Festini-Steele v. Steele et al
Filing
142
ORDER. The Court OVERRULES Plaintiff's objection to the magistrate judge's recommendation (ECF No. 140 ), ACCEPTS and ADOPTS the recommendation (ECF No. 139 ), and DENIES Plaintiff's motion for judgment on the pleadings (ECF No. 114 ). By Judge Raymond P. Moore on 11/22/2019. (rvill, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Action No. 1:18-cv-01342-RM-GPG
STELA FESTINI-STEELE,
Plaintiff,
v.
EXXONMOBIL CORPORATION,
Defendant.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before the Court on the August 14, 2019, recommendation of United States
Magistrate Judge Gordon P. Gallagher (ECF No. 139) to deny Plaintiff’s motion for judgment on
the pleadings (ECF No. 114) on her first claim for relief. Plaintiff has filed an objection to the
recommendation (ECF No. 140), and Defendant has filed a response to the objection (ECF
No. 141). For the reasons below, the Court overrules Defendant’s objection, accepts and adopts
the recommendation, and denies Plaintiff’s motion. The recommendation is incorporated herein
by reference. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).
I.
LEGAL STANDARDS
Pursuant to Fed. R. Civ. P. 72(b)(3), this Court reviews de novo any part of the
magistrate judge’s recommendation that is properly objected to. An objection is proper only if it
is sufficiently specific “to focus the district court’s attention on the factual and legal issues that
are truly in dispute.” United States v. One Parcel of Real Prop., 73 F.3d 1057, 1060 (10th Cir.
1996). “In the absence of a timely objection, the district court may review a magistrate judge’s
report under any standard it deems appropriate.” Summers v. State of Utah, 927 F.3d 1165, 1167
(10th Cir. 1991).
“Judgment on the pleadings is appropriate only when the moving party has clearly
established that no material issue of fact remains to be resolved and the party is entitled to
judgments as a matter of law.” Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138,
1141 (10th Cir. 2012) (quotation omitted). A motion for judgment on the pleadings is reviewed
under the same standards as a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Ward v. Utah,
321 F.3d 1263, 1266 (10th Cir. 2003). Accordingly, the Court must assess whether the
complaint is legally sufficient to state a claim for which relief may be granted. Brokers’ Choice
of Am., Inc. v. NBC Universal, Inc., 757 F.3d 1125, 1135-36 (10th Cir. 2014).
II.
BACKGROUND
Plaintiff and Billy R. Steele divorced in 2014. They prepared a separation agreement
using a form issued by the Colorado Judicial Department. (ECF No. 128-1, Separation
Agreement.) In the life insurance section of the agreement, a box is checked that corresponds to
this sentence: “The parties agree to the following terms relating to all life insurance accounts.”
(Id. at 3.) Below that, a box is checked that corresponds to “Other,” and this sentence is written:
“The Petitioner Billy R. Steele will carry life insurance on Co-Petitioner Stela Festini-Steele as
beneficiary until daughter [A.I.S.] is 18 years of age.” (Id. at 4.) The separation agreement was
later incorporated into a divorce decree. Defendant, Mr. Steele’s employer at the time of the
divorce, provided life insurance as an employee benefit.
Mr. Steele died in an auto accident in 2017. Plaintiff made a claim for the life insurance
benefits, but Defendant informed her that she was not the beneficiary of any policies insuring the
life of Mr. Steele. Plaintiff provided Defendant with the divorce decree and other documentation
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to support her claim. Nonetheless, Defendant denied Plaintiff’s claim based on its determination
that the separation agreement did not meet the requirements of a qualified domestic relations
order (“QDRO”). In its letter denying the claim, Defendant stated that the separation agreement
“does not meet QDRO requirements because it does not specify an amount of insurance to carry
and it does not specify the name of the benefit plan.” (ECF No. 125-4, Adverse Benefit
Determination at 1.)
Plaintiff brought an action in state court, which Defendant removed to this Court. After
filing an amended complaint (ECF No. 105), Plaintiff filed her motion for judgment on the
pleadings (ECF No. 114), which was referred to the magistrate judge (ECF No. 115). The
magistrate judge agreed with Defendant that the divorce decree is not a QDRO because it fails to
identify each plan to which it applies. Plaintiff objects to that determination. The Court reviews
the matter de novo.
