Moore v. Philip Morris Companies, Inc., No. 92-6558

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: MILBURN
• Citation: 8 F.3d 335
• Parties: 17 Employee Benefits Cas. 1499, Pens. Plan Guide P 23887L Vernal L. MOORE and Gerina D. Whethers, Plaintiffs-Appellants, v. PHILIP MORRIS COMPANIES, INC. and James R. Beard, Sr., Defendants-Appellees.
• Docket Number: No. 92-6558
• Decision Date: 13 October 1993

Page 335

8 F.3d 335 17 Employee Benefits Cas. 1499, Pens. Plan Guide P 23887L Vernal L. MOORE and Gerina D. Whethers, Plaintiffs-Appellants,
v.
PHILIP MORRIS COMPANIES, INC. and James R. Beard, Sr.,
Defendants-Appellees. No. 92-6558. United States Court of Appeals,
Sixth Circuit. Submitted Sept. 30, 1993.
Decided Oct. 13, 1993.

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Aubrey Williams, Gerry Ellis (briefed), Louisville, KY, for plaintiffs-appellants.

Douglas W. Becker, Becker, Farris & Gallagher and Phyllis Deeb, Louisville, KY (briefed), for defendants-appellees.

Before: MILBURN and GUY, Circuit Judges; and KRUPANSKY, Senior Circuit Judge.

MILBURN, Circuit Judge.

Plaintiffs, the executrix of Lillian D. Beard's estate and Beard's daughter, appeal the district court's grant of summary judgment in favor of defendants, Philip Morris Companies, Inc. ("Philip Morris") and the surviving spouse of Lillian D. Beard, James R. Beard. Plaintiffs sought to prohibit the distribution of proceeds of Lillian Beard's account with a Philip Morris deferred profit sharing plan to the surviving spouse. On appeal, the issues are (1) whether the surviving spouse is entitled to the proceeds of the plan under 29 U.S.C. § 1055(c)(2)(A)(i), (2) whether § 392.090(2) of the Kentucky Revised Statutes is preempted by ERISA, and (3) whether the plan administrator satisfied the notice requirements of the deferred profit sharing plan pursuant to 26 CFR § 1.401(a)-11(c)(3). For the reasons that follow, we affirm.

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I.

A.

During her employment with Philip Morris, Lillian D. Beard participated in the company's deferred profit sharing plan. In 1980, she designated her three children as beneficiaries. As beneficiaries, the children, at that time, were entitled to receive any distribution of the plan which was payable upon Beard's death. Beard's husband, James R. Beard, was not named as a beneficiary and thus had no interest in the proceeds.

In 1984, Congress enacted the Retirement Equity Act of 1984, Pub.L. 98-397, 98 Stat. 1426 ("REACT"). Among other things, REACT amended the Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal Revenue Code of 1954 by requiring plans, such as Philip Morris' deferred profit sharing plan, to provide that the surviving spouse of a participant is to receive the benefits under the plan following the death of the participant, unless such benefits are specifically waived by the surviving spouse in a manner prescribed by law; i.e., "... the spouse's [written] consent acknowledges the effect of such election [waiver] and is witnessed by a plan representative or a notary public...." 29 U.S.C. § 1055(c)(2)(A)(i). Philip Morris subsequently amended its plan to conform with REACT. ¹

In April 1991, Lillian D. Beard died. She was survived by her husband and her three children. Because James R. Beard at no time waived his right to the benefits of the plan, he alone became entitled to the proceeds, which totalled $101,829.41.

B.

Vernal L. Moore, executrix of the estate of Lillian D. Beard, and one of Beard's daughters, Gerina D. Whethers, filed an action in a Kentucky county court seeking a temporary injunction prohibiting the distribution of the proceeds to James R. Beard and a declaratory judgment of the rights of the parties as to the proceeds of the plan. Named as defendants were Philip Morris and James R. Beard. The Kentucky court granted the temporary injunction. However, Philip Morris removed the case to the district court pursuant to 28 U.S.C. § 1441 and 28 U.S.C. § 1331.

Defendants subsequently filed a motion for summary judgment under Federal Rule of Civil Procedure 56(c). They argued that under the plain language of REACT, a surviving spouse is automatically entitled to the proceeds of an ERISA plan unless the surviving spouse waives his right. Because James Beard did not grant his consent, defendants argued, plaintiffs had no right to a judgment prohibiting Philip Morris from distributing the proceeds to him.

