Metropolitan Life Insurance v. Pettit ( 1998 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
METROPOLITAN LIFE INSURANCE
COMPANY,
Plaintiff,
v.
BETTY T. PETTIT, No. 97-2244
Defendant-Appellant,
v.
PATRICIA B. PETTIT,
Defendant-Appellee.
METROPOLITAN LIFE INSURANCE
COMPANY,
Plaintiff,
v.
PATRICIA B. PETTIT, No. 97-2407
Defendant-Appellant,
v.
BETTY T. PETTIT,
Defendant-Appellee.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Claude M. Hilton, Chief District Judge.
(CA-96-1311-A)
Argued: September 23, 1998
Decided: December 31, 1998
Before MURNAGHAN and WILLIAMS, Circuit Judges, and
BULLOCK, Chief United States District Judge from the Middle
District of North Carolina, sitting by designation.
_________________________________________________________________
Affirmed by published opinion. Judge Williams wrote the opinion, in
which Chief Judge Bullock concurred. Judge Murnaghan wrote a sep-
arate concurring opinion.
_________________________________________________________________
COUNSEL
ARGUED: Robert Eric Greenberg, FRIEDLANDER, MISLER,
FRIEDLANDER, SLOAN & HERZ, Washington, D.C., for Appel-
lant. Brian Stuart Chilton, HOGAN & HARTSON, L.L.P., Washing-
ton, D.C., for Appellee. ON BRIEF: Glenn W. D. Golding,
FRIEDLANDER, MISLER, FRIEDLANDER, SLOAN & HERZ,
Washington, D.C., for Appellant. David G. Leitch, HOGAN &
HARTSON, L.L.P., Washington, D.C., for Appellee.
_________________________________________________________________
OPINION
WILLIAMS, Circuit Judge:
Upon the death of one of its insured, Tom Pettit (Tom), Metropoli-
tan Life Insurance Company (MetLife) sought to pay life insurance
proceeds due under an Employee Retirement Income Security Act
(ERISA) qualified plan. The designated beneficiary, Patricia Pettit
(Patricia), who was Tom's widow, and Tom's former wife, Betty Pet-
tit (Betty), both claimed a portion of the proceeds. Betty's claim was
based on a property settlement agreement that she entered into with
Tom in connection with their divorce. Faced with these competing
claims, MetLife filed an interpleader action to determine the proper
disposition of the insurance proceeds. Betty filed a cross-claim
against Patricia seeking to enforce a constructive trust against the dis-
puted proceeds. Both parties to the cross-claim filed competing
motions for summary judgment.
2
Relying on ERISA's preemption clause, the district court held that
Betty's claim was preempted because it was based upon state law that
related to an employee benefit plan. The district court noted further
that Betty had not employed a qualified domestic relations order
(QDRO), the method ERISA provided for a divorced spouse to
enforce property rights in an ERISA plan. Accordingly, the district
court granted Patricia's motion for summary judgment and denied
Betty's summary judgment motion. The district court also denied
Patricia's motion for attorney's fees and costs.
On appeal, Betty contends that because an ERISA plan administra-
tor should look outside of the plan provisions to allocate benefits
properly and that this burden does not conflict with ERISA's policies,
her constructive trust claim is not preempted. She also argues that
although the district court did not reach the merits of her constructive
trust claim, this Court may resolve those issues without remand. Patri-
cia filed a cross-appeal challenging the district court's denial of her
attorney's fees and costs. Because we agree that ERISA preempts the
constructive trust claim and that no attorney's fees should be awarded
in this case, we affirm the judgment of the district court.
I.
During divorce proceedings in 1989, Tom and Betty Pettit divided
their marital property through a property settlement agreement, which
was incorporated but not merged into their divorce decree, and a sepa-
rate QDRO that was entered by the Circuit Court of Fairfax County,
Virginia. The property settlement agreement provided for a division
of personalty and realty, the payment of spousal support, and other
general matters. That agreement also specifically required Tom to
maintain $200,000 of life insurance benefits in favor of Betty1 and to
transfer to Betty ownership of several life insurance policies issued by
Connecticut Mutual, American Mutual, and Prudential. The trans-
ferred policies are not at issue in this appeal. The QDRO transferred
to Betty one-half of Tom's interest in his income savings plan, which
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1 The life insurance provision also required Tom to provide at least
annual proof of compliance therewith. Betty never received or requested
such proof.
