JUNO v. VERIZON COMMUNICATIONS, INC., et al

Filing 41

MEMORANDUM AND ORDER granting Verizon's 3 Motion to Dismiss; dismissing the Estate's complt.; rendering as moot the Estate's motion to dismiss the verified complt., and closing case ***CIVIL CASE TERMINATED. Signed by Judge Peter G. Sheridan on 03/31/2011. (nr, )

NOT FOR PUBLICATION UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

Plaintiff.

MEMORANI)UM & ORDER

vs.
VERIZON COMMUNICATIONS, INC., FIDELITY EMPLOYER SERVICES COMPANY, LL.C., VICTORIA ARIAS SUTTON, and ELIZABETH SUTTON, Defendants.

This action involves claims by multiple parties. Plaintiff Dominick Juno ("Executor"), in his capacity as Executor of the Estate of William H. Sutton (Estate) has filed a Complaint (Estate's Complaint) seeking payment of the proceeds of a 401(k) account held by William H. Sutton (William) at the time of his death. Defendant Victoria Arias Sutton (Victoria) has filed a Verified Complaint (Verified Complaint), alleging that the Last Will and Testament of William should he declared null and void. Both Complaints were later removed to this Court. Thereafter, Defendant Elizabeth Sutton (Elizabeth). was joined in this action. Presently before this Court are two motions to dismiss: (1) Defendant Verizon Communications, Inc. (Verizon) and Fidelity Employer Services Company, L.L.C. (Fidelity) have moved to dismiss the Estate's Complaint, and (2) the Executor has moved to dismiss Victoria's \eritied Complaint.

Dockets.Justia.com

DOMINICK JUNO. EXECUTOR OF THE ESTATE OF WILLIAM H. SUTTON.

Civil Action No.: 10-1288 (PGS)

I.

According to the allegations in the Estates Complaint. William was aparticipant in a 401(k) savings plan (Savings Plan) by virtue of his employment with Verizon. The Savings Plan's records include a beneficiary designation, dated December 7, 1978, in which William designated his wife Victoria as his primary beneficiary. On November 6. 2002. William and Victoria were divorced. Pursuant to the judgment of divorce, William and Victoria each released the other from any claim to any property of the other. except as provided in the judgment of divorce." The supplemental divorce judgment, dated July 1, 2003. included a provision under which William was to provide Victoria with fifty percent of the value of the Savings Plan pursuant to a Qualified Domestic Relations Order (QDRO). On March 29. 2004, the Superior Court of New Jersey tbr Morris County. entered a Domestic Relations Order, which named Victoria as an alternate payee for fifty percent of the Savings Plan. On July 16, 2004, the Plan Administrator ofthe Savings Plan issued a QDRO Qualification Notice. The notice apprised William that the Domestic Relations Order was determined to be a Qualified Domestic Relations Order and that"jpiursuantto the QDRO. the alternate payee has been awarded a portion of the plan participant's benetits.' William never rescinded or changed his beneficiary designation under the Savings Plan after his divorce from Victoria. Thus, at the time of William's death, on October 31, 2009. the only beneficiary designation on file with the Savings Plan Administrator was the heneliciarv designation made in 1 978. On February 8. 2010, the Estate commenced this action 1w filing a complaint in the Chancery Division of the Superior Court of New Jersey for Morris County. The Estate's Complaint names as DefLndants Veriion nhich is the sponsor of the Saings Plan, Fidelit which pros ides directcd

recordkeeping and administrative services to the Savings Plan: and Victoria. who is \Villiams designated beneficiary under the Savings Plan. In addition to alleging that William inadvertently failed to change his beneficiary of the Savings Plan, the Estate's Complaint alleges that N.J.S.A. 3B:3-14(a) automatically extinguished William's pre-divorce designation ofVictoria as beneficiary. The Estate requests that the Court enter judgment: (1) directing Verizon and Fidelity to account for the Savings Plan proceeds;
(2)

retbrming the Savings Plan beneficiary designation and declaring the

Estate entitled to the Savings Plan proceeds: and (3) directing Verizon and Fidelity to disburse the Verizon Savings Plan proceeds to the Estate of William 1-1. Sutton. On February 25, 2010, Victoria filed a Verified Complaint in support of an order to show cause with the Chancery Division of the Superior Court of New Jersey fbr M orris County. asserting that William's Last Will and Testament should be set aside. On March 10, 2010, Verizon and Fidelity removed both actions to this Court on the basis of federal question jurisdiction under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.

