Greenebaum Doll & McDonald PLLC v. Sandler ( 2007 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0822n.06
Filed: December 3, 2007
Nos. 06-6494, 06-6496
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GREENEBAUM DOLL & McDONALD )
PLLC, )
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
DEBBIE D. SANDLER, ) WESTERN DISTRICT OF KENTUCKY
)
Defendant-Appellee/Appellant, )
)
SHANNON SANDLER et al., )
)
Defendants-Appellants/Appellees, )
and )
)
CHRIS MEINHART, Administrator of the )
Estate of David Sandler, )
)
Defendant-Appellee. )
Before: CLAY, SUTTON, and McKEAGUE, Circuit Judges.
SUTTON, Circuit Judge. Shannon and Nick Sandler contend that their stepmother, Debbie
Sandler, breached a prenuptial agreement with their now-deceased father and accordingly has no
right to the assets in his retirement account. We affirm the district court’s rejection of this claim as
a matter of law and remand the case to the district court to consider in the first instance Debbie’s
claim for attorney fees.
Nos. 06-6494, 06-6496
Greenebaum v. Sandler
I.
Shortly before their marriage in October 1995, Debbie and David Sandler entered into an
prenuptial agreement. In the agreement, Debbie and David “waive[d] and release[d] any claim,
demand or interest in any pension, profit-sharing, Keogh or other retirement benefit plan qualified
under ERISA and the Internal Revenue Code of the other party and agree[d] to execute any
documentation to verify and confirm this fact with the administrator of such plan.” JA 27. The
agreement required David and Debbie to “execute and provide any instruments or documents at any
time requested by the other party that are necessary or proper to effectuate the purposes and goals
of [the] Agreement.” JA 33. And it provided that, “in the event of David’s death, Debbie shall
receive David’s property described in paragraph[] . . . 6 . . . above [i.e., the paragraph discussing
retirement benefits], if and only if she is then living and David and Debbie were married on the date
of David’s death.” JA 31.
After he married Debbie, David joined the law firm of Greenebaum Doll & McDonald and
began participating in the firm’s retirement plan. Consistent with ERISA, see 29 U.S.C. § 1055, the
Greenebaum plan designates the participant’s surviving spouse as the default beneficiary and allows
a participant to designate a beneficiary “other than such spouse if (a) such spouse consents in writing
to a specific Beneficiary witnessed by a member of the Retirement Committee or acknowledged
before a Notary Public and (b) such consent acknowledges the effect of such consent.” JA 231. It
also provides that no change in beneficiaries “shall be effective until receipt of the new designation
by the Retirement Committee.” Id.
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The marriage did not work out. On May 31, 2005, Debbie left David, and three days later
David committed suicide. The two were still married at the time of David’s death, as neither one
of them had filed for legal separation or divorce. The prenuptial agreement as a result represents
“the last written statement of David Sandler’s intentions.” Greenebaum Doll & McDonald PLLC
v. Sandler, 458 F. Supp. 2d 420, 422 (W.D. Ky. 2006).
After David’s death, his two children from a previous marriage (Shannon and Nick) and
Debbie asserted “conflicting claims to” the retirement assets that the Greenebaum law firm held for
him in trust. JA 14. “[A]cting as a mere stakeholder,” the law firm filed a declaratory judgment
action against Debbie, David’s estate and David’s children to resolve the conflicting claims,
indicating that it “ha[d] no Designation of Beneficiary for Mr. Sandler.” JA 12–13. The children
filed a cross-claim against Debbie, asserting that she breached the prenuptial agreement by claiming
an interest in David’s retirement assets and by failing to execute—or, in the alternative, by refusing
to execute—“any instrument or document necessary to waive her interest in [David’s retirement
assets], including but not limited to a waiver of any spousal rights under ERISA.” JA 22–23.
The district court granted Debbie’s motion for summary judgment, holding that the prenuptial
agreement by itself did not satisfy either ERISA’s spousal-consent requirements or the Greenebaum
plan’s own requirement “for designation of a new beneficiary or spousal consent to such an action.”
