Co., 481 U.S. at 56, 107 S.Ct. at 1557-58; Reid v. Connecticut Gen. Life Ins. Co., 17 F.3d 1092, 1098 (8th Cir.1994) ("where there is no federal statutory law to apply in ERISA litigation, 'federal common law,' not state law, should be applied"). The federal courts may look to state law for guidance in developing federal common law, but it is inappropriate to apply state law if it conflicts with ERISA or its underlying policies. Brewer v. Lincoln Nat'l Life Ins. Co., 921 F.2d 150, 153 (8th Cir.1990), cert. denied, 501 U.S. 1238, 111 S.Ct 2872, 115 L.Ed.2d 1038 (1991); see also Pilot Life Ins. Co., 481 U.S. at 56, 107 S.Ct. at 1557-58 ("The expectations that a federal common law of rights and obligations under ERISA-regulated plans would develop ... would make little sense if the remedies available to ERISA participants and beneficiaries under Sec. 502(a) [29 U.S.C. Sec. 1132(a), the civil enforcement provisions of ERISA] could be supplemented or supplanted by varying state laws.").

Each party is adamant about its own citation of "controlling" law--one a Minnesota appeals court case and the other an Eighth Circuit case--because each believes its key case will win the day for the party that relies upon it. We do not believe, however, that the two cases compel different results.

The estate believes that Larsen v. Northwestern National Life Insurance Co., 463 N.W.2d 777 (Minn.Ct.App.1990), review denied (Minn. Feb. 6, 1991), controls, and that the result it seeks in this case is bolstered (if not ordained) by the teachings of that case. In Larsen, the decedent designated her husband to be the beneficiary of an insurance policy on her life. Nearly five years later, the couple divorced. Pursuant to a stipulated property settlement incorporated into the divorce decree, decedent and her husband were "awarded all right, title and interest in those life insurance policies covering his or her respective life." Id. at 780 (quoting the stipulation). Decedent died less than two months after the dissolution was final without changing the beneficiary (although there was evidence that she intended to), and her former husband claimed he was entitled to the proceeds of the life insurance policy.

The court held that, despite the absence of a specific reference in the stipulation to the beneficiary interests of the life insurance policies, the language "granting 'all right, title and interest ' contemplated rights beyond the cash surrender value of the policy or the right merely to receive physical delivery of the policy," and included the divestment of the former spouses' beneficiary rights in each other's life insurance policies. Id. The court further found that "the stipulation and dissolution decree adequately demonstrated decedent's intent that she no longer wished her ex-husband to have any interest in her life insurance policy," and decided it must "give effect" to that intention. Id. at 781. It is obvious why the estate would prefer that Larsen control the result in this case.

Mohamed directs our attention to Lyman Lumber Co. v. Hill, 877 F.2d 692 (8th Cir.1989). Lyman, a case on appeal from federal district court in Minnesota, concerned an ERISA-regulated employee profit-sharing plan. Decedent designated his wife as beneficiary of his profit-sharing plan five years before the couple was divorced. The divorce decree stated that decedent "shall have as his own, free of any interest of [his former spouse], his interest in the profit-sharing plan of his employer." Id. at 693 (quoting the decree) (alteration by this Court). Applying federal common law, the Court concluded that the divorce decree gave the decedent "his entire interest in the Plan free of any interest of" his former wife, but did not "specifically refer to and modify the beneficiary interest." Id. at 693, 694. The Court noted that it was indeed possible for a property settlement entered into pursuant to a dissolution of marriage to revoke a former spouse as beneficiary, but "only by terms specifically divesting the spouse's rights as a beneficiary under the policy or plan." Id. at 693. The settlement at issue in the case, the Court held, had not done so.

Thus, under federal common law, a settlement entered into pursuant to a judgment of dissolution may divest a former spouse of beneficiary rights to life insurance proceeds, even when the beneficiary designation has not been changed before the death of the insured. Cf. Metropolitan Life Ins. Co. v. Hanslip, 939 F.2d 904, 907 (10th Cir.1991) (stating that "absent any applicable divorce decree dictating otherwise," the former spouse who was the designated beneficiary was entitled to life insurance proceeds, given that state statute requiring otherwise was preempted by ERISA). Larsen, then, is clearly in accord with the body of federal common law on this issue. That case applied...