IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-21045
GILBERT “BUDDY” DIAL,
Plaintiff/Counter Defendant/Appellee,
versus
NFL PLAYER SUPPLEMENTAL DISABILITY PLAN,
Defendant/Counterclaimant/Third-Party Plaintiff/Appellant,
versus
JANICE MARYE,
Third-Party Defendant/Appellant.
- - - - - - - - - -
Appeals from the United States District Court
for the Southern District of Texas
- - - - - - - - - -
May 7, 1999
Before HIGGINBOTHAM, BENAVIDES, and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
An ERISA-qualified employee benefits plan and a potential
beneficiary challenge a district court’s determination on
distribution of benefits. We vacate and remand to the district
court to render judgment in favor of the defendant/counter-
claimant/third-party plaintiff/appellant and to consider the
third-party defendant/appellant’s request for attorneys’ fees.
I
Gilbert “Buddy” Dial and Janice Marye married in 1959 and
divorced in 1977. From 1959 until 1968, Dial played professional
football in the National Football League. As an NFL player, Dial
became eligible to receive benefits from the NFL Bert Bell
Retirement Benefit Plan (the “Bell Plan”), which provided both
retirement and disability benefits for players. Upon their
divorce, Dial and Marye entered into a property settlement
agreement, which was incorporated into their divorce decree. The
property set aside for Marye in the agreement included “[o]ne-
half of any interest Buddy Dial has in the Bert Bell NFL Player
Retirement Plan or any consideration, monetary or otherwise, that
presently or hereinafter will flow to Buddy Dial from said plan.”
The 1977 divorce decree also awarded Marye “one-half of any
later-discovered property.”
Dial began receiving “total and permanent” disability
benefits from the Bell Plan in March 1980. Dial apparently did
not notify Marye that he was receiving such benefits, did not
distribute one-half of the benefits to her, and did not reveal
the existence or terms of the 1977 property settlement agreement
to the Bell Plan. Marye learned in 1991 that Dial was receiving
such benefits. When Dial refused to surrender half of the
benefits to Marye, she filed a motion in state court to clarify
the divorce decree. At that time, Marye asked the court to sign a
qualified domestic relations order (“QDRO”) ordering the Bell
Plan to send payments directly to her. In June 1992, Dial turned
55, and his disability benefits converted to retirement benefits.
-2-
In February 1993, Marye and Dial compromised and settled the
state action. Marye agreed to give up the previous years’
benefits due her under the 1977 agreement and accepted a QDRO
ordering the Bell Plan to send 37.5 percent of Dial’s future
benefits directly to her. The QDRO echoed the 1977 agreement’s
language: It provided that Marye would receive 37.5 percent of
“the current distribution of any interest [Dial] has in the Plan
as of October 7, 1977 and any consideration, monetary or
otherwise, that presently or hereafter will flow to [Dial] from
said Plan.” Marye received her first monthly payment from the
Bell Plan in March 1993 for $1,500, or 37.5 percent of Bell’s
$4,000 monthly benefits. Dial continued to receive $2,500
monthly, or the remaining 62.5 percent.
In July 1993, the NFL Management Council and the NFL Players
Association entered into a collective bargaining agreement
(“CBA”) that increased player benefits and restructured existing
benefits plans. The Bell Plan was merged with the Pete Rozelle
NFL Player Retirement Plan to form the Bert Bell/Pete Rozelle NFL
Player Retirement Plan (the “Bell/Rozelle Plan”). Dial’s benefit
under the Bell/Rozelle Plan was $4,000, the same that it had been
under the Bell Plan. The CBA also required the NFL to create the
new NFL Player Supplemental Disability Plan (the “Disability
Plan”). The Disability Plan provided the bargained-for benefits
increase, paying additional disability benefits to certain
disabled players. The Disability Plan apparently came into
-3-
existence only because, owing to IRS regulations, the NFL could
not offer under the existing Bell/Rozelle Plan all the player
benefits resulting from the CBA. The Disability Plan pays
benefits only to players who, like Dial, were already entitled to
receive benefits under the Bell/Rozelle Plan. At that time, Dial
began receiving $2,250 per month from the Disability Plan, in
addition to his $4,000 per month from the Bell/Rozelle Plan. Dial
did not tell Marye about the new, supplemental benefits he was
receiving.
