Ragan v. Ragan

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
May 27, 2021
2021COA75
No. 20CA0038 Ragan v. Ragan — Employment Law — ERISA;
General Provisions Concerning Probate and Nonprobate
Transfers — Revocation of Probate and Nonprobate Transfers by
Divorce
This appeal concerns the interplay between Colorado’s divorce
revocation statute, section 15-11-804, C.R.S. 2020, under which
any beneficiary designation of a former spouse is automatically
revoked upon divorce, and the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, under which
an ERISA plan administrator must distribute plan proceeds to the
beneficiary named in the plan. In In re Estate of MacAnally, 20 P.3d
1197, 1203 (Colo. App. 2000), a division of this court held that
ERISA preempts the divorce revocation statute in the
“pre-distribution” context by requiring plan proceeds to be
distributed to the named beneficiary. A division of the court of
appeals now recognizes that ERISA preemption extends to
post-distribution lawsuits pursuant to section 15-11-804(8)(b). The
division therefore concludes as a matter of first impression in
Colorado that, absent an express waiver of rights to the proceeds,
ERISA precludes a lawsuit against a former spouse to recover
insurance proceeds that were distributed to her as the named
beneficiary.
COLORADO COURT OF APPEALS 2021COA75
Court of Appeals No. 20CA0038
El Paso County District Court No. 19CV31274
Honorable Gregory R. Werner, Judge
Rozalyn Ragan, Personal Representative of the Estate of Charles Phillip Ragan,
Deceased,
Plaintiff-Appellant,
v.
Melissa Ragan, a/k/a Melissa Hudson,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division V
Opinion by JUDGE YUN
J. Jones and Navarro, JJ., concur
Announced May 27, 2021
The Drexler Law Group, LLC, Matthew B. Drexler, Brian Melton, Stephen A.
Brunette, Colorado Springs, Colorado, for Plaintiff-Appellant
The Gasper Law Group, PLLC, Kenneth H. Gray, Jack Roth, Colorado Springs,
Colorado, for Defendant-Appellee
¶1 At the time of Charles Phillip Ragan’s death, his ex-wife,
Melissa Ragan, a/k/a Melissa Hudson, remained the named
beneficiary of his employer-sponsored life and accidental death
insurance policies. After the insurance proceeds were distributed to
Ms. Ragan, Mr. Ragan’s estate (Estate) sued her to recover those
proceeds.
¶2 The Estate’s case implicates the interplay between Colorado’s
divorce revocation statute, section 15-11-804, C.R.S. 2020, and the
Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. §§ 1001-1461, which the parties agree governs the
insurance policies. On one hand, ERISA provides that an employee
benefit plan “shall . . . specify the basis on which payments are
made to and from the plan,” 29 U.S.C. § 1102(b)(4), and that the
fiduciary shall administer the plan “in accordance with the
documents and instruments governing the plan,” 29 U.S.C.
§ 1104(a)(1)(D), and make payments to a beneficiary who is
“designated by a participant, or by the terms of an employee benefit
plan,” 29 U.S.C. § 1002(8). ERISA also provides that it “shall
supersede any and all State laws insofar as they may now or
1
hereafter relate to any employee benefit plan” covered by ERISA.
29 U.S.C. § 1144(a).
¶3 On the other hand, section 15-11-804(2)(a)(i) (subsection (2))
of Colorado’s divorce revocation statute provides that any
beneficiary designation of a then-spouse is automatically revoked
upon divorce. Section 15-11-804(8)(b) (subsection (8)(b)) further
provides that if “any part of this section is preempted by federal
law,” a former spouse “who . . . received a payment . . . to which
that person is not entitled under this section is obligated to return
that payment” or “is personally liable for the amount of the
payment . . . , to the person who would have been entitled to it were
this section or part of this section not preempted.”
¶4 The Estate concedes that ERISA preempts subsection (2) and
that the plan administrator properly distributed the insurance
proceeds to Ms. Ragan. But the Estate argues that
subsection (8)(b) allows the Estate to recover those proceeds from
Ms. Ragan, who, by operation of subsection (2), was not entitled to
those proceeds. The district court disagreed, concluding that
subsection (8)(b), like subsection (2), is preempted by ERISA and
2
that the Estate therefore had “no legal interest” in the insurance
proceeds.
