Nickel v. Est of Lurline Estes ( 1997 )

United States Court of Appeals,
Fifth Circuit.
Nos. 96-10797 and 96-10979.
R. Scott NICKEL, as Plan Benefit Administrator of the Thrift Plan
of Phillips Petroleum Company; Thrift Plan of Phillips Petroleum
Company, Plaintiffs-Counter Defendants-Appellees,
v.
Estate of Lurline ESTES, Defendant-Cross Defendant-Appellee,
Estate of Annie J. Layman, Defendant-Counter Claimant-Appellant,
Clifford D. Estes; Lisa C. Williams, Defendants-Cross
Defendants-Appellees,
Tom Fowler; C.W. Fowler; R.L. Layman; Barbara Peeples,
Defendants-Counter Claimants-Appellants.
Sept. 22, 1997.
Appeal from the United States District Court for the Northern
District of Texas.
Before REYNALDO G. GARZA, SMITH and EMILIO M. GARZA, Circuit
Judges.
EMILIO M. GARZA, Circuit Judge:
In this case, a decedent's cousins (including a step-cousin)
appeal the district court's decision that the decedent's children
are entitled to his pension benefits. We reverse and render
judgment in favor of the cousins.
I
Benny Brooks Estes ("Benny"), a former employee of Phillips
Petroleum Company ("Phillips"), had a vested interest in Phillips'
Thrift Plan. Benny designated his father and mother—Onis B. Estes
("Onis") and Lurline H. Estes ("Lurline")—as equal primary
beneficiaries of his plan benefits, but did not list any contingent
1
beneficiaries. Benny's only sibling passed away in 1930. Also,
Benny was divorced and had two children, Lisa Williams ("Lisa") and
Clifford Estes ("Clifford") (jointly, "the Estes defendants").
Benny died on November 14, 1992, and was survived by Lurline,
Lisa, and Clifford (Onis predeceased Benny). At the time of
Benny's death, the plan proceeds consisted of about 6,881 shares of
Phillips and about $4,725.50 in cash. The proceeds are currently
worth about $322,112.1
Lurline became the "entitled beneficiary" of these proceeds.2
However, Lurline died just three weeks after Benny. Lurline never
received any of the proceeds or designated a beneficiary for them.
Moreover, she did not have any surviving spouse, children, or
parents; besides her surviving grandchildren (the Estes
defendants), she had only a surviving sister, Annie Jane Layman
("Annie").
Section 1(B) of article XII of the plan provides that
[e]ach participant or entitled Beneficiary may designate a
primary Beneficiary or Beneficiaries, and a contingent
Beneficiary or Beneficiaries to receive distributions due upon
the person's death.... After receipt by the [Phillips' Thrift
Plan] Committee such Beneficiary designation shall take effect
as of the date the form was signed by the Participant or
entitled Beneficiary, whether or not he is living at the time
1
On July 28, 1997, the closing price for a share of Phillips
on the New York Stock Exchange was $46.125. We calculate the value
of the proceeds using this closing price.
2
Under the plan, an "entitled Beneficiary" is "a Beneficiary
who has become entitled to an interest in the Plan due to a
Participant's death." A "Beneficiary" is "a natural person, or a
legal entity, estate or corporation, designated to receive any
benefit under the Plan in the event of the Participant's or
entitled Beneficiary's death." A "Participant" is the person who
had the original interest in the plan, in this case Benny.
2
of such receipt.... If no such designation is on file ... the
Participant's or entitled Beneficiary's surviving spouse,
surviving children in equal shares, surviving parents in equal
shares, surviving sisters and brothers in equal shares, or his
estate, in that order of priority, shall be conclusively
deemed to be the Beneficiary designated to receive such
benefits.... If any Beneficiary of an entitled Beneficiary,
whether primary or contingent, dies before receiving the full
distribution of any interest he has become entitled to, his
estate shall receive the remaining distribution.