3
was maintained through his employer, but it made no mention of life
insurance benefits.
This appeal concerns the life insurance policy that Tom carried
through his employer, the National Broadcasting Company (NBC),
which was administered by MetLife. This life insurance policy was
subject to the provisions of ERISA; it was not specifically mentioned
in the property settlement agreement. Tom also owned and privately
maintained other life insurance policies. The beneficiary designations
on the policies were changed frequently, but at Tom's death, Betty
was not named as the beneficiary of either the MetLife policy or any
other policy that would fulfill the property settlement agreement's
$200,000 insurance obligation.2 Unbeknownst to Betty, Tom had des-
ignated his then wife, Patricia, as the beneficiary of the MetLife plan.
Seeking to enforce the property settlement agreement, Betty pre-
sented a claim to MetLife for a portion of the life insurance proceeds.
Faced with competing payment obligations because Betty's claim
clearly conflicted with the plan's beneficiary designation, MetLife
filed an interpleader action in the United States District Court for the
Eastern District of Virginia naming Betty Pettit and Patricia Pettit as
defendant-claimants. Betty then filed a counterclaim against MetLife,
which she later dismissed via consent order, and a cross-claim against
Patricia to enforce a constructive trust against the MetLife proceeds.
Upon cross motions for summary judgment, the district court granted
Patricia's motion and denied Betty's. Subsequently, the district court
denied Patricia's motion to obtain attorney's fees and costs from
Betty. This appeal followed.
II.
The threshold question in this case is whether ERISA preempts the
enforcement of a property settlement agreement against life insurance
benefits paid through an ERISA-governed plan. Betty asks that we
impose a constructive trust upon the life insurance proceeds if we find
that ERISA does not preempt her claim.
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2 The other policies variously named his children or Patricia as the ben-
eficiaries.
4
We review the district court's grant of Patricia's motion for sum-
mary judgment de novo. See M & M Med. Supplies & Serv. v. Pleas-
ant Valley Hosp., Inc., 981 F.2d 160, 163 (4th Cir. 1992) (en banc).
If there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law, then summary judgment is
appropriate. See Fed. R. Civ. P. 56(c); M & M Medical, 981 F.2d at
162-63. As the district court found and the parties agree, there are no
material facts in dispute. Our inquiry, therefore, necessarily extends
only to the application of the law in this case.
In any inquiry involving statutory construction, we begin with the
language of the statute itself. Commonly known as ERISA's preemp-
tion provision, 29 U.S.C.A. § 1144(a) states that ERISA "shall super-
sede any and all State laws insofar as they may now or hereafter relate
to any employee benefit plan." 29 U.S.C.A. § 1144(a) (West 1985).
This provision is supplemented by two statutory definitions. The first
broadly defines state law as "all laws, decisions, rules, regulations, or
other State action having the effect of law." 29 U.S.C.A. § 1144(c)(1)
(West 1985). The second defines employee benefit plan as a welfare
or pension benefit plan. See 29 U.S.C.A.§ 1002(3) (West Supp.
1998). ERISA also states that life insurance plans qualify as welfare
plans. See 29 U.S.C.A. § 1002(1) (West Supp. 1998) (defining wel-
fare plan as "any plan, fund or program . . . established or maintained
by an employer . . . to the extent that such plan, fund, or program was
established or is maintained for the purpose of providing for its partic-
ipants or their beneficiaries, through the purchase of insurance . . .
benefits in the event of . . . death").
From the statute's text, it is clear that the life insurance policy qual-
ifies as a welfare plan, and it is thus an employee benefit plan. The
parties agree, at least on this point. We also have no trouble determin-
ing that the constructive trust claim, which is based upon the terms
of a property settlement agreement entered to effect a property divi-
sion upon divorce, meets the ERISA definition of state law. This
Court has often held such claims to be within state law and thus sub-
ject to preemption. See, e.g., Stiltner v. Beretta U.S.A. Corp., 74 F.3d
1473, 1480 (4th Cir.) (holding that state tort law and contract claims
related to ERISA plan administration are preempted), cert. denied,
117 S. Ct. 54 (1996); Elmore v. Cone Mills Corp., 23 F.3d 855, 863
(4th Cir. 1994) (en banc) (noting the preemption of, inter alia, state
5
law contract claims against an ERISA plan). Having concluded that
state law is at issue and that we are dealing with an ERISA-defined
employee benefit plan, the only remaining question is whether they
"relate to" each other as that term is used in§ 1144(a).
