Opinion
Cause No. 99 C 582.
December 26, 2000.
MEMORANDUM OPINION AND ORDER
This cause coming to be heard on Plaintiff's Motion for Summary Judgment on Count I of the Second Amended Complaint [32-1], and Defendant Commonwealth Edison Company Service Annuity System's Motion for Summary Judgment [22-1], the Court having reviewed the submissions of the parties and heard the arguments of counsel, for the following reasons, Plaintiff's Motion for Summary Judgment on Count I is DENIED, and Defendant Commonwealth Edison Company Service Annuity System's Motion for Summary Judgment is GRANTED.
Jurisdiction
Plaintiff Hermelinda Guzman ("Plaintiff") asserts a claim under 29 U.S.C. § 1132 (a). Jurisdiction is proper under 38 U.S.C. § 1331.
Background Facts
The facts relating to Count I of the Second Amended Complaint are substantially undisputed. Plaintiff married Jose Guzman in 1970. Jose Guzman was an employee of Commonwealth Edison Company, and participated in the Commonwealth Edison Company Service Annuity System (the "Plan").
See Plaintiff's 12M Statement of Facts [DKT #34]; Plaintiff's 12(N) Statement in Response to Defendant's 12M Statement of Facts [DKT #35]; Defendant's 12M Statement of Facts [DKT #24]; Defendant's Reply to the Additional Facts in Plaintiff's 12(N) Statement [DKT #37]; Defendant's 12(N) Statement in Response to Plaintiff's 12M Statement of Facts [DKT # 38]; and Defendant's Supplemental 12(N) Statement in Response to Plaintiff's Supplemental Affidavit [DKT #47].
The Plan defines a "Beneficiary" as:
A Participant's Spouse or the Participant's Dependent Minor Child or Dependent Disabled Child entitled, in the event of the death of the Participant to receive a Service Annuity, under Section 6.3 (relating to the pre-retirement surviving spouse benefit), Section 6.4 (relating to the pre-retirement surviving child benefits) or Section 6.5 (relating to death benefits with respect to certain Participants who die during employment and after age 65). To the extent required by law and where applicable in the Plan, an alternate payee entitled to receive a Service Annuity under paragraph (1) of Section 13.2 (relating to exception to non-assignability for qualified domestic relations orders) shall also be a Beneficiary.
Plan, Section 2.1(4), at 3. of the Sections mentioned, only Section 6.3 is relevant to these motions.
The Plan further defines a "Spouse" as:
The individual married to a Participant on the Participant's Annuity Starting Date [the date on which the Annuity is payable] or, if earlier, on the date of the Participant's death. . . .
On May 24, 1996, a Judgment for Dissolution of Marriage (the "Judgment") was entered by the Circuit Court of Will County, Illinois, dissolving the marriage between Plaintiff and Jose Guzman. As relevant to this case, the Judgment provided:
X. That the defendant [Hermelinda Guzman] is to have Qualified Domestic Relations Order in Plaintiff's [Jose Guzman's] SIP Plan and pension which is to be 50% accrued during marriage through entry of Judgment of Dissolution. . . .
CC . . . and jurisdiction is specifically retained to enter and modify any Qualified Domestic Relations Order or amended Qualified Domestic Relations Order necessary to effectuate the terms of this Judgment.
"SIP" stands for "savings and investment plan." It was stipulated by counsel for all parties at the oral argument that the SIP is not at issue in this case.
Jose Guzman died on September 2, 1997. On October 7, 1997, at the request of one of Plaintiff's attorneys in the divorce proceeding (Robert Snyder, who is a defendant in this case), the Circuit Court in Will County entered an order entitled "Qualified Domestic Relations Order" (the "October 1997 Order"). On October 9, 1997, Plaintiff's attorneys wrote to the Plan claiming that benefits were due to Plaintiff under the Plan. On February 6, 1998, the Plan's representative wrote to Plaintiff's attorneys denying Plaintiff's claim for benefits. The Plan has consistently denied that Plaintiff is entitled to any benefits, arguing that because Plaintiff was not Jose Guzman's spouse at the time of his death and, because no valid Qualified Domestic Relations Order had been entered prior to his death designating Plaintiff as an alternate payee, Plaintiff has no rights to any benefits.
Plaintiff filed this action in 1999 against the Plan and the attorneys who represented her in the divorce proceedings. In Count I of the Second Amended Complaint. Plaintiff seeks a declaration that the Judgment establishes that Plaintiff has a legal interest in the benefits of Jose Guzman's Plan.