¶5 We affirm the district court’s judgment. In In re Estate of
MacAnally, 20 P.3d 1197, 1203 (Colo. App. 2000), a division of this
court held that ERISA preempts Colorado’s divorce revocation
statute in the “pre-distribution” context by requiring an ERISA plan
administrator to distribute plan proceeds to the beneficiary named
in the plan. We now recognize that ERISA preemption extends to
post-distribution lawsuits. Based on our analysis of legal authority
from other jurisdictions, we conclude as a matter of first impression
in Colorado that, absent an express waiver of rights to the proceeds,
ERISA precludes a lawsuit against a former spouse to recover
insurance proceeds that were distributed to him or her as the
named beneficiary.
I. Background
¶6 Charles and Melissa Ragan were married in 2012 and divorced
in December 2016. Less than five months later, on May 13, 2017,
Mr. Ragan died in a car-bicycle accident. Before the dissolution of
the Ragans’ marriage, Mr. Ragan took out several life and
accidental death insurance policies through his employer, Federal
3
Express, all of which named Ms. Ragan as the beneficiary.
Mr. Ragan did not change the beneficiary of these policies after his
divorce from Ms. Ragan.
¶7 Shortly after Mr. Ragan’s death, Ms. Ragan was notified of the
existence of the policies and received benefits in the amount of
approximately $535,000. Ms. Ragan contends, and the Estate does
not dispute, that she was unaware of the existence of the policies
before Mr. Ragan’s death. No party asserts that Ms. Ragan waived
or voluntarily relinquished her right to receive the insurance
proceeds.
¶8 Following a hearing, a domestic relations court found that the
insurance proceeds were not a material asset or liability of the
marital estate, that no maintenance or child support obligations
had to be secured with the proceeds, and that, therefore, the
Estate’s claim for recovery of the proceeds from Ms. Ragan was not
within that court’s continuing jurisdiction.
¶9 In May 2019, the Estate filed a complaint in district court
against Ms. Ragan and her businesses,1 seeking to recover the
1The complaint alleges that Ms. Ragan used the insurance
proceeds to establish her businesses.
4
insurance proceeds pursuant to subsection (8)(b) and asserting
related claims for breach of contract, breach of the covenant of good
faith and fair dealing, unjust enrichment, civil theft, and piercing
the corporate veil. The primary basis for the Estate’s claims is that
DECEDENT’s designations of FORMER
SPOUSE as beneficiary of said policies were
revoked as a matter of law upon entry of the
above-referenced Decree of Dissolution on
December 28, 2016, under C.R.S.
§ 15-11-804(2)(a), with the same effect as if
FORMER SPOUSE had disclaimed said
beneficiary designations, under C.R.S.
§ 15-11-804(4).
Thus, the Estate alleges that “FORMER SPOUSE was not entitled to
receive the insurance benefits specified above, and is obligated to
return or repay same to the ESTATE, together with any benefits
arising from payment of said benefits to her, under C.R.S.
§ 15-11-804(8).”
¶ 10 Ms. Ragan filed a motion for declaratory relief pursuant to
C.R.C.P. 57 and a motion to dismiss pursuant to C.R.C.P. 12(b)(5).
She argued that because ERISA preempts subsection (2) by
requiring the insurance proceeds to be distributed to her, it likewise
preempts subsection (8)(b) by precluding a post-distribution lawsuit
against her to recover those proceeds. In response, the Estate
5
argued that although ERISA preempts subsection (2), it does not
preempt subsection (8)(b) because attempting to recover benefits
before they have been distributed to the beneficiary differs from
attempting to recover benefits from the beneficiary after they have
been disbursed.
¶ 11 The district court granted both of Ms. Ragan’s motions. It
concluded that precedent from the United States Supreme Court
and other courts, including a division of this court, makes clear
that ERISA preempts any revocation statute — like section
15-11-804 — that automatically revokes a beneficiary designation
upon divorce. The only exception, the court explained, is in the
context of waiver by private agreement between the parties.
