Guardian Life Insurance Company of America v. Finch

Full title: THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, Plaintiff, v. KIMBERLYE…

Court: United States District Court, N.D. Texas

Date published: Jan 15, 2004

Civil Action No. 3:03-CV-1225-BH (N.D. Tex. Jan. 15, 2004)

Opinion

Civil Action No. 3:03-CV-1225-BH

January 15, 2004

MEMORANDUM OPINION AND ORDER

IRMA C. RAMIREZ, Magistrate Judge

Before the Court are:

(1) Eddie Lee Galaway's Motion for Summary Judgment, filed September 30, 2003;

(2) Kimberlye Finch's Response to Eddie Lee Galaway's Motion for Summary Judgment, filed October 21, 2003;

(3) Kimberlye Finch's Motion for Summary Judgment, filed September 30, 2003;

(4) Eddie Lee Galaway, as Administrator of the Estate of Bradford Wayne Galaway's Response to Kimberlye Finch's Motion for Summary Judgment, filed October 22, 2003; and

(5) Kimberlye Finch's Reply to Eddie Lee Galaway's Response to Finch's Motion for Summary Judgment, filed November 5, 2003.

Having reviewed the pertinent pleadings and the law applicable to the issues raised, the Court is of the opinion that Eddie Lee Galaway's Motion for Summary Judgment should be GRANTED and Kimberlye Finch's Motion for Summary Judgment should be DENIED.

I. BACKGROUND

Bradford Wayne Galaway ("Galaway") and Kimberlye Finch ("Finch") were married on September 22, 2001. On or about February 1, 2002, the Guardian Life Insurance Company of America ("Guardian") issued a group insurance policy to Galaway's employer, which provided Galaway with basic life insurance and accidental death benefits. The policy constitutes an insured employee welfare benefit plan governed by and subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002. Galaway named Finch as the beneficiary of the policy. Galaway and Finch were divorced on June 20, 2002. The Agreed Final Decree of Divorce, signed by both Galaway and Finch and their respective attorneys, awarded Galaway as his separate property, all insurance policies insuring his life. On November 8, 2002, Galaway was killed in an airplane accident. He died intestate and had not changed the named beneficiary on the life insurance policy prior to his death.

Finch claims that as the named beneficiary under the policy, she is entitled to receive the benefits payable under the policy. Eddie Lee Galaway, the duly appointed Administrator of the Estate of Bradford Wayne Galaway ("Estate"), asserts that Finch was divested of any rights to the policy benefits through the divorce decree and that the benefits should be paid to the Estate. On May 30, 2003, Guardian filed the instant interpleader action, seeking to require Finch and the Estate to interplead and settle their respective rights to the policy benefits. Guardian was discharged from all liability with respect to the benefits on September 16, 2003. Both Finch and the Estate have now filed motions for summary judgment on the issue of entitlement to the benefits, stating that the only issue to be resolved is the law to be applied to the case.

II. STANDARD OF REVIEW

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). A material fact is one that "might affect the outcome of the suit under the governing law" and a "dispute about a material fact is `genuine' . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In a motion for summary judgment, the burden is on the movant to prove that no genuine issue of material fact exists, and if the movant fails to meet his burden, the motion must be denied, regardless of the nonmovant's response. Little, 37 F.3d at 1075. If, however, the movant does meet his burden, then the nonmovant must go beyond the pleadings and "designate specific facts showing that there is a genuine issue for trial." Id. "If the non-movant fails to present facts sufficient to support an essential element of his claim, summary judgment is appropriate." Vela v. City of Houston, 276 F.3d 659, 666 (5th Cir. 2001). The record before the court must be considered in the light most favorable to the nonmovant. Harrison v. Byrd, 765 F.2d 501, 504 (5th Cir. 1985).

III. ANALYSIS

Both parties agree that no genuine issue of material fact exists in this case and that this case may be decided as a matter of law. The parties also agree that the policy at issue in this case is governed by ERISA. The Estate argues that ERISA does not prevent a beneficiary from waiving rights to insurance benefits, and that Finch waived her rights to the policy benefits in the divorce decree. Finch asserts that ERISA does not provide for waiver of beneficiary rights and dictates that benefits be paid in accordance with plan documents.

