Metropolitan Life Insurance v. Parker , 436 F.3d 1109 ( 2006 )


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  •                   FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    METROPOLITAN LIFE INSURANCE            
    COMPANY, a New York
    corporation,
    Plaintiff,
    v.
    EILEEN M. PARKER, aka Eileen
    Marrero,
    Defendant-Appellant,          No. 03-16518
    ANITA PIETROFITTA; ESTATE OF                 D.C. No.
    SCOTT PARKER, by and through its           CV-01-00881-JAT
    personal representative.
    Defendants-Appellees,
    and
    ZACHARY DRY, a minor child by
    and through his natural mother
    and guardian Lisa Dry,
    Defendant.
    
    1281
    1282           METROPOLITAN LIFE INS. v. PARKER
    METROPOLITAN LIFE INSURANCE             
    COMPANY, a New York
    corporation,
    Plaintiff,
    v.
    EILEEN M. PARKER, aka Eileen
    Marrero,                                     No. 03-16620
    Defendant-Appellee,
    ANITA PIETROFITTA,                            D.C. No.
    CV-01-00881-JAT
    Defendant-Appellant,
    OPINION
    and
    ZACHARY DRY, a minor child by
    and through his natural mother
    and guardian Lisa Dry; ESTATE OF
    SCOTT PARKER, by and through its
    personal representative.
    Defendants.
    
    Appeal from the United States District Court
    for the District of Arizona
    James A. Teilborg, District Judge, Presiding
    Argued and Submitted
    June 15, 2005—San Francisco, California
    Filed February 2, 2006
    Before: Richard C. Tallman, Jay S. Bybee, and
    Carlos T. Bea, Circuit Judges.
    Opinion by Judge Bybee
    METROPOLITAN LIFE INS. v. PARKER           1285
    COUNSEL
    Richard M. Waugh, Richard M. Waugh, Ltd., Phoenix, Ari-
    zona, for defendant-appellant Eileen Marrero.
    Candess J. Hunter and Isabel M. Humphrey, Phoenix, Ari-
    zona, for defendant-appellee/cross-appellant Anita Pietrofitta.
    David L. Haga and Jennifer R. Houde, Gallagher & Kennedy,
    P.A., Phoenix, Arizona, for defendant-appellee estate of Scott
    Parker.
    Kevin J. Parker, Snell & Wilmer, Phoenix, Arizona, for
    defendant-appellee Zachary Dry.
    OPINION
    BYBEE, Circuit Judge:
    This is a cautionary tale for ERISA administrators. We are
    met with three claimants to an ERISA-governed life insurance
    policy held by the decedent, Scott Parker: Anita Pietrofitta,
    his widow; Eileen Marrero, his ex-wife; and the Estate of
    Scott Parker, which represents Zachary Dry, a son born to a
    third woman five months after Parker died. Metropolitan Life
    Insurance Company (“MetLife”) declared the policy proceeds
    owing but could not identify the proper beneficiary and filed
    this action in interpleader in the District of Arizona. We nar-
    row the field from three to two and remand to the district
    court for further findings of fact.
    I.   BACKGROUND AND PROCEEDINGS
    The Employee Retirement Income Security Act
    (“ERISA”), 
    29 U.S.C. § 1001
     et seq. governs the administra-
    tion of employer-provided benefit pension plans. Congress
    1286           METROPOLITAN LIFE INS. v. PARKER
    passed the Act to protect the interests of the participants in
    these plans and their designated beneficiaries and to provide
    employers with uniform guidelines and rules regarding the
    administration of benefit plans. See 
    29 U.S.C. §§ 1001
    (a)-(c),
    1001b(a)-(c). The two most basic components of any ERISA
    plan are the plan administrator and the plan documents. The
    plan administrator is a fiduciary charged with the duty to
    administer the benefit plan “in accordance with the documents
    and instruments governing the plan insofar as such documents
    and instruments are consistent [with ERISA].” 
    29 U.S.C. § 1104
    (a)(1)(D). The fiduciary is responsible for paying bene-
    fits to the “beneficiary,” who is a “person designated [1] by
    a participant, or [2] by the terms of an employee benefit
    plan.” 
    29 U.S.C. § 1002
    (8).
    Scott Parker worked for Bank of America and participated
    in the Bank of America Group Benefits Program at the time
    of his death. Through the program, Parker obtained an insur-
    ance policy from MetLife for $120,000 in basic life insurance
    benefits and $337,000 in additional option benefits, for a total
    life insurance coverage of $457,000. Bank of America’s plan
    was subject to ERISA.
