Hullett v. Towers, Perrin, Forster & Crosby, Inc.

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
10-27-1994
Hullett v.Towers, Perrin, Forster & Crosby, et al.
Precedential or Non-Precedential:
Docket 94-1517
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Recommended Citation
"Hullett v.Towers, Perrin, Forster & Crosby, et al." (1994). 1994 Decisions. Paper 169.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
NO. 94-1517
____________
JOSEPH W. HULLETT,
Appellee
v.
TOWERS, PERRIN, FORSTER & CROSBY, INC.;
TOWERS, PERRIN RETIREMENT INCOME PLAN;
TOWERS, PERRIN PENSION RESTORATION PLAN;
LESLIE B. TALCOTT
Leslie B. Talcott, Appellant
____________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. No. 92-cv-01184
____________
Argued September 20, 1994
Before: GREENBERG, ROTH, and ROSENN, Circuit Judges
Opinion Filed October 28, 1994
____________
DOUGLAS EVAN RESS, ESQ. (Argued)
MARGARET LOUD CHARENDOFF, ESQ.
Kaufman, Coren, Ress & Weidman
1525 Locust Street - 16th Floor
Philadlephia, PA 19102
Attorneys for Appellant
GERALD F. MCCORMICK, ESQ. (Argued)
Duane Morris & Heckscher
735 Chesterbrook Boulevard - Suite 300
Wayne, PA 19084
Attorneys for Appellee
____________
OPINION OF THE COURT
ROSENN, Circuit Judge.
This case presents an interesting question concerning
the interpretation of a property settlement agreement entered
into by a husband and wife in anticipation of their divorce, and
the application of the Employee Retirement Income Security Act of
1974 (ERISA), 28 U.S.C. § 1001 et seq., to the agreement. On
February 26, 1992, Joseph W. Hullett filed suit against his ex-
wife, Leslie B. Talcott, in the United States District Court for
the Eastern District of Pennsylvania seeking, inter alia, a
declaration that the settlement agreement did not constitute a
qualified domestic relations order (QDRO) within the meaning of
ERISA, and an injunction prohibiting payment of any of Hullett's
pension benefits to Talcott.1
Each of the parties subsequently filed cross-motions
for partial summary judgment. The district court granted in part
Hullett's motion for partial summary judgment and denied
Talcott's motion. The court held that the settlement agreement
constitutes a QDRO, and that Talcott is entitled to receive one-
half of the pension benefits which Hullett has accrued as of
December 31, 1983, the date of the settlement agreement, if she
remains unmarried at the time Hullett actually retires or is
required to begin receiving pension benefits. Talcott timely
appealed to this court. We reverse.
1
. The district court exercised jurisdiction over this case
pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1). This
court has jurisdiction over this appeal from a final judgment
pursuant to 28 U.S.C. § 1291.
I.
Hullett and Talcott were married on August 19, 1961.
In 1965, Hullett commenced employment with Towers, Perrin,
Forster & Crosby, Inc. (Towers, Perrin) in its reinsurance
division. He thereafter became a manager, stockholder, vice-
president, senior vice-president, a member of the board of
directors, and a member of the Towers, Perrin executive
committee.
In 1982 or 1983, Hullett and Talcott separated. On
December 31, 1983, they entered into a property settlement
agreement (the Agreement), which William H. Lamb, Esq., drafted.
The parties' subsequent divorce decree incorporated by reference
the Agreement as part of the decree. At the time of the
separation, Hullett was a fully vested member of Towers, Perrin
pension plans which consisted of a Retirement Income Plan
qualified under Section 401(a) of the Internal Revenue Code (Plan
or Pension Plan) and a non-qualified Retirement Income
Restoration Plan which had become effective as of January 1,
1976. The Agreement provided that in the event that Talcott
remained unmarried at the time of Hullett's retirement, Hullett
would pay to her, in the year of his retirement, fifty percent of
all income received pursuant to his fully vested, accrued pension
credit under the Plan.
By letter dated January 22, 1986, Hullett wrote
Talcott, contending that the Agreement contained an error in that
the pension was suppose to be valued as of December 31, 1983, of
which value Talcott was suppose to receive fifty percent.
Talcott responded that the Agreement was correct as written.