§§

1001 -1461. Simultaneously, the

Administrator ofthe Savings Plan commenced a separate interpleader action, naming the Estate and Victoria as defendants. See VeiL--on Eniplo tee the
Estate Benefits Committee i

Dominick Juno, Executor of

ofIVi!!iamn if. Stir/on and Victoria Arias Sutton, No, 10--1246 (PGS-ES). On February I 8.

2011, by Consent Order, Elizabeth was joined in this action and the interpleader action.

The Court has limited its presentation of the facts to primarily the allegations in the Estate's Complaint.

II. Federal Rule ofCivil Procedure 1 2(bX6) allows a court to dismiss a complaint for failure to state a claim upon which reliefcan be granted. When considering a 12(bX6) motion to dismiss, the Court must accept as true all allegations in the complaint and draw all reasonable inferences in favor of the non-moving party. See Ashcroft v. Iqbai, 129 S. Ct 1937, 1949-50(2009); BellAti. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint survives a motion to dismiss if it "contain[sj sufficient factual matter, accepted as true, to `state a claim to reliefthat is plausible on its face.'"
Iqbal, 1295. Ct. at 1949 (quoting Twombly, 550 U.S. at 570). The plausibility standard requires that

the facts alleged "allow[] the court to draw the reasonable inference that the defendant is liable for the conduct alleged" and demands "more than a sheer possibility that a defendant has acted unlawfully." Id. "A pleading that offers `labels and conclusions' or `a formulaic recitation of the elements ofa cause ofaction will not do.'" Id (quoting Twombly, 55 U.S. at 555). When evaluating a motion to dismiss, coufts generally consider only the allegations in the complaint, exhibits attached to the complaint matters ofpublic record, and documents that form the basis ofthe claim."
Lwn v. Bank ofAm., 361 F.3d 217,222 n.3 (3d Cir. 2004).

The Court notes that the parties submitted affidavits with both motions, which present facts beyond the allegations in the Complaints. Because the parties indicated to the Court that there was no need for discovery before disposition ofthe instant motions and because the parties did not wish to convert the instant motions into ones for summaryjudgment, the Court's decision is based on only the allegations in the Complaints and the documents that form the bases of the claims.

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III.

2 The Court vill first address Verizon and Fidelity's motion to dismiss the Estates 3 Complaint The Estate's Complaint appears to be based on two principal theories. First, the Estate asserts the judgment of divorce equitably distributed all of the assets and liabilities between William and released each other from any claim to the property of the other. Second. the Estate alleges that the pre-divorce designation of Victoria as the beneficiary of the Savings Plan was extinguished by
4 virtue ofN.J.S.A. 313:3-14(a).
Verizon

asserts that neither of those legal theories state a claim upon

which relief can be granted. Considering the Estate's first legal theory, Verizon argues that the judgment of divorce has no effect on the Saving Plan's obligation to distribute the remaining balance of William's account in accordance with the Savings Plan's documents and William's beneficiary designation. The Estate agrees that the account should be distributed according to Savings Plan documents, but asserts that such requires consideration of the QDRO. The Estate maintains that because the QDRO

incorporates New Jersey law, N.J.S.A. 3B:3-14(a) operates to effectively terminate William's designation of Victoria as the Savings Plan beneficiary.

1

For ease of reference. the Court will refer to Verizon and Fidelitvas Verizon.