Given this language, Annie would presumably be "conclusively"
entitled to receive the full proceeds of the plan once Lurline
died. However, Annie passed away seven months after Lurline, and,
like Lurline, Annie never received any plan proceeds before her
death. Moreover, she left behind a will naming four equal
beneficiaries—Barbara Ann Peeples ("Barbara"), Tom Fowler ("Tom"),
C.W. Fowler ("C.W."), and R.L. Layman ("R.L.") (collectively, "the
Layman defendants"). Barbara, Tom, and C.W. are Annie's children
from her first marriage, and Benny's cousins; R.L. is Annie's
stepson from her second marriage, and Benny's step-cousin. Under
the plan, Annie's estate would apparently receive the entire amount
of the proceeds. Then, assuming Annie left a valid will, the
proceeds would be distributed equally among the Layman defendants.
Several months after Benny expired, the probate court
appointed Marcus Armstrong as independent executor of Lurline's
estate. Shortly after his appointment, Armstrong executed on
behalf of Lurline's estate a disclaimer of all of Lurline's
interest in the plan. The Phillips' Thrift Plan Committee received
a copy of the disclaimer within nine months of Benny's death.
Section 4 of article XII of the plan states that
[i]n the event that a Beneficiary or an entitled Beneficiary
3
signs and delivers to the Committee a written disclaimer of
Plan benefits which satisfies the [Internal Revenue] Code's
requirements to be tax qualified, and such benefits, but for
the disclaimer, would otherwise pass to such person as a
result of the death of a Participant or entitled Beneficiary,
the person executing such disclaimer of benefits shall be
deemed to have failed to survive the deceased Participant or
entitled Beneficiary from whom he otherwise would have taken.
For such disclaimer to be considered effective for purposes of
the Plan, the disclaimer must be received by the Committee
prior to the earlier of the date which is 9 months after the
death of the Participant or entitled Beneficiary, or the date
on which such person has requested any Plan transaction
involving such Plan benefits. In the event that Plan benefits
are distributed to the Beneficiary or entitled Beneficiary
prior to the receipt of such disclaimer, pursuant to the other
terms of the Plan, such distribution shall completely release
and relieve [Phillips and others] on account of and to the
extent of any payment made before receipt of the disclaimer.
There is no dispute that the disclaimer was written, signed,
timely, and satisfied the applicable Code requirements. The
parties also agree that, assuming the disclaimer was otherwise
valid, Lurline would be deemed to have predeceased Benny and the
plan's proceeds would pass to the Estes defendants. The issue,
then, is simply whether the disclaimer was valid. If it was, the
Estes defendants should get the proceeds. If not, the Layman
defendants should get them.
Because Phillips did not know whether the disclaimer was
valid, it was unsure whether the Estes defendants or Layman
defendants should receive the plan's proceeds. Thus, R. Scott
Nickel, the plan benefit administrator of the Phillips' Thrift
Plan, brought an interpleader action against Lurline's estate,
Annie's estate (of which Barbara is independent executrix), Lisa,
Clifford, Barbara, Tom Fowler, C.W. Fowler, and R.L. Layman. Lisa
and Clifford then filed counterclaims against Nickel and the plan,
4
and the Layman defendants filed counterclaims against the Estes
defendants and Lurline's estate.
The Estes defendants and Layman defendants both moved for
summary judgment. The district court agreed with the Estes
defendants, granting their motion for summary judgment and denying
the Layman defendants' motion. On appeal, the Layman defendants
argue that the district court erred. Specifically, they assert
that (1) the Employee Retirement Income Security Act ("ERISA"), 29
U.S.C. §§ 1001 et seq., preempts the state statutes authorizing the
appointment of Armstrong as executor and permitting the disclaimer
and (2) Armstrong could not execute a valid disclaimer under the
plan because he was not a "Beneficiary or an entitled Beneficiary."
We examine these arguments in turn.
II
The Layman defendants contend that the district court erred
in determining that ERISA does not preempt the state statutes that
authorize the appointment of Armstrong as executor and the
disclaimer that Armstrong made on behalf of Lurline's estate. We
review de novo a district court's preemption analysis under ERISA.
Hook v. Morrison Milling Co., 38 F.3d 776, 780 (5th Cir.1994).
