National Auto. Dealers and Associates Retirement Trust v. Arbeitman

• Decision Date: 10 July 1996
• Docket Number: 95-3230 and 95-3231,Nos. 95-3137,s. 95-3137
• Citation: 89 F.3d 496
• Parties: 20 Employee Benefits Cas. 1614, Pens. Plan Guide P 23922M NATIONAL AUTOMOBILE DEALERS AND ASSOCIATES RETIREMENT TRUST; Anthony Ursomarso; Stephen M. Qua; Frank R. Anderson, Jr.; William S. Dodge; David E. Gezon; Ray Green; Mark Miller; Jimmy C. Payton; Jack T. Price; Richard R. Smith; Frank E. McCarthy, Plaintiffs, Patricia A. Arbeitman; Brooke Ann Arbeitman; Christopher Michael Arbeitman, Appellee/Cross-Appellants, v. Donna M. ARBEITMAN, Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 496

89 F.3d 496

20 Employee Benefits Cas. 1614, Pens. Plan Guide P 23922M

NATIONAL AUTOMOBILE DEALERS AND ASSOCIATES RETIREMENT TRUST Anthony Ursomarso; Stephen M. Qua; Frank R. Anderson, Jr. William S. Dodge; David E. Gezon; Ray Green; Mark Miller Jimmy C. Payton; Jack T. Price; Richard R. Smith; Frank E. McCarthy, Plaintiffs Patricia A. Arbeitman; Brooke Ann Arbeitman; Christopher Michael Arbeitman, Appellee/Cross-Appellants, v. Donna M. ARBEITMAN, Appellant/Cross-Appellee.

Nos. 95-3137, 95-3230 and 95-3231.

United States Court of Appeals, Eighth Circuit.

Submitted March 19, 1996.

Decided July 10, 1996.

Robert Jay Brummond, St. Louis, MO, argued (Lawrence S. Denk, on the brief), for appellants.

Michael A. Wolff, Clayton, MO, argued (Charles Alan Seigal, III, on the brief), for appellee.

Before McMILLIAN, JOHN R. GIBSON, and BOWMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Harold Arbeitman was employed by two Dodge dealerships, Royal Parkway Dodge, Inc. and Royal Gate Dodge, Inc., both of which had pension funds established under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 (1994). Harold died and the trustees of both funds filed this interpleader action to determine their liability to Patricia Arbeitman, his first wife from whom he was divorced, who was named as beneficiary in the Royal Parkway plan, and Donna Arbeitman, his surviving spouse. The magistrate judge ¹ awarded one-half of the Royal Parkway plan to the named beneficiary, Patricia, and the remaining one-half, as well as all of the benefits to the Royal Gate plan to the surviving spouse, Donna. In the appeal and cross-appeal, Patricia and Donna both claim entitlement to all of both funds. In addition, Patricia and the children from her marriage to Harold claim error in failing to impose a constructive trust on the Royal Parkway funds. We affirm.

Harold Arbeitman died in August 1992. While employed by Royal Parkway Dodge and Royal Gate Dodge, Harold participated in their pension and profit sharing plans. ²

Harold and Patricia were married in October 1966. They had two children, Brooke and Christopher. On August 27, 1982, Harold designated Patricia as the primary beneficiary of the Royal Parkway plan, with all of his living children as contingent death beneficiaries. He did not designate a death beneficiary for the Royal Gate plan.

An Illinois court dissolved Harold and Patricia's marriage in July 1983 and entered a decree adopting their separation agreement in December 1983. In part, the agreement provided that upon Harold's death, the obligations agreed to by the parties would survive as charges against his estate. Further, Harold also agreed to maintain a life insurance policy sufficient to pay the balance of any support payments owed at the time of his death. Patricia and Harold also agreed to relinquish "any right, title or interest in and to any earnings, accumulations, pension plans, profit sharing plans, future investments, money or property of the other...."

Donna and Harold married in August 1987. Before the marriage they entered into a prenuptial property agreement, the validity of which was later upheld by Missouri courts. The agreement listed the separate property of Donna and Harold, and provided that each party agreed to keep and retain sole ownership of all property listed, "free and clear of any title, interests, rights, or claims of the other." Neither plan was listed in Harold's schedule of property.

After his marriage to Donna, Harold and Patricia maintained an amicable relationship. Harold did not change the beneficiary designation on the Royal Parkway Plan. Harold also provided more than the required level of support for Patricia and his children. After Harold's death, Patricia received her last support payment in October 1992. Harold failed to provide a life insurance policy sufficient to satisfy his support obligations under the separation agreement.

