Dahl v. Aerospace Employees' Retirement Plan of the Aerospace Corporation et al

Filing 37

MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 10/29/15. (gwalk, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
PHYLLIS DAHL,

)
)
)
)
)
)
)
)
)
)
)
)

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 Plaintiff Phyllis
Dahl’s (“Dahl”) Motion to Reconsider an August 13, 2015 order
dismissing this case for failure to state a claim upon which
relief can be granted.

[Dkt. 28.]

For the following reasons,

the Court will deny the motion.
I. Background
This case arose from an August 2003 final decree of
divorce between Dahl and Defendant Ronald Goetz (“Goetz”).
(Compl. [Dkt. 1] ¶¶ 8-9.)

A Virginia court incorporated Dahl

and Goetz’s divorce settlement agreement, which gave Dahl the
option to elect a fifty, seventy-five, or one hundred percent
survivor annuity benefit under Goetz’s pension plan.
¶ 14.)

(Id.

Goetz was a participant in the Aerospace Employees’

1

Retirement Plan (“AERP”) through his employer, The Aerospace
Corporation.

(Id. ¶ 11.)

AERP permits a plan participant to

designate a beneficiary to receive a survivor annuity after the
participant has died.

(Id. ¶ 12.)

Goetz continued to work for The Aerospace Corporation
for eleven years after the divorce, during which time he
remarried.

Over those eleven years, Dahl did not inform AERP of

her divorce settlement nor did she elect beneficiary status.
(Id. ¶ 26.)

When Goetz retired on July 31, 2014, Dahl still had

not elected the survivor benefits.

(Id. ¶ 22.)

Goetz gave Dahl

no notice of his intent to retire.

(Id. ¶ 21.)

Furthermore,

Goetz did not inform AERP of the divorce settlement and
affirmatively marked on his retirement application that there
were no court orders requiring his benefits to be paid to
another person.

(Id. ¶¶ 30-32.)

Instead, Goetz designated his

current wife as his survivor beneficiary.
In October 2014, after learning of Goetz’s retirement,
Dahl submitted a “draft Qualified Domestic Relations Order” to
AERP for its review.

(Id. ¶ 22.)

AERP would not recognize the

draft order, however, because the survivor annuity vested in
Goetz’s current wife at the time of Goetz’s retirement.
24-28.)

(Id. ¶¶

After appealing AERP’s decision to the plan

administrator, Dahl filed this suit seeking to void Goetz’s
designation of his current wife as his beneficiary, among other
2

relief.

(Id. at 6-7.)

As defendants, Dahl named Goetz, his

current wife, and the Aerospace Employees’ Retirement Plan of
The Aerospace Corporation (collectively “Defendants”).
On August 13, 2015, the Court issued a Memorandum
Opinion granting Defendants’ motion to dismiss Dahl’s complaint
for failure to state a claim.

(Mem. Op. at 16.)

Like AERP,

this Court found that Dahl did not have a Qualifying Domestic
Relations Order (“QDRO”) at the time of Goetz’s retirement.
(Id. at 10.)

Thus, under Forth Circuit law, the benefits vested

in Goetz’s current wife at that time.

(Id. at 10-11.)

Additionally, the Court rejected Dahl’s argument that the
Supreme Court cases of Yiatchos v. Yiatchos, 376 U.S. 306 (1964)
and Free v. Bland, 369 U.S. 663 (1962), should apply to void
Goetz’s beneficiary designation as an act of fraud or breach of
good faith.

(Mem. Op. at 11-15.)

In Yiatchos, the Supreme Court applied a doctrine that
it first recognized in Free, namely that a federal regulatory
scheme’s preemption of state law should “not be used as a shield
for fraud or to prevent relief ‘where the circumstances manifest
fraud or a breach of trust tantamount thereto.’”1
U.S. at 308 (quoting Free, 369 U.S. at 670).

Yiatchos, 376

The statutory

scheme at issue in Yiatchos was a federal treasury regulation

1

For simplicity, the Court will refer to this doctrine
as the Yiatchos doctrine.
3

declaring the beneficiary named on a savings bond the “sole and
absolute owner” of the bond after the purchaser’s death.

Id.

The purchaser in Yiatchos, however, used community property to
buy the bonds.

Thus, under state law, the purchaser’s wife

would have had a claim to at least some of the bonds.

The

Supreme Court expressed concern that the federal regulation’s
preemption of the state communal property law would shield a
potential fraudulent use of community property.

Thus, the

Supreme Court remanded to state court to determine whether the
purchaser’s use of community property was tantamount to fraud
under federal law.