ERISA states that it "shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit
plan...." 29 U.S.C. § 1144(a). The ERISA preemption provision has
a "broad scope" and "expansive sweep." A state law " "relate[s]
to' a covered employee benefit plan for purposes of [§ 1144(a) ]
"if it has a connection with or reference to such a plan.' "
5
District of Columbia v. Greater Washington Bd. of Trade, 506 U.S.
125, 129, 113 S. Ct. 580, 583, 121 L. Ed. 2d 513 (1992) (quoting Shaw
v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S. Ct. 2890, 2899-
2900, 77 L. Ed. 2d 490 (1983)). ERISA may preempt a related state
law even if the state law is not specifically intended to regulate
ERISA-covered plans. Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 139, 111 S. Ct. 478, 483, 112 L. Ed. 2d 474 (1990). However,
ERISA's preemptive scope has limits. "Some state actions may
affect employee benefit plans in too tenuous, remote, or peripheral
a manner to warrant a finding that the law "relates to' the plan."
Shaw, 463 U.S. at 100 n. 21, 103 S. Ct. at 2901 n. 21.
The district court determined that state law was merely
"peripheral" to the plan and thus would not be preempted under
ERISA. However, it looked to Texas Probate Code § 145 et seq. and
Texas Probate Code § 37A to interpret the plan and decide that
Armstrong's disclaimer was valid. Texas Probate Code § 145 et seq.
governs the appointment of independent administrators; the probate
court appointed Armstrong independent executor pursuant to these
provisions.3 Texas Probate Code § 37A permits any personal
representative of a decedent with court approval or independent
executor of a decedent without prior court approval to disclaim
property that the decedent would be entitled to receive as a
beneficiary. The statute goes on to provide that the disclaimer
3
"Independent executor" means the personal representative of
an estate under independent administration. TEX. PROB.CODE ANN. §
3(q). "Independent executor" includes the term "independent
administrator." Id.
6
will relate back to the death of the person making the decedent a
beneficiary and will ensure that the property passes as if the
later decedent (i.e., the person on whose behalf the disclaimer is
made) had predeceased the earlier decedent (i.e., the person making
the later decedent a beneficiary).
Putting aside the merits of the district court's preemption
analysis, we determine that the district court erred by reaching
the preemption issue in the first place. As the Estes defendants
concede in their brief, we can decide the validity of the
disclaimer without resort to state law. Indeed, we can resolve the
validity of the disclaimer without going beyond the terms of the
plan itself. As the Sixth Circuit has noted, "ERISA plans are to
be administered according to their controlling documents.... [I]f
the designation on file controls, administrators and courts need
look no further than the plan documents to determine the
beneficiary...." McMillan v. Parrott, 913 F.2d 310, 312 (6th
Cir.1990); see also MacLean, 831 F.2d at 728 (finding that state
testamentary law "interfere[d] with the administration of the Plan
and violate[d] its terms" since the plan provided "a valid method
for determining the beneficiary").
In short, we determine that the district court did not need to
go beyond the plain language of the plan to resolve the parties'
dispute. Thus, the district court erred not only in looking to
state law but in conducting a preemption analysis at all.
III
The Layman defendants next maintain that Armstrong could not
7
execute a valid disclaimer under the plan because he was not a
"Beneficiary or an entitled Beneficiary." We review de novo
questions of law, such as whether an ERISA plan's terms are clear
and, if they are, how those terms should be interpreted. Sunbeam-
Oster Co. Group Benefits Plan for Salaried and Non-Bargaining
Hourly Employees v. Whitehurst, 102 F.3d 1368, 1373 (5th Cir.1996).
We review for clear error findings of fact, such as the intent of
parties regarding an ERISA plan. Id.
The plan states that "[i]n the event that a Beneficiary or an
entitled Beneficiary signs and delivers to the Committee a written
disclaimer of Plan benefits which satisfies the [Internal Revenue]
Code's requirements to be tax qualified, and such benefits, but for
the disclaimer, would otherwise pass to such a person as a result
of the death of a Participant or entitled Beneficiary," the
disclaimer is valid. The question is whether the reference to
"Beneficiary" encompasses a personal representative, executor, or
administrator who disclaims on behalf of the beneficiary.
