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Metropolitan Life Insurance Co. v. McDonald

United States District Court, E.D. Michigan, Southern Division

June 10, 2019

METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff,
v.
BEATRICE MCDONALD and SARAH MCDONALD RAY, Defendants.

          OPINION AND ORDER GRANTING RAY'S MOTION FOR SUMMARY JUDGMENT [23], DENYING MCDONALD'S MOTION FOR SUMMARY JUDGMENT [25] AND DENYING MCDONALD'S MOTION TO FILE A CROSS CLAIM [24]

          LAURIE J. MICHELSON UNITED STATES DISTRICT JUDGE

         The central question in this case can be stated briefly: Is Sarah L. McDonald Ray or Beatrice McDonald entitled to the proceeds from Leon McDonald's life-insurance policy? The answer is brief too: Sarah L. McDonald Ray. The justification for this answer, however, is not so brief.

         For over 20 years, Leon McDonald and Sarah L. McDonald Ray were married. In February 1986, the two divorced. (See ECF No. 23, PageID.146.) As part of their divorce, Leon and Sarah entered into a Property Settlement Agreement (“Divorce Agreement”). The Divorce Agreement stated, “The husband [Leon McDonald] shall name the wife [Sarah L. McDonald] as the primary beneficiary of the husband's General Motors Corporation life insurance policy, and shall name as equal contingent beneficiaries thereof the parties' daughter [and the parties' two grandchildren]. The husband shall continue to have the above persons as his primary and contingent beneficiaries, unless such persons agree to a change.” (ECF No. 23, PageID.153.)

         Sometime before his divorce from Sarah, Leon began a relationship with Beatrice McDonald. In time, the two would marry. Despite the Divorce Agreement, Leon eventually named Beatrice as the primary beneficiary of his General Motors life-insurance policy. (ECF No. 1, PageID.31.) This occurred at least by 2003. (See ECF No. 1, PageID.31.) In 2010, Leon completed another change-of-beneficiary form, keeping Beatrice as the primary beneficiary but adding his daughter (from his marriage with Sarah) as a contingent beneficiary. (ECF No. 1, PageID.27.)

         In July 2016, Leon died. MetLife, the administrator of General Motors' life-insurance plan, received competing claims to the proceeds of Leon's life-insurance policy: one from Sarah, one from Beatrice. So MetLife filed this interpleader lawsuit asking the Court to sort it out.

         In their respective motions for summary judgment, Sarah and Beatrice take expected positions: Sarah says the Divorce Agreement trumps the beneficiary-designation forms; Beatrice says just the opposite.

         Who is correct largely depends on the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). ERISA regulates employee-benefit plans, including the General Motors life-insurance plan. (See ECF No. 1, PageID.66.) Speaking generally, ERISA prohibits assigning or “alienat[ing]” the proceeds of a life-insurance policy to anyone but the named beneficiary. See 29 U.S.C. § 1056(d)(1). And, still speaking generally, ERISA's provisions preempt or, more precisely, “supersede any and all State laws insofar as they . . . relate to any employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). Because the Divorce Agreement was incorporated into the divorce judgment entered by the state court, and because it attempts to dictate the beneficiaries of an ERISA-governed policy, it is a state law that relates to an employee benefit plan. Cf. Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 147 (2001). So it seems that the Divorce Agreement runs into ERISA's anti-alienation provision and its preemption provision. And if that were so, it seems that Beatrice should receive the life-insurance proceeds. 29 U.S.C. § 1104(a)(1)(D) (providing that plan administrator is to “discharge his duties . . . in accordance with the documents and instruments governing the plan”).

         But that is, as noted, “speaking generally.” And in this case, it is necessary to be more specific. “In 1984, Congress amended ERISA to provide greater protection for spouses and dependents after a divorce.” Sun Life Assurance Co. of Canada v. Jackson, 877 F.3d 698, 700 (6th Cir. 2017). In particular, Congress exempted qualified domestic relations orders (or “QDROs”) from ERISA's anti-alienation and preemption provisions. See 29 U.S.C. § 1144(b)(7); Boggs v. Boggs, 520 U.S. 833, 846-47 (1997). So if Leon and Sarah's Divorce Agreement is a QDRO, then the Divorce Agreement would not run afoul of ERISA's anti-alienation provision. Boggs, 520 U.S. at 846-47. Nor would the Divorce Agreement be preempted by ERISA. Id.