Id. at 309-13.

Despite Dahl’s urging, this

Court declined to apply the Yiatchos doctrine to the QDRO
process when dismissing this case.
Dahl filed a motion to alter or amend the Court’s
judgment on the limited argument that the Court erroneously
declined to void Goetz’s beneficiary designation as the product
of fraud or breach of trust.2

(Pl.’s Mem. in Supp. [Dkt. 28].)

Defendants filed memoranda in opposition to this motion,
(Goetz’s Mem. in Opp. [Dkt. 32]; AERP’s Mem. in Opp. [Dkt. 33]),
to which Dahl replied, (Pl.’s Reply Mem. [Dkt. 35]).
waived a hearing on this motion.

Dahl

Thus, the matter is ripe for

disposition.
2

Dahl does not challenge the Court’s prior finding that
her domestic relations order was not a QDRO within the meaning
of ERISA, 29 U.S.C. § 1056(d)(3)(B).
4

II. Legal Standard
Federal Rule of Civil Procedure 59(e) governs this
motion to reconsider.

A court may amend a judgment under Rule

59(e) in the following three circumstances: “(1) to accommodate
an intervening change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a clear error
of law or prevent manifest injustice.”
994 F.2d 1076, 1081 (4th Cir. 1993).

Hutchinson v. Staton,
Amending a judgment “is an

extraordinary remedy that should be applied sparingly.”
Mayfield v. NASCAR, Inc., 674 F.3d 369, 379 (4th Cir. 2012).

A

reconsideration motion “is inappropriate if it asks the court to
‘reevaluate the basis upon which it made a prior ruling’ or
‘merely seeks to reargue a previous claim.’”

Projects Mgmt. Co.

v. DynCorp Int’l, LLC, 17 F. Supp. 3d 539, 541 (E.D. Va. 2014)
(quoting United States v. Smithfield Foods, Inc., 969 F. Supp.
975, 977 (E.D. Va. 1997)).
III. Analysis
Dahl argues that three sentences in the prior opinion
were incorrect and led the Court to erroneously reject the
application of the Yiatchos doctrine as a means of voiding
Goetz’s beneficiary designation.

Dahl perceived errors in the

following: (1) the opinion states that Dahl cited no cases
applying the Yiatchos doctrine to an ERISA, (Pl.’s Mem. in Supp.
at 1-3); (2) the opinion found no principles in Yiatchos to
5

guide a district court’s fraud or breach of trust analysis, (id.
at 6-8); and (3) the opinion implies in a footnote that Goetz
did not engage in fraud or breach of trust by failing to
disclose the divorce settlement to AERP, (id. at 4-6).
Furthermore, Dahl’s reply memorandum argues that these perceived
errors result from “a misapprehension of the evidence and the
Complaint, and result[] in manifest injustice.”
Mem. at 3-4.)

(Pl.’s Reply

Addressing these arguments in turn, the Court

finds no error in its prior decision and denies Dahl’s motion to
reconsider.
A.

The Court’s Consideration of Dahl’s Cited Cases
Dahl argues that the dismissal of her case was

“premised on the mistaken conclusion that ‘Ms. Dahl has cited no
case law that applies the fraud/breach of trust exception
recognized in Yiatchos and Free to ERISA.’”
Supp. at 1 (quoting Mem. Op. at 13).)

(Pl.’s Mem. in

Dahl’s memorandum at the

motion to dismiss stage cited Sun Life Insurance Co. v. Tinsley,
which applied the federal common law of undue influence to set
aside an ERISA life insurance beneficiary designation.

Sun

Life, No. 6:06-cv-00010, 2007 WL 1052485, at *6 (W.D. Va. Apr.
4, 2007).

For several reasons, Sun Life does not demonstrate

clear error in the Court’s prior decision.
The Court considered Sun Life when evaluating Dahl’s
argument at the motion-to-dismiss stage.
6

This Court’s

memorandum opinion cited and accurately summarized Sun Life’s
holding in a parenthetical.

(See Mem. Op. at 14.)

In light of

the Court’s actual reference to Sun Life, Dahl can make no
credible argument that the Court overlooked that case.

Dahl’s

argument, therefore, must be that the Court misunderstood the
significance of Sun Life by concluding that the case did not
apply the Yiatchos doctrine to ERISA.
The Court did not misunderstand the significance of
Sun Life.

Even Dahl admits that Sun Life never purported to

rely on Yiatchos or Free as the basis of its decision.

