Dahl v. Aerospace Employees' Retirement Plan of the Aerospace Corporation et al
Filing
21
MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 8/13/2015. (dvanm, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
PHYLLIS DAHL,
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Plaintiff,
v.
AEROSPACE EMPLOYEES’
RETIREMENT PLAN OF THE
AEROSPACE CORP., et al.
Defendants.
M E M O R A N D U M
1:15cv611 (JCC/IDD)
O P I N I O N
This matter is before the Court on Defendants Julie
and Ronald Goetzes’ and Defendant Aerospace Employees’
Retirement Plan of the Aerospace Corp.’s Motions to Dismiss.
[Dkts. 4, 11.]
For the following reasons, the Court will grant
the motions.
I. Background
Phyllis Dahl (“Ms. Dahl” or “Plaintiff”) is the former
spouse of Ronald Goetz (“Mr. Goetz”).
(Compl. [Dkt. 1] ¶ 1.)
Their marriage was dissolved by the Circuit Court of Fairfax
County on August 8, 2013 through a final decree of divorce
(“final decree”).
(Id. ¶ 8.)
The final decree ratified and
incorporated a written settlement agreement (“settlement
agreement”) between Ms. Dahl and Mr. Goetz.
1
(Id. ¶ 9.)
Pursuant to the terms of the settlement agreement, each party
had the option to elect the survivor annuity benefit under the
other’s retirement plan.
(Id. ¶ 10.)
At the time of the
settlement agreement, Mr. Goetz was still employed by The
Aerospace Corp. and Ms. Dahl was a former employee of The
Aerospace Corp. with a vested right to her own pension benefits
under the Aerospace Employees’ Retirement Plan (“AERP”).
(Id. ¶
11.)
Under the AERP, the survivor annuity is paid to the
designated survivor after the death of the plan participant.
(Id. ¶ 12.)
Per the terms of the AERP, Ms. Dahl could elect to
choose a survivor annuity equal to fifty, seventy-five, or one
hundred percent of Mr. Goetz’s pension payments.
(Id. ¶ 15.)
To offset the survivor annuity payments, the AERP reduces the
amount of pension payments to retirees who designate survivor
annuitants.
(Id. ¶ 13.)
In the settlement agreement, Ms. Dahl
and Mr. Goetz agreed that the party electing a survivor annuity
under the other’s plan would compensate the other for the
reduction in periodic pension payments.
(Id. ¶ 14.)
Mr. Goetz retired from The Aerospace Corp. on July 31,
2014.
retire.
(Id. ¶ 21.)
(Id.)
He did not tell Ms. Dahl about his plans to
On October 6, 2014, after Ms. Dahl learned of
Mr. Goetz’s retirement, Ms. Dahl’s counsel submitted a draft
Qualified Domestic Relations Order (“QDRO”) to the AERP for
2
review.
(Id. ¶ 22.)
The draft QRDO stated that Ms. Dahl was to
receive a one hundred percent survivor annuity under Mr. Goetz’s
pension.
(Id.)
Three days later, counsel for AERP wrote Ms.
Dahl’s counsel advising that the draft QDRO could not operate to
assign a survivor annuity to Ms. Dahl, because upon Mr. Goetz’s
retirement on July 31, 2014 his current wife, Julie Goetz (“Mrs.
Goetz”) became vested with a fifty percent survivor annuity.
(Id. ¶ 24.)
Ms. Dahl’s counsel wrote to the AERP fiduciaries
asking that they reconsider the draft QDRO because Mr. Goetz had
hidden his retirement from Ms. Dahl and hidden the survivor
annuity provisions of the final decree from the AERP.
25.)
(Id. ¶
The AERP administrator stated that the draft QRDO had not
been submitted to the AERP before the effective date of Mr.
Goetz’s retirement.
(Id. ¶ 26.)
Because he had elected a fifty
percent survivor annuity for Mrs. Goetz and that survivor
annuity had irrevocably vested in Mrs. Goetz under both the
Employee Retirement Income Security Act (“ERISA”) and the AERP,
the AERP was powerless to act. (Id.)
decision.
(Id. ¶ 27)
Ms. Dahl appealed the
The appeal was denied.
Ms. Dahl filed this suit.
(Id. ¶ 28.)
In the complaint, she
alleges that Mr. Goetz “actively deceived the AERP by advising
it in his retirement application that there were no court orders
requiring any part of [his] benefit to be paid to any other
3
person.”
(Id. ¶ 32.)
This was “a concealment of material fact
in violation of the implied covenant of good faith and fair
dealing” inherent in every contract.
