Guardian Life Insurance Co. of America v. Finch

United States Court of Appeals
Fifth Circuit

IN THE UNITED STATES COURT OF APPEALS
F I L E D
December 22, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-10212

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

Plaintiff

v.

KIMBERLYE FINCH

Defendant - Appellant

v.

EDDIE LEE GALAWAY, Administrator, on behalf
of Estate of Bradford Wayne Galaway

Defendant - Appellee

Appeal from the United States District Court for the
Northern District of Texas

Before KING, Chief Judge, and HIGGINBOTHAM and DAVIS, Circuit
Judges.

KING, Chief Judge:

The Guardian Life Insurance Company of America filed this

interpleader action in order to determine who should receive the

proceeds of a life insurance plan governed by ERISA. Eddie Lee

Galaway, the administrator of the decedent’s estate, claimed that

the estate should receive the proceeds because Kimberlye Finch,

the named beneficiary and the decedent’s ex-wife, waived her

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rights to them when she and the decedent divorced. By order of

the district court and with the consent of all parties, this case

was transferred to a magistrate judge. Applying the federal

common law of waiver, the magistrate judge agreed with Eddie Lee

Galaway, determining that Finch had waived her rights under the

plan. Accordingly, the magistrate judge granted summary judgment

in his favor. Finch now appeals this decision, citing Egelhoff

v. Egelhoff, 532 U.S. 141 (2001), for the proposition that a

federal district court must look to the text of ERISA itself, not

to federal common law, when identifying the beneficiary of a plan

governed by ERISA. For the following reasons, we AFFIRM the

judgment of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

Bradford Wayne Galaway (“Galaway”) and Kimberlye Finch

married on September 22, 2001. On February 1, 2002, the Guardian

Life Insurance Company (“Guardian”) had issued to Galaway’s

employer a group life insurance policy covering Galaway. Galaway

named Finch as the beneficiary of this policy. All parties to

this suit agree that this life insurance policy is an employee

welfare benefits plan governed by § 3(21)(A) of Title I of the

Employee Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. §§ 1001-1461 (2000).

On June 20, 2002, Galaway and Finch divorced. As part of

the divorce proceedings, they voluntarily entered into an Agreed

Final Decree of Divorce that awarded Galaway all “right, title,

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interest, and claim in and to” his life insurance policies. The

Agreed Final Decree of Divorce divested Finch of her interest in

any such policies.

On November 8, 2002, Galaway died intestate in an airplane

accident. At the time of his death, Galaway had not changed the

named beneficiary of his life insurance policy.

After Galaway’s death, both Eddie Lee Galaway, as

administrator of Bradford Wayne Galaway’s estate, and Finch

claimed sole entitlement to the insurance proceeds. On May 30,

2003, Guardian filed an interpleader action in the United States

District Court for the Northern District of Texas, in which it

asked the court to identify the proper beneficiary of the

insurance proceeds.

In deciding the present case, the magistrate judge, citing

Fifth Circuit precedent, applied federal common law to determine

that Finch had waived her rights to the insurance proceeds.

Accordingly, the magistrate judge granted summary judgment in

favor of Eddie Lee Galaway and denied Finch’s cross-motion for

summary judgment. Finch now appeals this decision.

II. STANDARD OF REVIEW

This court reviews a district court’s grant of summary

judgment de novo. Martinez v. Schlumberger, Ltd., 338 F.3d 407,

410-11 (5th Cir. 2003); Clift v. Clift, 210 F.3d 268, 269-70 (5th

Cir. 2000). Summary judgment is appropriate when no genuine

issue as to any material fact exists and the moving party is

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entitled to judgment as a matter of law. FED. R. CIV. P. 56(c).

III. ANALYSIS

On appeal, Finch argues that the magistrate judge erred when

she relied on federal common law to identify the beneficiary of

the life insurance plan. In support of this claim, Finch invites

the court’s attention to Egelhoff, 532 U.S. at 141, which she

claims undermines this circuit’s longstanding practice of looking

to federal common law to determine if the named beneficiary of an

ERISA-governed benefits plan has effected a valid waiver of her

rights. All parties appear to agree that this issue--whether,

after Egelhoff, courts can rely on federal common law to

determine if the beneficiary of an ERISA plan has waived her

rights--is the sole issue before the court. Likewise, all

parties appear to agree that this case should be disposed of on

summary judgment because the facts of the case are not in

dispute.

Finch’s claim that the magistrate judge improperly applied

federal common law when deciding this case fails. In this

circuit, we have applied federal common law to determine whether

the named beneficiary of a plan governed by ERISA has waived her

rights under the plan. See Manning v. Hayes, 212 F.3d 866 (5th

Cir. 2000), cert. denied, 532 U.S. 941 (2001). For the reasons

set forth below, Egelhoff does not undermine this approach.