Following Harold's death, the Trusts brought this interpleader action to have the court determine who was entitled to receive Harold's benefits under the pension plans. The benefits from the Royal Parkway plan were approximately $83,373, and from the Royal Gate plan, $48,665. The magistrate judge determined that both plans provided that as surviving spouse, Donna should receive fifty percent of Harold's account balance. Because Harold had failed to designate a beneficiary under the Royal Gate plan, the plan required the plan administrator to distribute the remaining fifty percent of Harold's interest to the surviving spouse, Donna. The magistrate judge held that the prenuptial agreement between Harold and Donna did not waive Donna's rights as surviving spouse under the plans. Further, the court refused to impose a constructive trust in favor of Patricia or the children, who argued that Donna had breached the prenuptial agreement by claiming a right in the proceeds. Thus, the magistrate judge held that Donna should receive all of the proceeds from the Royal Gate plan and one-half of the proceeds from the Royal Parkway plan.

The magistrate judge also concluded that Patricia, as named beneficiary, should receive the remaining fifty percent of Harold's interest in the Royal Parkway plan. The separation agreement lacked the specificity necessary to waive her rights as named beneficiary under the plan, and it failed to satisfy the requirements of a qualified domestic relations order under ERISA, which would preclude Donna from establishing an interest in the Royal Parkway plan. Finally, the magistrate judge rejected Patricia's contention that the plan was intended to take the place of the life insurance policy required by the separation agreement.

The court ordered the proceeds of the plans to be distributed to Donna and Patricia, and reasonable costs and fees to be paid to the Trusts. Donna appeals the magistrate judge's decision awarding part of the Royal Parkway fund to Patricia. Patricia, Brooke, and Christopher cross-appeal the decision awarding the balance of the proceeds to Donna.

I.

"[A] reviewing court should apply a de novo standard of review unless the plan gives the 'administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.' " Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir.1996) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989)). Here, the Administrator did not exercise any such authority, but simply paid the funds into the court in this interpleader action. Thus, we review the magistrate judge's interpretation of ERISA and the plan provisions de novo. See Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 278 (7th Cir.) (en banc), cert. denied, 498 U.S. 820, 111 S.Ct. 67, 112 L.Ed.2d 41 (1990).

A.

Donna first argues that the magistrate judge erred in awarding Patricia fifty percent of the proceeds in the Royal Parkway Fund. She contends that the magistrate judge failed to properly apply the provisions of the Royal Parkway plan, specifically, that the magistrate judge ignored the plan requirement that she consent to designation of Patricia as beneficiary.

ERISA defines the term qualified preretirement survivor annuity as "an annuity for the life of the surviving spouse the actuarial equivalent of which is not less than 50 percent of the portion of the account balance of the participant (as of the date of death) to which the participant had a nonforfeitable right...." 29 U.S.C. § 1055(e)(2) (1994).

The Royal Parkway Plan creates a qualified preretirement survivor annuity in the event of the preretirement death of a plan participant. Section 9.2.B of the plan provides:

if a Participant dies before the Annuity Starting date, then at least 50% of the Participant's vested account balance on the date of death shall be applied toward the purchase of an annuity for the life of the Surviving Spouse. The remainder of the Participant's vested account balance will be paid to the Participant's designated Beneficiary in accordance with Sec. 9.4; if the Participant's designated Beneficiary is the Surviving Spouse, the entire vested account balance shall be applied toward the purchase of an annuity for the life of the Surviving Spouse.

Section 9.4 of the plan provides for the distribution of proceeds in the event of a participant's death. Section 9.4 states:

Subject to the provisions in Sec. 9.2, in the event of the death of a Participant, the Participant's Beneficiary(ies) designated by the Participant in accordance with Sec. 9.12, shall have a nonforfeitable right to at least 50% of the total value of the Participant's Employee Account as of the date of the Participant's death.

Section 9.2.B implements the requirements of ERISA, defining the surviving spouse's qualified preretirement survivor annuity as an amount at least fifty percent of the decedent's account balance. Section 9.4 specifies that a named beneficiary is also entitled to at least fifty percent of the account. Thus, under the terms of the plan, when there is a named beneficiary other than the spouse, the named beneficiary is entitled to fifty percent and a qualified preretirement survivor annuity is established on behalf of the surviving spouse for the other fifty percent.

Section 9.12 of the plan specifies the method for designating beneficiaries. The section states in part that "[e]ach Participant ... may designate a Beneficiary ... to receive retirement benefits surviving his death as provided under this Plan, provided, however, that if a Participant is married on the date of his death, such designation will be subject to the spousal consent requirements in Secs. 9.1 and 9.2."

Section 9.1.A(6) is the only portion of Section 9.1 and 9.2 that relates to spousal consent. Under that section, a waiver of the qualified preretirement survivor annuity is not effective unless the spouse "consents in writing," the...