In July 1994, Marye discovered that Dial was receiving
supplemental benefits. She submitted the property settlement
agreement from her divorce to the Disability Plan. The Disability
Plan’s administrators (the “Plan administrators”) determined that
the 1977 property settlement agreement gave Marye a one-half
interest in Dial’s supplemental benefits. The Plan administrators
did not rely on the 1993 QDRO that entitled Marye to 37.5 percent
of Dial’s Bell Plan benefits; instead, they found that the
Disability Plan benefits constituted “later discovered” property
to be divided evenly between Dial and Marye under the 1977
divorce agreement. In August 1994, the Disability Plan notified
Dial that it had concluded that Marye was due half of Dial’s
Disability Plan benefits. The Plan administrators stated that if
Dial disputed the Disability Plan’s conclusion before October
1994 it would not begin making the payments to Marye. When Dial
-4-
failed to respond, the plan began paying Marye $1,125 per month,
or 50 percent of Dial’s Disability Plan benefits at that time.
(The supplemental payments increased in March 1995 to $3,085 and
in March 1997 to $4,335 monthly.)
Not until February 1996 did Dial contact the Disability Plan
and ask it to stop paying benefits to Marye. The Plan
administrators refused, stating that the payments complied with
the settlement agreement and that state court would be the
appropriate forum for Dial to resolve with Marye any dispute
concerning the 1977 settlement agreement. On April 25, 1996, Dial
filed this action against the Disability Plan in federal district
court for breach of fiduciary duty and for declaratory judgment
that he is entitled to all of the Disability Plan benefits. Dial
did not name Marye as a party to the action. On February 19,
1997, the district court granted the Disability Plan’s motions
(1) to add Marye as a third-party defendant and (2) to deposit
the disputed benefits into an interest-bearing interpleader
account each month. On May 1, 1997, Marye filed a state-law
cross-claim against Dial, requesting the court to treat the
Disability Plan benefits as community property earned during her
marriage to Dial and to divide the benefits accordingly. The
district court granted summary judgment to Dial on October 28,
1997. At the same time, the court denied as moot the Disability
Plan’s and Marye’s motions for summary judgment and dismissed
Marye’s cross-claim without prejudice. The court also directed
-5-
Dial to file a supplemental motion for attorneys’ fees from the
Disability Plan, which it awarded on December 8, 1997. The
Disability Plan and Marye appealed to this Court.
II
The Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1001 et seq., governs the Disability
Plan. ERISA includes anti-alienation and anti-assignment clauses
that apply to former spouses’ rights to pension benefits. See 29
U.S.C. § 1056(d)(1), (d)(3)(a). The 1984 Retirement Equity Act
(“REA”) amended these provisions to allow ERISA-qualified
benefits to be assigned pursuant to a QDRO, which “creates or
recognizes the existence of an alternate payee’s right to, or
assigns to an alternate payee the right to, receive all or a
portion of the benefits payable with respect to a participant
under a plan.” 29 U.S.C. § 1056(d)(3)(I)(i). The REA provides
procedures that a plan administrator must follow to determine if
a state-court domestic relations order is “qualified.” An ERISA
plan administrator may treat a domestic relations order signed
before the REA took effect in 1985 as a QDRO even if the order
fails to meet the statutory requirements otherwise applied to
QDRO’s. See Retirement Equity Act, Pub. L. No. 98-397, § 303(d),
98 Stat. 1426, 1453 (1984). The Disability Plan treated Dial and
Marye’s 1977 divorce decree, which incorporated their property
settlement splitting later-discovered property, as a QDRO.
-6-
The district court correctly characterized Dial’s suit as an
ERISA action. The Disability Plan contends that Dial should
instead have brought a state-law claim against Marye for
clarification of the settlement agreement. ERISA § 514(a)
provides in part:
Except as provided in subsection (b) of this section,
the provisions of this subchapter and subchapter III of
this chapter shall supersede any and all State laws
insofar as they may now or hereafter relate to any
employee benefit plan described in section 1003(a) of
this title and not exempt under section 1003(b) of this
title.
29 U.S.C. § 1144(a). The propriety of Dial’s federal action rests
upon whether it “relates to an[] employee benefit plan” under
ERISA § 514(a). Courts read § 514(a)’s “relates to” provision
very broadly. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97,
103 S. Ct. 2890, 2900 (1983). This Circuit stated in 1990 that
cases preempting state-law claims with ERISA
have at least two unifying characteristics: (1) the
state law claims address areas of exclusive federal
concern, such as the right to receive benefits under
the terms of an ERISA plan; and (2) the claims directly
affect the relationship among the traditional ERISA
entities--the employer, the plan and its fiduciaries,
-7-
and the participants and beneficiaries.