Because “no facts have been pled in this case that such an
agreement exists” and “the Estate does not reference any such
waiver in this case,” the court concluded that ERISA preempts the
Estate’s post-distribution claims against Ms. Ragan to recover
funds that were properly distributed to her as the named
beneficiary.
¶ 12 The Estate filed a motion to alter or amend the judgment. The
court denied the motion, noting that “all of the cases cited by [the
6
Estate] involve a purported voluntary relinquishment of a claim by
the beneficiary” while this case, in contrast, involves the revocation
of a beneficiary’s interest by operation of state law.
II. Analysis
¶ 13 The Estate contends that the district court erred by
concluding that ERISA preempts subsection (8)(b).2 Specifically, the
Estate argues that ERISA does not preempt its claims because they
are “for post-distribution recovery of insurance proceeds paid to a
decedent’s former spouse, and [are] not an action against an ERISA
plan administrator to attempt to recover insurance proceeds prior
to distribution by the ERISA plan administrator.” Ms. Ragan
contends that the Estate’s appeal is frivolous and requests an
assessment of fees and costs as sanctions pursuant to C.A.R. 38(b).
After setting out the standard of review, we turn first to Colorado’s
divorce revocation statute, then to ERISA and the body of case law
surrounding ERISA preemption. We then address Ms. Ragan’s
request for sanctions.
2The Estate does not argue on appeal that its claims for breach of
contract, breach of the covenant of good faith and fair dealing,
unjust enrichment, civil theft, and piercing the corporate veil
survive if ERISA preempts subsection (8)(b).
7
A. Standard of Review
¶ 14 We review the district court’s summary judgment ruling on a
declaratory judgment claim under C.R.C.P. 57 de novo. Fire House
Car Wash, Inc. v. Bd. of Adjustment for Zoning Appeals, 30 P.3d 762,
766 (Colo. App. 2001). We also review the district court’s ruling on
a motion to dismiss under C.R.C.P. 12(b)(5) de novo. Scott v. Scott,
2018 COA 25, ¶ 17. And we review the district court’s statutory
interpretation de novo. In re Estate of Johnson, 2012 COA 209, ¶ 8.
B. Colorado’s Divorce Revocation Statute
¶ 15 Subsection (2) provides that, with certain exceptions not
applicable here, a divorce revokes any revocable disposition or
appointment of property made by a divorced individual to the
individual’s then-spouse in a governing instrument, including a
beneficiary designation in an insurance policy. § 15-11-804(2)(a)(i);
Estate of Johnson, ¶ 9.
¶ 16 Subsection (8)(a) then provides that “a former spouse . . . who,
not for value, received a payment . . . to which that person is not
entitled under this section is obligated to return the payment . . . ,
or is personally liable for the amount of the payment . . . , to the
8
person who is entitled to it under this section.” Subsection (8)(b)
further provides that
[i]f this section or any part of this section is
preempted by federal law with respect to a
payment . . . covered by this section, a former
spouse . . . who, not for value, received a
payment . . . to which that person is not
entitled under this section is obligated to
return that payment . . . , or is personally
liable for the amount of the payment . . . , to
the person who would have been entitled to it
were this section or part of this section not
preempted.
§ 15-11-804(8)(b).
C. ERISA
¶ 17 “ERISA is a comprehensive statute regulating employee
pension and welfare plans.” Estate of MacAnally, 20 P.3d at 1199.
“The purpose of ERISA is ‘to protect the interests of employees and
their beneficiaries in employee benefit plans and to ensure that
plans and plan sponsors are subject to a uniform body of benefit
law . . . .’” Id. at 1201 (quoting Barrett v. Hay, 893 P.2d 1372, 1380
(Colo. App. 1995)).
¶ 18 ERISA provides that an employee benefit plan “shall . . .
specify the basis on which payments are made to and from the
plan,” 29 U.S.C. § 1102(b)(4), and that the fiduciary shall
9
administer the plan “in accordance with the documents and
instruments governing the plan,” 29 U.S.C. § 1104(a)(1)(D).
Additionally, each ERISA-governed plan must “provide that benefits
provided under the plan may not be assigned or alienated.”