Unfortunately, that term is not so clearly defined and, not surpris-
ingly, this is not the first time the courts have faced difficulty in
applying it. Taken at its face value, the term "relates to" has no logical
boundary. See New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1677 (1995). In
one way or another, everything relates to everything else. See id. As
the United States Supreme Court has stated, "We simply must go
beyond the unhelpful text and the frustrating difficulty of defining
[relates to] . . . ." Id.Section 1144(a), however, makes one thing clear, and that is that
Congress intended to preempt state law. See 29 U.S.C.A. § 1144(a).
"Where, as here, Congress has included in legislation a specific provi-
sion addressing -- and indeed, entitled -- pre-emption, the Court's
task is one of statutory interpretation -- only to identify the domain
expressly pre-empted by the provision." Cipollone v. Liggett Group,
Inc., 505 U.S. 504, 532 (1992) (Blackmun, J., concurring in part and
in the judgment, and dissenting in part) (internal quotation marks
omitted). Because § 1144(a) asserts Congress's power to supersede
state law, the Supreme Court often has invoked traditional preemption
principles to give it effect. See Travelers Ins. Co., 115 S. Ct. at 1676;
see also California Div. of Labor Standards Enforcement v. Dil-
lingham Constr., N.A., Inc., 117 S. Ct. 832, 843 (1997) (Scalia, J.,
concurring) (noting that the Court now applies traditional preemption
principles to ERISA preemption questions).
When addressing preemption, federal courts are appropriately
reluctant to displace state law and, accordingly, begin with the pre-
sumption that "Congress does not intend to supplant state law."
Travelers Ins. Co., 115 S. Ct. at 1676; see Coyne & Delany Co. v.
Selman, 98 F.3d 1457, 1467 (4th Cir. 1996). Nevertheless, when Con-
gress expresses its intention clearly to do so through its constitution-
ally appointed legislative power, the Supremacy Clause establishes
that federal law supersedes state law that either directly, by implica-
tion, or by express provision conflicts with federal law. See U.S.
6
Const., art. VI, § 2; Pacific Gas & Elec. Co. v. State Energy
Resources Conservation & Dev. Comm'n, 461 U.S. 190, 203-04
(1983). Put another way, where the "`law stands as an obstacle to the
accomplishment of the full purposes and objectives of Congress,' fed-
eral preemption occurs." John Hancock Mut. Life Ins. Co. v. Harris
Trust & Sav. Bank, 510 U.S. 86, 99 (1993) (quoting Silkwood v. Kerr-
McGee Corp., 464 U.S. 238, 248 (1984)). In Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 96-97 (1983), the Supreme Court stated that under
the unique language of § 1144(a), a state law relates to an employee
benefit plan if it has a connection with, or a reference to, such a plan.
See Dillingham Constr., N.A., 117 S. Ct. at 837 (citing Shaw, 463
U.S. at 96-97).
Using the Shaw standard, it is obvious that a constructive trust
claim against a plan beneficiary, which arises from a domestic rela-
tions agreement and directly affects the distribution of plan benefits,
has a connection with an ERISA plan. Congress made as much clear,
for ERISA itself addresses interests that may arise in plans pursuant
to a domestic relations action. See 29 U.S.C.A. § 1056(d) (West Supp.
1998)3; Hopkins v. AT&T Global Info. Solutions Co., 105 F.3d 153,
155-56 (4th Cir. 1997) (describing the requirements for a QDRO).
Such a clear signal from Congress about what it considers to relate
to an ERISA plan cannot be ignored. This action, therefore, easily
numbers among those that are subject to preemption under the broad
standard announced in Shaw.
The more traditional conflict preemption test yields the same
answer, because the application of the state law claim does, in this
case, interfere with congressional goals. ERISA's express purpose is
to protect interstate commerce and the interests of partici-
pants in employee benefit plans and their beneficiaries, by
requiring the disclosure and reporting to participants and
beneficiaries of financial and other information with respect
_________________________________________________________________
3 "Each pension plan shall provide that benefits provided under the plan
may not be assigned or alienated. . . . Each pension plan shall provide
for the payment of benefits in accordance with the applicable require-
ments of any qualified domestic relations order." 29 U.S.C.A. § 1056(d)
(West Supp. 1998).