    Parker and Eileen Marrero married in 1981. In 1990, Parker
    executed a will leaving his entire estate to Marrero, provided
    that she survived him for longer than four months. On Octo-
    ber 11, 1991, Marrero filed a Petition for Dissolution of Mar-
    riage in the Superior Court of Maricopa County in Arizona,
    and Parker accepted service of the petition four days later.
    Just two weeks later, on October 29, 1991, Parker executed a
    Beneficiary Designation and Change Form to distribute his
    ERISA benefits. Under the line to designate the “Primary
    Beneficiary(ies),” there were five boxes to be filled in:
    “Name,” “Relationship to You,” “Relationship Code,” “% of
    Benefits to be Allocated,” and “Social Security Number (if
    available).” The box labeled “Relationship Code” referred to
    six codes listed at the bottom of the page: “SP-Spouse,” “CH-
    Child(ren),” “PA-Parent,” “TR-Trust,” “ES-Estate,” and “OT-
    METROPOLITAN LIFE INS. v. PARKER             1287
    Other.” Parker filled in three of the five boxes. On the line for
    “Name” he wrote “As Indicated in My Will.” In the space
    provided under “Relationship Code” he wrote “ES” for estate.
    He then allocated 100% of his benefits and left the remaining
    two boxes—“Relationship to You” and “Social Security
    Number”—blank. No will was attached to the beneficiary
    designation form, which Bank of America accepted without
    objection.
    On December 20, 1991, the State of Arizona dissolved Par-
    ker and Marrero’s marriage pursuant to her petition for disso-
    lution. Eight years later, in 1999, Parker married Anita
    Pietrofitta. Parker died on July 21, 2000, and as far as the par-
    ties can document, failed to revise or alter his 1990 will or his
    1991 beneficiary designation form.
    In probate proceedings in Arizona, the Maricopa County
    Superior Court ruled that the testamentary devise under Par-
    ker’s 1990 will was revoked by operation of Arizona’s
    divorce revocation statute, ARIZ. REV. STAT. § 14-2804. The
    court then found that, there being no will, Parker died intes-
    tate. The court awarded Parker’s estate to Pietrofitta. See
    ARIZ. REV. STAT. § 14-2102(1). A wrinkle appeared when Par-
    ker’s son from a different relationship was born on December
    6, 2000, more than five months after Parker’s death. The court
    amended the order of intestacy and declared Zachary Dry, the
    recently born son, an heir of Parker’s and entitled to one-half
    of Parker’s separate property and all of Parker’s undivided
    one-half community property share.
    Although the record is silent on this point, it appears that
    the ERISA plan administrators at Bank of America had no
    clue how to distribute Parker’s insurance proceeds. MetLife
    filed this interpleader action in the District of Arizona to
    determine the proper beneficiary of Parker’s life insurance
    benefits. It named Pietrofitta, Marrero, Dry and other poten-
    tial claimants as defendants. The district court dismissed
    MetLife from the action and awarded MetLife attorneys’ fees.
    1288           METROPOLITAN LIFE INS. v. PARKER
    Three parties filed summary judgment motions, none of
    whom disputed the underlying facts of the litigation. The par-
    ties disagreed as a matter of law as to whether the plan bene-
    fits should be paid to: (1) Marrero under the testamentary
    devise in Parker’s will pursuant to his designation that bene-
    fits be paid “As Indicated [by his] Will”; (2) Parker’s Estate
    as indicated by his designation of “ES” or “Estate” under the
    “Relationship Code” box on the beneficiary designation form;
    or (3) Pietrofitta as Parker’s surviving wife in accordance
    with the default plan documents.
    The district court held that, although Parker wrote “As Indi-
    cated in My Will” as the name of the only beneficiary on the
    beneficiary designation form, that designation is not a person
    under ERISA because it does not designate an “individual” or
    one of the statutorily defined beneficiaries in 
    29 U.S.C. §§ 1002
    (8)-(9). Since Parker had written “ES” in the “Rela-
    tionship Code” portion of the beneficiary designation form,
    however, the district court found that the designation of his
    estate was consistent with Parker’s designation of “As Indi-
    cated in My Will.” Accordingly, the district court found that
    “Parker designated his Estate as the beneficiary of the [plan]
    benefits.” The district court also noted that its “finding [was]
    consistent with ERISA policies because the plan administrator
    would have to look only at the plan documents—not the Will
    or state law—in paying the Policy benefits to the designated
    beneficiary.”
    Both Marrero and Pietrofitta appeal the decision of the dis-
    trict court.