In support of their motion, defendants submitted the affidavit of Karen C. Cornett, the Employee Benefits Supervisor for Philip Morris' Louisville operations, who was responsible for the administration of employee benefits such as the deferred profit sharing plan. Cornett stated that the files of Philip Morris did not contain a form executed by James R. Beard waiving his right to the proceeds of the plan. Cornett also stated that in March of 1989, she assisted Lillian Beard in obtaining a loan against her account in the plan. According to the affidavit, Cornett informed Beard that REACT required Beard to obtain the written consent of her husband before being able to obtain the loan and that REACT also made her husband the automatic beneficiary under the plan unless her husband waived his right by a written and notarized document. Moreover, attached to Cornett's affidavit were six documents prepared by Philip Morris: a question

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and answer brochure, an informational booklet, a letter, a prospectus, a plant notice, and an excerpt from a company newspaper. Each of the documents informed plan participants about the changes in beneficiary status resulting from REACT. Cornett explained in her affidavit that each of the documents, other than the plant posting, was either distributed to or mailed to participants of the plan, including Lillian D. Beard.

Plaintiffs filed a response to defendants' motion for summary judgment. They contended that under Kentucky law, James R. Beard was not entitled to the proceeds of the plan because of his allegedly adulterous conduct. Plaintiffs also argued that Philip Morris failed to satisfy the notice requirements of 29 U.S.C. § 1022 with respect to the effects REACT had upon the status of beneficiaries under the plan. In support of their notice argument, plaintiff included three affidavits: one of Gerry Ellis, an attorney representing Lillian D. Beard's estate in a Jefferson County, Kentucky, Probate Court; another of Gerina D. Whethers; and the third of Vernal L. Moore. In his affidavit, Ellis stated that although in 1990 Lillian D. Beard "began to suspect that there might be some complications" with the beneficiary status of the plan, "she was not aware that her children could be totally excluded as beneficiaries." J.A. 88. Ellis also stated that he was informed by Cornett that "Philip Morris had done a poor job of explaining and communicating the spousal provisions of the profit sharing plan to its employees." J.A. 89. According to Whethers' affidavit, Beard was unaware that her interest in the plan would not go to her three daughters in accordance with the beneficiary designation made in 1980. Moore stated in her affidavit that Beard "had never gotten any notice or been informed by Philip Morris that her wishes [that her three children receive the proceeds of the plan] would not be honored." J.A. 96.

Defendants' motion was referred to a magistrate pursuant to 28 U.S.C. § 636(b)(1)(A) & (B). After review of the submitted evidence, the magistrate recommended that the motion for summary judgment be granted. Construing the plain language of the statute, the magistrate concluded that where a participant in a qualifying plan has designated a beneficiary other than his or her spouse without the written consent of that spouse, the participant's spouse is entitled to the deceased participant's funds regardless of the beneficiary designation. The magistrate also rejected plaintiffs' argument that under § 392.090(2) of the Kentucky Revised Statutes, James R. Beard was precluded from collecting the proceeds of the plan, concluding that the state law was preempted under ERISA. Lastly, the magistrate concluded that Philip Morris did not fail to satisfy ERISA's notice requirements set forth in 29 U.S.C. § 1022. The district court accepted the recommendation of the magistrate and granted defendants' motion. This timely appeal followed.

II.

We review a district court's grant of summary judgment pursuant to Fed.R.Civ.P. 56(c) de novo, using the same test utilized by the district court. See Faughender v. City of North Olmsted, Ohio, 927 F.2d 909, 911 (6th Cir.1991). Summary judgment is proper if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir.1988). The party moving for summary judgment bears the initial burden and need not support its motion with affidavits or other materials "negating " the opponent's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Adock v. Firestone Tire & Rubber Co., 822 F.2d 623, 626 (6th Cir.1987). Rather, "the burden on the moving party may be discharged by 'showing'--that is, pointing out to the district court--that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325, 106 S.Ct. at 2554.

Once the moving party has met its burden of production, the nonmoving party then must go beyond the pleadings and by affidavits, or by "depositions, answers to interrogatories, and admissions on file," designate "specific facts showing that there is a genuine issue for trial." Id. at 324, 106 S.Ct.

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at 2553. Thus, the nonmoving party must do more than show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). It must present significant probative evidence in support of...