Hullett's attorney then wrote Lamb seeking to confirm Hullett's
position and to do the necessary to clarify the Agreement. In
response, Lamb's office disputed Hullett's claim. It emphasized
that on the original drafts, 100% of all income received from the
pension plan was to be payable to Talcott upon Hullett's
retirement and receipt of benefits, but that the valuation date
was deleted in return for Talcott receiving a full 50% of
whatever pension was ultimately payable to Hullett. In December
of 1986, Hullett informed Larry Margel, Chief Actuary at Towers,
Perrin, that he had signed an agreement which dealt with his
whole pension instead of with the pension as valued at December
31, 1983, and Margel provided Hullett with some arguments
regarding the situation.
On February 5, 1990, Towers, Perrin unilaterally
terminated Hullett's employment. As defined in Hullett's Pension
Plan, he had an early retirement date of January 1, 1991, and a
normal retirement date of January 1, 2001. Hullett could receive
pension benefits as of his early retirement date based upon a
reduction of benefits of 5% for each year below the normal
retirement date. Towers, Perrin and Hullett subsequently entered
into a Release and Agreement, whereby the parties agreed that
Hullett would receive a pension equal to the one he would have
earned under the Plan had he remained employed with Towers,
Perrin on his early retirement date.2
2
. This amounted to a pension under the Pension Plan of
$7,258.37 per month commencing January 1, 2001, plus a social
By letter dated August 20, 1991, the administrator for
the plans, Karl W. Lohwater, determined that the Agreement was a
QDRO3 within the meaning of ERISA, and that under the terms of
the Agreement, Talcott was entitled to 50% of all of Hullett's
pension benefits from both plans, with payment to commence when
Talcott elected to receive the pension benefits. Hullett
appealed this initial determination. By letter dated January 15,
1992, the plan administrator made a final determination to
recognize the Agreement as a QDRO and to pay Talcott 50% of
Hullett's pension, without regard to any December 31, 1983
valuation date and without regard to when Hullett decided to
commence receipt of his share of the pension monies.
On February 26, 1992, Hullett filed a complaint against
Talcott in federal court seeking, inter alia, a declaration that
the Agreement did not constitute a QDRO, and an injunction
prohibiting payment of any of Hullett's pension benefits to
Talcott. Talcott filed a motion to dismiss Hullett's complaint,
contending that Hullett had improperly sought de novo review of
(..continued)
security supplement under the Plan of $554.14 per month from
January 1, 2001 through May 31, 2003, plus a supplemental pension
of $3,220.30 per month commencing January 1, 2001.
3
. A QDRO is defined in 29 U.S.C. § 1056(d)(3)(B)(i). Prior to
1984, ERISA's provisions failed to clearly delineate the interest
of a non-employee spouse in pension benefits of the employee
spouse. Under the 1984 amendments to ERISA, if a domestic
relations order provides for distribution of part or all of a
participant's benefits under a qualified pension plan to an
alternate payee and meets the requirements set forth in the
statute, then the creation, recognition, or assignment of these
benefits to the alternate payee is not considered an assignment
or alienation prohibited by ERISA's spendthrift provisions.
the plan administrator's determination, which the district court
denied. Talcott subsequently filed a counterclaim against
Hullett and a crossclaim against Towers, Perrin, Towers Perrin
Retirement Plan, and Towers Perrin Pension Restoration Plan
(collectively, the "Towers, Perrin Defendants"), seeking a
declaration of the rights of the parties. The Towers, Perrin
defendants crossclaimed seeking similar relief. Talcott also
filed a motion in limine seeking the introduction of parol
evidence, which the district court denied.
The parties then filed cross-motions for partial
summary judgment. The district court granted in part Hullett's
motion, and denied Talcott's motion regarding the QDRO
determination but granted relief on other grounds. The court
held that the Agreement constituted a QDRO, and that Talcott was
entitled to receive one-half of the pension benefits which
Hullett had accrued as of December 31, 1983 if she remains
unmarried at the time Hullett actually retires or is required to
begin receiving pension benefits from Towers, Perrin. Talcott
filed a motion to alter or amend the judgment and for
reconsideration, which the district court denied.
II.
This court exercises plenary review over a grant of
summary judgment, and we apply the same test the district court
should have utilized initially. Oritani Sav. and Loan Ass'n v.
Fidelity and Deposit Co., 989 F.2d 635, 637 (3d Cir. 1993).
Summary judgment is appropriate only when it is demonstrated that
there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. Celotex Corp.
v. Catrett, 477 U.S. 317, 322-32 (1986); Fed.R.Civ.P. 56(c). An
issue of 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
deciding a motion for summary judgment, all reasonable inferences
must be drawn in favor of the non-movant. Oritani, 989 F.2d at
638.