    II.   JURISDICTION AND STANDARD OF REVIEW
    The district court had jurisdiction pursuant to the inter-
    pleader statute, 
    28 U.S.C. § 1335
    ; State Farm Fire & Cas. Co.
    v. Tashire, 
    386 U.S. 523
    , 535 (1967), and the presence of a
    federal question, 
    28 U.S.C. § 1331
    . We have jurisdiction to
    review final district court orders, including the denial of Mar-
    METROPOLITAN LIFE INS. v. PARKER             1289
    rero’s and Pietrofitta’s Motions for Summary Judgment, and
    the grant of the Estate’s Motion for Summary Judgment. See
    
    28 U.S.C. § 1291
    ; Bosley Med. Inst., Inc. v. Kremer, 
    403 F.3d 672
    , 675-76 (9th Cir. 2005).
    We review de novo an order granting summary judgment.
    Ellison v. Robertson, 
    357 F.3d 1072
    , 1075 (9th Cir. 2004).
    We also review de novo the district court’s interpretation of
    an ERISA insurance policy’s language. Shaver v. Operating
    Eng’rs Local 428 Pension Trust Fund, 
    332 F.3d 1198
    , 1201
    (9th Cir. 2003); Cisneros v. UNUM Life Ins. Co., 
    134 F.3d 939
    , 942 (9th Cir. 1998). We review the district court’s find-
    ings of fact for clear error. Mont. Right to Life Ass’n v. Eddle-
    man, 
    343 F.3d 1085
    , 1090 (9th Cir. 2003).
    III.   ANALYSIS
    [1] We are asked to determine the proper beneficiary of
    Parker’s benefit plan. Under ERISA, a beneficiary is deter-
    mined in one of two ways: it is designated by the participant
    or by the terms of an employee benefit plan. The facts of this
    case involve the unfortunate situation where neither the par-
    ticipant, nor the beneficiary designation form clearly desig-
    nate the beneficiary. Our task is further complicated by
    ERISA’s silence on how ERISA plan administrators are to
    determine the proper designee in situations where they are
    presented with conflicting or ambiguous designations. While
    ERISA does not specifically address these situations, there are
    general provisions and directives that guide us in our resolu-
    tion of the issue.
    [2] As in any determination of the award of benefits under
    any ERISA plan, we begin with an examination of the gov-
    erning plan documents. ERISA requires a benefit plan to
    “specify the basis on which payments are made to and from
    the plan.” 
    29 U.S.C. § 1102
    (b)(4). It requires the fiduciary to
    administer the plan “in accordance with the documents and
    instruments governing the plan,” 
    29 U.S.C. § 1104
    (a)(1)(D),
    1290           METROPOLITAN LIFE INS. v. PARKER
    and to make payments to a “beneficiary designated by a par-
    ticipant, or by the terms of a plan,” 
    29 U.S.C. § 1002
    (8). A
    “beneficiary” is defined as “a person designated by a partici-
    pant, or by the terms of an employee benefit plan, who is or
    may become entitled to a benefit thereunder.” 
    29 U.S.C. § 1002
    (8) (emphasis added). “Person” is subsequently defined
    as “an individual, partnership, joint venture, corporation,
    mutual company, joint-stock company, trust, estate, unincor-
    porated organization, association, or employee organization.”
    
    29 U.S.C. § 1002
    (9).
    Beyond ERISA’s general requirement that a fiduciary
    administer the plan in accordance with the plan documents, 
    29 U.S.C. § 1104
    (a)(D)(1), we have little to guide us in this par-
    ticular case. We have had this matter thrust upon us through
    the device of interpleader precisely because the plan fidu-
    ciaries do not know how to distribute the proceeds from Par-
    ker’s insurance policy. We take, then, as our task to
    determine, first, whether Parker made an unambiguous desig-
    nation of a beneficiary and, second, if he did not, whether the
    plan documents provide a default beneficiary. See 
    29 U.S.C. § 1002
    (8).
    We thus turn to Parker’s beneficiary designation form,
    most of which Parker failed to complete. There are two items
    on the form relevant to the disposition of this case: Parker
    listed “ES” (code for “Estate”) in the “Relationship Code”
    box, and in the box directly to the right, entitled “Name,” Par-
    ker listed “As Indicated in My Will.” We must determine
    whether one, neither, or the two designations read together
    establish a beneficiary cognizable under ERISA.
