Life Insurance Company of North America v. Jackson et al
OPINION & ORDER. IT IS ORDERED that Jackson's Motion for Summary Judgment (Doc. 30) is GRANTED and Park's Motion for Summary Judgment (Doc. 27) is DENIED. IT IS FURTHER ORDERED that the Clerk of Court is directed to enter judgment in favor of Alette Jackson and against Samantha Parks. IT IS FURTHER ORDERED that execution of that judgment is STAYED until time for appeal has expired and no appeal has been taken, or, if appeal is taken, the case is resolved by the Ninth Circuit Court of Appeals or by settlement. Signed by Judge Donald W. Molloy on 9/14/2017. (NOS)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
SEP 1 ~ 2017
Cieri<, U S District Court
District Of Montana
This interpleader action concerns a dispute over who is entitled to the
proceeds of an BRISA-qualified life insurance policy. The two claimants have
filed cross-motions for summary judgment, each arguing they are entitled to the
contested funds. Because ERISA preempts related state law, Claimant Alette
Jackson's motion for summary judgment is granted, and Claimant Samantha
Parks' motion is denied.
Life Insurance Company of North America ("North America"), an insurance
company with is principal place of business in Philadelphia, Pennsylvania, issued
Life Insurance Policy No. FLX-980313, (the "Policy") to Applied Materials, Inc.
(Doc. 20 at if 1.) Sterling Stanley Jackson ("Sterling"), an Applied Materials
employee, subsequently enrolled in the Policy. (Id. at if 5 .) The Policy is
Employment Retirement Income Security Act ("ERISA") qualified. (Id. at if 12.)
Sterling died on March 11, 2016. (Id. at if 6.) The total death benefit owed
pursuant to the Policy is $124,123.01, including interest. (Id. at if 10.)
Sterling's beneficiary designation under the Policy named Claimant Alette
Jackson ("Jackson"), Sterling's spouse at the time. Sterling and Jackson divorced
March 17, 2015, roughly a year before Sterling's death. (Id.) On October 2, 2015,
approximately six months after his divorce and five months before his death,
Sterling revised his Last Will and Testament. (Doc. 29-5.) The will devises "[a]ll
the rest, residue and remainder of [Sterling's] estate ... in equal shares to [his]
children," Scott Jackson and Samantha Parks. (Doc. 29 at ifif 12-13; Doc. 29-5.)
Sterling's will neither refers to nor provides for Jackson. (Doc. 29. at if 14; Doc.
Jackson disputes both that Sterling revised his will and that the revised
leaves Sterling's estate to his children and makes no mention of Jackson.
(Jackson's SDF, Doc. 34 at ifif 12-14.) Jackson argues she is without sufficient
information to admit or deny them, (Id. citing Jackson's Answer, Doc. 26 at ifif 46), but provides no evidence in support, and does not acknowledge that the Will
does not mention Jackson and leaves Sterling's estate to his children, (Doc. 29-5).
Jackson therefore fails to "cite to particular parts of materials in the record," or
"show that the materials cited [by Parks] do not establish the absence ... of a
genuine dispute, or that [Parks] cannot produce admissible evidence to support the
Sterling's estate was opened for probate on March 25, 2016, in the Eleventh
District Court of Montana, Flathead County. (Doc. 29 at if 10.) Claimant
Samantha Parks ("Parks") was appointed personal representative of the estate.
(Doc. 20 at if 3.) On February 6, 2017, North America filed a Complaint for
Interpleader requesting a judicial determination of the proper payee or payees for
benefits from the Policy. (Doc. 1.) The Complaint named Alette Jackson and
Samantha Parks, as the personal representative of Sterling's estate. (Id.) North
America deposited the contested funds with the Court, (Doc. 10), and was
dismissed from the case, (Doc. 23). Claimants Jackson and Parks remain in the
case as cross-defendants. They have now filed cross-motions for summary
judgment, each requesting a declaratory judgment that they are entitled to the
contested funds. (Docs. 27, 30.)