29 U.S.C. § 1056(d)(1). With certain exceptions not relevant here, a
plan fiduciary must “discharge his duties with respect to a plan
solely in the interest of the participants and beneficiaries.”
29 U.S.C. § 1104(a)(1).
¶ 19 ERISA further contains an express preemption provision,
29 U.S.C. § 1144(a), which states that ERISA “shall supersede any
and all State laws insofar as they may now or hereafter relate to any
employee benefit plan” covered by ERISA.
D. Law Governing ERISA Preemption
¶ 20 Two types of preemption — statutory or express preemption
and direct or conflict preemption — have been used to conclude
that ERISA preempts state divorce revocation statutes.
¶ 21 Statutory or express “preemption occurs when a statute
expressly states that it preempts other law.” Estate of MacAnally,
20 P.3d at 1201. “In the ERISA context, ERISA preempts a state
law pursuant to statutory [or express] preemption where a state law
10
relates to any employee benefit plan covered by ERISA.” Id.; see
29 U.S.C. § 1144(a). A state law “‘relates to’ an employee benefit
plan . . . if it has a connection with or reference to such a plan.”
Barrett, 893 P.2d at 1376 (quoting Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 96-97 (1983)).
¶ 22 Direct or conflict preemption, in turn, occurs where
“compliance with both federal and state regulations is a physical
impossibility, . . . or where state law stands as an obstacle to the
accomplishment and execution of the full purposes and objectives
of Congress.” Boggs v. Boggs, 520 U.S. 833, 844 (1997) (citation
omitted). “In the face of [a] direct clash between state law and the
provisions and objectives of ERISA, the state law cannot stand.” Id.¶ 23 In Estate of MacAnally, 20 P.3d at 1203, a division of this
court held that ERISA preempts Colorado’s divorce revocation
statute in the “pre-distribution” context — that is, before benefits
are distributed to a named beneficiary by an ERISA plan
administrator. At the time of Richard MacAnally’s death, his former
spouse, Imogene Levin, remained the named beneficiary of his
ERISA-governed annuity contracts. Id. at 1199. MacAnally’s estate
argued that Levin’s designation as the beneficiary was revoked by
11
operation of law. Id. The division noted that, under 29 U.S.C.
§ 1104, an ERISA plan administrator must pay a death benefit to
the beneficiary named in the plan (Levin) if the plan participant dies
before retirement, while the divorce revocation statute, in contrast,
changed the beneficiary to whom benefits must be paid from Levin
to an unnamed beneficiary (MacAnally’s estate). Id. at 1203. Under
these circumstances, the division concluded, the divorce revocation
statute directly conflicted with ERISA, and based on principles of
direct or conflict preemption, ERISA preempted the divorce
revocation statute. Id.¶ 24 The year after Estate of MacAnally, the United States Supreme
Court reached a similar conclusion. See Egelhoff v. Egelhoff,
532 U.S. 141 (2001). In Egelhoff, a husband designated his wife as
the beneficiary of an ERISA-governed life insurance policy provided
by his employer. After the couple divorced, the husband failed to
change the beneficiary of the life insurance policy. Id. at 144.
When the husband died, the plan proceeds were paid to his ex-wife
according to the pre-divorce beneficiary designation. The
decedent’s children from a previous marriage sued the ex-wife to
recover the proceeds, citing a Washington statute that provided for
12
automatic revocation upon divorce of the designation of a former
spouse as beneficiary. Id. at 144-45. Based on ERISA’s express
preemption provision, 29 U.S.C. § 1144(a), the Court held that
ERISA preempted the Washington statute. Egelhoff, 532 U.S. at
146.
¶ 25 The Court reasoned that the Washington statute required plan
administrators to pay benefits to the beneficiaries chosen by state
law rather than to those identified in the plan documents. Id. at
147. This outcome, the Court said, contradicts ERISA’s
requirements that a plan “shall . . . specify the basis on which
payments are made to and from the plan,” 29 U.S.C. § 1102(b)(4),
and that the fiduciary shall administer the plan “in accordance with
the documents and instruments governing the plan,” 29 U.S.C.