    [3] First, Parker’s designation of “ES” in the “Relationship
    Code” box is not a valid designation. The district court con-
    cluded that the designation was valid because an estate is a
    valid “person” for purposes of determining a beneficiary
    under sections 1002(8) and (9). By themselves, however, the
    relationship codes do not identify a beneficiary; rather, they
    METROPOLITAN LIFE INS. v. PARKER                   1291
    identify categories of persons or entities who might be benefi-
    ciaries. The relationship codes describe the relationship of the
    named beneficiary to the plan participant and serve to classify
    or clarify the named beneficiary.1 While an estate is a “per-
    son” under section 1002(9), and consequently can be a benefi-
    ciary under section 1002(8), the relationship code “Estate” is
    capable of representing a number of things and cannot, by
    itself, unambiguously designate a beneficiary. See BLACK’S
    LAW DICTIONARY 586-89 (8th ed. 2004) (discussing a variety
    of meanings.). Thus, for reasons that will become clear in this
    case, it is not clear that the relationship code “Estate” refers
    to the same thing as “estate” in 
    29 U.S.C. § 1002
    (9). Conse-
    quently, we disagree with the district court’s conclusion that
    the relationship code “ES” designated a valid beneficiary.
    [4] Second, Parker’s reference to “As Indicated In My
    Will” does not designate a legally valid beneficiary because
    it is ambiguous. We simply cannot determine Parker’s
    intended beneficiary from these words. It is impossible to tell,
    for example, whether Parker intended that the beneficiaries
    identified in the will receive his benefit proceeds only if the
    will was held valid in probate or whether he intended the pro-
    ceeds to reach the beneficiaries irrespective of the will’s
    validity. This case illustrates the problem perfectly. Although
    Pietrofitta claims that there is a second will, only one will has
    been discovered. Under the 1990 will, Marrero would be the
    beneficiary of the proceeds. But under Arizona law, that will
    is invalid, and the Arizona courts have declared Parker intes-
    tate. By simply referring to his will—without referring to the
    date of the will, attaching a copy, or otherwise identifying the
    document—Parker left us to muse over whether he wanted his
    beneficiaries to take the proceeds under a document called a
    “will” or under his will, as provided by law. The answers to
    these questions point us in contrary directions.
    1
    The relationship codes may be very useful. If, for example, a plan par-
    ticipant named “Mary Smith” as his beneficiary, the code might clarify
    whether Mary Smith was the participant’s wife (“SP” for spouse) or his
    mother (“PA” for parent).
    1292              METROPOLITAN LIFE INS. v. PARKER
    [5] The district court determined that, by referring to his
    “will,” Parker had not referred to a “person” recognized under
    
    29 U.S.C. §§ 1002
    (8), (9). Although we agree with the district
    court that the words “As Indicated in My Will” do not liter-
    ally refer to a “person” under ERISA, we think the district
    court’s analysis was too narrow. ERISA is silent on the man-
    ner in which the designation of a beneficiary is made. Conse-
    quently, such determinations are left by the governing terms
    of the benefit plan. We see nothing in ERISA that precludes
    incorporation by reference, so that a plan participant could,
    for example, designate his beneficiaries by referring to a list,
    even though “list” is not a “person” defined in section 1002(9).2
    We conclude that Parker’s attempted incorporation fails not
    because incorporation by reference is, per se, inconsistent
    with ERISA, but because the reference does not clearly iden-
    tify the beneficiaries. We therefore agree with the district
    court’s conclusion that the designation “As Indicated in My
    Will” is ineffective; however, we do so on different grounds.
    [6] Considering the phrase “As Indicated in My Will”
    together with relationship code “ES” only adds to the confu-
    sion. An estate may, of course, pass through a valid will.
    Since Parker’s will is not valid, however, his estate will pass
    through Arizona’s intestate succession laws, and not through
    his will. We cannot give effect to both of Parker’s instructions
    because the proceeds pass to one party under the will and a
    different set of parties under his estate.
    The Supreme Court’s decision in Egelhoff v. Egelhoff, 
    532 U.S. 141
     (2001), does not affect our analysis. In Egelhoff,
    David Egelhoff, the plan participant, designated his then-wife
    2
    Here, however, is one lesson of our cautionary tale: plan administrators
    disserve both plan participants and beneficiaries when they accept a bene-
    ficiary designation that does not unambiguously identify the beneficiaries.
    If plan administrators will accept a designation by reference, they would
    be well advised to require that plan participants either attach the docu-
    ments referred to or otherwise clearly identify where they may be found.
    METROPOLITAN LIFE INS. v. PARKER            1293
    Donna, as his beneficiary. Shortly after they were divorced,
    David died in a car accident. David’s children from a prior
    marriage argued that, by virtue of the divorce, Donna was dis-
    qualified by Washington law from receiving the proceeds.