For purposes of interpretation, a property settlement
agreement is treated the same as any other contract under
Pennsylvania law. See e.g., Lower v. Lower, 584 A.2d 1028, 1030
(Pa.Super. 1991). A court's purpose in examining a contract is
to interpret the intent of the contracting parties, as
objectively manifested by them. Mellon Bank, N.A. v. Aetna
Business Credit, Inc., 619 F.2d 1001, 1009 (3d Cir. 1980). The
process of interpreting a contract requires the court to make a
preliminary inquiry as to whether the contract before it is
ambiguous. Stendardo v. Federal Nat'l Mortgage Ass'n, 991 F.2d
1089, 1094 (3d Cir. 1993). A contract provision is ambiguous if
it is susceptible of two reasonable alternative interpretations.
Mellon, 619 F.2d at 1011. Where the written terms of the
contract are not ambiguous and can only be read one way, the
court will interpret the contract as a matter of law. Stendardo,
991 F.2d at 1094. If the contract is determined to be ambiguous,
then the interpretation of the contract is left to the
factfinder, to resolve the ambiguity in light of extrinsic
evidence. Id.; Mellon, 619 F.2d at 1011.
Pennsylvania courts apply the "plain meaning rule" of
interpretation of contracts which assumes that the intent of the
parties to an instrument is "embodied in the writing itself, and
when the words are clear and unambiguous the intent is to be
discovered only from the express language of the agreement."
County of Dauphin v. Fidelity & Deposit Co., 770 F. Supp. 248,
251 (M.D.Pa.) (quotation omitted), aff'd, 937 F.2d 596 (3d Cir.
1991). Nevertheless, a determination whether the language of an
agreement is unambiguous may not be apparent without examining
the context in which the agreement arose. Steuart v. McChesney,
444 A.2d 659, 662 (Pa. 1982). Thus, a court is not always
confined to the four corners of the written document in
determining whether an ambiguity exists. Mellon, 619 F.2d at
1011. Rather, the judge must "consider the words of the
contract, the alternative meaning suggested by counsel, and the
nature of the objective evidence to be offered in support of that
meaning." Id.
III.
We begin our analysis by examining the language of the
Agreement, which states in relevant part:
The retirement income plan listed in Schedule
"A" is payable to Husband upon his
retirement. The parties agree that in the
event Wife remains unmarried at the time of
Husband's retirement that fifty percent (50%)
of all income received pursuant to said
pension plan shall be paid by Husband to Wife
in the year of his retirement. It is
understood by both parties, that this pension
benefit is payable to Husband only if he
survives to his early retirement date of
January 1, 1991, and Husband, or Husband's
estate, are only bound hereby if Husband does
so survive.
* * *
Schedule "A"
(1) Seventy (70) shares of Towers, Perrin
Common Stock with a total current value of
$63,700.00 on the date of valuation, December
31, 1983.
(2) Two thousand three hundred and ten
(2,310) shares of Towers, Perrin Preferred
Stock with a total current value of
$231,000.00 on the date of valuation,
December 31, 1983.
(3) Fully vested, accrued pension credit
under the Towers, Perrin Retirement Income
Plan (hereinafter referred to as Towers,
Perrin RIP).
The district court found that the above contractual
language was susceptible to only one interpretation. The court
held that Talcott was entitled to 50% of the pension credit
vested and accrued as of December 31, 1983, the date of the
Agreement. In so holding, the court relied on the past tense
form of the words "vested" and "accrued". However, this language
also can be interpreted to refer to the pension credit "vested
and accrued" at the time of Hullett's retirement.
The record in this case shows that the district court
erred in holding that the language of the Agreement was not
ambiguous. The evidence supports as reasonable Talcott's
alternative interpretation that she was to receive 50% of "all"
of Hullett's pension, without being limited to only 50% of the
pension credit vested and accrued at the time of the Agreement.
Schedule A was specific in providing valuation dates for the
other two assets identified on it, Talcott's share of the common
and preferred stock, and the body of the Agreement specifically
states that these assets are valued as of December 31, 1983. In
contrast, the parties did not provide a valuation date for the
Pension Plan. Lamb, the scrivener of the Agreement, testified
that the draft version of the Agreement provided that Talcott was
to receive 100% of the pension valued as of December 31, 1983,
but that the valuation date was deleted in subsequent drafts and
the final Agreement in return for Talcott receiving a full 50% of
whatever pension was ultimately payable to Hullett.