In answering this question, we look first to the plain
meaning of the plan. See Lockhart v. United Mine Workers of
Am.1974 Pension Trust, 5 F.3d 74, 78 (4th Cir.1993) (stating that
an "award of benefits under any ERISA plan is governed in the first
instance by the language of the plan itself"). Clearly, the plan
says nothing about anyone disclaiming on behalf of the beneficiary
or entitled beneficiary. It merely states that "a Beneficiary or
an entitled Beneficiary [can disclaim by] sign[ing] and
deliver[ing] to the Committee a written disclaimer." Since
8
Armstrong, rather than Lurline, signed and delivered to the
Committee a written disclaimer, that disclaimer is invalid under
the plan. See Rodrigue v. Western & So. Life Ins. Co., 948 F.2d
969, 971 (5th Cir.1991) (ruling that court cannot alter plain
meaning of plan); see also Coleman v. Nationwide Life Ins. Co.,
969 F.2d 54, 57 (4th Cir.1992) (noting that courts may not
disregard plain meaning of plan) cert. denied, 506 U.S. 1081, 113
S. Ct. 1051, 122 L. Ed. 2d 359 (1993); Bellino v. Schlumberger
Technologies, Inc., 944 F.2d 26, 30 (1st Cir.1991) (holding that
employees were entitled to plan benefits under plain meaning of
plan).
Our interpretation of "Beneficiary or an entitled Beneficiary"
as meaning just the beneficiary or entitled beneficiary himself (as
opposed to the beneficiary/entitled beneficiary himself or the
personal representative of a deceased beneficiary/entitled
beneficiary) is bolstered by looking at the words immediately
preceding and following the "sign and deliver" language. The
relevant sentence reads: "In the event that a Beneficiary or an
entitled Beneficiary signs and delivers to the Committee a written
disclaimer of Plan benefits which satisfies the Code's requirements
to be tax qualified, and such benefits, but for the disclaimer,
would otherwise pass to such person as a result of the death of a
Participant or entitled Beneficiary, the person executing such
disclaimer of benefits shall be deemed to have failed to survive
the deceased Participant or entitled Beneficiary from whom he
otherwise would have taken" (emphasis added). Like "Beneficiary"
9
or "entitled Beneficiary," the phrases "such person" and "the
person executing such disclaimer" in this sentence cannot refer to
a personal representative of the beneficiary or entitled
beneficiary, but only to the beneficiary or entitled beneficiary
himself. In short, "Beneficiary or an entitled Beneficiary" can
mean nothing more than beneficiary or entitled beneficiary.
In response, the Estes defendants emphasize the clause
following "which" in the sentence "... a Beneficiary or an entitled
Beneficiary signs and delivers to the Committee a written
disclaimer of Plan benefits which satisfies the Code's requirements
to be tax qualified ...." They contend that various Internal
Revenue Service ("Service") regulations and private letter rulings
as well as Tax Court decisions specifically permit a personal
representative to disclaim on behalf of a decedent. This, though,
is irrelevant. The plan drafters used "which" in the quoted
sentence to add a clause restricting the meaning of the antecedent
clause. See OXFORD ENGLISH DICTIONARY 225 (2d ed.1989) (defining
"which" as pronoun "[i]ntroducing a clause defining or restricting
the antecedent and thus completing the sense" and offering examples
of this usage such as "[t]his is the path which leads to death").
In other words, the clause following "which" is an additional
requirement that must be met before a disclaimer is valid. The
Estes defendants' interpretation of the sentence would require us
to construe "which" as "or"; they want us to read the sentence to
mean either that a beneficiary signs and delivers a written
disclaimer or that a beneficiary meets the Code's requirements for
10
a qualified disclaimer (one of which arguably permits a personal
representative to disclaim on behalf of a decedent). We decline to
adopt this strained construction of the plan. The quoted sentence
clearly requires a beneficiary to sign and deliver a written
disclaimer that also meets the Code's requirements for being tax
qualified.