ERISA broadly preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Fifth Circuit has held that the Texas beneficiary redesignation statute, Tex. Fam. Code § 9.301, relates to employee benefit plans and is preempted by ERISA. Manning v. Hayes, 212 F.3d 866, 870 (5th Cir. 2000). In Manning, the Fifth Circuit reaffirmed the rule set forth in Clift v. Clift, 210 F.3d 268 (5th Cir. 2000) and Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir. 1994), that federal common law, rather than the text of ERISA itself, governs resolution of cases in which a former spouse who is still the designated beneficiary of a policy governed by ERISA is alleged to have waived her rights to the policy benefits. Manning, 212 F.3d at 872. The court decided not to follow the minority view, which employs the principles of conflict preemption, noting that "the law of family relations, which includes an individual's right to expressly apportion property upon divorce, has traditionally been a fairly sacrosanct enclave of state law." Id. at 872. The court determined that in applying federal common law to cases such as the case at bar, the courts should borrow from state law when determining the federal common law that should control. Id. According to the Fifth Circuit, the rule of federal common law applicable to disputes concerning waiver by a designated beneficiary of ERISA life insurance proceeds is that "a named ERISA beneficiary may waive his or her entitlement to the proceeds of an ERISA plan providing life insurance benefits, provided that the waiver is explicit, voluntary, and made in good faith." Id. at 874.

Finch asserts that the Supreme Court's decision in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), "decisively overruled both Clift and Brandon." (Finch's Br. in Opp. to Galaway's M. for Summ. J. at 2.) In Egelhoff, the Supreme Court held that ERISA preempted a Washington state statute providing for automatic revocation of the designation of a former spouse upon divorce. Egelhoff, 532 U.S. at 143. The Court noted that preemption of such statutes is necessary to prevent "[r]equiring ERISA administrators to master the relevant laws of 50 states." Id. at 149. However, the Court limited its holding to the finding that the Washington statute was expressly preempted by ERISA and declined to address whether the principles of conflict preemption applied. Id. at 146. The Court also failed to address the circuit split regarding whether federal common law or ERISA itself governs in cases of preemption and did not overrule the Fifth Circuit's common law approach as set out in Clift and Brandon.

Although the Supreme Court did not determine whether conflict preemption was applicable upon a determination of ERISA preemption, its decision in Egelhoff does cast doubt on whether the Fifth Circuit's federal common law approach, as set out in Manning, Clift, and Brandon, should continue to be applied in such cases. This issue was expressly considered in Metropolitan Life Ins. Co. v. Palmer, 238 F. Supp.2d 821 (E.D.Tex. 2002), wherein the court conducted a detailed analysis of the common law approach to ERISA preemption and the potential effects of Egelhoff on that approach. There, the court noted that while Egelhoff involved the issue of ERISA preemption of a state statute, Brandon involved a divorce decree that could constitute a waiver under federal common law. Metropolitan Life Ins. Co., 238 F. Supp.2d at 825-26. The court cited Egelhoff for the proposition that one of the purposes of preemption was to prevent requiring ERISA administrators to master the relevant laws of 50 States. Id. at 826 (citing Egelhoff, 532 U.S. at 149). The court noted that

[a]pplication of a divorce decree presents much less danger. A divorce decree is entitled to full faith and credit. As such, the choice-of-law fears noted in Egelhoff do not exist. Absent a clear showing that the rule set forth in Brandon has been discredited by the Supreme Court, this district court is not at liberty to depart from the established law of the Fifth Circuit.

Metropolitan Life Ins. Co., 238 F. Supp.2d at 826 (internal citations omitted). In light of the fact that the Supreme Court declined to determine whether the principles of conflict preemption apply and did not overrule the federal common law approach set forth by the Fifth Circuit in Manning, Clift and Brandon, this Court will also follow established Fifth Circuit precedent.

Applying the federal common law of waiver in this case, it is clear that Finch waived her rights to the policy benefits at issue. The Fifth Circuit has held that any waiver of ERISA benefits must be explicit, voluntary, and made in good faith. Manning, 212 F.3d at 874. The Agreed Final Decree of Divorce stated that Galaway was awarded "as his sole and separaty property, and [Finch] is divested of all right, title, interest, and claim in and to . . .[a]ll policies of life insurance (including cash values) insuring [Galaway's] life. (Appx. to Galaway's M. for Summ. J. at 18, 23.) The divorce decree was signed by Finch and her attorney. Id. at 23. The waiver of Finch's rights to the policy is explicit, and Finch does not allege that there is any issue relating to whether the parties acted voluntarily or in good faith. Because the divorce decree include language explicitly divesting Finch of an interest in any and all policies insuring Galaway's life and the waiver was voluntary and in good faith, the Court finds that Finch waived her beneficiary status in the subject policy.

IV. CONCLUSION

For the foregoing reasons, the Court concludes that no genuine issue of material fact exists and that summary judgment is appropriate in this case. Accordingly, Eddie Lee Galaway's Motion for Summary Judgment is hereby GRANTED and Kimberlye Finch's Motion for Summary Judgment is hereby DENIED. SO ORDERED.