§ 1104(a)(1)(D), making payments to a beneficiary who is
“designated by a participant, or by the terms of an employee benefit
plan,” 29 U.S.C. § 1002(8). Egelhoff, 532 U.S. at 147. Further, the
Court concluded that the Washington statute interfered with
ERISA’s objective of nationally uniform plan administration, which
enables employers to “establish a uniform administrative scheme”
and provide “a set of standard procedures to guide processing of
13
claims and disbursement of benefits.” Id. at 148 (quoting Fort
Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987)). No such
uniformity can exist if plans are subject to different legal obligations
in different states because plan administrators would need to know
every state’s law on this subject to determine whether the
designation of a beneficiary had been revoked by operation of law.
Id. at 149.
E. ERISA Preempts Subsection (8)(b)
¶ 26 The Estate acknowledges that, under Estate of MacAnally and
Egelhoff, subsection (2) is preempted by ERISA and that the plan
administrator thus properly distributed the insurance proceeds to
Ms. Ragan. However, the Estate contends that ERISA does not
preempt the Estate’s “post-distribution” suit under subsection (8)(b)
to recover those funds.
¶ 27 The Estate bases its argument on Kennedy v. Plan
Administrator for DuPont Savings & Investment Plan, 555 U.S. 285(2009), and Andochick v. Byrd, 709 F.3d 296 (4th Cir. 2013). In
Kennedy, the Supreme Court held that an ERISA plan
administrator must distribute benefits to the beneficiary named in
the plan, notwithstanding the fact that the named beneficiary
14
signed a waiver disclaiming her right to the benefits. 555 U.S. at
288. But the Court left open the question of whether, once the
benefits were distributed by the administrator, the plan
participant’s estate could enforce the named beneficiary’s waiver
against her. Id. at 299 n.10 (“Nor do we express any view as to
whether the Estate could have brought an action in state or federal
court against [the named beneficiary] to obtain the benefits after
they were distributed.”).
¶ 28 In Andochick, the Fourth Circuit took up the question left open
by Kennedy and held that ERISA does not preempt
“post-distribution suits to enforce state-law waivers” against ERISA
beneficiaries. 709 F.3d at 299-301; see also, e.g., Estate of
Kensinger v. URL Pharma, Inc., 674 F.3d 131, 132 (3d Cir. 2012)
(after ERISA plan administrator distributes funds to named
beneficiary who waived her right to plan proceeds, plan
participant’s estate can sue named beneficiary to enforce her waiver
and recover the funds); Sweebe v. Sweebe, 712 N.W.2d 708, 710
(Mich. 2006) (“While a plan administrator is required by ERISA to
distribute plan proceeds to the named beneficiary, the named
15
beneficiary can then be found to have waived the right to retain
those proceeds.”).
¶ 29 The Estate argues that, if ERISA does not preempt
post-distribution suits to enforce express waivers by named
beneficiaries of their rights to ERISA plan proceeds, neither should
it preempt a post-distribution suit based on a state statute that
purports to divest a named beneficiary of her right to plan proceeds
by operation of law. For three reasons, we are not persuaded.
¶ 30 First, none of the cases relied on by the Estate allows a
state-law-based post-distribution claim for ERISA benefits in the
absence of a waiver by the named beneficiary.3 Indeed, several of
3 During oral argument, counsel for the Estate appeared to argue
that Evans v. Diamond, 957 F.3d 1098 (10th Cir. 2020), Stillman v.
Teachers Insurance & Annuity Ass’n College Retirement Equities
Fund, 343 F.3d 1311 (10th Cir. 2003), and Walsh v. Montes,
388 P.3d 262, 265 (N.M. Ct. App. 2016), allow post-distribution
claims for ERISA-governed benefits based on a state statute. But
none of these cases supports this proposition. Evans, 957 F.3d at
1104-05, held that a different federal statute, the Federal Employee
Retirement Systems Act, preempted an estate’s lawsuit to enforce a
beneficiary’s waiver and, in doing so, decided that Kennedy v. Plan
Administrator for DuPont Savings & Investment Plan, 555 U.S. 285,
299 n.10 (2009), was inapplicable. Stillman, 343 F.3d at 1314-23,
did not involve ERISA preemption or ERISA-governed benefits. And
Walsh, 388 P.3d at 266, involved a claim for recovery of
ERISA-governed benefits based on an express waiver, not a state
statute.