In addition, even if the Estes defendants could show that the
plan permits executors to disclaim on behalf of the estates of dead
beneficiaries, such a disclaimer would still be invalid. Under the
plan, Lurline ceased being the beneficiary of the proceeds the
instant she died, and the proceeds never passed to her estate. As
soon as Lurline expired, the plan designated Annie—rather than
Lurline's estate—as beneficiary.
Article XII(1)(A) of the plan states that
[s]ubject to Paragraph B of this Section, upon the death of a
Participant, or the death of a Beneficiary of a Participant
who has become entitled to an interest in the Plan due to a
Participant's death (entitled Beneficiary), prior to the
Valuation Date upon which complete distribution of his entire
account under the Plan occurs, the remaining full balance of
his account shall be payable to his designated Beneficiary....
Paragraph B then provides in pertinent part that
[i]f no [Beneficiary] designation is on file ... the
Participant's or entitled Beneficiary's ... surviving sisters
and brothers in equal shares, or his estate, in that order of
priority, shall be conclusively deemed to be the Beneficiary
designated to receive such benefits.... If any Beneficiary of
an entitled Beneficiary, whether primary or contingent, dies
before receiving the full distribution of any interest he has
become entitled to, his estate shall receive the remaining
distribution.
After Benny's death, Lurline became the entitled beneficiary of the
proceeds. Upon Lurline's death, the proceeds became payable to her
11
designated beneficiary. Since Lurline did not designate a
beneficiary, Annie (Lurline's only sibling)—not Lurline's
estate—became the beneficiary of the proceeds under the plan. Upon
Annie's death, Annie's estate received the proceeds since Annie was
the beneficiary of Lurline, an entitled beneficiary. Thus, the
proceeds should now pass under state law, presumably pursuant to
Annie's will.4 Accordingly, since the proceeds never passed to
Lurline's estate, Armstrong—in his capacity as the executor of
Lurline's estate—could not have disclaimed them. He had no
authority over the proceeds at all.
The Estes defendants dispute this conclusion by pointing to a
Second Circuit opinion, Rolin v. Commissioner of Internal Revenue,
588 F.2d 368 (2d Cir.1978). Apparently, the Estes defendants
believe that Rolin stands for the proposition that an executor can
disclaim an interest on behalf of a decedent that the decedent
originally possessed but which did not pass to the decedent's
estate. In particular, they rely on the court's statement that
"since the principle of retroactive renunciation is that a
disclaimer of an interest may be treated as relating back in time,
it seems irrelevant to the efficacy of that principle that the
interest has expired." Id. at 370.
In Rolin, Daniel established a trust which, upon his death,
4
ERISA does not preempt state law governing passage of the
proceeds from Annie's estate to the beneficiaries of her will
because the plan does not discuss how the proceeds should pass from
a beneficiary's estate. In other words, once the proceeds pass to
Annie's estate, the plan ceases to designate a beneficiary; hence,
state law that determines who takes the proceeds under Annie's will
does not relate to the plan and is not preempted.
12
would be divided into "Trust A" and "Trust B." His wife, Genevieve,
would receive income from the trusts for life. In addition,
Genevieve obtained the right to invade the corpus of Trust A during
her life as well as general testamentary power of appointment over
Trust A's assets. If Genevieve died without having exercised her
power of appointment, Trust A would merge into Trust B and the
assets would be distributed to the Rolins' issue. Subsequently,
Daniel passed away and, four months later, so did Genevieve.
Genevieve never received income from either trust and never used
her power of appointment. Genevieve's executors then tried to
renounce Genevieve's interest in the merged trust. The Service
opposed this attempt, arguing that the executors could not disclaim
Genevieve's power of appointment because it expired at her death.
In deciding the dispute, the court noted that, under New York law,
an executor could disclaim a legacy left to a decedent and the
disclaimer would relate back to the date of the gift and prevent
title from ever divesting. The court then held that, since an
executor could disclaim a legacy, there was no reason why he could
not also disclaim a power of appointment, even if that power had
expired. The court reasoned that a power of appointment was just
one right in the bundle of rights constituting a fee simple, and if
an executor could disclaim the whole bundle of rights, he could
also disclaim one of the rights.