Moreover, unlike the pension language, Talcott's
entitlement to the other assets on Schedule A is in no way
contingent upon her remaining unmarried. Talcott argues that
this is because she was only getting the shares of stock that
were rightfully hers as of the time of the divorce, but that
Hullett did not want to continue increasing her share of his
pension if she then chose to remarry. This interpretation of the
contractual language is a reasonable one.
The district court observed that its interpretation was
further supported by Paragraph 12 of the Agreement, which states
that neither party has any claim to any personal property,
tangible or intangible, thereafter acquired by the other. The
inclusion of Paragraph 12, a standard contractual provision, does
not preclude Talcott's interpretation of the Agreement as a
reasonable one. As testified by the scrivener, Lamb:
[Paragraph 12 is] a standard clause which is
intended to cover the situation where after
this agreement is signed husband goes out and
buys a car or wife goes out and buys an
airplane or a townhouse or whatever, neither
party has any claim on any of those assets
after this agreement is signed.
Similarly, the two contractual provisions cited by Hullett,
concerning the freedom to live apart and engage in any employment
and the release of claims against each other, are standard
contractual provisions which serve separate and distinct
purposes. These provisions are not inherently inconsistent with
Talcott's suggested interpretation of the Agreement.
The extrinsic evidence presented by Talcott shows that
her interpretation is a reasonable alternative one, and thus the
language regarding the amount of pension benefits to which
Talcott is entitled is ambiguous. See e.g., Lower, 584 A.2d at
1032 (holding that failure to define "alimony" and "support"
created ambiguity to be resolved by factfinder); Lohmann v.
Piczon, 487 A.2d 1386, 1389 (Pa.Super. 1985) (finding "net income
after taxes," 25% of which husband was to pay wife, was ambiguous
as to whether it included any of husband's tax deductions); De
Witt v. Kaiser, 484 A.2d 121, 126 (Pa.Super. 1984) (finding term
"income" in context of husband's support obligations to be
ambiguous, thus requiring extrinsic evidence to define term).
Therefore, we must remand this case to allow a factfinder to
resolve the ambiguity in light of the extrinsic evidence.
IV.
The second dispute focuses on the following contractual
language:
The retirement income plan listed in Schedule
"A" is payable to Husband upon his
retirement. The parties agree that in the
event Wife remains unmarried at the time of
Husband's retirement that fifty percent (50%)
of all income received pursuant to said
pension plan shall be paid by Husband to Wife
in the year of his retirement. It is
understood by both parties, that this pension
benefit is payable to Husband only if he
survives to his early retirement date of
January 1, 1991, and Husband, or Husband's
estate, are only bound hereby if Husband does
so survive.
The district court attempted to examine the use of the
word "retirement" as used in the Plan to determine what the
parties meant, but found that the Plan does not provide a single
definition of the word. Rather, the Plan describes three
separate retirement dates, early, normal, and postponed. The
court thus turned back to the Agreement to determine which
definition the parties intended to control. The court concluded
that the parties intended that Talcott be entitled to her
benefits when Hullett elects to and does receive his pension
benefits, or when he is required to commence receipt of his
pension benefits under the terms of the Plan, in the event that
Talcott remains unmarried at that time.
Before the district court, Hullett argued that Talcott
is entitled to 50% of the pension benefits which he accrued prior
to December 31, 1983, only if she remains unmarried at the time
he actually retires from the workplace in general. On appeal,
Hullett now adopts the district court's interpretation of the
Agreement.
Talcott argues that the district court misconstrued the
Agreement, and notes that the use of the term "retirement" in the
Agreement directly follows a sentence in which the parties
defined retirement as that point at which the retirement income
plan was "payable" to Hullett. She contends that "payable" means
the point at which the money may be paid on demand, not the point
at which payment actually commences. See Black's Law Dictionary
(5th ed. 1979) at 1016 (defining payable as "[c]apable of being
paid; suitable to be paid; admitting or demanding payment; justly
due; legally enforceable"). Talcott asserts that this date would
be January 1, 1991, when Hullett reached his early retirement
date under the Plan, and that the court erred in construing the
Agreement to empower Hullett to hold her pension money hostage to
her remaining unmarried until he turns 60, in the year 2001.
Talcott describes various scenarios where the district court's
interpretation of the Agreement could cause her to lose all or
part of her share in the pension benefits. Thus, Talcott argues,
because she remained unmarried at the time of Hullett's
retirement from Towers, Perrin, she is presently entitled to her
50% share of pension benefits, whatever they might be, and she is
free to remarry.