16
the cases explicitly distinguish between post-distribution suits to
enforce waivers and post-distribution suits based on state divorce
revocation statutes. In Sweebe, for example, the Michigan Supreme
Court emphasized that its holding that a valid waiver is not
preempted by ERISA was consistent with the principle that parties
have a broad freedom to contract, 712 N.W.2d at 712, while, in
contrast, a state statute that automatically revoked a beneficiary
designation upon divorce would “clearly invade[] an area that is
covered by ERISA,” id. at 713. In Culwick v. Wood, 384 F. Supp. 3d
328, 345 (E.D.N.Y. 2019), the court noted that a former spouse’s
contention that ERISA preempted New York’s divorce revocation
statute was “a red herring” because the claim against her was
based on her express waiver of her right to plan proceeds, not on
the state statute. And in Hennig v. Didyk, 438 S.W.3d 177, 183
(Tex. App. 2014), the court determined that it need not resolve
whether ERISA preempted a post-distribution suit under Texas’s
divorce revocation statute because the named beneficiary expressly
waived her rights to plan proceeds. Thus, while the Estate cites
these and other cases holding that ERISA does not preempt
post-distribution suits to enforce express waivers by named
17
beneficiaries, it fails to show how those cases support its contention
that ERISA should not preempt a post-distribution suit based on a
divorce revocation statute.
¶ 31 Second, the Washington Court of Appeals examined a case
almost identical to this one and held that ERISA “preempts a
party’s reliance on [Washington’s divorce revocation statute] for
recovery of ERISA funds in the hands of the designated beneficiary.”
Estate of Lundy v. Lundy, 352 P.3d 209, 215 (Wash. Ct. App. 2015).
The Lundy court emphasized that, while Kennedy recognized an
open question in the context of waiver by private agreement
between the parties, it did “not recognize an open question in the
context of a state-law-based claim to . . . ERISA benefits” after they
had been distributed to the named beneficiary. Id. at 214.
¶ 32 In reaching its conclusion, the Lundy court looked to a Ninth
Circuit case, Carmona v. Carmona, 603 F.3d 1041 (9th Cir. 2010).
In Carmona, a husband designated his then-wife as his survivor
beneficiary under two ERISA-governed pension plans. Id. at 1048.
When the husband remarried, he petitioned the family court to
revoke his designation of his ex-wife as survivor beneficiary and
substitute his new wife. Id. at 1049. After the husband’s death,
18
the court ordered the plan administrator to change the survivor
beneficiary from his ex-wife to his new wife or, in the alternative,
ordered that the funds his ex-wife received be placed in a
constructive trust with his new wife as beneficiary. Id. The Ninth
Circuit held that the plan administrator was not required to redirect
the surviving spouse benefits to the new wife and that the
constructive trust was impermissible because “state law doctrines
(including constructive trusts) may not be invoked to assign
benefits to parties other than those designated as beneficiaries
under ERISA.” Id. at 1061. “Any alternative rule,” the court
observed, “would allow for an end-run around ERISA’s rules and
Congress’s policy objective of providing for certain beneficiaries,
thereby greatly weakening, if not entirely abrogating, ERISA’s broad
preemption provision.” Id.¶ 33 Thus, as the Lundy court noted, Carmona “explicitly
disapprove[d] of state law ‘end-runs’ around ERISA imposed by
state courts.” Lundy, 352 P.3d at 214. Accordingly, the court held
that ERISA preempts claims under Washington’s divorce revocation
statute both before and after plan proceeds are distributed to the
named beneficiary. Put another way, the plan participant’s estate
19
could not “revive” the preempted statute “simply by applying it in a
postdistribution argument.” Id.
¶ 34 We, like the Lundy and Carmona courts, agree that
subsection (8)(b) cannot be used as a statutory end-run around
preemption and “cannot be used to contravene the dictates of
ERISA.” Carmona, 603 F.3d at 1061. Accordingly, we conclude
that subsection (8)(b) cannot revive the preempted subsection (2)
simply by effecting the same result after ERISA plan proceeds have
been distributed to the named beneficiary.