7
thereto, by establishing standards of conduct, responsibility,
and obligation for fiduciaries of employee benefit plans, and
by providing for appropriate remedies, sanctions, and ready
access to the Federal courts.
29 U.S.C.A. § 1001(b) (West 1985). Reading both this text and the
entirety of ERISA, courts previously have determined that ERISA
was intended to establish exclusive federal regulation over employee
benefit plans. See Travelers Ins. Co., 115 S. Ct. at 1677 (quoting
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)). In
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990), the Supreme
Court determined that economic considerations supported Congress's
decision to subject employee benefit plans to only one body of
national, uniform law because ERISA would thereby minimize
administrative and financial burdens on employers. See id. at 142;
Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir. 1996)
(noting the Supreme Court's guidance). State laws that obstruct the
accomplishment of those goals must give way to ERISA.
We have determined that at least three specific categories of state
laws sufficiently impact employee benefit plans and ERISA's pur-
poses such that they must be superseded. See Coyne & Delany, 98
F.3d at 1468. These categories are: (1) laws that"mandate employee
benefit structures or their administration"; (2)"laws that bind employ-
ers or plan administrators to particular choices or preclude uniform
administrative practice, thereby functioning as a regulation of an
ERISA plan itself"; and (3) "`laws providing alternate enforcement
mechanisms' for employees to obtain ERISA plan benefits." LeBlanc
v. Cahill, 153 F.3d 134, 147 (4th Cir. 1998) (quoting Coyne &
Delany, 98 F.3d at 1468 (citing Travelers Ins. Co., 115 S. Ct. at 1678-
79)). In Coyne & Delany, we restated this Court's position that if a
state law of general applicability was in question, it would not be pre-
empted unless it affected relations between traditional plan entities
including the principals, the employer, the plan, the plan fiduciaries,
and the beneficiaries. See Coyne & Delany, 98 F.3d at 1469 (citing
Custer v. Sweeney, 89 F.3d 1156, 1167 (4th Cir. 1996)). We also have
noted that designating the beneficiary of an ERISA life insurance plan
sufficiently relates to a plan to come within the scope of the preemp-
tion clause. See Phoenix Mut. Life Ins. Co. v. Adams, 30 F.3d 554,
560 (4th Cir. 1994); see also, e.g., Brandon v. Travelers Ins. Co., 18
8
F.3d 1321, 1325 (5th Cir. 1994); Krishna v. Colgate Palmolive Co.,
7 F.3d 11, 14-15 (2d Cir. 1993); MacLean v. Ford Motor Co., 831
F.2d 723, 727-28 (7th Cir. 1987). The question thus becomes whether
the claim at issue falls within these impermissible categories.
In answering this question, it is once again worth noting that
ERISA, by its own terms, provides a method for a former spouse to
secure an interest in plan benefits. See, e.g. , Hopkins v. AT&T Global
Info. Solutions Co., 105 F.3d 153, 157 (4th Cir. 1997) (noting that a
former spouse's interest in pension plan benefits"can be protected
simply by obtaining a QDRO"). Under § 1144(b)(7), QDROs, as
defined by § 1056(d)(3), are specifically excepted from preemption.
See 29 U.S.C.A. §§ 1144(b)(7), 1056(d)(3) 4 (West 1985 & Supp.
1998). Two strong inferences flow from the QDRO exception. First,
Congress understood that such state law domestic proceedings may
"relate to" a plan such that the enforcement of a provision requiring
payment from employee pension or welfare benefits would, absent the
exception, be preempted. See Boggs v. Boggs, 117 S. Ct. 1754, 1763
(1997) (noting that "QDRO's, unlike domestic relations orders in gen-
eral, are . . . exempt from ERISA's general preemption clause"). Sec-
ond, and more important to the question at hand, Congress meant to
make a QDRO the acceptable method for a divorced spouse to attach
an interest in a former spouse's benefit plan. ERISA thus maintains
its own enforcement mechanism for aggrieved former spouses.5
_________________________________________________________________
4 To qualify as a QDRO, a court must create or recognize the interest
in the ERISA plan and the order must include pertinent information such
as mailing addresses and the amount and manner of payment. See 29
U.S.C.A. § 1056(d)(3) (West Supp. 1998). The statute also places limits
on the effect of the QDRO. See id.5 We note that 29 U.S.C.A. § 1056(d) restricts the alienation of pension
plan benefits, and does not speak to welfare plan benefits. See 29
U.S.C.A. § 1056(d) (West Supp. 1998) (stating that "pension plan . . .