A party seeking summary judgment will prevail if it can demonstrate that
"there is no genuine dispute as to any material fact and [it] is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(a). Accordingly, summary judgment is
appropriate where the evidence produced by the parties permits only one
conclusion. Anderson v. Liberty Lobby, Inc., 4 77 U.S. 242, 251 (1986). While
fact." Fed. R. Civ. P. 56(c)(l)(A),(B).
factual disputes irrelevant or unnecessary to the outcome of the case are not
considered, in deciding a motion for summary judgment a court must draw "all
justifiable inferences" in favor of the party against whom summary judgment is
asserted. Id. at 248, 255. "[W]hen parties submit cross-motions for summary
judgment, each motion must be considered on its own merits." Fair Haus.
Council ofRiverside Cnty. , Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir.
2001) (citations and internal punctuation marks omitted). "It is well-settled ...
that the filing of cross-motions for summary judgment ... does not vitiate the
court's responsibility to determine whether disputed issues of material fact are
present." United States v. Fred A. Arnold, Inc., 573 F.2d 605, 606 (9th Cir. 1978).
ERISA and Montana Code Annotated § 72-2-814
Parks argues that the contested funds should be distributed to the estate
because Montana Code Annotated§ 72-2-814 revoked Jackson's interest in those
funds when she and Sterling divorced. Jackson argues that ERISA preempts§ 722-814, and that she is the rightful recipient of the contested funds. Jackson is
In passing ERIS A, Congress acted "to protect the rights of workers who
earn pension benefits and to encourage plan participation." Carmona v. Carmona,
603 F.3d 1041, 1053 (9th Cir. 2010) (citation omitted). ERISA is "an intricate,
comprehensive statute that governs both pension and welfare plans." Id. Among
its requirements, ERIS A established "'a straightforward rule of hewing to the
directives of the plan documents,"' creating "'a bright-line requirement to follow
plan documents in distributing benefits." Id. (citing Kennedy v. Plan Admin. for
DuPont Savings & Inv. Plan, 555 U.S. 285, 300, 302 (2009)). To that end,
"ERISA's pre-emption section, 29 U.S.C. § 1144(a), states that ERISA 'shall
supersede any and all State laws insofar as they may now or hereafter relate to any
employee benefit plan' covered by ERISA." Egelhojf v. Egelhoff, 532 U.S. 141,
"(A] state law relates to an ERIS A plan 'if it has a connection with or
reference to such a plan."' Id. at 147 (quoting Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 97 (1983)). To evaluate the "connection with" prong ofERISA
preemption analysis, courts must "look both to the objectives of the ERJSA statute
as a guide to the scope of the state law that Congress understood would survive, as
well as the nature of the effect of the state law on ERISA plans." Id. (citing Cal.
Div. ofLabor Stds. Enf v. Dillingham Constr., N.A., Inc., 519 U.S . 316, 325
Montana Code Annotated § 72-2-814
Section 72-2-814 governs the revocations of probate and nonprobate
transfers by divorce. In pertinent part, it provides:
(2) Except as to a retirement system established in Title 19 or as
provided by the express terms of a governing instrument, a court order,
or a contract relating to the division of the marital estate made between
the divorced individuals before or after the marriage, divorce, or
annulment, the divorce or annulment of a marriage: (a) revokes any
revocable: (i) disposition or appointment of property made by a divorced
individual to the individual's former spouse in a governing instrument
§ 72-2-8 l 4(2)(a)(i). The statute defines "governing instrument" as "a governing
instrument executed by the divorced individuals before the divorce," and defines
"revocable" as "a disposition ... under which the divorced individual, at the time
of the divorce ... was alone empowered, by law or under the governing
instrument, to cancel the designation in favor of the individual ' s former spouse."