Count II and III of the Second Amended Complaint are claims of professional malpractice brought against her former attorneys. Plaintiff's Motion for Summary Judgment as to Count II was denied on November 6, 2000.
Legal Analysis
As an employee pension benefit plan, the Plan is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., as well as the Internal Revenue Code. ERISA contains a spendthrift provision providing that "benefits provided under the [retirement] plan may not be assigned or alienated." 29 U.S.C. § 1056 (d)(1). However, 29 U.S.C. § 1056 (d)(3)(A) allows an exception to that anti-alienation provision for a "qualified domestic relations order." That section further requires that "[e]ach pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order." The elements necessary for a "qualified domestic relations order" ("QDRO") are set out in 29 U.S.C. § 1056 (d)(3)(B) through (L). At the oral argument on the cross-motions, the Plan's counsel agreed, for purposes of the cross-motions, that the October 1997 Order contained the specific elements required of a QDRO. However, the Plan argues, the October 1997 Order cannot constitute a QDRO because it was entered after Jose Guzman's death.ERISA requires a pension plan to provide for a pre-retirement survivor annuity ( 29 U.S.C. § 1055 (a)):
Each pension plan to which this section applies shall provide that:
(1) in the case of a vested participant who does not die before the annuity starting date, the accrued benefit payable to such participant shall be provided in the form of a qualified joint and survivor annuity; and
(2) in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified pre-retirement survivor annuity shall be provided to the surviving spouse of such participant.
There is only one issue to determine on the cross-motions for summary judgment by Plaintiff and the Plan, which is, whether either the Judgment or the October 1997 Order constitutes a QDRO assigning Plaintiff rights in survivor's benefits from Jose Guzman's interest in the Plan. That question is one of law involving the statutory construction of the legal requirements of a QDRO, rather than the interpretation of the Plan, and therefore, there is no deference to the Plan administrator's determination. Samaroo v. Samaroo, 193 F.3d 185, 189 (3d Cir. 1999). For the following reasons, the answer to that question is negative, and therefore, as a matter of law, the Plan is entitled to summary judgment.
The October 1997 Order
At various times in her briefs and papers, Plaintiff argued that the October 1997 Order established her legal rights in the Plan. See, e.g., (Pl.'s Mem. in Opp'n at 11.) However, at oral argument on the cross-motions for summary judgment, Plaintiff's counsel acknowledged that such an argument could not succeed and abandoned it. Plaintiff's counsel was correct in this acknowledgment. Courts have routinely concluded that rights to survivor's benefits are fixed as the participant's death, and a valid QDRO cannot be entered after the participant's death that would expand the liability of the Plan. See, e.g., In re Marriage of Norfleet, 243 Ill. App.3d 925, 612 N.E.2d 939 (4th Dist. 1993); Ross v. Ross, 308 N.J. Super. 132, 158, 705 A.2d 784, 796 (N.J.Super. A.D. 1998): "No federal case has allowed a QDRO to be entered after a participant's death. . . . [F]ederal law is clear that where QDRO does not exist, one should not be entered to save the meaning of a property settlement agreement."
Samaroo v. Samarco, 193 F.3d 185 (3d. Cir. 1999) is closely on point. In that case, the plaintiff and her former husband were divorced in 1984. The husband did not remarry. The divorce decree did not provide that the plaintiff would be entitled to the former husband's pre-retirement survivor's benefits, but after his death in 1987, the plaintiff obtained a nunc pro tunc amendment to the divorce decree purporting to create such an entitlement. The former husband's estate did not object because the amendment did not cost the estate anything, but had the result of undoing the effect of the husband's dying without a survivor. The District Court held that the amendment could not qualify as a QDRO because it would violate 29 U.S.C. § 1056 (d)(3)(D) by conferring survivor's benefits on the plaintiff after those benefits had lapsed by reason of the husband's death. The Court of Appeals for the Third Circuit affirmed. The Third Circuit rejected the plaintiff's argument that the plan was effectively cheating the former husband out his survivor benefits.
The fact that some participants die without a surviving spouse to qualify for benefits is not an unfair forfeiture, as Robichaud [the plaintiff] contends, but rather part of the ordinary workings of an insurance plan. . . .
Until he died, Samaroo enjoyed the right to remarry and thereby bestow on a new wife the right of survivorship rights under his pre-retirement annuity. . . . When Samaroo died without remarrying or naming Robichaud as alternate payee of the survivor's rights, the right to dispose of the benefits lapsed. Allowing Samaroo (or his estate) to preserve the right to confer the benefits on a new wife as long as he was alive and had the possibility of remarrying, and then to designate Robichaud as the surviving spouse after his death, is allowing him to have his cake and eat it, too.193 F.3d at 190-191.