benefits provided under the plan may not be assigned or alienated"). Sec-
tion 1144, however, does not limit similarly the scope of preemption. See
29 U.S.C.A. § 1144(a) (West 1985) (stating that ERISA provisions "shall
supersede any and all State laws insofar as they may now or hereafter
relate to any employee benefit plan"). Furthermore, the statutory excep-
tion to the preemption clause, 29 U.S.C.A. § 1144(b)(7), references only
the QDRO definition, and not the scope of the anti-alienation provision.
9
In this case, the property settlement agreement, which does not
qualify as a QDRO, provides an alternate mechanism to obtain plan
benefits and thus falls into the third category of preempted laws. The
interference among the traditional parties is clear because ERISA
requires that a "fiduciary discharge his duties with respect to a plan
solely in the interest of the participants and beneficiaries and . . . in
accordance with the documents and instruments governing the plan."
29 U.S.C.A. § 1104(a) (West Supp. 1998). The life insurance benefi-
ciary designation was the plan instrument that governed the payment
of the death benefits. If that designation is trumped by an external
contract, such as the property settlement agreement, then the relation-
ships between the employee and the plan, the plan and the named
beneficiary, and the administrator and the plan will all be impacted
by an outside agreement of which the administrator will likely be
unaware. This situation leads to unpredictability, whereas a QDRO,
which must be filed with a plan administrator,6 provides notice and
predictability for the plan administrator, participants, and beneficia-
ries. Not only is a claim under a property settlement agreement an
alternate enforcement mechanism that impacts the traditional parties,
_________________________________________________________________
See 29 U.S.C.A. § 1144(b)(7) (West Supp. 1998) ("[The preemption
clause] shall not apply to qualified domestic relations orders (within the
meaning of section 1056(d)(3)(B)(i) of this title) .. . ."). Thus, read liter-
ally, the preemption provision applies to both welfare and pension plans.
We "prefer a literal reading of ERISA" to a"flexible reading."
Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 1080, 1083 (7th Cir.
1994) (concluding that the QDRO exception to the preemption provision
applies to all ERISA plans, not just pension plans). The Tenth Circuit
and the Sixth Circuit also have concluded that the QDRO exception
applies to all ERISA plans. See Metropolitan Life Ins. Co. v. Marsh, 119
F.3d 415, 421 (6th Cir. 1997); Carland v. Metropolitan Life Ins. Co., 935
F.2d 1114, 1119-20 (10th Cir. 1991). The preemption provision thus
applies equally to all ERISA plans, and is not limited to pension plans.
6 The concurrence misinterprets our use of the term "filed." According
to the statute, the plan administrator must "receive" the QDRO and we
imply nothing more. See 29 U.S.C.A. § 1056(d)(3)(G) (West 1998). The
certainty that underlies a QDRO does not arise from some formal filing
process, but instead from a plan administrator's ability to determine con-
clusively who is entitled to the ERISA benefits by looking to a single
qualifying order -- the QDRO.
10
it is also exactly the situation that Congress sought to avoid when it
enacted ERISA.
Betty's constructive trust claim, which is based upon a property
settlement agreement, if allowed to stand, would directly conflict with
ERISA's goal of providing a nationally uniform plan administration
and reduce the QDRO provisions to a meaningless footnote in the
preemption context. Undoubtedly, this claim would also reduce the
certainty of plan administration and increase litigation, along with the
associated costs. We would allow state law to escalate the administra-
tive costs that Congress sought to decrease. There could hardly be a
more striking example of a state claim hindering the full accomplish-
ment of congressional objectives. Because the claim interferes with
Congress's clear objectives and conflicts with the plain language of
ERISA, it must fall victim to the ERISA preemption provision.
Betty's argument that the preemption clause does not apply to
cases such as these is unpersuasive. She contends that looking outside
of the plan provisions to determine the proper disposition of benefits
does not burden the plan administrator. She first mistakenly relies on
this Court's decision in Estate of Altobelli v. International Bus. Mach.