§ 72-2-814(1)(d),(f). The Montana Supreme Court has held that§ 72-2-814
applies to a life insurance policy owner's designation of his spouse as the
beneficiary, where the parties later divorced. Thrivent Fin. for Lutherans v.
Andronescu, 300 P.3d 117, 118 (Mont. 2013). The Court held that the statute
"operates at the time of the insured's death and applies to any divorce that took
place during the insured's lifetime." Id. Thus, under Montana law, if a life
insurance policy holder designates his or her spouse as the beneficiary but
subsequently divorces, the former spouse's interest in the life insurance benefits is
revoked by operation of law.
Parks argues that, because Sterling and Jackson divorced approximately a
year before Sterling's death,§ 72-2-814 revoked Jackson's interest in the Policy
proceeds. Parks contends that ERISA should not preempt Montana law because
ERISA's preemption clause is broad and does "not always preempt state law."
(Doc. 28 at 12.) In response, Jackson, citing Egelhoff, argues that ERISA does
preempt§ 72-8-814. Jackson has the better argument.
In Egelhoff, the Supreme Court considered whether a Washington statute
governing the disposition of nonprobate assets was preempted where the decedent
had designated his former wife as the beneficiary under his ERISA-qualified life
insurance and pension plans but had not removed her as the listed beneficiary
following their divorce and prior to his death intestate in a car accident. 532 U.S.
at 144. The statute in question provided that"' [i]f a marriage is dissolved or
invalidated, a provision made prior to that event that relates to the payment or
transfer at death of the decedent's interest in a nonprobate asset in favor of or
granting an interest or power to the decedent's former spouse is revoked."' Id.
(quoting Wash. Rev. Code§ l l.Ol.010(2)(a) (1994)).
The Court concluded "that the statute [was] expressly pre-empted by
ERISA." Id. at 146. Because '[t]he statute [bound] ERISA plan administrators to
a particular choice of rules for determining beneficiary status," and required
administrators to "pay benefits to the beneficiaries chosen by state law," the Court
reasoned it was "connected to" ERISA by implicating "an area of core ERISA
concern." Id. at 147. In particular, the statute would have abrogated the ERISA
requirements "that a plan shall 'specify the basis on which the payments are made
to and from the plan,' § 1102(b)( 4), and that the fiduciary shall administer the plan
'in accordance with the documents and instruments governing the plan,'
§ l 104(a)(l)(D), making payments to a ' beneficiary' who is 'designated by a
participant, or by the terms of [the] plan.'§ 1002(8)." Id.
Here, the operation of§ 72-2-814 is analogous to that of the preempted
Washington statute. Namely, it would require the plan administrator to look to
state law to determine to whom payments should be made from the plan, rather
than to the plan itself. Under the Policy, Jackson is entitled to the contested funds
because she is the named beneficiary. But under Montana law, Parks would be
entitled to that money, as Sterling and Jackson's divorce would have revoked
Jackson's interest in the Policy proceeds. That different outcome is in fact exactly
what Parks hopes to achieve.
Similarly, Parks' arguments that the comments to§ 72-2-814 create space
for the Court to apply Montana law in the face of ERIS A does not escape Egelhoff,
Supreme Court precedent that is squarely on-point. Nor does Parks' reliance on
Mendez-Bellido v. Board of Trustees ofDivision 1181, A.TU New York
Employees Pension Fund & Plan, a case involving a slayer statute, provide
assistance. 709 F. Supp. 329 (E.D.N.Y. 1989). Besides the fact that this case does
not involve a slayer statute, the Supreme Court expressly declined to decide the
issue. Egelhoff, 532 U.S. at 152.
Because ERISA preempts state law "connected with" BRISA-qualified
employee benefit plans, id. at 147, Jackson is entitled to the contested funds as the
named beneficiary under Sterling's Policy.