(See

Pl.’s Reply at 2 (“The Sun Life Court did not use the words
‘Free’ or ‘Yiatchos,’ yet nonetheless set aside an ERISA
beneficiary designation as a product of fraud.”).

Sun Life

never cited either of those opinions nor referenced the
necessity to avoid any “regulatory imperative.”

Thus, the Sun

Life court clearly had a different rationale for setting aside a
life insurance beneficiary designation for undue influence.
That rationale was ERISA’s “silen[ce] on the matter of which
party shall be deemed beneficiary among disputing claimants.”
Sun Life, 2007 WL 1052485, at *2 (quoting Phoenix Mut. Life Ins.
Co. v. Adams, 30 F.3d 554, 562 (4th Cir. 1994)).

To fill this

gap within ERISA, the Sun Life court abruptly resorted to
federal common law principles of undue influence to decide
whether to set aside a beneficiary designation.
7

Id.

Relying on

federal common law developed by the Sixth Circuit, the court
concluded that the plan participant’s beneficiary designation
was “ineffective” because it was made under the undue influence
of the beneficiary.

Id. at *6.

Dahl attempts to shoehorn this

case into the Yiatchos doctrine by arguing that “[w]hether
expressly stated or not, the avoidance of beneficiary
designations tainted by fraud is the Free and Yiatchos
Doctrine.”

(Pl.’s Reply at 2.)

Under this view, Dahl believes

Sun Life applied Yiatchos to ERISA, making this Court’s
statement that Dahl cited no such case error.
Regardless of whether Sun Life unknowingly conjured
the spirit of Yiatchos when applying federal common law to set
aside a beneficiary designation, it was not error for this Court
to decline to do the same.

Like the Sun Life court, this Court

has the power to “fill in the interstices of ERISA” with federal
common law.

Singer v. Black & Decker Corp., 964 F.2d 1449, 1452

(4th Cir. 1992).

Despite that power, “we must respect the fact

that Congress in creating ERISA has ‘established an extensive
regulatory network and has expressly announced its intention to
occupy the field.’”

Provident Life & Acc. Ins. Co. v. Waller,

906 F.2d 985, 992 (4th Cir. 1990) (quoting U.S. Steel Mining Co.
v. District 17, 897 F.2d 149, 153 (4th Cir. 1990)).
“Importantly, courts must be conscientious to fashion federal
common law only when it is ‘necessary to effectuate the purposes
8

of ERISA.’”

Singer, 964 F.2d at 1452 (quoting Provident Life,

906 F.2d at 992).

Courts applying these principles have reached

conflicting conclusions about the soundness of creating federal
common law to fill ERISA’s statutory gaps.

See, e.g., Provident

Life, 906 F.2d at 992-93 (citing cases disagreeing about the
application of federal common law of unjust enrichment to
ERISA); Sanson v. Gen. Motors Corp., 966 F.2d 618, 622 (11th
Cir. 1992) (citing cases disagreeing about creation of a federal
common law cause of action against ERISA plan administrator for
fraudulent misrepresentation).

For the following reasons, none

of the cases Dahl cites convince this Court that creating a
fraud or breach of trust exception to Goetz’s pension plan
beneficiary designation is necessary to effectuate the purposes
of ERISA.
First, applying federal common law fraud in this case
would likely conflict with ERISA’s antialienation provision.
“[R]esort to federal common law generally is inappropriate when
its application would conflict with the statutory provisions of
ERISA . . . .”

Singer, 964 F.2d at 1452.

“ERISA is an

intricate, comprehensive statute,” which governs both pension
and welfare plans.

Boggs v. Boggs, 520 U.S. 833, 841 (1997).

Within its regulation of pension plans, ERISA explicitly
prohibits plan participants from assigning benefits to other
people.

29 U.S.C. § 1056(d)(1) (“Each plan shall provide that
9

benefits provided under the plan may not be assigned or
alienated.”).

This prohibition “is mandatory and contains only

two exceptions, which are not subject to judicial expansion.”
Boggs, 520 U.S. at 851 (citing §§ 1056(d)(2), (d)(3)(A)).

One

of those exceptions is the QDRO, which Dahl claims entitles her
to plan benefits.

A state court order, however, only avoids the

prohibition on assigning plan benefits if the order meets
statutory requirements to qualify as a QDRO.

See

§§ 1056(d)(3)(C)-(E) (listing requirements); Boggs, 520 U.S. at
846 (“A domestic relations order must meet certain requirements
to qualify as a QDRO.” (internal citations omitted)).
It is uncontested in this motion that Dahl’s domestic
relations order was not a QDRO when Goetz retired.