Corp., 77 F.3d 78 (4th Cir. 1996), which construed the application of
ERISA's anti-alienation clause, 29 U.S.C.A. § 1056(d)(1), not the
preemption clause. See 29 U.S.C.A. § 1056(d)(1) ("Each pension plan
shall provide that benefits provided under the plan may not be
assigned or alienated."). Construing that clause as a spendthrift provi-
sion, we determined that a plan administrator could be compelled to
look outside of the plan documents to determine whether a designated
beneficiary had waived an interest in plan benefits. See Altobelli, 77
F.3d at 81-82. But, as we stated at the beginning of our discussion in
Altobelli, "ERISA does not address this topic directly, so federal
courts may resolve it by developing federal common law." Id. at 80.
That is not the case here. Section 1144 preempts all state law that
relates to an ERISA plan, while specifically excepting QDROs. See
29 U.S.C.A. § 1144(a), (b)(7). ERISA directly addresses the topic at
hand, and there is no room for us to countermand the statutorily
expressed intent of Congress.7
_________________________________________________________________
7 We agree with the concurrence when it asserts that welfare benefits
may be assigned without using a QDRO. See 29 U.S.C.A. § 1056(d)(1)
11
Betty also supports her argument with a case from the Eighth Cir-
cuit, Equitable Life Assurance Soc'y of United States v. Crysler, 66
F.3d 944 (8th Cir. 1995). In that case, the Eighth Circuit held that a
divorce decree, which specifically required the assignment of ERISA
welfare benefits to the participant's spouse, was not preempted by
ERISA. See id. at 948. To support its holding, the court relied partly
upon its reading of the Supreme Court's decision in Mackey v. Lanier
Collection Agency & Service, Inc., 486 U.S. 825, 836-38 (1988),
which determined that welfare benefits could be alienated without
violating § 1056(d)(1). The Eighth Circuit reasoned that because
ERISA did not prohibit the alienation or assignment of welfare bene-
fits, then those assignments could not conflict with ERISA and
thereby be preempted. See Crysler, 66 F.3d at 948. We disagree.
ERISA contemplates just such a scenario. ERISA allows the alien-
ation of welfare benefits as the Supreme Court held in Mackey. See
Mackey, 486 U.S. at 836-38. ERISA, however, does not stop there.
It further specifies how such an alienation or assignment should be
accomplished in the domestic relations context -- through a QDRO.
See 29 U.S.C.A. §§ 1056(d)(3)(A), 1144(b)(7) (exempting only
QDROs from the anti-alienation and preemption provisions). We join
other courts who have read the statutes similarly. See Boggs, 117
S. Ct. at 1763 (noting that only QDROs, not domestic relations orders
in general, are saved from ERISA's general preemption provision and
pension plan alienation provision); Mattei v. Mattei, 126 F.3d 794,
809 (6th Cir. 1997) ("Where there is no QDRO . . . awards of prop-
erty pursuant to divorce decrees must fall before conflicting designa-
tions of ERISA beneficiaries."), cert. denied , 118 S. Ct. 1799 (1998);
Metropolitan Life Ins. Co. v. Marsh, 119 F.3d 415, 420-21 (6th Cir.
1997) (holding that although any domestic relations order might not
_________________________________________________________________
& (d)(3). We also agree that ERISA's preemption clause would bar any
state law domestic relations order from attaching ERISA plan benefits,
pension or welfare, if it did not qualify as a QDRO. See 29 U.S.C.A.
§ 1144(a) (West 1998). However, the concurrence's assertion that federal
common law could somehow overcome ERISA's plain mandate, which
provides that a QDRO is the proper method for attaching benefits in the
domestic relations context, stretches too far. Certainly, Congress could
amend ERISA to provide for an alternate enforcement mechanism, but
the courts cannot.