Rolin is not really on point here. First, since no ERISA plan
was involved in Rolin, the court relied heavily on New York wills
and trust law for its decision. However, we may not follow state
13
law in this case because such law would "relate" to the plan and
thus be preempted (though, of course, we decide that state law
governs the passage of the proceeds from Annie's estate). Second,
the trust agreement in Rolin specifically provided that Genevieve's
executors could renounce her interest in the trust should she die
before accepting trust benefits. Here, the plan says nothing about
a personal representative, executor, or administrator disclaiming
on behalf of a decedent. Third, while the power of appointment may
have expired at Genevieve's death, at least some interest from the
trust passed to Genevieve's estate. In other words, some rights
from the bundle of rights over the trust that Daniel bequeathed to
Genevieve passed to her estate. Given the passage of some of the
trust rights, the court held that Genevieve's executors could
disclaim all of these rights. In our case, though, none of the
rights Lurline had over the proceeds passed to her estate. They
all went to Annie and then Annie's estate. Fourth, even if we were
to construe Rolin as adopting the general rule that an executor can
disclaim an interest on behalf of a decedent that the decedent
originally possessed but which did not pass to the decedent's
estate (which we do not), it would not matter here. The plan
states that plan benefits "but for the disclaimer, [must] otherwise
pass to [the entitled Beneficiary] as a result of the death of a
Participant...." But if Armstrong had not disclaimed the proceeds,
the entitled beneficiary would not have been Lurline or Lurline's
14
estate but, rather, Annie or Annie's estate.5 Under the plan,
Annie received the proceeds upon Lurline's death (i.e., Annie
became the entitled beneficiary) and, after Annie expired, the
proceeds passed to Annie's estate.
Therefore, we determine that Armstrong's disclaimer was
invalid and that the proceeds must pass according to the plan.
This means that Annie received the proceeds upon Lurline's death,
and that, after Annie expired, the proceeds passed to Annie's
estate. Accordingly, the proceeds must now go to Barbara, the
independent executrix of Annie's estate, for distribution under the
terms of Annie's will or otherwise.6
IV
Lastly, the Layman defendants challenge the district court's
order that they pay the plaintiffs $4,461.54 in attorneys' fees and
costs. Apparently, the district court awarded this amount to the
plaintiffs because they were merely the stakeholders in the
litigation and because the Layman defendants were "the unsuccessful
defendants in this case." We review an award of attorneys' fees
and costs for abuse of discretion. Bruce Hardwood Floors, Div. of
Triangle Pac. Corp. v. UBC, So. Council of Indus. Workers, Local
Union No. 2713, 103 F.3d 449, 453 (5th Cir.1997).
5
Armstrong executed the disclaimer before Annie expired but
did not file it until after her death.
6
We emphasize that we do not decide in this appeal whether
Annie's will is valid or, if it is, how the proceeds should be
distributed to the will's beneficiaries. We simply hold that the
proceeds passed to Annie's estate under the plan and thus should
now be given to Barbara for independent administration.
15
We agree with the district court that the plaintiffs should
not bear unnecessary costs and attorneys' fees in this litigation,
and that the plaintiffs should be able to recover costs and fees
from the unsuccessful defendants in this case. Thus, we will award
the plaintiffs $4,461.54 in costs and fees against the Estes
defendants.
V
For the foregoing reasons, we REVERSE the judgment of the
district court and RENDER judgment in favor of the Layman
defendants. Moreover, we ORDER that the plaintiffs recover
$4,461.54 in costs and fees against the Estes defendants.
REYNALDO G. GARZA, Circuit Judge, dissenting:
The majority states that the district court erred by
conducting a preemption analysis and that the case turns on whether
Lurline Estes' executor, Marcus Armstrong, can validly disclaim her
right to proceeds from the Phillips Thrift Plan within nine months
of Benny's death, as was Lurline's right under the terms of the
plan. The majority believes that Armstrong was not a beneficiary
under the plan, and therefore, did not have the right to validly
disclaim the proceeds from the plan. Accordingly, the majority has
voted to reverse the decision of the district court in this matter.
While I concur with the first part of this line of reasoning, I
disagree with the majority's conclusion that Armstrong does not
have the authority to disclaim. I therefore respectfully dissent,
for the following reasons.