(Id. ¶ 34.)
She also
claims that Mr. Goetz’s failure to notify her of his retirement
was a concealment of a material fact upon which Ms. Dahl relied
to her detriment.
(Id. ¶ 33.)
She seeks a declaratory judgment
pursuant to 29 U.S.C. § 1132(a)(1)(B) that the designation and
recognition of Mrs. Goetz as survivor annuitant under Mr.
Goetz’s plan is null and void and that she is entitled to elect
“by appropriate QDRO” a fifty, seventy-five, or one hundred
percent stake in Mr. Goetz’s survivor annuity.
(Compl. at 7-8.)
She also seeks an injunction against AERP requiring it to
immediately implement any relief granted.
Goetzes and AERP move to dismiss.
(Id. at 8.)
Both
Both AERP and the Goetzes
argue that Ms. Dahl lacks standing to bring this claim or, in
the alternative, her claim fails as a matter of law because the
survivor annuity has already vested in Mrs. Goetz.
(Goetzes’
Mem. in Supp. [Dkt. 5] at 1-2; AERP’s Mem. in Supp. [Dkt. 12] at
2, 13.)
Additionally, the Goetzes argue that they are not
proper defendants.
(Goetzes’ Mem. in Supp. at 1-2.)1
1
Having
Relatedly, the Goetzes argue that it is “entirely unclear” as
to the purported basis of liability against them. (Goetzes’
Mem. in Supp. at 1.) They also note that the complaint contains
no enumerated counts. (Id.)
4
been fully briefed and argued, this motion is ripe for
disposition.
II. Legal Standard
“A motion to dismiss under Rule 12(b)(6) tests the
sufficiency of a complaint[.]”
Republican Party of N.C. v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992) (citation omitted).
The Supreme Court has stated that in order “[t]o survive a
motion to dismiss, a [c]omplaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
“A claim has facial plausibility when the pleaded
factual content allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.”
Id.
The issue in resolving such a motion is not
whether the non-movant will ultimately prevail, but whether the
non-movant is entitled to offer evidence to support his or her
claims.
“Determining whether a complaint states a plausible
claim for relief [is] . . . a context-specific task that
requires the reviewing court to draw on its judicial experience
and common sense.”
Iqbal, 556 U.S. at 679 (citations omitted).
To survive a motion to dismiss, a plaintiff’s complaint must
demand more than “an unadorned, the-defendant-unlawfully-harmed5
me accusation.”
555.
Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at
Legal conclusions couched as factual allegations are not
sufficient. Twombly, 550 U.S. at 555.
Hence, a pleading that
offers only “formulaic recitation of the elements of a cause of
action will not do.”
at 557.
Iqbal, 556 U.S. at 678; Twombly, 550 U.S.
Nor will a complaint that tenders mere “naked
assertion[s]” devoid of “further factual enhancement.”
Iqbal,
556 U.S. at 678; Twombly, 550 U.S. at 557.
Moreover, the plaintiff does not have to show a
likelihood of success on the merits.
Rather, the complaint must
merely allege - directly or indirectly - each element of a
“viable legal theory.”
Twombly, 550 U.S. at 562-63.
III. Analysis
All three Defendants argue that the there was no QDRO
naming Ms. Dahl as the survivor annuitant before Mr. Goetz
retired; as such, the survivor annuity has already vested in
Mrs. Goetz.
at 7.)
(Goetzes’ Mem. in Supp. at 6; AERP’s Mem. in Supp.
Defendants also argue that Ms. Dahl lacks standing to
bring this claim.
in Supp. at 13-14.)
(Goetzes’ Mem. in Supp. at 4-5; AERP’s Mem.
Additionally, the Goetzes claim they are
not proper defendants.
(Goetzes’ Mem. in Supp. at 5-6.)
opposition, Ms. Dahl argues that the fraud/breach of trust
exception to the “regulatory imperative” recognized by the
Supreme Court in Free v. Bland and Yiatchos v. Yiatchos is
6
In
applicable here.
(Dahl’s Opp. to AERP’s Mot. [Dkt. 16] at 4;
Dahl’s Opp. to Goetzes’ Mot. [Dkt. 14] at 11-14.)
She also
argues that she has standing to bring the claims here and that
the Goetzes are necessary parties under Federal Rule of Civil
Procedure 19.
(Dahl’s Opp. to Goetzes’ Mot. at 8-10, 15-17.)
Turning first to the standing argument, an ERISA
action may be brought only by a participant or a beneficiary.