A. Fifth Circuit Precedent

In a series of cases, this court has held that when ERISA

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preempts state law, we apply federal common law to determine

whether a beneficiary like Finch has effected a waiver. See

Manning, 212 F.3d at 866; Clift, 210 F.3d at 268; Brandon v.

Travelers Ins. Co., 18 F.3d 1321 (5th Cir. 1994). Following this

line of precedent, a waiver is valid if it is “explicit,

voluntary and made in good faith.” Manning, 212 F.3d at 871; see

also Clift, 210 F.3d at 269-71; Brandon, 18 F.3d at 1325-27. In

Brandon, a case quite similar to the present one, we held that a

decedent’s ex-wife, who was the named beneficiary of a life

insurance plan governed by ERISA, was not entitled to the

proceeds of the plan because she waived them in a settlement

agreement. Specifically, in Brandon, this court found that ERISA

preempted a Texas state law that would have automatically

nullified upon divorce the decedent’s previous designation of his

then-wife as the plan’s beneficiary. Brandon, 18 F.3d at 1325.

After making this finding, this court then sought to “ascertain

the law that is applicable to the controversy” by looking to the

“statutory language or, finding no answer there, to federal

common law . . . .” Id. (internal quotation marks omitted).

Similarly, in Manning, this circuit followed the same approach.

See Manning, 212 F.3d at 870. Specifically, it asked “whether,

having established that the state law is preempted, the federal

law governing the resolution of [the case] may be reasonably

drawn from the text of ERISA itself, or must instead be developed

as a matter of federal common law.” Id. Thus, in a series of

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cases, this court has consistently applied federal common law to

determine the proper beneficiary of plans governed by ERISA.

Outside of this circuit, the majority of courts that have

considered whether federal common law governs disputes between an

ex-spouse who is an ERISA plan’s designated beneficiary and other

claimants to the plan’s proceeds have reached the same conclusion

that this court has reached. Specifically, most courts have: (1)

concluded that ERISA does not preempt a waiver by a named

beneficiary of her interest in the plan’s proceeds; and (2)

relied on federal common law principles in order to determine if

the named beneficiary effected a valid waiver of her rights under

the plan. See Hill v. AT&T Corp., 125 F.3d 646, 648 (8th Cir.

1997); Estate of Altobelli v. Int’l Bus. Machs. Corp., 77 F.3d

78, 81-82 (4th Cir. 1996); Mohamed v. Kerr, 53 F.3d 911, 914 (8th

Cir. 1995), cert. denied, 516 U.S. 868 (1995); Fox Valley &

Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 280

(7th Cir. 1990) (en banc), cert. denied, 498 U.S. 820 (1990);

Metro. Life Ins. Co. v. Flinkstrom, 303 F. Supp. 2d 34, 39-43

(D. Mass. 2004); John Hancock Mut. Life Ins. Co. v. Timbo, 67 F.

Supp. 2d 413, 419-20 (D.N.J. 1999). Only the Sixth Circuit has

clearly gone the other way, finding that the text of ERISA

forecloses employing federal common law to determine a plan’s

beneficiary. Metro. Life Ins. Co. v. Pressley, 82 F.3d 126, 129-

30 (6th Cir. 1996) (concluding that “[t]he Sixth Circuit takes a

different view [from the majority of other circuits] and holds

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that ERISA itself supplies the rule of law.”). Hence, the

majority of circuits that have considered the issue presently

before this court have concluded, as we have done in the past,

that it is appropriate to apply federal common law to determine

if the named beneficiary of an ERISA plan has waived her rights.

B. Finch’s Arguments

In her appellate brief, Finch argues that Egelhoff

effectively overrules this circuit’s decisions looking to federal

common law to identify the beneficiary of an ERISA plan.

Instead, according to Finch, Egelhoff requires courts to look

solely to the text of ERISA and to the plan documents--not to

federal common law--in order to determine the proper beneficiary

of a life insurance policy governed by ERISA. In support of this

claim, Finch cites a passage in Egelhoff in which the Supreme

Court stated that “ERISA’s pre-emption section, 29 U.S.C.

§ 1144(a), 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.” Egelhoff, 532 U.S. at 146

(internal quotation marks omitted). Finch also notes that the

Supreme Court held that a “fiduciary shall administer the plan

‘in accordance with the documents and instruments governing the

plan,’ making payments to a ‘beneficiary’ who is ‘designated by a

participant, or by the terms of [the] plan.’” Id. at 147

(alteration in original) (internal citation omitted). According

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to Finch, the magistrate judge’s ruling in the present case,

which relies on federal common law rather than the language of

the plan documents, effectively abrogates ERISA as it relates to

life insurance plans. Thus, Finch argues that the magistrate

judge erred when she looked to federal common law in order to

identify the plan’s beneficiaries.