Again, Talcott's interpretation of the contractual
language is a reasonable alternative one. It is clear that the
parties did not foresee or provide for Hullett terminating his
employment with Towers, Perrin prior to when he was entitled to
his pension benefits. Thus, the contractual language is
ambiguous, and its interpretation should be left to the
factfinder to resolve in light of any extrinsic evidence the
parties may present on remand.
V.
The parties' final dispute concerns the district
court's appropriate standard of review of the plan
administrator's determinations. In Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101 (1989), the United States Supreme Court
held that challenges under section 1132(a)(1)(B) of ERISA are to
be reviewed under a de novo standard unless the plan gives the
administrator discretionary authority to determine eligibility
for benefits or to construe the terms of the plan. Id. at 115.
Where a plan administrator is given discretionary authority to
determine eligibility for benefits or to construe the terms of
the plan, the appropriate standard of review of the
administrator's determinations is an arbitrary and capricious
standard. Id. at 114-15. Discretionary powers need not be
expressly granted; they may be implied by the plan's terms. Luby
v. Teamsters Health Welfare & Pension Trust Funds, 944 F.2d 1176,
1181 (3d Cir. 1991).
Neither party has appealed the district court's ruling
that the Agreement constitutes a QDRO, and therefore it is not
necessary for this court to determine whether the district court
erred in reviewing de novo the plan administrator's finding that
the Agreement is a QDRO. The district court did not err in
holding that it should review de novo the plan administrator's
construction of the Agreement, which involved issues of contract
interpretation under the Agreement and not the Plan. However, as
discussed above, the Agreement is ambiguous and thus the issues
of the amount of Talcott's share of pension benefits, the time of
Hullett's retirement, and the effect of Talcott's marital status
are for the factfinder to resolve on remand in light of the
extrinsic evidence.
Additionally, the district court erred in refusing to
give deference to the plan administrator's determination that he
would segregate Talcott's QDRO monies and commence payment at the
time she elects to receive her share. That is, when Talcott
elects to begin her benefit payments, the administrator will
calculate the amount she is entitled to receive by making an
actuarial calculation converting the present value of one half of
Hullett's pension, valued as of the date determined by the
factfinder, to a pension payable over Talcott's lifetime. In
contrast, the court held that Talcott may continue receiving
monthly benefits only as long as Hullett receives them pursuant
to the Plan.
In making his determination regarding the distribution
of payments, the plan administrator exercised his discretionary
authority to construe the terms of the Plan. Section 8.1(h) of
the Plan provides, "If the [plan administer] receives a QDRO with
respect to a Member's divorce from his Spouse, it will comply
with such Order and reduce the benefits otherwise payable to or
on behalf of such Member under this Plan or the Actuarial
Equivalent of any benefits payable to his Spouse under this Plan
pursuant to such QDRO." Additionally, the Plan Procedures for
Domestic Relations Orders provides that any amount that would be
payable to an alternate payee under a QDRO will be separately
accounted for under the Plan and will remain segregated while the
plan participant or alternate payee appeals the administrator's
QDRO determination. At the end of this appeal period, "the
segregated amounts, adjusted for investment results, will be paid
to the plan participant or the alternate payee (or credited to
the account of the plan participant or alternate payee) in
accordance with the determination of the [plan administrator]."
Thus, the district court erred in refusing to give deference to
the administrator's holding that Talcott's pension is payable
over her lifetime, and instead holding that payments to Talcott
will terminate when Hullett's pension payments terminate. The
court was required to uphold the administrator's determination as
to QDRO payments unless it was arbitrary and capricious. It was
not.
In summary, the district court erred by granting in
part Hullett's motion for partial summary judgment. Talcott has
presented reasonable alternative interpretations of the
contractual language regarding the distribution of Hullett's
pension and the provision requiring payment upon Hullett's
retirement if Talcott remains unmarried. Thus, these provisions
are ambiguous and are appropriate for a factfinder's resolution
upon remand. Finally, although the district court properly
reviewed the plan administrator's interpretation of the Agreement
on a de novo basis, it erred in refusing to give deference to the
plan administrator's determination regarding the payment of
benefits under the QDRO.
VI.
Accordingly, the district court's grant of partial
summary judgment in favor of Hullett will be reversed and the
case remanded for proceedings consistent with this opinion.