Memorial Hospital System v. Northbrook Life Insurance Co., 904
F.2d 236, 245 (5th Cir. 1990). In the instant case, Dial’s claim
concerns “traditional ERISA entities”: himself (a Plan
participant), Marye (a potential Plan beneficiary), the Plan, and
the NFL (administrator and employer). Dial seeks benefits that,
in the absence of QDRO, he is due; paying him those benefits is
among the Plan administrators’ ERISA-governed responsibilities.
Dial’s suit was proper under ERISA. Cf., e.g., Brandon v.
Travelers Insurance Co., 18 F.3d 1321, 1325 (5th Cir. 1994)
(“[T]he designation of a beneficiary ‘relates to’ the provision
of an ERISA plan to a sufficient degree to be preempted by that
statute.”); Carland v. Metropolitan Life Insurance Co., 935 F.2d
1114, 1121 (10th Cir. 1991) (holding that an ex-wife’s state
claim to recover ERISA-qualified insurance benefits pursuant to a
divorce decree amounted to an ERISA § 504 claim for breach of
fiduciary duty against the plan administrators); Brown v.
Connecticut General Life Insurance Co., 934 F.2d 1193, 1195 (11th
Cir. 1991) (holding that ERISA preempted a state action for a
declaration of the rightful beneficiary of an ERISA-qualified
group life insurance policy pursuant to a divorce agreement);
McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir. 1990) (holding
that ERISA preempts a state-law claim for designation of
beneficiary).
-8-
III
The Disability Plan gives its administrators discretionary
authority to interpret the Plan provisions, such that a court
should review the administrators’ factual determinations and plan
interpretations for abuse of discretion. See Sweatman v.
Commercial Union Insurance Co., 39 F.3d 594, 597 (5th Cir. 1994).
In this case, however, the Plan administrators neither made
factual determinations nor interpreted the Disability Plan.
Instead, the Plan administrators interpreted the meaning of a
separate contract between Dial and Marye; they had to answer two
questions: (1) whether the 1974 property settlement agreement
constitutes a QDRO for Plan purposes, and (2) if so, what the
distribution of benefits should be under the settlement
agreement. A court reviews a plan administrator’s statutory and
legal conclusions de novo. See Penn v. Howe-Baker Engineers,
Inc., 898 F.2d 1096, 1100 (5th Cir. 1990) (reviewing de novo plan
administrators’ determination as to whether an employee was an
independent contractor for coverage purposes). Likewise, the
district court here did not owe deference to the Disability Plan
administrators’ interpretation of a domestic relations order, a
contract judicially approved by a state court. See Matassarin v.
Lynch, --- F.3d ---, --- (5th Cir. 1999); see also Hullett v.
Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 114 (3d Cir.
1994) (stating that the district court “did not err in holding
-9-
that it should review de novo the plan administrator’s
construction of the [divorce agreement], which invoked issues of
contract interpretation under the Agreement and not the plan”).
The district court erred in reviewing the Plan administrators’
decision for abuse of discretion only and should instead have
employed de novo review.
IV
In deciding to pay one-half of Dial’s Disability Plan
benefits to Marye, the Plan administrators relied on the 1977
property settlement. According to the Plan administrators, Dial’s
Disability Plan benefits fall within the settlement agreement’s
provision that “in the event the parties are mistaken and there
exists any other property, separate or community, which is not
listed herein which is later discovered, then the same shall be
divided fifty percent (50%) to Wife and fifty percent (50%) to
Husband.”1 The Plan administrators did not find that the
Disability Plan benefits were governed by the separate agreement,
the 1993 QDRO, which awarded Marye just 37.5 percent of benefits
1. The Plan administrators argued to the district court:
At the time they entered into the Property Settlement
Order in 1977, Mr. Dial and Ms. Marie [sic] mistakenly
believed that all of the rights to deferred benefits
Mr. Dial had earned during his career as an NFL Player
from the 1959 through 1968 football seasons were
embodied in the Bert Bell Plan. With the establishment
of the Bert Bell/Pete Rozelle Plan and the Disability
Plan in 1993, it became apparent that this belief was
mistaken. Ms. Marie [sic] discovered the existence of
the additional property--Mr. Dial’s benefit under the
Disability Plan--in 1994.