29 U.S.C. § 1132(a)(1).
ERISA defines “beneficiary” as “a
person designated by a participant, or by the terms of an
employee benefit plan, who is or may become entitled to a
benefit thereunder.”
29 U.S.C. § 1002(8).
Defendants argue
that Ms. Dahl lacks standing to bring this claim because she is
neither a participant nor a beneficiary under the statute.
(Goetzes’ Mem. in Supp. at 4-5; AERP’s Mem. in Supp. at 13-14.)
But standing to bring an ERISA action does not depend on whether
a plaintiff is actually entitled to benefits.
Lewis v. Kratos
Def. & Sec. Solutions, 950 F. Supp. 2d 851, 858 (E.D. Va. 2013).
In this circuit, it is settled that having a meritorious claim
is not a requirement for standing as a participant or
beneficiary; rather, the Fourth Circuit has made clear that
“[w]hether an employee has standing as a ‘participant’ [or
beneficiary] depends, not on whether he is actually entitled to
benefits, but on whether he has a colorable claim that he will
prevail in a suit for benefits.”
Davis v. Featherstone, 97 F.3d
7
734, 737 (4th Cir. 1996) (citation and internal quotation marks
omitted); see also Moon v. BWX Techs., Inc., 498 F. App’x 268,
273–74 (4th Cir. 2012); Lewis, 950 F. Supp. 2d at 858.
Importantly, the test for a colorable claim is “not a stringent
one,” but asks instead if the claim is “arguable and
nonfrivolous, whether or not it would succeed on the merits.”
Davis, 97 F.3d at 737–38.
Here, the complaint alleges that
under the terms of the settlement agreement, Ms. Dahl has the
option to select a percentage of the survivor annuitant benefit
under Mr. Goetz’s retirement plan.
(Compl. ¶ 15.)
Therefore,
the Court finds that Ms. Dahl has an “arguable and nonfrivolous”
claim to benefits.
Benefits provided under a pension “plan may not be
assigned or alienated,” 29 U.S.C. § 1056(d)(1), except pursuant
to “a qualified domestic relations order,” 29 U.S.C. §
1056(d)(3)(A).
A qualified domestic relations order “creates or
recognizes the existence of an alternate payee’s right to, or
assigns to an alternate payee the right to, receive all or a
portion of the benefits payable with respect to a participant
under a plan.”
29 U.S.C. § 1056(d)(3)(B)(i)(II).
In order to
be a qualified domestic relations order, the order must meet
several statutory criteria.
See 29 U.S.C. § 1056(d)(3)(C)-(D).
In this case, the question is whether there was a QDRO in place
at the time Mr. Goetz retired.
Therefore, this case is
8
controlled by Hopkins v. AT&T Global Information Solutions Co.,
in which the Fourth Circuit held that a domestic relations order
was not “qualified” when it was not in effect at the time of the
participant’s retirement.
105 F.3d 153, 156-57 (4th Cir. 1997).
In Hopkins, the plaintiff, Vera Hopkins, and the
participant, Paul Hopkins were divorced.
Id. at 154.
Paul was
ordered to pay Vera alimony, and Vera obtained a judgment
allowing her to attach to Paul’s wages.
Paul married Sherry Hopkins.
eligible for pension benefits.
Id.
Id.
After the divorce,
He retired in 1993 and became
Id.
The pension benefits were
paid in the form of a joint and survivor annuity – Paul was to
receive a fixed income for life (“pension benefit”), and if his
spouse survived him, she would receive fifty percent of that
fixed income for the remainder of her life (“surviving spouse
benefit”).
Id. at 154-55.
In 1994, Vera obtained a judgment
against Paul for past-due alimony.
Id.
No longer able to
attach to Paul’s wages, she sought and received an order from
the state court to collect past-due alimony and current alimony
from Paul’s pension (“surviving spouse order”).
Id.
She then
sued AT&T, Paul’s former employer, seeking a declaratory
judgment that the surviving spouse order was a QRDO entitling
her to the surviving spouse benefit.
Id.
The district court
granted summary judgment for AT&T, which the Fourth Circuit
upheld.
Id.
After careful review of ERISA, the Fourth Circuit
9
determined that Sherry’s interest in the surviving spouse
benefit vested in 1993, when Paul retired.
Id. at 156.
Therefore, Vera’s surviving spouse order would be a payment
against Sherry, a beneficiary.
Id.
“To be qualified, however,
a ‘domestic relations order’ must relate to a benefit ‘payable
with respect to a participant.’”
Id.
As Sherry was a
beneficiary and not a participant, the surviving spouse order
was not a QRDO.
Id.
Here, Mr. Goetz retired on July 31, 2014.