Circuit Judge Mansmann, dissenting in Samaroo, expressed concern that the effect of the majorrity's holding was an unwarranted interference with states' ability to administer domestic relations law. 193 F.3d at 192. Judge Mansmann would recognize the power of the state court judge to enter judgment nunc pro tunc as of a date before the former husband's death, to avoid the ERISA statute's prohibition on a QDRO that requires a plan to provide increased benefits. Id. However, the majority's opinion would not be contrary to Illinois state law. In re Marriage of Norfleet, 243 Ill. App.3d 925, 612 N.E.2d 939 (4th Dis. 1993), suggests that Illinois state law would not recognize the ability of the Will County Court to enter a QDRO after Jose Guzman's death.
This case is distinguishable from Trustees of Directors Guild of America-Producer Pension Benefit Plans v. Tise, ___ F.3d ___, 2000 WL 1781652 (9th Cir. 2000). In that case, the claimant had obtained a child support judgment against the participant and had served the plan's administrator with an Order to Show Cause more than a year before the participant's death. The Ninth Circuit held that the Order to Show Cause, which "unambiguously" directed the plan to pay a specified amount to satisfy the judgment, triggered the plan's statutory obligation to determine that whether the order was a QDRO. Therefore, at the time that the participant died, the plan was obligated to segregate the funds that would become due the claimant if the order was deemed to be a QDRO. During the 18 month segregation period, the claimant obtained a QDRO. The Ninth Circuit stated, "Because Tise had placed the plan on notice of her interest in Myers' pension plan proceeds before his death, the fact that he died before the QDRO issued is immaterial." 2000 WL 1781652, *9. In the present case, Plaintiff's lawyers notified the Plan of her claim on October 9, 1997, a month after Jose Guzman's death. In addition, there was no argument in the Tise case, as there is here, that the plan's obligation would be increased by recognizing the claimant's interest, since in the Tise case the participant had named a beneficiary who would have received the funds if the claimant did not.
Thus, in the present case, if the Judgment does not constitute a QDRO, the October 1997 Order cannot supply the deficit.
The Judgment
The Plan argues that the Judgment cannot be a QDRO because it fails to include the elements required by 29 U.S.C. § 1056 (d)(3)(C), including: (1) the amount or percentage of the participant's benefits to be paid by the plan; (2) the number of payments or period to which the order applies; (3) the names of the plans to which the order applies. Furthermore, the Plan argues, the Judgment does not specifically state that Plaintiff shall be considered a surviving spouse, as required by 29 U.S.C. § 1056 (d)(3)(F). (Def.'s Mem. at 5.)
Plaintiff argues that the Judgment is specific enough. Plaintiff argues that the amount or percentage of Jose Guzman's benefits to be paid to Plaintiff, although not complete on the face of the Judgment, can be determined by the Plan from the fact that the judge entering the Judgment stated on the record that "the pension . . . will be split fifty/fifty pursuant to In Re: Hunt." (Pl.'s 12M Statement, ¶ 10, cited in Pl.'s Mem. at 7.) Presumably, to apply the Hunt formula, the Plan would also have to know that Jose Guzman was married to Plaintiff when he began work at Commonwealth Edison in order to determine the amount that "accrued during marriage through judgment of dissolution."
Plaintiff states that the Plan can determine the number of payments or period from the Plan documents. (Pl.'s Mem. at 8.) The Plan denies Plaintiff's assertion, and claims that an affirmative election of the timing and number of payments must be made in the QDRO. (Def.'s Reply at 7-9.) In response to the Plan's argument that the Judgment does not specify Plaintiff's right to survivor's benefits, Plaintiff argues that the October 1997 Order nunc pro tunc amended the Judgment, an argument that has been discussed above.
In support of her argument that the Judgment is specific enough, Plaintiff relies primarily on Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 1080 (7th Cir. 1994). In Wheaton, the Seventh Circuit considered a divorce decree that required the former husband to maintain the life insurance he carried at the time of the divorce through his employer with the children of the marriage named as sole and irrevocable primary beneficiaries. Subsequently, the former husband remarried and named his new wife as the exclusive beneficiary of his life insurance carried though his employer. After the former husband died, the second wife contested the right of the two sons from the first marriage to the insurance proceeds. The Seventh Circuit held that the decree was specific enough to satisfy ERISA since the only "difficult question" was the division between the two sons. 42 F.3d at 1084. The Court held that the law presumes equal division, and, therefore, the insurer could safely construe the decree to require the proceeds to be divided equally between the sons. 42 F.3d at 1085. The Court stated, "The requirement of clear specification is designed to spare the plan administrator from litigation-fomenting ambiguities as to who the beneficiaries designated by the divorce decree are." Id. Significantly, in the Wheaton case, it was clear that the decree intended to create an interest in survivor benefits, and clearly identified who was to receive those benefits.