Unjust Enrichment and Constructive Trust
Parks further argues that, under Montana law, Jackson will be unjustly
enriched if she is permitted to retain the Policy proceeds, and asks for an
imposition of a constructive trust on the contested funds. Jackson rebuts the claim
of unjust enrichment as also preempted by ERISA in this context. Jackson's
argument is once again persuasive.
"A constructive trust arises when a person holding title to property is
subject to an equitable duty to convey it to another on the ground that the person
holding title would be unjustly enriched if the holder were permitted to retain it."
Mont. Code Ann. § 72-3 8-123. "[T]he imposition of a constructive trust serves as
a possible remedy to rectify the unjust enrichment of a party." N. Cheyenne Tribe
v. Roman Catholic Church ex rel. Dioceses of Great Falls/Billings, 296 P.3d 450,
457 (Mont. 2013). Under Montana law:
[a] claim for unjust enrichment, in the context of a constructive trust,
requires proof of three elements: "(1) a benefit conferred upon a
defendant by another; (2) an appreciation or knowledge of the benefit by
the defendant; and (3) the acceptance or retention of the benefit by the
defendant under such circumstances that would make it inequitable for
the defendant to retain the benefit without payment of its value."
Volk v. Goeser, 367 P.3d 378, 389 (Mont. 2016) (quoting N. Cheyenne Tribe, 296
P.3d at 457).
Here, the undisputed facts show the first two elements of an unjust
enrichment claim would be met if Jackson were awarded the contested funds.
First, a benefit (the contested funds) would be conferred upon her by another
(North America). Second, Jackson would have knowledge of that benefit (as her
participation in this lawsuit demonstrates).
But resolution of the third element is not as clear. The facts show Sterling
executed a will following his divorce from Jackson, and that the will contained no
mention of Jackson. (Doc. 29-5.) However, though an adverse inference may be
drawn from Sterling's decision to omit Jackson from his will, that inference still
leaves open a question of fact as to Sterling's motivation in leaving Jackson as the
named beneficiary under the Policy. The third element of unjust enrichment
therefore raises questions of disputed fact. However, summary judgment
regarding a constructive trust is still appropriate.
Even if Parks succeeded in her unjust enrichment claim, she would still face
ERlSA preemption because the Ninth Circuit has held that "a state law
constructive trust cannot be used to contravene the dictates of ERlSA." Carmona ,
603 F.3d at 1061. In Carmona, the Ninth Circuit considered whether "a
participant to an ERlSA regulated Qualifed Joint and Survivor Annuity ... plan
may change the surviving spouse beneficiary after the participant has retired and
the annuity has become payable." Id. at 1047-48. The court answered in the
negative, stating that the retirement of the plan participant "ordinarily creates a
vested interest in the surviving spouse at the time of the participant's retirement."
Id. at 1048.
Because a Nevada state court had imposed a constructive trust on the
annuity proceedings in question, the court also had to consider whether it was
permissible for a state court to create a constructive trust on annuity proceedings
from an BRISA-qualified pension plan, with the decedent's subsequent wife as the
beneficiary. Id. at 1061. After first holding the state court's Qualified Domestic
Relations Order could not reassign surviving spouse benefits after the plant
participant had retired (and the interest had vested), id. at 1058, the court noted
a state court cannot achieve through a constructive trust on the proceeds
of a pension plan what this court maintains it cannot achieve through a
[Qualified Domestic Relations Order]. Any alternative rule would allow
for an end-run aroundERISA's rules and Congress's policy objective of
providing for certain beneficiaries, thereby greatly weakening, if not
entirely abrogating, ERISA's broad preemption provision.
Id. at 1061. While noting that "[i]t may not be that all constructive trusts instituted
by state courts, particularly those that seek to recover ill-gotten gains, will have a
sufficient connection with or reference to an ERISA plan to trigger ERISA's
preemption provision," the court held that "when a state court creates a
constructive trust with the explicit purpose of avoiding ERISA's rules, it too must
be preempted." Id. at 1062.