21.)
(Compl. ¶
Ms. Dahl does not dispute that there was no QRDO in effect
at the time of Mr. Goetz’s retirement that detailed her desire
to exercise her option for the survivor benefit and what
percentage she wished to receive.
(See id. ¶ 22 (“On October 6,
2014, after Phyllis finally learned [of] Ronald’s retirement,
Phyllis’ counsel submitted a draft Qualified Domestic Relations
Order (“QRDO”) to the AERP for its review.
The draft QRDO
contained a provision decreeing that Phyllis was to receive a
100% survivor annuity under Ronald’s pension from AERP.”).)2
Consequently, on the date of Mr. Goetz’s retirement, the
survivor benefit vested in Mrs. Goetz.
2
Because Mrs. Goetz is a
Furthermore, the settlement agreement cannot qualify as a QDRO
because it contains neither a fixed amount or a percentage of
benefits (or, in the alternative, how the percentage or fixed
amount is to be determined) and the number of payments or period
of time such payments should be made as required by statute.
(Compl. ¶ 14.)
10
beneficiary and not a participant, the draft QDRO does not
relate to a benefit “payable with respect to a participant.”
Therefore, Ms. Dahl’s claim fails as a matter of law.
See
Hopkins, 105 F.3d at 157; see also Carmona v. Carmona, 603 F.3d
1041, 1060 (9th Cir. 2008) (“We hold here only that a state DRO
may not create an enforceable interest in surviving spouse
benefits to an alternate payee after a participant's retirement,
because ordinarily at retirement the surviving spouse's interest
irrevocably vests.”); Langston v. Wilson McShane Corp., 828
N.W.2d 109, 116-17 (Minn. 2013) (applying Hopkins and stating
“Because we conclude that a plan participant's surviving spouse
benefits vest in a current spouse at the time of a plan
participant's retirement, and under ERISA only a QDRO can
alienate pension benefits, a pre-existing state law right cannot
prevent the vesting of those rights.
To conclude otherwise
would undermine ERISA's preemption of state law by causing a
DRO, rather than a QDRO, to have some effect on the alienation
of benefits under ERISA - a result that ERISA itself clearly
prohibits.”).
Ms. Dahl concedes that there is no QDRO that would
allow her to collect survivor annuitant benefits, but argues
instead that Mr. Goetz’s election of a survivor annuity for Mrs.
Goetz was a void act.
(Dahl’s Opp. to Goetzes’ Mot. at 7;
11
Dahl’s Opp. to AERP’s Mot. at 3.)3
In support, Ms. Dahl cites to
Free v. Bland and Yiatchos v. Yiatchos, two Supreme Court cases
which Ms. Dahl claims establish the fraud/breach of trust
exception to the “regulatory imperative.”
AERP’s Mot. at 4.)
(Dahl’s Opp. to
Both cases concerned determining
survivorship rights in U.S. savings bonds where U.S. Treasury
regulations conflicted with state law.
See Yiatchos, 376 U.S.
306, 307-08 (1964); Free, 369 U.S. 663, 664 (1962).
In Free, the Supreme Court held that the surviving coowner of the savings bonds was entitled to the proceeds of the
bonds without liability to the beneficiaries of the deceased coowner, despite conflicting state law purporting to forbid a
married couple to make survivorship arrangements with respect to
community property and requiring such property to pass as part
of the deceased’s estate in accordance with his will or the
intestacy laws.
Free, 369 U.S. at 670.
In dicta, the Court
noted that “[t]he regulations are not intended to be a shield
for fraud and relief would be available in a case where the
circumstances manifest fraud or a breach of trust tantamount
thereto . . . .”
Id. at 670.
However, “the doctrine of fraud
applicable in such a case must be determined on another day, for
this issue is not presently here.”
3
Id.
In Yiatchos, the
Dahl repeats this argument in both oppositions. For ease of
citation, the Court will refer to Dahl’s opposition to AERP’s
motion.
12
Supreme Court considered the scope and application of what it
deemed the “regulatory imperative” in Free – namely, in what
circumstances fraud or breach of trust would override the
Treasury regulations permitting rights of survivorship in
savings bonds.
Yiatchos, 376 U.S. at 307.
The Court remanded
the case to develop a factual record as to whether the widow had
consented to her husband naming his brother as the surviving coowner of the bonds.4
Id. at 313.
“If she gave such consent, or
if she ratified the purchase and registration of the bonds, the
conduct of the husband was not, for federal purposes, fraud or
breach of trust sufficient to avoid the command of the
regulations, and [his brother] would be entitled to all of the
bonds.”