As the majority points out, the parties agree that the
16
disclaimer satisfied the applicable Code requirements, and if the
disclaimer is otherwise valid, Lurline would be deemed to have
predeceased Benny Brooks Estes (as did Onis, Benny's father). If
the disclaimer is valid and Lurline is considered to have
predeceased Benny, the proceeds from the plan will pass to Benny's
children, the Estes defendants. If the disclaimer is not valid,
Benny's cousins, the Layman defendants, get the proceeds.
The majority states that proper interpretation of the "plain
language" of the plan can lead us to proper resolution of this
dispute, and I agree. The key issue is whether the reference to
"Beneficiary or an entitled Beneficiary," as listed in the plan,
includes a personal representative or executor who disclaims on
behalf of the beneficiary. The majority believes that the phrase
"Beneficiary or an entitled Beneficiary" should be strictly and
literally construed, and therefore, the phrase does not encompass
executors or representatives (such as Armstrong in this case).
Under this interpretation, Armstrong's disclaimer is invalid, and
the Layman defendants should take the proceeds of the plan rather
than the Estes defendants.
I believe the majority's interpretation of the phrase
"Beneficiary or an entitled Beneficiary" is overly narrow. First
of all, while it is true that we must look to the plain meaning of
the terms within the plan for guidance, the cases cited by the
majority state or imply that clarity and a lack of ambiguity are
important factors in proper interpretation of the terms in a plan.
Specifically, in the cases cited where benefits are denied, the
17
terms are more sharply restrictive and obvious in their meaning
than those in this case. For example, in Rodrigue v. Western and
So. Life Ins. Co., this Circuit held that Rodrigue's claim under a
state equitable estoppel theory was invalid because he was asking
for payment for medical procedures explicitly excluded from the
plan. Rodrigue v. Western and So. Life Ins. Co., 948 F.2d 969, 970
(5th Cir.1991) (Rodrigue had kidney stones and the plan stated it
would not pay for treatment for ailments of the genitourinary
system). This case is distinguishable from the instant case
because Rodrigue was asking for a treatment explicitly forbidden in
the plan, there were no questions of grammar or definition of a
particular word involved in Rodrigue, and the other cases were
similarly specific in what was or wasn't allowed under their plans.
See also Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 57 (4th
Cir.1992), cert. denied 506 U.S. 1081, 113 S. Ct. 1051, 122 L. Ed. 2d
359 (1993); Lockhart v. United Mine Workers of America 1974
Pension Trust, 5 F.3d 74, 78 (4th Cir.1993). This specificity is
not in place here.
A plain meaning interpretation of "beneficiary" will include
agents and representatives of beneficiary, because such
interpretation is commonplace in the law. Postmortem disclaimers
by executors are quite common and hardly unforeseeable deviations
from the terms of the plan (which, as stated, provides for
disclaimers for quite some time after the death of the participant
or beneficiary). For example, a beneficiary's legal representative
can disclaim an interest just as the beneficiary herself can, under
18
the qualified disclaimer definition as set forth in Section 2518(b)
of the Internal Revenue Code of 1986. 26 C.F.R. § 25.2518-
2(b)(1)(1996). An interpretation of the Plan which encompasses
such disclaimers is not a departure from standard plain language
interpretations of contract and labor law, and would not undermine
the integrity of the ERISA plan.
Also, the Layman defendants cited no case law for the
proposition that a beneficiary's legal representative or executor
cannot disclaim an interest in the plan. In fact, there is ample
legal support for the contrary. For example, the Rolin case cited
and distinguished by the majority stands for the proposition that
an executor stands in the shoes of a testator beneficiary for the
purposes of disclaimer. Estate of Rolin v. Commissioner of
Internal Revenue, 68 T.C. 919, 1977 WL 3714 (1977), aff'd 588 F.2d
368 (2d Cir.1978); see also Estate of Allen v. Commissioner of
Internal Revenue, 56 T.C.M. 1494 (1989). While the majority
distinguishes the Rolin case from the instant case due to the
difference in subject matter, I believe that the relevant point of
Rolin is the idea that executors have the authority to disclaim
property which was to be given to the testator beneficiary, and
that the time-period for disclaimers may relate back and act
retroactively. I believe that a plain meaning interpretation of
beneficiary incorporates the Rolin approach with regard to
executors. The fact that Texas, as well as many other states,
considers executors to have certain powers of disclaimer further
bolsters the position that the drafters would assume that
19
beneficiary would encompass executors, in terms of disclaimer and
all other powers listed for participants and beneficiaries in the
plan, and most specifically, regarding the right to wait up to nine
months after the death of Benny to disclaim. TEX. PROB. CODE ANN.