III.
ANALYSIS
Under the Employee Retirement Income Security Act of 1974 (“ERISA”), federal law
preempts nearly all state law claims relating to employee benefit plans. Carland v. Metro. Life
Ins. Co., 935 F.2d 1114, 1118 (10th Cir. 1991). However, a limited exception applies to divorce
decrees issued by state courts that meet the QDRO requirements. Id. at 1119. This exception to
federal preemption “protect[s] spouses and dependents by allowing a state order, outside of the
four corners of the employee benefit plan, to modify the distribution of the plan’s benefits.” Sun
Life Assurance Co. v. Jackson, 877 F.3d 698, 702 (6th Cir. 2017).
To qualify as a QDRO, an order must clearly specify
(i)
the name and last known mailing address (if any) of the participant and the
name and mailing address of each alternate payee covered by the order,
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(ii)
the amount or percentage of the participant’s benefits to be paid by the
plan to each such alternate payee, or the manner in which such amount or
percentage is to be determined,
(iii)
the number of payments or period to which such order applies, and
(iv)
each plan to which such order applies.
29 U.S.C. § 1056(d)(3)(C). A divorce decree meeting these requirements “provides all the
necessary information to determine the identity of a beneficiary without creating unreasonable
administrative burdens for the plan administrator.” Carland, 935 F.3d at 1120. Thus, the QDRO
requirements “protect plan administrators by requiring the order to be clear about the identify of
the alternate payee and the benefits to be redirected.” Jackson, 877 F.3d at 702; see also Metro.
Life Ins. Co. v. Wheaton, 42 F.3d 1080, 1084 (7th Cir. 1994) (“The purpose [of the QDRO
requirements] is to reduce the expense of ERISA plans by sparing plan administrators the grief
they experience when because of uncertainty concerning the identity of the beneficiary they pay
the wrong person, or arguably the wrong person, and are sued by a rival claimant.”).
Because Defendant denied Plaintiff’s claim based on its determination that the separate
agreement “does not specify an amount of insurance to carry and does not specify the name of
the benefit plan” (ECF No. 125-4 at 1), this case implicates the second and fourth QDRO
requirements listed above. 1 The Court agrees with Defendant that neither requirement is met and
therefore the separation agreement is not a QDRO.
The separation agreement states that Mr. Steele “will carry life insurance on
Co-Petitioner Stela Festini-Steele as beneficiary.” (ECF No. 128-1 at 4.) According to Plaintiff,
1
To the extent Defendant attempts to raise additional issues in its opposition to Plaintiff’s motion for judgment on
the pleadings (ECF No. 125), these are not properly before the Court. See Spradley v. Owens-Ill. Hourly Emps.
Welfare Benefit Plan, 686 F.3d 1135, 1140 (10th Cir. 2012) (“[T]he federal courts will consider only those
rationales that were specifically articulated in the administrative record as the basis for denying a claim.” (quotation
omitted)); see also id. at 1040-41 (“A plan administrator may not treat the administrative process as a trial run and
offer a post hoc rationale in district court.” (quotation omitted)).
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this language means that Mr. Steele agreed to carry life insurance on himself with Plaintiff as the
beneficiary. But Plaintiff’s interpretation is not the only plausible interpretation of this language.
To begin with, it is not entirely clear whose life is to be insured. The language does not say that
Mr. Steele will carry life insurance on his own life. Instead, it says that he will carry life
insurance “on” Plaintiff. Such language could mean that Mr. Steele was supposed to carry life
insurance on Plaintiff’s life with himself as the beneficiary. Although Plaintiff presents a
plausible reading of the separation agreement, the purpose of requiring a QDRO to “clearly
specify” the listed requirements is to avoid such uncertainty. See Hawkins v. C.I.R., 86 F.3d 982,
991 (10th Cir. 1996). In addition, the form used by Plaintiff and Mr. Steele, which directs the
parties to “[c]heck all that apply,” contains a fill-in portion that states “[t]he Petitioner will carry
life insurance on his/her life in the amount of $ _____ with _____ (name of spouse) as
beneficiary . . . .” (ECF No. 128-1 at 3.) Had Plaintiff and Mr. Steele checked the corresponding
box and used this part of the form agreement, perhaps ascertaining their intent would be a less
formidable challenge. But in any event, “[w]hether a domestic relations order qualifies as a
QDRO depends on the language of the order itself; the subjective intentions of the parties are not
controlling.” Hawkins, 86 F.3d at 989-90. The QDRO requirements are not optional, see id.
at 992, and the Court finds that the language of the separation agreement fails to “clearly
specify” two of the statutory requirements.