Dahl argues

that she would have submitted a valid QDRO if it were not for
Goetz’s fraud.

To entertain this argument, the Court would have

to expand the concept of a QDRO to grant Dahl rights to plan
benefits where no actual QDRO existed.

Faced with a similar

request, the Minnesota Supreme Court found that allowing a nonQDRO state law right to divest a beneficiary designation would
“undermine ERISA’s preemption of state law by causing a
[domestic relations order], rather than a QDRO, to have some
effect on the alienation of benefits under ERISA—a result that
ERISA itself clearly prohibits.”

Langston v. Wilson McShane

Corp., 828 N.W.2d 109, 117 (Minn. 2013).
10

Without knowledge that

any other court has expanded the definition of a QDRO in the way
Dahl proposes, it was not error for this Court to decline to
pioneer that path.

See Boggs, 520 U.S. at 851 (describing the

QDRO exception as “not subject to judicial expansion”).
Additionally, injecting a fraud analysis into the
pension plan beneficiary designation process would create
uncertainty in pension plan administration.

The Supreme Court,

in Kennedy v. Plan Administrator for DuPont Savings &
Investment, emphasized the importance of certainty in ERISA
beneficiary designations.

555 U.S. 285 (2009).

There, the

Supreme Court declined to adopt a rule “that might blur the
bright-line requirement to follow plan documents in distributing
benefits.”

Id. at 303.

Currently, the statutory QDRO

requirements give a plan administrator “specific and objective
criteria” to consider, akin to a “statutory checklist.”
301-02.

Id. at

If this Court were to require plan administrators to

also consider the absence of fraud in beneficiary designation,
that could force administrators to make “factually complex and
subjective determinations” that Kennedy expressly sought to
avoid.

Id. at 302.
Lastly, recognizing alleged fraud to void Goetz’s

designation here would violate the terms of the AERP benefit
plan.

“[R]esort to federal common law generally is

inappropriate when its application would . . . discourage
11

employers from implementing plans governed by ERISA, or threaten
to override the explicit terms of an established ERISA benefit
plan.”

Singer, 964 F.2d at 1452.

AERP does not provide any

form of benefit that requires the recalculation of an annuity
after benefit payments have commenced.

(See AERP Mem. in Supp.

Mot to Dismiss [Dkt. 12] at 12; AERP Section 4.4 [Dkt. 12-1] at
1-4.)

If the Court invokes federal common law to void the

beneficiary designation here, the plan would necessarily be
required to recalculate the annuity payments.

This would

conflict with the plan terms and burden the plan administrator.
The factually distinguishable case of Sun Life does
not rebut these reasons for declining to apply an exception to
the QDRO statute.

The Sun Life court did not have to consider

the importance of the explicit QDRO statutory requirements or
ERISA’s prohibition on assigning pension plan benefits.

These

issues did not arise in Sun Life because that case involved life
insurance benefits, see Sun Life, 2007 WL 1052485, at *1,
whereas “ERISA’s anti-alienation provision applies only to
pension plans.”

Metro. Life Ins. Co. v. Marsh, 119 F.3d 415,

419-20 (6th Cir. 1997); see also Mackey v. Lanier Collection
Agency & Serv., Inc., 486 U.S. 825, 836 (1988) (“Specifically,
ERISA § 206(d)(1) bars (with certain enumerated exceptions) the
alienation or assignment of benefits provided for by ERISA
pension benefit plans.

Congress did not enact a similar
12

provision applicable to ERISA welfare benefit plans . . . .”);
Manning v. Hayes, 212 F.3d 866, 873 (5th Cir. 2000) (“Both ERISA
§ 1055 and ERISA § 1056 are facially limited in application to
pension plans, and neither section purports to have any
application with respect to competing claims to benefits under a
non-pension employee welfare plans [sic], such as [a] life
insurance policy.”).

Thus, Sun Life only serves as evidence

that a federal court may apply federal common law to fill the
interstices of ERISA when appropriate, something this Court
never disbelieved.

Sun Life does not, however, compel this

Court to conclude that it would be appropriate to do so in this
pension plan case.

Dahl’s disagreement with the Court’s

interpretation of Sun Life and Yiatchos does not justify
reconsideration under Rule 59(e).

See Hutchinson v. Staton, 994

F.2d 1076, 1082 (4th Cir. 1993) (“While plaintiffs disagreed
with how the district court applied the Christianburg standard,
mere disagreement does not support a rule 59(e) motion.”).
Similarly, Dahl’s citations to cases applying the
Yiatchos doctrine to statutory or regulatory schemes other than
federal treasury regulations do not convince this Court to apply
that exception here.