¶ 35 Third, addressing a different federal law in Hillman v. Maretta,
569 U.S. 483 (2013), the United States Supreme Court concluded
that the law preempted a provision of Virginia’s divorce revocation
statute very similar to Colorado’s subsection (8)(b). Although the
federal law at issue in Hillman was the Federal Employees’ Group
Life Insurance Act of 1954 (FEGLIA), 5 U.S.C. §§ 8701-8716, not
ERISA, we nonetheless find the Court’s reasoning persuasive on the
issue of whether a state statute can sidestep preemption. See
Lundy, 352 P.3d at 212 (stating that although Hillman is not
controlling, it “make[s] clear that the account proceeds go to the
20
federally determined beneficiary regardless of state law to the
contrary”).
¶ 36 The Virginia statute at issue in Hillman provided, first, that a
divorce or annulment revokes a “beneficiary designation contained
in a then existing written contract owned by one party that provides
for the payment of any death benefit to the other party.” Va. Code
Ann. § 20-111.1(A) (West 2011) (Section A). In a provision
equivalent to Colorado’s subsection (8)(b), the Virginia statute then
provided that,
[i]f this section is preempted by federal law
with respect to the payment of any death
benefit, a former spouse who, not for value,
receives the payment of any death benefit that
the former spouse is not entitled to under this
section is personally liable for the amount of
the payment to the person who would have
been entitled to it were this section not
preempted.
Va. Code Ann. § 20-111.1(D) (Section D).
¶ 37 In Hillman, the husband named his then-wife as the
beneficiary of his Federal Employees’ Group Life Insurance (FEGLI)
policy. 569 U.S. at 488. They subsequently divorced, and the
husband remarried. At the time of the husband’s death, however,
his ex-wife remained the named beneficiary of his FEGLI policy. Id.
21
at 488-89. After the proceeds were distributed to the ex-wife, the
new wife sued the ex-wife, arguing that the ex-wife “was liable to
her under Section D for the proceeds of her deceased husband’s
FEGLI policy.” Id. at 489. The ex-wife, however, argued that she
should be allowed to keep the insurance proceeds because
Section D — like Section A — was directly preempted by FEGLIA.
Id.
¶ 38 The Supreme Court agreed. Id. at 490. In reaching its
decision, the Court noted that FEGLIA provides that, upon an
employee’s death, life insurance benefits are paid in accordance
with a specified “order of precedence.” Id. at 486 (quoting 5 U.S.C.
§ 8705(a)). The proceeds accrue “[f]irst, to the beneficiary or
beneficiaries designated by the employee in a signed and witnessed
writing received before death.” 5 U.S.C. § 8705(a). “[I]f there is no
designated beneficiary,” the benefits are paid “to the widow or
widower of the employee.” Id. Thus, FEGLIA creates a scheme that
gives highest priority to an insured’s designated beneficiary.
Hillman, 569 U.S. at 493. The Court concluded that
Section D interferes with Congress’ scheme,
because it directs that the proceeds actually
“belong” to someone other than the named
22
beneficiary by creating a cause of action for
their recovery by a third party. It makes no
difference whether state law requires the
transfer of the proceeds, as Section A does, or
creates a cause of action, like Section D, that
enables another person to receive the proceeds
upon filing an action in state court. In either
case, state law displaces the beneficiary
selected by the insured in accordance with
FEGLIA and places someone else in her stead.
Id. at 494 (citations omitted).
¶ 39 In his concurrence, Justice Thomas observed that “[t]he direct
conflict between Section D and FEGLIA is . . . evident in the fact
that Section D’s only function is to accomplish what Section A
would have achieved, had Section A not been pre-empted.” Id. at
501 (Thomas, J., concurring in the judgment). Though Section D
does not directly preclude the payment of benefits to the designated
beneficiary, Justice Thomas noted, “it accomplishes the same
prohibited result by transforming the designated party into little
more than a passthrough” for the individual state law has
designated as the true beneficiary. Id. at 501-02.
