Has Seventh District Court of Appeals ruled on ERISA preemption of post-distribution lawsuits?

[pwitt]

Hello,

I've been trying to determine if the Seventh Circuit Court of Appeals has "ruled" one way or the other on the validity of post-distribution lawsuits from ERISA covered Plans to recover monies paid to ex-spouse that explicitly "waived" ANY benefits of ANY SORT ,i.e prior to death of the plan participant as well as entitlement to any death benefit(s)?  If so, can someone please provide a case citation? Thanks in advance!

Philip W. 

[pwitt]

Buehler? Buehler? Anybody?

[Tom Veal]

Can you describe the circumstances more fully?  Is this a DB plan?  If so, did it terminate in a standard or a distress termination?  Is the plaintiff the plan's trustee or the employer?  What will be done with the funds recovered from the ex-spouse?

[fmsinc]

I don't think the USCA for the 7th Circuit has addressed this issue but there are cases all over the courntry that have permitted post distribution suits in order to overcome Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009).  But keep in mind that in footnote 10 Kennedy said: 

""Nor do we express any view as to whether the Estate could have brought an action in state or federal court against Liv to obtain the benefits after they were distributed. Compare Boggs v. Boggs, 520 U.S. 833, 853, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997) ("If state law is not preempted, the diversion of retirement benefits will occur regardless of whether the interest in the pension plan is enforced against the plan or the recipient of the pension benefit"), with Sweebe v. Sweebe, 474 Mich. 151, 156-159, 712 N.W.2d 708, 712-713 (2006) (distinguishing Boggs and holding that "while a plan administrator must pay benefits to the named beneficiary as required by ERISA," after the benefits are distributed "the consensual terms of a prior contractual agreement may prevent the named beneficiary from retaining those proceeds"); Pardee v. Pardee, 2005 OK CIV APP. 27, ¶¶ 20, 27, 112 P.3d 308, 313-314, 315-316 (2004) (distinguishing Boggs and holding that ERISA did not preempt enforcement of allocation of ERISA benefits in state-court divorce decree as "the pension plan funds were no longer entitled to ERISA protection once the plan funds were distributed")."

Some of recent cases upholding post-distribution suits are:

Andochick v. Byrd, 709 F.3d 296 (USCA 4th Cir.,2013). 

In re: Marriage of Stine, No. A154972, Court of Appeals of California, First District, Division One, - Filed November 22, 2019 - that you can find at -
https://scholar.google.com/scholar_case?case=17865274454005199096&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:14880692104701005079:AAGBfm2qi1_JaXLJvydb4f3quYTnTlLkbA
cited Andochick v. Byrd. 

Hennig v. DIDYK, Tex: Court of Appeals, 438 S.W.3d 177 (2014). 

In McCarthy v. Estate of McCarthy, No. 14-CV-6194 (JMF), United States District Court, S.D. New York (2015)

United States District Court for the Northern District of Ohio in Davis v. Drake -
http://scholar.google.com/scholar_case?case=3333936970567538351&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt
 

Cunningham v Hebert, Case No. 14 C 9292, United States District Court, N.D. Illinois, Eastern Division. November 1, 2016 - that you can find at:
https://scholar.google.com/scholar_case?case=17784378297196159743&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt

There are many other from US District Courts as well.  

 

[pwitt]

Thank you VERY MUCH for your reply and the NUMEROUS citations!   I've been searching several different sources (Justia, Casetext,etc.) and personally haven't found any rulings that would be adverse. I had read the petition for a Writ of Certiorari in Ragan v. ragan and I thought it presented a pretty good summary (albeit from 2 yrs ago) of the various "Districts" positions regarding post -distribution lawsuits to recover monies paid out to ex-spouses. I'l sit and read all of your "citations" this evening. Thank you very much for your extremely detailed and informative reply! I REALLY APPRECIATE IT!!

[Peter Gulia]

Pwitt, if you seek particularly a decision of the U.S. Court of Appeals for the Seventh Circuit, read Melton v. Melton, 324 F.3d 941, 943–945 (7th Cir. 2003) (ERISA preempts a State-law constructive-trust remedy), available at https://casetext.com/case/melton-v-melton.

Trial courts in the Seventh Circuit have applied Melton’s reasoning. See, for example, Reliastar Life Ins. Co. v. Keddell, No. 09-c-1195, 2011 U.S. Dist. LEXIS 3164, 2011 WL 111733, at *3 (E.D. Wis. Jan. 12, 2011) (“A constructive trust would violate ERISA’s preemptive force even if it applied after the funds from the [plan] were actually distributed.”).

You’d use your citator tools to find whether any Seventh Circuit decision questions or distinguishes Melton’s reasoning.

I have not researched this point recently.