Those cases provide support that Yiatchos

has application outside of the regulatory scheme that prompted
its creation.

Those cases do not, however, lead to the

conclusion that this Court should be the first to apply the
13

doctrine to an ERISA pension plan beneficiary designation.
Therefore, the Court denies Dahl’s motion to reconsider on this
basis.
B.

Dahl’s next complaint of error is also unconvincing.
The Court’s Decision Not to Find Fraud in Goetz’s
Designation of Julie Goetz as His Survivor Annuitant
Dahl’s next basis for reconsideration is a footnote in

the Court’s prior opinion stating that Goetz was truthful when
he marked on his retirement benefits application that there was
no QDRO “requiring any part of [his] benefit to be paid to any
other person.”

(Mem. Op. at 15 n.5.)

Dahl argues that the

Court’s statement reflects a “mistake of law, misapprehension of
the evidence and the Complaint, and results in manifest
injustice” because, even if technically truthful, Goetz’s
conduct was itself “fraud and a breach of trust.”
Mem. at 3-4.)

(Pl.’S Reply

The Court finds no reason to reconsider its prior

opinion on this basis.
First, Dahl’s argument that this footnote demonstrates
a clear error of law is mooted by the above discussion.

The

decision above reaffirms why the Court will not apply federal
common law of fraud or the Yiatchos doctrine to the QDRO
exception to the pension plan antialienation provision.

Having

reached that conclusion, there can be no clear error in finding
that Goetz’s conduct does not void his beneficiary designation.

14

Second, contrary to Dahl’s argument, there is no
manifest injustice in this outcome.3

The “manifest injustice

standard presents [parties] with a high hurdle.”

In re Yankah,

514 B.R. 159, 166 (E.D. Va. 2014) (quoting Westerfield v. United
States, 366 F. App’x 614, 619 (6th Cir. 2010).

That hurdle is

not surpassed by permitting Goetz’s current wife to remain the
beneficiary of his pension plan survivor annuity.

Dahl had

eleven years to elect beneficiary status or put the plan
administrator on notice of her option to elect.
years she failed to do either.

For eleven

As the Minnesota Supreme Court

concluded in a case with similar facts, former spouses “must act
with diligence to preserve their state-law rights in accordance
with ERISA’s statutory scheme.”

Langston v. Wilson McShane

Corp., 828 N.W.2d 109, 117 (Minn. 2013).
Third, the Court finds no misapprehension of the
evidence or the Complaint.

The Court has considered Dahl’s

argument that Goetz’s designation of his current wife as a
survivor annuitant was an independent act of fraud or breach of
3

Dahl raised arguments of manifest injustice for the
first time in her reply brief. (See Pl.’s Reply Mem. at 3-4.)
The Court is free to reject arguments raised for the first time
in a reply brief. E.I. du Pont de Nemours & Co. v. Kolon
Indus., Inc., 847 F. Supp. 2d 843, 851 n.9 (E.D. Va. 2012) (“It
would be manifestly unjust and would undermine the integrity of
the judicial process if the Court were to consider these new
arguments because they were presented knowing that [Defendants]
had no opportunity to respond.”). This procedural impropriety
provides an independent reason for the Court’s denial of the
motion to reconsider on this basis.
15

trust, in addition to Dahl’s other arguments.

Dahl appears to

disagree with the Court’s resolution of these issues.

Mere

disagreement with the Court’s conclusion, however, does not
demonstrate any misapprehension of the facts or complaint.
C.

The Court’s Statement that the Scope of a Fraud
Exception Is Not Defined
As a third perceived error, Dahl argues that the Court

wrongly concluded that Yiatchos “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.”

(Pl.’s Mem. in Supp. at 14.)

When considering

whether fraud was present, the Yiatchos Court said it would
apply “federal standards . . . guided by state law.”
at 309.

Similarly, in Sun Life, the court looked to federal

common law adapted from the law of six states.
at *3.

376 U.S.

2007 WL 1052485,

This Court has expressed at length in this opinion why

it will not apply a similar fraud exception to ERISA’s pension
plan antialienation provision and QDRO process.

Therefore, any

perceived error in the Court’s prior statement regarding lack of
guidance is moot.

In other words, although the Court has the

authority to create federal common law, the Court does not find
sufficient reason to invoke that power here.

16

IV. Conclusion
For the foregoing reasons, the Court finds that
reconsideration is not warranted.
deny Dahl’s motion.

October 29, 2015
Alexandria, Virginia

Therefore, the Court will

An appropriate order will issue.

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

17