    The Court ruled that ERISA preempted the Washington stat-
    ute and that state law cannot “bind[ ] ERISA plan administra-
    tors to a particular choice of rules for determining beneficiary
    status.” 
    Id. at 147
    . The Court emphasized that national unifor-
    mity was ensured by “ERISA’s commands that a plan shall
    ‘specify the basis on which payments are made to and from
    the plan,’ § 1102(b)(4).” Id.; see also Branco v. UFCW-N.
    Cal. Employers Joint Pension Plan, 
    279 F.3d 1154
     (9th Cir.
    2002) (holding that ERISA preempted a state court order
    awarding spousal interest in an employee’s pension proceeds).
    Nothing that we have said here is contrary to Egelhoff. We
    have referred to Arizona probate proceedings to make clear
    how Parker’s reference to his “will” and his relationship code,
    “ES,” led to contradictory conclusions. We have held only
    that we cannot determine whether Parker intended to give
    effect to Arizona’s laws when he designated his beneficiary
    by incorporating by reference his will. Unlike the Washington
    law at issue in Egelhoff, Arizona has not forced the hand of
    plan administrators or this court; no Arizona law precludes
    the administrator of this benefit plan from determining the
    proper beneficiary. See Egelhoff, 
    532 U.S. at 148
    ; Liberty Life
    Assurance Co. v. Kennedy, 
    358 F.3d 1295
    , 1300 (11th Cir.
    2004) (permitting beneficiaries to be designated through a
    will); 
    id.
     (“Insurers who offer employee benefit plans under
    ERISA are free to allow policyholders to change beneficiaries
    through more than a single means and, so long as the policy-
    holders are informed of the means and the plan administrator
    complies with its fiduciary obligations, ERISA is not impli-
    cated.”).
    [7] Overall, we are presented with a situation where Parker
    has made an invalid beneficiary designation on his beneficiary
    designation form. His attempted designation, therefore, fails.
    1294              METROPOLITAN LIFE INS. v. PARKER
    When a plan participant fails to identify a beneficiary, we
    must turn to the governing plan documents to ascertain the
    default beneficiary. See 
    29 U.S.C. § 1002
    (8) (“ ‘[B]ene-
    ficiary’ means a person designated by a participant, or by the
    terms of an employee benefit plan.”). Here, however, the par-
    ties dispute which of two plans found in the record was in
    effect at the time of Parker’s death. Pietrofitta argues that a
    Boatmen’s Bancshares, Inc. policy was in effect at the time of
    Parker’s death, and that it makes the decedent’s spouse the
    default beneficiary.3 In contrast, the Estate argues that a Bank
    of America plan was in effect at the time of Parker’s death,
    and that it establishes the decedent’s estate as the default benefi-
    ciary.4 Although the parties advanced these arguments in their
    opening summary judgment pleadings and at the motions
    hearing before the district court, the district court did not
    make a finding of fact as to which plan was in effect at the
    time of Parker’s death.5 The court referred to the Bank of
    America plan in its general order, but because of its disposi-
    tion, never reached the question of which plan governed for
    purposes of determining a default beneficiary. We cannot tell
    from the two plan documents in the record their effective
    dates or how, if at all, they govern Parker’s designation. We
    therefore remand to the district court to make a factual finding
    3
    That policy reads: “If no beneficiary is named or no beneficiary sur-
    vives the insured individual, proceeds shall be payable in the following
    order to: 1) the spouse, if living . . . .”
    4
    The Bank of America employee handbook provides: “If you die and no
    beneficiary designation is in effect as to any part of the insurance, or if
    there is no designated beneficiary then living with respect to any part of
    the insurance, the insurance company may, at its option, pay such part to
    your estate.”
    5
    At oral argument, counsel for Pietrofitta argued, and counsel for the
    Estate seemed to concede, that the Estate did not argue below that the
    Bank of America plan governed and that the argument has been waived.
    The Estate plainly attached a copy of the Bank of America handbook to
    its first summary judgment pleading. Documents from both the Boatmen’s
    plan and the Bank of America plan are in the record before us. Moreover,
    counsel for the Estate at the district court’s motions hearing argued that
    the Bank of America plan governed. The argument has not been waived.
    METROPOLITAN LIFE INS. v. PARKER        1295
    as to which plan governed at the time of Parker’s death and
    to determine the default beneficiary.
    IV.   CONCLUSION
    The judgment is reversed, and we remand for further pro-
    ceedings, consistent with this opinion. Each party to this
    appeal shall bear its own costs.
    REVERSED and REMANDED.