This is not advice to anyone.

[pwitt]

Thank you for the detailed response, citations, and advice on "searching" Peter I really appreciate it!

[pwitt]

Hi Tom,

 

I prefer not to get into too many details regarding the actual detailed circumstances at this time; as I anticipate legal action shortly on the matter and who knows who would be reading this. That being said, the "issue at hand" involves a Defined Benefit Plan that paid the death benefit of a recently deceased, fully vested, former plan participant, to their ex-spouse.
The ex-spouse, as part of a Marital Settlement Agreement many years earlier , had specifically waived any interest whatsoever in the DB Plan; either in recieving a share of future payments or any potential death benefit .  

[Effen]

Just jumping in because I am curious, what this an insured death benefit?  I assume it was something over and above the QPRSA which should not have been paid to the ex spouse since they weren't married at the time of death and assumingly they didn't have a QDRO.  If it was an ancillary death benefit, was the ex-spouse the named beneficiary?  

I assume you are involved because someone else thinks they should have been paid the death benefit?  

 

[pwitt]

Hello Effen,

No "insured death benefit". The recently deceased had a pretty standard "old-school" Pension Plan from an employer they worked for many, many years earlier. Because "they" worked for the company many years ago and for a long period of time, two things occured: 1) They named their then "spouse" as primary beneficiary, 2) They were fully "vested" in the plan but  when they died they had not begun to take benefits (they died before the minmum age to start recieving "benfits" of any type under the DB Plan). Many years later, after leaving the company, they divorced their previous spouse(who had previously been made the PRIMARY beneficiary). As stated prior, the MSA included specific language wherein the soon-to-be former spouse "waived" any interest of any sort in said DB Plan. The T.P.A. for the DB plan went ahead and paid out the lump-sum "death benefit"   to the former spouse. It was a substantial sum and without a  "valid" primary benficiary the sum would have been/should have been paid to the deceased's Estate which has several beneficiaries. More than one highly-regarded attorney has suggested pursuing action , post-distribution, in state court to recovery the monies. Hence the reason for my original question (the Estate falls within the purview of the Seventh District). Based upon caselaw  generously supplied by previous posters (special thanks to Peter Gulia), it would appear that such a strategy would be destined to fail.

[Effen]

Interesting, but seems to me they had "many years" to change the primary beneficiary if they wanted to.   You say the beneficiary designation was not valid, but I disagree..  I guess that is your fight, but I assume you will be suing the ex-spouse, not the TPA.  I don't see how the TPA did anything wrong.  They have a signed beneficiary designation and they paid the death benefit based on that.    

[Peter Gulia]

pwitt, while recognizing Melton (if you find nothing that overrules, questions, or distinguishes it), consider these possibilities:

Might an action seeking an equity remedy that the former spouse restore to the decedent’s estate property that in good conscience does not belong to the former spouse at least begin in a State’s courts?

Might such an action proceed in a State’s courts?

Or are the would-be litigants citizens of different States?

If so, would the former spouse seek a removal to a Federal court?

Might the former spouse and her lawyers be unaware of Melton (and of the several Federal district court decisions that follow Melton)?

Might a judge be unaware of Melton (if neither litigant briefs it)?

If an action proceeds in a State’s court, might a judge recognize that Melton does not control the States’ courts?

Of Federal courts’ decisions, only a decision of the Supreme Court of the United States can be a precedent that controls a State’s courts. A decision of an inferior Federal court, while it usually gets “respectful consideration”, does not control a State court’s interpretation.

Bryan A. Garner, Carlos Bea, Rebecca White Berch, Neil M. Gorsuch, Harris L Hartz, Nathan L. Hecht, Brett M. Kavanaugh, Alex Kozinski, Sandra L. Lynch, William H. Pryor Jr., Thomas M. Reavley, Jeffrey S. Sutton & Diane Wood, The Law of Judicial Precedent §§ 79-80 [pages 679-693] (Thomson Reuters 2016).

If an action proceeds in a State’s court, is the decedent’s estate’s advocate excused from citing Melton because it is not “legal authority in the controlling jurisdiction”? Model Rules of Pro. Conduct r. 3.3(a)(2) (Am. Bar Ass’n 2024).

Whatever might be a persuasive authority in a State’s court or even a precedent for a Federal court in the Seventh Circuit, is the decedent’s estate’s lawyer free to present “a good faith argument for an extension, modification[,] or reversal of existing law”? Model Rules of Pro. Conduct r. 3.1 (Am. Bar Ass’n 2024).

Might each of the decedent’s estate and the former spouse recognize uncertainties about the other’s claims, uncertainties about remedies, and each’s burdens of litigation as reasons to settle on a partial amount to be restored to the decedent’s estate?

This is not advice to anyone.