¶ 40 The Estate argues that Hillman’s rationale does not apply to
this case because ERISA, unlike FEGLIA, does not contain a
statutory order of precedence. While the Supreme Court
23
determined that the federal interest in FEGLIA was “to ensure that
a duly named beneficiary will receive the insurance proceeds and be
able to make use of them,” Hillman, 569 U.S. at 491, the Estate
contends that the federal interest in ERISA is “to simply ensure that
employers and plan administrators act in accordance with the
plan’s written terms,” Walsh v. Montes, 388 P.3d 262, 265 (N.M. Ct.
App. 2016); see also Evans v. Diamond, 957 F.3d 1098, 1104-05
(10th Cir. 2020). But the Estate construes ERISA’s purpose too
narrowly. Although ERISA does not contain a statutory order of
precedence, “the protection of beneficiaries . . . [is] a paramount
ERISA objective.” VanderKam v. VanderKam, 776 F.3d 883, 886
(D.C. Cir. 2015). As the District of Columbia Circuit has explained,
ERISA protects retirement benefits for millions
of pension plan participants and their
beneficiaries. 29 U.S.C. § 1001(b). Finding
that the stability of retirement benefits directly
affects the national economy, id. § 1001(a),
Congress acted to ensure that accrued benefits
remain unaltered by individuals and states
alike. It accomplished this by prohibiting
participants from assigning or alienating their
own benefits, id. § 1056(d)(1), and, with limited
exceptions, superseding state laws that “relate
to any employee benefit plan,” id. § 1144(a).
Id. at 885.
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¶ 41 Notably, Congress created an exception from ERISA’s
preemption and anti-alienation provisions for a narrow category of
state court orders known as qualified domestic relations orders.
29 U.S.C. § 1056(d)(3)(A). “Where Congress explicitly enumerates
certain exceptions to a general prohibition, additional exceptions
are not to be implied, in the absence of evidence of a contrary
legislative intent.” Andrus v. Glover Constr. Co., 446 U.S. 608,
616-17 (1980). As the district court in this case noted in its
well-reasoned order,
Congress could have put in place a default rule
providing that insurance proceeds accrue to a
widow or widower and not a named
beneficiary. Congress could have put in place
a provision that a divorce decree operates to
control over the designation of a beneficiary.
Congress could have put in place a provision
whereby a decedent’s will is more reliable
evidence of the decedent’s intention than a
beneficiary designation form executed years
earlier. Congress could have provided that the
benefits automatically revert to the estate of
the participant upon the participant’s divorce
from the beneficiary. Congress did none of
that. Instead, Congress established a clear
and predictable procedure for an employee to
indicate who the intended beneficiary of his life
insurance shall be.
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¶ 42 To sum up, the Estate presents no authority supporting a
state-law-based claim — rather than one based on waiver by private
agreement between the parties — to recover ERISA plan proceeds
after their distribution to the named beneficiary. Further, Lundy
and Carmona explicitly disapprove of state law “end-runs” around
ERISA preemption. And finally, we are persuaded by the reasoning
in Hillman that federal law preempts a state statute similar to
subsection (8)(b). Accordingly, we agree with the district court’s
conclusion that ERISA preempts the Estate’s post-distribution
claims to recover the insurance proceeds from Ms. Ragan.
F. Sanctions
¶ 43 Ms. Ragan contends that the Estate’s appeal is frivolous and
requests an assessment of fees and costs pursuant to C.A.R. 38(b).
That we ultimately disagree with the Estate’s arguments does not
mean the appeal was frivolous as filed or argued. See City of Aurora
v. Colo. State Eng’r, 105 P.3d 595, 620 (Colo. 2005) (“Meritorious
actions that prove unsuccessful and good faith attempts to extend,
modify, or reverse existing law are not frivolous.”). No prior
Colorado case has addressed the enforceability of subsection (8)(b).
And because the Estate raised arguably meritorious contentions on
26
an issue of first impression in Colorado, we deny Ms. Ragan’s
request for fees and costs.
III. Conclusion
¶ 44 We affirm the judgment and deny Ms. Ragan’s request for fees
and costs pursuant to C.A.R. 38(b).
JUDGE J. JONES and JUDGE NAVARRO concur.
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