Other Courts of Appeal have also liberally construed the criteria by which a domestic relations order will qualify as a QDRO. See Stewart v. Thorpe Holding Co. Profit Sharing Plan, 207 F.3d 1143, 1153 (9th Cir. 2000) (collecting cases). However, the important qualification is that the order lacks "no essential information" and "there is no ambiguity as to how to dispense the proceeds of the ERISA plan." Id. at 1153-54. The Tenth Circuit has rejected an argument that the Wheaton decision means that
the sufficiency of an order should be evaluated on a case-by-case basis in relation to the subjective knowledge of the plan administrator. . . . [W]e believe that relaxing the specificity requirements of [IRS] section 414(p)(2) [the requirements for a QDRO] would involve the courts in precisely the sort of subjective inquiry the statue was designed to avoid: that is, if the specificity requirements are to be evaluated only in light of a plan administrator's subjective knowledge, even the most facially inadequate order could theoretically qualify as a QDRO, so long as the plan administrator was aware of the parties' "true" meaning.Hawkins v. Commissioner of Internal Revenue, 86 F.3d 982, 992 (10th Cir. 1996).
Under Illinois law, "[i]f the QDRO fails to specify that an alternate payee, or the former spouse, has a right of survivorship, the alternate payee or former spouse will not be entitled to that benefit." Robson v. Electrical Contractors Assn., 312 Ill. App.3d 374, 381, 727 N.E.2d 692, 698 (1st Dist. 1999). The Court in Robson held that the failure of the QDRO to specify survivor benefits overrode even the designation of the former wife as the beneficiary of the pension trust (which the husband had failed to change after the divorce).
The reasons for the requirement that a domestic relations order specify survivor's benefits if any are intended to be conveyed are obvious and practical. A participant or a court might well determine that a former spouse should receive a share of a participant's pension if the participant lives long enough to retire, but also conclude that a surviving spouse should be entitled to any survivor benefits in the event that the participant dies before retirement.
Plaintiff argues that the Judgment should be deemed "ambiguous" and that the Court should consider her affidavit and the deposition of her attorney that her intent and that of her attorney was for the Plaintiff to receive a "full survivor's benefit." (Pl.'s Reply in Support at 3-4.) Plaintiff relies on Indiana State Council of Carpenters Pension Fund v. Veclotch, 785 F. Supp. 106 (N.D. Ind. 1992) as authority that parol evidence may be used to determine whether the Judgment should be interpreted to provide for survivor benefits. However, the Veclotch decision is not on point here. In that case, the order, which both parties agreed constituted a QDRO, stated, "The Husband agrees that he will continue to keep the Wife's name as beneficiary on his employee's Pension Trust Carpenter's Local Union #413 until he reaches the age of sixty-five (65) years." 785 F. Supp. at 107. The Court held that the plan was not entitled to summary judgment because there was a question of fact regarding the meaning of the word "beneficiary" as used in the QDRO.
Apparently the Veclotch decision has not been followed as authority in any reported decision.
Whether the Veclotch decision remains good law is questionable in light of the previously quoted decisions by Courts of Appeal that a QDRO must be unambiguous. In any event, the Veclotch case is very different from what Plaintiff is trying to do here, which is not to interpret an arguably ambiguous provision but to insert a provision relating to survivorship that does not appear in the Judgment. Plaintiff's effort to do so is contrary to Illinois law as expressed in Robson. Furthermore, Plaintiff's personal subjective intention, and that of her attorney, are not relevant, legally admissible evidence of the meaning of the Judgment. Even the meaning of Plaintiff's phrase "full survivor's benefit" is unclear, given the fact that the Judgment refers to only "50% accrued through marriage." The Judgment is not a QDRO that provides Plaintiff with survivor benefits in Jose Guzman's interest in the Plan.
CONCLUSION
For the foregoing reasons, Plaintiff's Motion for Summary Judgment as to Count I is DENIED. Commonwealth Edison Company Service Annuity System's Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.