Id. at 310.
Notably, both Free and Yiatchos concerned U.S.
Treasury regulations, not interpretation of ERISA.
Ms. Dahl has
cited no case law that applies the fraud/breach of trust
exception recognized in Yiatchos and Free to ERISA.
(See Dahl’s
Opp. to AERP’s Mot. at 5-7 (citing In re Novosielski, 992 A.2d
89, 91 (Pa. 2010) (considering conflict between state law and
Treasury regulations in determining ownership of Treasury Direct
account); Towne v. Towne, 707 S.W.2d 745, 746 (Tx. Ct. App.
4
The case was also remanded for the determination, under state
law, whether the widow had an interest in the community’s
specific assets, or only a half interest in the estate
generally. Yiatchos, 376 U.S. at 313.
13
1986) (affirming trial court’s imposition of constructive trust
on proceeds of a life insurance policy issued by the Veterans
Administration); see also Sun Life Ins. Co. v. Tinsley, No.
6:06-CV-00010, 2007 WL 1052485, at *6 (W.D. Va. Apr. 4, 2007)
(setting aside change of beneficiary designation on life
insurance policy governed by ERISA on grounds of undue influence
without citation to Free or Yiatchos))).
This Court declines to
expand such a doctrine to a different, complex regulatory scheme
like ERISA.
Additionally, even if the Court were to find that
Free and Yiatchos could be extended to ERISA, Ms. Dahl has cited
no case law delineating the scope of the fraud exception.
Yiatchos remanded the case to develop a factual record on a
narrow question.
It did not set forth principles that would
guide a district court in determining whether there has been a
fraud or breach of trust in a different factual scenario.
Ms. Dahl’s fraud argument is further frustrated by
Langston v. Wilson McShane Corp., a case from the Supreme Court
of Minnesota with nearly identical facts.
In Langston, per the
terms of the divorce decree the participant was to designate the
plaintiff, his ex-wife, to receive the survivor benefit under
his pension plan.
Langston, 828 N.W.2d at 111.
Several years
after the divorce and before the plaintiff served a QDRO on the
plan, the participant remarried, designated his wife as the
survivor beneficiary, and retired.
14
Id. at 111-12.
The court
held that the surviving spouse benefits vested in his current
wife at the time of the participant’s retirement, even though
there was a state court order directing the participant to name
his ex-wife as the surviving spouse beneficiary.
Id. at 116.
Though the case did not discuss Free or Yiatchos, the court
rejected the plaintiff’s argument that she had a pre-existing
right to the surviving spouse benefits under the state court
judgment and decree of divorce, which was entered prior to the
participant’s retirement.
Id.
Here, as in Langston, Mr. Goetz was aware of the
divorce decree and settlement agreement when he elected Mrs.
Goetz as his survivor annuitant.5
Langston, as persuasive
authority, strengthens Defendants’ arguments that Free and
Yiatchos do not apply here.
Further supporting this conclusion
is the fact that, unlike Langston, there was no decree here
declaring that Ms. Dahl was entitled to a specific percentage of
Mr. Goetz’s survivor’s benefits.
Rather, Ms. Dahl had to
affirmatively elect to receive such benefits, which in the
5
At oral argument, Plaintiff’s counsel argued that Mr. Goetz
defrauded the AERP when, on his application for retirement
benefits, Mr. Goetz represented that there was no QDRO. The
form asked Mr. Goetz to certify that there was no QDRO
“requiring any part of [his] benefit to be paid to any other
person.” (Goetzes’ Reply [Dkt. 15], Ex. 2 (emphasis added).)
Mr. Goetz would not have needed to know the legal distinction
between a QDRO and a DRO to answer that question truthfully, as
the settlement agreement on its face did not require that Mr.
Goetz pay Ms. Dahl a part of his benefit.
15
eleven years since her divorce became final she did not do.
Therefore, since there was no QDRO establishing Ms. Dahl’s right
to survivor benefits at the time Mr. Goetz retired, the
surviving spouse benefit irrevocably vested in Mrs. Goetz as of
the date of Mr. Goetz’s retirement.6
IV. Conclusion
For the foregoing reasons, the Court will grant the
motions and dismiss the case.
Should Defendants wish to seek an
award of reasonable attorneys’ fees and costs pursuant to 29
U.S.C. § 1132(g), they are directed to file a separate motion
detailing the factual and legal support for such an award.
An
appropriate order will issue.
August 13, 2015
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
6
In light of this holding, the Court does not need to address
whether the Goetzes are proper defendants in this action.
16
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