12
be barred by the anti-alienation provision, ERISA preempts all orders
except those that meet the strictures of a QDRO); Fox Valley & Vicin-
ity Const. Workers Pension Fund v. Brown, 897 F.2d 275, 279 (7th
Cir. 1990) (en banc) ("ERISA preempts any attempt to alienate or
assign benefits by a domestic relations order if that order is not a
QDRO"). If we were to hold that ERISA did not preempt run-of-the-
mill domestic relations agreements, which were not barred by the
anti-alienation provision, then we effectively would read the preemp-
tion provision exception, § 1144(b)(7), and the referenced QDRO
provision, § 1056(d)(3), out of existence, thus violating a fundamental
precept of statutory interpretation.8 Cf. Travelers Ins. Co., 115 S. Ct.
at 1679-80. We believe Congress made itself clear on this point --
unless a domestic relations settlement complies with the QDRO
requirements, ERISA preempts its enforcement through a state law
mechanism such as a constructive trust.
_________________________________________________________________
8 We note that a recent decision by the Ninth Circuit, Emard v. Hughes
Aircraft Co., 153 F.3d 949 (9th Cir. 1998), enforced a surviving spouse's
community property interest in an ERISA welfare plan via constructive
trust, despite the fact that the beneficiary designation form still named a
former spouse. We must disagree with that decision, just as we did with
Equitable Life Ins. Co. v. Crysler, 66 F.3d 944 (8th Cir. 1995).
In the Emard opinion, the Ninth Circuit noted both that the Supreme
Court had approved garnishment of ERISA benefits in Mackey v. Lanier
Collection Agency & Service, Inc., 486 U.S. 825 (1988), and that in
Guidry v. Sheet Metal Workers National Pension Fund , 493 U.S. 365,
372 (1990), the Court determined that a constructive trust was synony-
mous with garnishment. See Emard, 153 F.3d at 954. Importantly, nei-
ther of these Supreme Court decisions involved domestic relations
orders. In Marsh, the Sixth Circuit addressed an argument similar to the
Ninth Circuit's holding in Emard. See Metropolitan Life Ins. Co. v.
Marsh, 119 F.3d 415, 420-21 (6th Cir. 1997). As that decision stated,
attaching welfare benefits to satisfy a debt is not addressed by ERISA.
See id. Designating a beneficiary of welfare benefits is addressed, how-
ever, as is the procedure to be followed in the case of divorce. See id.Surprisingly, the Ninth Circuit's opinion fails to make even a passing ref-
erence to the relevance of the QDRO provisions. We find the reasoning
of Emard unpersuasive and agree with the Sixth Circuit's holding in
Marsh.
13
Because we determine that Betty's claim is preempted, we need not
decide whether this Court could properly enforce a constructive trust
against the plan proceeds without benefit of first remanding the case
to the district court.
III.
Patricia cross-appeals the district court's ruling denying payment of
her attorney's fees and costs. ERISA provides that a"court in its dis-
cretion may allow a reasonable attorney's fee and costs of action to
either party." 29 U.S.C.A. § 1132(g)(1) (West 1985). We review the
denial of fees to determine whether the district court abused that dis-
cretion. See Reinking v. Philadelphia American Life Ins. Co., 910
F.2d 1210, 1217 (4th Cir. 1990).
We have established a five-factor test to determine whether attor-
ney's fees should be awarded. See Quesinberry v. Life Ins. Co. of N.
Am., 987 F.2d 1017, 1028-29 (4th Cir. 1993) (en banc); Reinking, 910
F.2d at 1217-18. These factors are:
(1) degree of opposing parties' culpability or bad faith;
(2) ability of opposing parties to satisfy an award of attor-
ney's fees;
(3) whether an award of attorney's fees against the opposing
parties would deter other persons acting under similar cir-
cumstances;
(4) whether the parties requesting attorney's fees sought to
benefit all participants and beneficiaries of an ERISA plan
or to resolve a significant legal question regarding ERISA
itself; and
(5) the relative merits of the parties' positions.
Denzler v. Questech, 80 F.3d 97, 104 (4th Cir. 1996).
[This] "five factor approach is not a rigid test, but rather pro-
vides general guidelines for the district court." Indeed, we
14
have recognized that some of the factors may not be appro-
priate in any given case. Nonetheless, we require the district
court to justify an attorney's fee determination by evaluating
the five factors in order to give us some basis for review.
Id. (citing and quoting Quesinberry, 987 F.2d at 1029).
The district court properly applied the factors to Patricia's motion
seeking fees. The district court determined that Betty's actions were
neither frivolous nor in bad faith and that the relative merits of the
parties' positions did not weigh in favor of a fee award. See
Metropolitan Life Ins. Co. v. Pettit, Civ. No. 96-1311-A (E.D. Va.