-10-
that “flowed to” Dial from the Bell Plan.2
The district court, reviewing for abuse of discretion, found
that the Disability Plan’s benefits interpretation was both
legally incorrect and arbitrary and capricious. The court stated
that, under the administrators’ reading, the disability benefits
need not have been in existence in 1977 in order to constitute
2. Curiously, however, the Plan administrators state in
their brief that Article III of the 1977 divorce decree--the
“flow to” provision--supports their decision to pay one-half of
the Disability Plan benefits to Marye. The Plan administrators
offer no explanation as to why the 1977 “flow to” provision would
support their decision but the identical language in the 1993
QDRO would not apply. According to Dial, the Disability Plan’s
failure to apply the 1993 QDRO to the Disability Plan precludes
it from relying on the 1977 settlement’s “flow to” language. We
agree with Dial. But the record reveals, and the district court’s
order granting summary judgment recognizes, that the Plan
administrators neither needed to rely upon nor did rely primarily
on the 1977 “flow to” provision. On August 11, 1994, the Plan
wrote to Marye’s counsel:
Although . . . the property settlement agreement refers
specifically only to benefits under the [Bell/Rozelle
Plan], we think the language on page 3 of that document
to divide 50/50 “any other property, separate or
community, which is not listed herein which is later
discovered” is sufficient to provide Ms. [Marye] with
50% of the benefit otherwise payable under the
Supplemental Disability Plan to Mr. Dial.
The district court’s opinion states:
NFL did not grant Marie [sic] the lower percentage
share of 37.5 percent as stipulated in the 1993 QDRO
because that order explicitly stated that it related to
the Bert Bell NFL Player Retirement Plan (Memorandum in
Support of NFL’s Motion, Instrument No. 43, Exh. 7, at
1). Thus, NFL reasoned, limiting Marie’s [sic] award to
37.5 percent of Dial’s benefits under the new
disability plan based on the later 1993 QDRO would be
improper.
We agree with the district court’s implication that the Plan
administrators based their decision on the “later discovered”
property clause.
-11-
“later discovered” property. This interpretation, the district
court found, conflicted with the 1977 settlement agreement’s
“purpose and intent” clause. That clause states:
Husband and Wife have caused this Article to be added
to and made a part of this Agreement in an effort to
clarify the purposes of the parties and with a view of
aiding any Court before which this Agreement should
come for interpretation or enforcement. . . . The
parties have attempted to divide their marital property
in a manner which conforms to the “just and right”
standard. . . . The parties believe that . . . [a just
and right] standard is best met by an equal division
and partition of the marital property in existence as
of the date . . . [the settlement agreement] is
executed.
Implicit in the court’s conclusion that the “purpose and intent”
clause conflicted with the administrators’ interpretation of
“later discovered property” are two assumptions: (1) that the
administrators’ interpretation in fact dictates that property
need not have existed in 1977 in order to come within the “later
discovered” clause; and (2) that because the Disability Plan did
not exist in 1977, Dial’s benefits paid by the Plan did not exist
in 1977. We find neither assumption defensible. Dial’s disability
benefit was in existence by the 1977 divorce, insofar as he had
already finished his NFL career, thereby earning his right to the
-12-
benefits, and had nothing left to do but wait for his benefits to
vest. The disability benefit did not yet exist in 1977 only if
Dial’s later act of “becoming disabled” could be said to have
earned or created the benefit. Dial did nothing after 1977 to
earn disability benefits. Instead, a contingent disability
benefit--contingent upon the development of the disabling
condition from injuries already assumed while Dial played
football--belonged to Dial as of the time he ended his football
career. What changed in 1993 was not the fact or existence of the
disability benefit, but merely the benefit’s payment size and the
source from which the payments came. Under this reading, the Plan
administrators’ decision does not require any property created
after the 1977 settlement agreement to fall within the “later
discovered” provision, and the district court’s reason for
finding legal untenableness vanishes.
Reviewing the Plan administrators’ interpretation de novo,
as the district court should have done, we find the
interpretation legally correct. Because no material facts are
disputed, we vacate the district court’s decision and direct the
entry of judgment for the Disability Plan.
Our decision should not be extended beyond this case’s
specific circumstances. Dial and Marye are now long divorced.
Dial, and not Marye, must deal with the consequences, including
medical bills and loss of alternate income, attributable to his
football-related disability, for which the disability benefits
-13-
are intended to compensate. We recognize that problems could
arise if we were to create a general rule that disability
benefits are later-discovered property subject to division under
a divorce agreement. Had Dial, for example, worked during his
marriage in a factory and years later unexpectedly developed
respiratory problems found to be attributable to the factory
environment, we would not contemplate awarding one-half of any
settlement therefrom to Marye on the basis of the “later
discovered” clause. The result we reach in this case is mandated
because Dial’s contingent disability benefit existed at the time
of the divorce and because Dial and Marye entered their divorce
agreement after the enactment of ERISA but before the 1984
Retirement Equity Act. The REA allows the splitting of ERISA-
qualified disability benefits by specific intent of the parties,
i.e., by reference to the plan and to the benefits in a
judicially approved QDRO. But Congress in enacting the REA also
allowed pre-1984 agreements to suffice as QDROs even without the
panoply of statutory protections. Such is the case here. Had Dial
and Marye entered their property settlement agreement after the
REA became effective, then the Plan administrators could not have
treated the “later discovered” clause as a QDRO. Because they
entered the agreement in 1977, and because they later discovered
the Disability Plan would pay a larger benefit that constitutes
“later discovered” property, the Plan administrators’ decision
was legally correct.