Greenebaum, 458 F. Supp. 2d at 423. The court reasoned that Debbie “was never asked to sign a
consent or waiver form[,] . . . so the issue of breach for failure to consent to a designated beneficiary
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does not arise.” Id. at 423 n.3. The court also rejected Debbie’s request for attorney fees, concluding
that “all other motions are moot.” Id. at 423 (emphasis omitted).
II.
A.
We first consider the district court’s rejection of the children’s claim for specific performance
of the prenuptial agreement. The children, as an initial matter, concede that the prenuptial agreement
fails to meet ERISA’s requirements—and with good reason. There is little support for the notion
that a prenuptial agreement by itself can satisfy ERISA’s spousal-consent requirement. See
Hagwood v. Newton, 282 F.3d 285, 290 (4th Cir. 2002) (“In reaching our conclusion that premarital
agreements cannot fulfill the requirements of [ERISA], we join the unanimous view of other federal
courts that have considered the question.”); Treas. Reg. § 1.401(a)-20 Q&A–28 (“Q[uestion]: Does
consent contained in an antenuptial agreement or similar contract entered into prior to marriage
satisfy the [spousal] consent requirements of [those provisions of the Internal Revenue Code that
contain the same requirements as ERISA]? A[nswer]: No. An agreement entered into prior to
marriage does not satisfy the applicable consent requirements . . . .”). But even if such agreements
could in the abstract satisfy the requirement, this one assuredly did not. It did not designate a
specific beneficiary (other than Debbie) or authorize David to designate a third-party as the
beneficiary without Debbie’s consent, which violates 29 U.S.C. § 1055(c)(2)(A)(ii) (“[A spousal]
election . . . shall not take effect unless . . . such election designates a beneficiary . . . which may not
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be changed without spousal consent (or the consent of the spouse expressly permits designations by
the participant without any requirement of further consent by the spouse).”).
In pressing their claim, the children thus raise a slightly different argument. They contend
that the prenuptial agreement obligates Debbie contractually either “to execute the documentation
verifying and confirming her agreement to waive and release her rights in” David’s retirement
accounts or to pay “the damages resulting from her breach.” Br. at 10–11. Leaving to one side the
question whether ERISA preempts even this contract claim, the children misread the prenuptial
agreement. In paragraph 6, to be sure, it says that “[e]ach party waives and releases any claim,
demand or interest in any pension, profit-sharing, Keough or other retirement benefit plan qualified
under ERISA and the Internal Revenue Code of the other party and agrees to execute any
documentation to verify and confirm this fact with the administrator of such plan.” JA 27. But
paragraph 10 then adds that, “in the event of David’s death, Debbie shall receive David’s property
described in paragraph[] . . . 6 . . . above, if and only if she is then living and David and Debbie were
married on the date of David’s death.” JA 31.
Read together, the provisions mean that Debbie agreed to waive any claim or interest in
David’s retirement accounts in the event that the two were divorced—and to execute the necessary
documents at that time and upon David’s request to confirm such waiver—but not in the event that
David died during their marriage. Thus, if David died and if Debbie was still married to him, she
was entitled to “receive David’s property described in paragraph[] . . . 6”—i.e., David’s retirement
assets. JA 31. Buttressing this interpretation are the fact that, as the district court noted, “Debbie
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Sandler was never asked to sign a consent or waiver form,” Greenebaum, 458 F. Supp. 2d at 423 n.3,
and the fact that the agreement prohibited everyone except Debbie and David from bringing a “cause
of action arising or resulting from [the] Agreement,” JA 33. As Debbie indicated during her
deposition: “This [provision relating to the retirement accounts] was only to be put into effect on the
dissolution of our marriage. In the event our marriage was dissolved, then I was agreeing that I
would sign whatever he wanted me to sign . . . . This did not create any obligations prior to a
dissolution of the marriage. . . . [T]hat was the understanding that both David and I had when we
entered into this.” JA 113–14; see also JA 124 (Question to Debbie: “Did either you or David
execute any documentation to verify and confirm [your waiver] with the administrator of [the] plan?”