Sept. 11, 1997). The district court further stated that because Betty's
claim was legitimate, it was unnecessary to impose fees to deter oth-
ers from the same conduct and that there was no evidence that Betty
would be able to satisfy the fee imposition. See id. Finally, Patricia
was protecting only her own interests and was not attempting to bene-
fit others. See id.We agree with the reasoning of the district court and accordingly
find no abuse of discretion.
IV.
Because we agree with the district court's grant of summary judg-
ment in favor of Patricia Pettit and find no abuse of discretion in its
denial of attorney's fees, we affirm the judgment.
AFFIRMED
MURNAGHAN, Circuit Judge, concurring:
I agree that the proper result is that Betty Pettit is not entitled to
any of the life insurance proceeds from the ERISA welfare plan and
that she cannot succeed in establishing a state law constructive trust
claim. Under the amendments to ERISA in the Retirement Equity Act
of 1984, Pub. L. No. 98-397, 98 Stat. 1426 (1984), ERISA's preemp-
tion provision does preempt Betty's state law constructive trust claim
because it is based on a state law domestic relations order that is not
15
a Qualified Domestic Relations Order (QDRO), 29 U.S.C.A.
§§ 1144(a), 1144(b)(7) (West 1985 & Supp. 1998).
However, in my view ERISA does not require a divorce order to
be a QDRO for it to alienate or assign ERISA welfare plan benefits.
While state law (including a state law divorce order that is not a
QDRO) is preempted, that means only that the legal question raised
is governed by federal law. So, with respect to Betty's claim against
the welfare plan here, it would be barred by ERISA as against any
state law claim. Yet Betty might rely, not on a state law claim, but
on any applicable provisions of the ERISA statute itself or on federal
common law where ERISA is silent. See Phoenix Mutual Life Ins. Co.
v. Adams, 30 F.3d 554, 563 (4th Cir. 1994) (citing Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989), and Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41, 56 (1987)); Singer v. Black & Decker
Corp., 964 F.2d 1449, 1452 (4th Cir. 1992). In such a case, if the
ERISA statute or federal common law provided her a route to follow,
Betty would not be barred by her failure to obtain a QDRO. Conse-
quently, noting that we deal with a welfare plan here, I do not accept
the statement by the Court that the lack of a QDRO would cause
Betty's failure whatever route she might take. See 29 U.S.C.A.
§ 1056(d)(1) (West Supp. 1998) (ERISA's anti-alienation provision
applies only to pension plans, not welfare plans). Cf., e.g., Estate of
Altobelli v. International Business Machines Corp. , 77 F.3d 78 (4th
Cir. 1996) (allowing the contents of an apparently pre-empted state
divorce order and its underlying property settlement agreement to
determine an issue under federal common law); Fox Valley & Vicinty
Const. Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir. 1990)
(en banc) (same; court stated explicitly that state law on the issue was
pre-empted under 29 U.S.C. § 1144(a)).
But having a method by which Betty could yet proceed to recover
from the welfare plan despite the absence of a QDRO, she premised
her claim exclusively upon state law, and that state law claim is pre-
empted by ERISA.
Hence, I concur in the result reached by the majority. Yet I wish
to preserve, in case a similar issue should arise again, the argument
that a QDRO is not necessary to pursue successfully a welfare plan
16
by a federal approach, either under ERISA or, in its silence, under the
federal common law.*
_________________________________________________________________
*Separately, I note that I do not accept the majority's statement that
a QDRO must be filed with a plan administrator, if by that statement the
majority means that a divorce order that meets all of the requirements of
29 U.S.C.A. §§ 1056(d)(3)(B) - (E) is ineffective unless formally "filed"
with the plan administrator. I am not familiar with any section of ERISA
or any case law that imposes a formal filing requirement. Section
1056(d)(3)(G) indicates that a plan administrator must eventually receive
the QDRO. If a QDRO is effective merely upon the plan administrator's
eventual receipt of the QDRO (and before payment), then the notice and
predictability benefit of a QDRO over other domestic relations orders as
proposed by the majority evaporates. Cf. Fox Valley, supra, 897 F.2d at
282 (noting duty of plan administrators to investigate marital history and
existence of any domestic relations orders; implying a QDRO is effective
"when it becomes known to the Fund before payment").
17