         So is the Divorce Agreement a QDRO? To answer that question, the Court must first decide whether the Divorce Agreement is a domestic relations order or “DRO.” That is because to be a qualified DRO, the Divorce Agreement must first be a DRO. See 29 U.S.C. § 1056(d)(3)(B)(i). Fortunately, it is readily apparent that the Divorce Agreement is a DRO. DROs include “approval[s] of a property settlement agreement” that (1) “relate[] to the provision of . . . marital property rights to a spouse” or “former spouse” and (2) are “made pursuant to a State domestic relations law.” 29 U.S.C. § 1056(d)(3)(B)(ii). The Divorce Agreement is a “property settlement agreement” that was incorporated by reference into Leon and Sarah's judgment of divorce which was pursuant to Florida domestic relations law. (ECF No. 12, PageID.101.) So the Divorce Agreement is a DRO.

         Now to the qualified part. To be a QDRO, the Divorce Agreement must meet additional requirements. One set of requirements are obviously satisfied: the Divorce Agreement does not require MetLife (or any other administrator of the General Motors plan) to provide a benefit that is not part of the plan, it does not divert funds from a beneficiary named in another QDRO, and it does not require MetLife “to provide increased benefits.” See 29 U.S.C. § 1056(d)(3)(D). And the Divorce Agreement “creates or recognizes the existence of an alternate payee's right to . . . receive all or a portion of the benefits payable.” 29 U.S.C. 1056(d)(3)(B)(i). (An “alternate payee” is simply a “spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.” 29 U.S.C. § 1056(d)(3)(K).)

         There are five more requirements for the Divorce Agreement to be a QDRO. See 29 U.S.C. § 1056(d)(3)(C). In particular, the Divorce Agreement must “clearly specif[y]” (more on what this means in moment) the following: (1) “the name and the last known mailing address (if any) of the participant”; (2) “the name and mailing address of each alternate payee covered by the order, ” (3) “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, ” (4) “the number of payments or period to which such order applies, ” and (5) “each plan to which such order applies.” 29 U.S.C. § 1056(d)(3)(C)(i)-(iv).

         As noted, the Divorce Agreement must “clearly specif[y]” the five items referenced in § 1056(d)(3)(C). When Congress amended ERISA in 1984 to remove QDROs from the ambit of preemption, it gave greater protection to “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. of Canada v. Jackson, 877 F.3d 698, 702 (6th Cir. 2017). But Congress had to balance that “greater flexibility” for family members against a plan administrator's obligations under ERISA. And § 1056(d)(3)(C) aimed to do that by “requiring the [state court] order to be clear about the identity of the alternate payee and the benefits to be redirected.” Jackson, 877 F.3d at 702. So to be a QDRO, the Divorce Agreement must “clearly specify” the five items referenced in § 1056(d)(3)(C). That said, clearly specifying something does not require “Simon Says rigidity” or “magic words”; “[o]ne may ‘clearly specify' something by implication or inference so long as the meaning is definite.” Jackson, 877 F.3d at 701.

         So does the Divorce Agreement “clearly specify” the five items in § 1056(d)(3)(C)? Take them one by one.

         One. The Divorce Agreement has Leon's full name, “Leon R. McDonald.” (ECF No. 23, PageID.147.) It does not explicitly recite his last known mailing address, but it does say that he and Sarah owned a “marital home” at “17933 East Road, Hudson, Florida” and that, at the time of the divorce, that home was in the process of being sold. (ECF No. 23, PageID.149.) Thus, at the time of the divorce, the administrator of General Motors' life-insurance plan could contact Leon at 17933 East Road. And, as noted, ease of administration is the point of the § 1056(d)(3)(C) requirements. See Jackson, 877 F.3d at 702; Hamilton v. Washington State Plumbing & Pipefitting Indus. Pension Plan, 433 F.3d 1091, 1097 (9th Cir. 2006) (providing that the “pivotal question” is whether the marriage dissolution order “clearly contains the information specified in the statute that a plan administrator would need to make an ...


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