Here, while any constructive trust would be the product of a federal rather
than a state court, the end would be to circumvent ERISA' s requirement that the
contested funds be paid to the named beneficiary. As such, a constructive trust
would be an impermissible attempt to evade Egelhoff and the ERISA preemption
Parks accurately notes that Carmona leaves open the possibility that
imposition of a constructive trust may not be sufficiently connected to ERISA to
be preempted. Parks latches on to this potential exception to further argue that a
constructive trust here would not violate ERISA because: (1) the Supreme Court in
Kennedy, while ruling that the terms of an ERISA-qualified pension plan
controlled who was the beneficiary of the plan, did not "express any view as to
whether [an estate] could have brought an action in state or federal court against
[an ex-spouse] to obtain the benefits after they were distributed," 555 U.S. at 299
n.10; and (2) the instant case is not controlled by Carmona's ban on constructive
trusts on ERISA benefits because Carmona concerned a pension plan, 603 F.3d at
1053, and not, as is the case here, a welfare benefit plan. These considerations
may muddy the waters, but do not obscure Egeljhoff s conclusion that ERISA
preempts state laws such as Montana's divorce revocation statute, 532 U.S. at 151 ,
nor Carmona's rule "that a state law constructive trust cannot be used to
contravene the dictates ofERISA," 603 F.3d at 1061.
As to the first, Kennedy's silence as to the precise question at issue here
does not in turn mean that application of a constructive trust on life insurance
benefits disbursed pursuant to an ERISA plan would not violate ERISA
preemption. As discussed above, ERISA preempts state law "related to an
employee benefit plan," 29 U.S .C. § l 144(a), and the Supreme Court has held such
preemption applies where a state divorce statute would mandate a beneficiary
other than the one named in the BRISA-qualified plan, Egelhoff, 532 U.S. at 151.
To apply a constructive trust to the distributed funds under these circumstances
would elevate form over substance and thereby "contravene the dictates of
ERISA." Carmona, 603 F.3d at 1061.
As to the second, the distinction between a pension plan and a welfare
benefit plan is one without a difference in this context. Although, as Parks points
out, pension plans are subject to statutory requirements that do not pertain to
welfare benefit plans, both are subject to the ERISA preemption provision. 29
U.S.C. § l 144(a). Citing Carmona, the Ninth Circuit has held that "the
preemption provision of ERIS A precludes the imposition of a constructive trust
upon the proceeds" from a life insurance policy." St. Julian v. St. Julian, 2012
WL 1377028, at* 1 (9th Cir. April 20, 2012) (unpublished). And the United
States District Court for the District of Idaho, when confronted with the question
of whether a constructive trust could be imposed on the benefits from an ERISAqualified life insurance policy, relied on Carmona and St. Julian in holding that it
could not. See Orr v. Prudential, Case No. 1: l l-cv-00647-BLW (June 12, 2012)
(Doc. 37-1). The district court reasoned that "it makes no difference that Carmona
involved pension plan benefits and this case involves employee welfare plan
benefits," because "[t]he principle behind Carmona-that a plaintiff cannot use a
constructive trust to make an end-run around ERISA requirements-applies
equally to both types of benefits." Id. at 5-6. The same logic applies here, where a
constructive trust would provide an end-run around ERISA requirements.
Imposition of a constructive trust on the contested funds is inappropriate.
IT IS ORDERED that Jackson's Motion for Summary Judgment (Doc. 30)
is GRANTED and Park's Motion for Summary Judgment (Doc. 27) is DENIED.
IT IS FURTHER ORDERED that the Clerk of Court is directed to enter
judgment in favor of Alette Jackson and against Samantha Parks.
IT IS FURTHER ORDERED that execution of that judgment is STAYED
until time for appeal has expired and no appeal has been taken, or, if appeal is
taken, the case is resolved by the Ninth Circuit Court of Appeals or by settlement.
of September, 2017.
o oy, District Judge
United r tes D strict Court
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