Debbie’s response: “No. . . . He never asked me to. It wasn’t the intent of the agreement.”). As
unfortunate and perhaps as unfair as this outcome seems, the reality remains that Debbie received
no more and no less of David’s retirement assets than the prenuptial agreement gave her.
Callahan v. Hutsell, Callahan & Buchino P.S.C. Revised Profit Sharing Plan, No. 92-5796,
1993 WL 533557 (6th Cir. Dec. 20, 1993), does not change matters. Callahan, it is true, did hold
that ERISA “could not relieve [a surviving spouse] of her obligation to act in accordance with her
contractual undertaking[]” to sign a spousal-consent form. Id. at *7. But the prenuptial agreement
in Callahan differed markedly from this one. It said that Nancye Callahan both waived her interest
in Ed Callahan’s retirement plans and agreed to execute, “as soon as possible” after the wedding, “a
“designation form that Ed presumably intended to give to the plan administrator . . . in order to
renew his designation of [his estate] as beneficiary under [his retirement] plans.” Id. at *1. As part
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of the agreement, Nancye also “acknowledged that she would not be entitled to a death benefit under
the plans.” Id. at *2. Here, in contrast, the agreement provided that, if David and Debbie were
married at the time of David’s death, Debbie would receive David’s retirement assets. Because the
agreement here also required Debbie to “execute and provide any instruments or documents at any
time requested by the other party that [were] necessary or proper to effectuate the [agreement’s]
purposes and goals,” JA 33 (emphasis added), and because “no party argues that Debbie Sandler was
ever asked to sign any [spousal-consent form], . . . the issue of breach for failure to consent to a
designated beneficiary does not arise,” Greenebaum, 458 F. Supp. 2d at 423 n.3.
The Callahan agreement also designated a specific beneficiary, Ed’s estate, and gave Ed the
authority to “designate any beneficiary he desired.” Callahan, 1993 WL 533557, at *1. Here,
however, the agreement contained no similar grant of authority or designation of a third-party
beneficiary. To the contrary, the agreement named Debbie as the beneficiary in the event of David’s
death and permitted Debbie to name someone other than the children as the beneficiary without
violating the agreement. Cf. Hagwood, 282 F.3d at 291 (explaining that ERISA’s spousal-consent
requirements not only “ensure voluntariness” but also “give[] the surviving spouse control over who
would receive the benefits in lieu of the surviving spouse”). Thus, even if the estate in Callahan
had a tenable claim of breach and a tenable claim of harm from the breach, the children here have
no such claim.
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B.
As for Debbie Sandler’s motion for attorney fees, it appears that it got lost in the mix of
motions and cross-motions. The district court’s opinion makes no mention of the motion for
attorney fees but instead concludes by saying that “all other motions are moot.” Greenebaum, 458
F. Supp. 2d at 423 (emphasis omitted). From all that the record shows, we can see no reason why
this motion would have been moot. Although “[t]here may well be convincing reasons for denying
the motion for costs,” Bridgeport Music, Inc. v. Universal-MCA Music Publ’g, Inc., 481 F.3d 926,
930 (6th Cir. 2007) (internal quotation marks omitted); see also First Trust Corp. v. Bryant, 410 F.3d
842, 851 (6th Cir. 2005) (discussing the “five-factor test [utilized] in assessing whether the district
court properly exercised its discretion in awarding [attorneys’] fees”), we “cannot know for sure”
until and “unless such grounds are made explicit,” Bridgeport, 481 F.3d at 930 (internal quotation
marks omitted). “[T]he court’s silence,” in short, “prohibits us from examining the soundness of its
discretionary judgment” on the motion for fees, id. (internal quotation marks omitted), and
accordingly we ask the district court to consider the motion in the first instance.
III.
For these reasons, we affirm in part, reverse in part and remand the case to the district court
to consider Debbie’s request for attorney fees.
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