First, the separation agreement does not clearly specify each plan to which it applies.
See § 1056(d)(3)(C)(iv). No plan is identified or named in the separation agreement, and, as
noted above, it is not entirely clear whose life is to be insured and who the intended beneficiary
is. Plaintiff argues that Mr. Steele’s account with Defendant must be included because the
separation agreement expressly applies “to all life insurance accounts,” relying heavily on
5
Jackson, 877 F.3d at 704. However, the provision at issue in that case contained considerably
more specificity and clarity than the separation agreement in this case, providing, in relevant
part, as follows: “In order to secure the obligation of the parties to support their child during her
minority, Father and Mother shall maintain, unencumbered, all employer-provided life insurance,
now in existence at a reasonable cost, or later acquired at a reasonable cost, naming their minor
child as primary beneficiary during her minority . . . .” Id. at 700. In assessing whether the
Jacksons’ divorce decree identified each plan to which it applied, the court had little trouble
concluding that “all employer-provided life insurance” referred to the specific
employer-provided plan under consideration. Id. at 704. But the separation agreement here uses
much broader language and purports to apply “to all life insurance accounts” (ECF No. 128-1
at 3), without reference to whether they are employer-provided, currently in existence, or later
acquired. Expanding the rationale of Jackson to encompass the separation agreement in this case
would allow Plaintiff to circumvent the QDRO requirements simply by using the inclusive term
“all.” Such a result would violate the plain meaning of § 1056(d)(3)(C), which states that a
QDRO must “clearly specify” the four requirements listed above. Moreover, relaxing these
requirements “would involve the courts in precisely the sort of subjective inquiry that statute was
designed to avoid.” Hawkins, 86 F.3d at 992; see id. at 993 (holding that the identical statute
under the Internal Revenue Code “should be accorded its plain meaning, and not interpreted so
as to allow the parties to omit the requested information whenever it is convenience or even
perhaps logical to do so.”).
Second, the separation agreement does not clearly specify the amount or percentage of
the participant’s benefits to be paid by the plan to Plaintiff, or the manner in which such amount
or percentage is to be determined. See § 1056(d)(3)(C)(ii). Based on the same reasoning as
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above, the Court concludes that Plaintiff cannot circumvent this requirement simply by executing
a separation agreement that purports to memorialize the parties’ agreement on “terms relating to
all life insurance accounts.” The QDRO requirements were designed to allow parties to a
divorce decree to modify employee benefit plans under limited circumstances, without creating
unreasonable administrative burdens for plan administrators. The intent was to allow
distribution of plan benefits while avoiding inquiry into what the parties intended when drafting
the divorce decree. See Hawkins, 86 F.3d at 992 (“We do not believe that Congress intended—
without expressly saying so—that the precise [QDRO] requirements . . . could be disregarded in
favor of conducting this type of ad hoc subjective inquiry.”). To accept the separation agreement
here as a QDRO would mean accepting a facially inadequate order on the basis that
administrator was aware of the parties’ true intentions, an approach the United States Court of
Appeals for the Tenth Circuit expressly rejected in Hawkins.
IV.
CONCLUSION
Therefore, the Court OVERRULES Plaintiff’s objection to the magistrate judge’s
recommendation (ECF No. 140), ACCEPTS and ADOPTS the recommendation (ECF No. 139),
and DENIES Plaintiff’s motion for judgment on the pleadings (ECF No. 114).
DATED this 22nd day of November, 2019.
BY THE COURT:
____________________________________
RAYMOND P. MOORE
United States District Judge
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