\`ictoria filed a letter memorandum. joining in support of Verizon's motion to dismiss the Estate's Complaint, While Verizon's motion to dismiss was pending. the Estate advised the Court of a document, which appears to show that Victoria waived her interest in a survivor benefit in the Verizon Pension Plan for Mid-Atlantic Associates. Such a document does not form the basis of the Estate's claim as it is unrelated to the 401(k). Therefore, such document shall have no bearing on the outcome of Verizon's motion to dismiss.

The parties dispute whether this case is governed by the United States Supreme Courts

recent decision in Kennedy v. Plan Administrator for DuPont Sa'ings & Investment Plan, 129 S. CL 865 (2009). In Kennedy, the decedent participated in a savings and investment plan governed by
ER1SA. id. at 868. The decedent had designated his wife as beneficiary of the plan. hut

subsequently divorced her. Id. at 869. The divorce decree divested the wife of an interest in the proceeds ol' any retirement or pension plan arising from the decedent's employment. Id. The decedent, however, did not change his beneficiary after his divorce, Id. Upon the decedent's death, the plan administrator distributed the funds of the savings and investment plan in accordance with

the decedent's beneficiary designation. Id The decedent's estate sued, "claiming that the divorce
decree amounted to a waiver of the
...

benefits on [the wife's] part." Id at 869.

The Supreme Court held that although the divorce decree was valid, it did not operate as an ERISA waiver because "[t]he plan administrator [was] obliged to act `in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provision of [ERISA]." Id. at 874-85. Thus, the Court stated that the claims of the decedent's estate stood or fell by "the terms of the plan" because ERISA was intended to ensure
`a straightforward rule of hewing to the directives of the plan documents that lets employers

establish a uniform administrative scheme, with a set of standard procedures to guide processing of claims and disbursement of benefits." Id. at 875 (internal quotation marks and citations omitted). "The point is that by giving a plan participant a clear set of instructions for making his own

instructions clear, ERISA forecloses any justification for enquiries into nice expressions of intent, in favor of the virtues of adhering to an uncomplicated rule." Jd. at 875-76. Generally, less certain
rules would force plan administrators "to examine a multitude of external documents that might

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purport to affect the dispensation of benefits... and be drawn into litigation like this over the meaning and enforceabi litv of purported waivers."
id

(internal quotations and citations omitted)).

The Supreme Court noted. however, that a plan administrator must look outside the plan documents to enforce a QL)RO: The very enflrce-abilitv of QI)ROs means that sometimes a plan administrator must look for the beneficiaries outside plan documents notwithstanding § 11 04(a)( I )(D); § 1 056(d)(3)(J) provides that a person who is an alternate payee under a QDRO shall be considered for purposes of any provision of ERISA a beneficiary under the plan. But this in effect means that a plan administrator who enforces a QDRO must be said to enforce plan documents, not ignore them. In any case, a QDRO enquiry is relatively discrete, given the specific and objective criteria for a domestic relations order that qualifies as a QDRO, requirements that amount to a statutory checklist working to spare an administrator from litigation-formenting ambiguities. This is a far cry from asking a plan administrator to figure out whether a claimed federal common law waiver was knowing and voluntary, whether its language addressed the particular benefits at issue, and so forth. on into factually complex and subjective determinations. Id. at 876 (internal quotation marks, citations, and footnotes omitted).

Turning to the facts of this case, the language of the Domestic Relations Order states that Victoria was to be named an alternate payee and that "[s]ubsequent to the date the Plan Administrator determines [the] Domestic Relations Order is Qualified, the Alternate Payee shall be
assigned an amount equal to 50% of the Participant's total vested Account balance under the Plan In a letter to William. dated July 16, 2004, the Plan Administrator advised that the Domestic Relations Order met the standards necessary to be deemed a QDRO under ERISA. In addition, the Plan Administrator advised: "Pursuant to the QDRO. the alternate payee has been awarded a portion of the plan partiCipant's benefits." The Plan Administrator also outlined the administration of