§ 145, et seq. (Vernon 1980 & Supp.1997); TEX. PROB. CODE ANN. §
37A (Vernon 1980 & Supp.1997).
Article XII, Section 4 of the Plan Document incorporates the
requirements for disclaimer from the Internal Revenue Code for the
purposes of describing the disclaimer requirements for the plan
with the following statement.
In the event that a Beneficiary or an entitled Beneficiary
signs and delivers to the committee a written disclaimer of
Plan benefits which satisfies the [Internal Revenue] Code's
requirements to be tax qualified, and such benefits but for
the disclaimer, would otherwise pass to such person as a
result of the death of a Participant or entitled Beneficiary,
the person executing such disclaimer of benefits shall be
deemed to have failed to survive the deceased Participant or
entitled Beneficiary from whom he otherwise would have taken.
I believe the majority's concern over the implications of the word
"which" in this section of the plan is misplaced and serves to
unnecessarily complicate the issue. A plain language reading of
this section, consistent with the plain legal usage of the word
"beneficiary" leads me to believe that the reference to the
Internal Revenue Code is there for the purpose of aiding in the
definition of the requirements of an appropriate disclaimer, a
definition which (in both plain usage and the Tax Code) includes
executors. The "which" is there to modify the previous phrase, and
serves to point toward proper definition of what beneficiary will
encompass. It does not create and "either/or" situation or an
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excessively limiting construction of the phrase. This term is
therefore far from fatal to the Estes defendants.
Moreover, the plan does not use the phrase "Beneficiary or an
entitled Beneficiary" exclusively in describing who can execute
disclaimer. The plan refers to "person executing such disclaimer."
I believe this further undermines the contention that the drafters
intended a very strict and literal definition of beneficiary, one
which would not encompass other persons such as executors or
representatives. If that were the intent of the drafters, they
would presumably would have consistently used the allegedly
limiting phrases throughout this section of the plan.
In addition, I believe that the Estes defendants are the
appropriate recipients of the proceeds from the Plan for the simple
reason that I find it difficult to believe that Benny Brooks Estes
would want his hard-earned money to go to someone other than his
immediate family. I suspect that Benny would turn over in his
grave at the thought of such a distribution. Also, it has been
stated that one of the primary goals of ERISA is to provide support
for an employee and his family. Cartledge v. Miller, 457 F. Supp.
1146, 1156 (S.D.N.Y.1978); In re Masters, 73 B.R. 796, 799
(Bankr.D.Or.1987). A distribution of plan proceeds which favors
the cousins of Benny Brooks Estes over his own children is not only
likely to be exactly the opposite of what Benny would have wanted,
but is also not in keeping with the goals of ERISA.
Further, the majority's belief that the Layman defendants
should receive the proceeds from the plan because that would be the
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presumed intent of the drafters of the plan rings hollow, given
that Phillips was the party that filed an interpleader action to
clarify who rightfully should receive the proceeds. I find it
unlikely that Phillips would have filed this action and hold up
distribution of the proceeds if it was so obvious that the proper
distribution under the plan would be to the Layman defendants.
Last, the majority's assertion that a distribution to the Estes
defendants is a strained construction of the plan seems a bit odd
given that it is the majority which seems to be straining to find
a way to take the proceeds away from the parties that Benny would
most likely want to have provided for. A decision in favor of the
Estes defendants, aside from being the more just result, makes more
sense given the terms of the plan and the actions of Phillips.
For the foregoing reasons, I respectfully dissent, and
accordingly would affirm the decision of the district court.
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