-14-
V
A district court may in its discretion award attorneys’ fees
to any party in an ERISA suit. See 29 U.S.C. § 1102(g)(1). We
review for abuse of discretion the district court’s decision to
grant attorneys’ fees to Dial. See Todd v. AIG Life Insurance
Co., 47 F.3d 1448, 1458 (5th Cir. 1995). We find that the
district court abused its discretion.
In deciding whether to award attorneys’ fees, a district
court applies the five-factor test set forth in Iron Workers
Local No. 272 v. Bowen, 624 F.2d 1255 (5th Cir. 1980). The court
considers:
(1) the degree of the opposing parties’ culpability or
bad faith; (2) the ability of the opposing parties to
satisfy an award of attorneys’ fees; (3) whether an
award of attorneys’ fees against the opposing parties
would deter other persons acting under similar
circumstances; (4) whether the parties requesting
attorneys’ fees sought to benefit all participants and
beneficiaries of an ERISA plan or to resolve a
significant question regarding ERISA itself; and (5)
the relative merits of the parties’ positions.
Id. at 1266; see Todd, 47 F.3d at 1459. The district court cited
Bowen and offered this discussion of whether to award attorneys’
fees:
-15-
In the instant case, the Court finds that an award of
attorneys’ fees and costs would be proper. First,
although the Court stops short of accusing NFL of
acting in bad faith, NFL is clearly responsible for its
erroneous interpretation that was in direct conflict
with the plain meaning of the settlement agreement.
Second, NFL has the ability to pay an award of
attorneys’ fees. Third, an award of attorneys’ fees in
the instant case would deter other administrators from
straining to justify an interpretation of a QDRO that
is clearly inconsistent with other provisions in the
order. With respect to the last factors [of the Bowen
test], even though Dial’s suit was limited to the
vindication of his own claim under the plan and did not
address significant legal questions regarding ERISA,
Dial presented a demonstrably stronger or more
meritorious case. At least four of the Bowen factors
support an award of reasonable attorneys’ fees and
costs to Dial. Accordingly, the Court finds that an
award of attorneys’ fees and costs would promote
ERISA’s remedial purpose of protecting beneficiaries.
Our opinion today renders inaccurate the district court’s
determination that Dial presented a more meritorious case. We
note also that any imputation of bad faith in this case to the
-16-
Plan administrators is simply unreasonable. The Plan
administrators’ decision did not save the Disability Plan any
money; the Plan paid the same amount it would have paid under
Dial’s reading, only to a second beneficiary as well. The Plan
administrators had no reason or incentive to interpret the
settlement agreement one way or the other. They allowed Dial the
opportunity to respond before the Plan began paying benefits to
Marye. Moreover, the district court’s award of attorneys’ fees
would have no deterrent effect. The Plan administrators merely
chose to interpret an outside document in the way they found
correct. Plan administrators must do this with every QDRO they
receive. No matter what the outcome of this litigation, punishing
the Disability Plan administrators would at most encourage other
administrators to interpret documents in favor of the original
beneficiary, regardless of a valid QDRO. The only Bowen factor
favoring attorneys’ fees for Dial was the Supplemental Plan’s
ability to pay, and the district court’s opinion mentions no
relevant non-Bowen factors.
Marye has requested this Court to award her reasonable
attorneys’ fees for defending her beneficiary rights.
Acknowledging that the outcome of this case was a “close call,”
we direct the district court to consider Marye’s request on
remand.
VI
-17-
The judgment of the district court is VACATED and the case
is REMANDED to the district court for entry of judgment in favor
of the defendant/counterclaimant/third-party plaintiff/appellant
NFL Player Supplemental Disability Plan in accordance with this
opinion. The dismissal of third-party defendant/appellant Janice
Marye’s community-property claim is AFFIRMED, as the issue is now
moot. We direct the district court on remand to consider Marye’s
request for attorneys’ fees.
-18-