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benefits. indicatine that "[tjhe alternate payee is awarded 50% of' the parlicipant's vested account balance Such lhcts clearly evidence that under the QDR( Victoria is the alternate payee offiftv

percent of the Savings Plan. But. the QDRO is silent with respect to the remaining balance of the Savings Plan. The Court is persuaded that Kennedi controls the disposition othe remaining balance of the Savings Plan. Pursuant to Keimc'dv. the Plan Administrator must distribute the remaining
fifty

percent of the Savings Plan "in accordance with the documents and instruments governing the plan."

id. at 875, and should not look to the QDRO to divine any expression of William's intent as to the
distribution of the balance of the Savings Plan. See ki at 875-76. Looking to the language of the Savings Plan, Section 17 pertains to the "Designation of Beneficiaries." Specifically, section 17.1 provides for "Lump Sum Payable Upon Death," stating that "upon the death of a Participating Employee or Inactive Participant, the vested balance of his or her Accounts shall be paid to the Beneficiary or Beneficiaries most recently designated by the deceased in a lump sum." The parties concede that Victoria is the named beneficiary on the designation form completed by William in 5 1978: thus, the Plan Administrator may distribute the balance of the Savings Plan to Victoria.

In her opposition to Verizon's motion to dismiss. Elizabeth argued that the balance of the account should he paid into the Estate pursuant to Section 17.1. Section 17.1 states that 1w Ihen there is any question regarding the legal right of any person to receive a distribution under the Plan, the amount in question mar be paid to the participant's estate." (emphasis added). Such language is permissive, permitting the Plan Administrator to take such a course of action: however. ii does not mandate that the Plan Administrator take such a course. Further, Victoria requests that the Court place the funds of the Savings Plan into a constructive trust. However, the Court declines to take such action in light of Victoria's assertion that if the Court granted Verizon's motion to dismiss, New Jersey law would apply to revoke Victoria's interest in the account. 8

Considering the Estate's second legal theory

that NJ.S.A. 3B:3-14(a) revokes William's

designation of Victoria as a beneficiary the Court concludes that such an argument is a non-starter. NJ.SA. 3B:3-14(a) pro ides as follos: Except 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, a divorce or annulment: (1) revokes any revocable: (a) dispositions or appointment of property made by a divorced individual to his former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced individual's former spouse

In the event of a divorce or annulment, provisions of a governing instrument are given effect as ifthe former spouse and relatives ofthe lbrmer spouse disclaimed all provisions revoked by this section. If provisions are revoked solely by this section, they are revived by the divorced individual's remarriage to the former spouse or by the revocation, suspension or nullification of the divorce or annulment. No change of circumstances other than as described in this section and in N.J.S.A. 3B:7-l effects a revocation or severance. The Court has determined that ERISA mandates that the Plan Administrator look to the documents and instruments go eming the plan, not to the QDRO, when distributing the balance of the Savings Plan. Thus. ERISA governs the outcome of this case. Because ERISA broadly preempts "all state laws insofar as they may
now

or hereafter relate

to

any employee benefit plan" covered by ERISA.

FRTSA preempts any application of N.J.S.A. 3B:3-14(a). 29 U.S.C.

§

1144(a): see also EgelhofJ

Egelhof,f. 532 U.S. 141 (2001): In re Ken.singer. No. 09-6510. 201() U.S. I)ist. LEXIS 116078. *56 n.l (D.X.J. Nov. 1.201(i) (noting parties conceded ERlS\
9
preempts N.J.S.A. 3B:3-14).

Therefore, IT IS on this 31st day of March 2011, ORDERED that Verizon's motion to dismiss is granted (ECF No. 3.); and IT IS FURTHER ORDERED that the Estate's Complaint is dismissed; and IT IS FURTHER ORDERED that the Court declines to exercise jurisdiction over the Verified Complaint and remands the Verified Complaint back to the Chancety Division Probate
e

Part of the Superior Court of New Jersey for Morris County; and IT IS FURTHER ORDERED that the Estate's motion to dismiss the Verified Complaint is rendered moot (ECF No. 14.); and if IS FURTHER ORDERED that the Clerk shall dismiss this case.

PETER G. SHERIDAN, U.S.DJ. March3l,2011

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