Second, Finch argues that the magistrate judge erred because

applying federal common law to determine a plan’s beneficiary

would undermine the goal of uniformity in the application of

ERISA. In support of this claim, Finch notes that in Egelhoff,

the Supreme Court held that ERISA preempted a Washington statute

providing for the automatic revocation of the designation of a

former spouse as a plan’s beneficiary upon a divorce. According

to the Court, preemption was necessary in order to prevent

“[r]equiring ERISA administrators to master the relevant laws of

50 States . . . .” Egelhoff, 532 U.S. at 149. The Court further

noted that “[u]niformity is impossible, however, if plans are

subject to different legal obligations in different States.” Id.

at 148. While Egelhoff pertained to a state statute, Finch

contends that the uniformity it refers to would be defeated if

plans are subject to different legal obligations in different

federal districts or circuits. Accordingly, Finch claims that

the magistrate judge erred when she relied on federal common law

to decide this case.

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 C. The Effect Of Egelhoff

Contrary to Finch’s assertions, Egelhoff does not undermine

this court’s practice of applying federal common law to determine

if an ERISA plan’s named beneficiary has effected a valid waiver

of her rights under the plan. First, the holding of Egelhoff is

inapplicable to the present case because Egelhoff does not

address the application of federal common law to ERISA plans.

Rather, Egelhoff only addresses whether ERISA preempts a state

statute that automatically revokes the designation of a spouse as

the beneficiary of a life insurance policy upon divorce.

Egelhoff, 532 U.S. at 141. The Supreme Court’s holding in

Egelhoff--that ERISA does preempt a state statute that

automatically revokes an ex-spouse as a plan’s beneficiary after

a divorce--is unremarkable and is in line with a number of

decisions from this court holding that ERISA preempts state laws

of this sort. See, e.g., Manning, 212 F.3d at 870 (holding that

29 U.S.C. § 1144(a) preempts all state laws insofar as they

relate to an ERISA plan). Finch’s attempt to extend the holding

of Egelhoff beyond its facts so as to undermine the magistrate

judge’s reliance on federal common law in the present case is

unsupported by any case law and flatly contradicts this court’s

prior precedent. See, e.g., Manning, 212 F.3d at 871; Clift, 210

F.3d at 269-71; Brandon, 18 F.3d at 1325-26. This court sees no

reason to extend the scope of Egelhoff to find that it preempts

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federal common law in addition to state statutes. Accordingly,

the magistrate judge properly relied on federal common law when

determining that Finch had waived her rights under the life

insurance plan.

Second, the goal of uniformity that the Supreme Court

discusses in Egelhoff is not undermined when courts rely on the

federal common law of waiver to determine if a beneficiary has

waived her rights under an ERISA plan. To begin with, Egelhoff

only discusses the problems created when plan administrators must

look to state law in order to identify a plan’s beneficiary.

Egelhoff, 532 U.S. at 148 (stating that uniformity would be

undermined if plans are subject to different legal obligations in

different states). Egelhoff never holds that uniformity would be

undermined if courts relied on federal common law. In fact, plan

administrators must at times look to federal common law (e.g., to

determine how a certain provision of ERISA has been interpreted

in a particular circuit). Thus, reliance on federal common law

cannot alone undermine the uniformity that the Supreme Court

discusses in Egelhoff. Moreover, applying federal common law to

determine if an ERISA plan’s beneficiary waived her rights can be

seen as promoting, rather than undermining, national uniformity.

See Fox Valley, 897 F.2d at 281-82 (“As we have noted, federal

courts are charged with creating federal common law rules to

govern ERISA, and the creation of such federal rules will provide

the needed uniformity.”). Thus, Finch’s argument that reliance

10
on federal common law would undermine national uniformity fails.

Third, the Supreme Court in Egelhoff strongly suggested that

courts can at times rely on common law principles when

determining the identity of the beneficiary of an ERISA plan.

Egelhoff, 532 U.S. at 152. Referring to state “slayer” statutes,

the Supreme Court stated:

In the ERISA context, these “slayer” statutes could
revoke the beneficiary status of someone who murdered a
plan participant. Those statutes are not before us, so
we do not decide the issue. We note, however, that the
principle underlying the statutes--which have been
adopted by nearly every State--is well established in
the law and has a long historical pedigree predating
ERISA. And because the statutes are more or less
uniform nationwide, their interference with the aims of
ERISA is at least debatable.

Id. (internal citations omitted). Accordingly, the Supreme Court

has, at times, noted that it might be proper for lower courts to

look to common-law principles when interpreting provisions of

ERISA. See id.; Varity Corp. v. Howe, 516 U.S. 489, 498, 502

(1996) (using the common law as a starting point for interpreting

ERISA’s fiduciary duties).

Finally, several post-Egelhoff decisions from other circuits

reinforce our conclusion that Egelhoff does not undermine this

court’s application of federal common law to determine if an

ERISA plan’s named beneficiary has effected a valid waiver. For

instance, in Melton v. Melton, 324 F.3d 941 (7th Cir. 2003), the

Seventh Circuit relied on federal common law to determine if a

valid waiver had been effected by a plan’s beneficiary. The

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Seventh Circuit concluded that “[e]ven where ERISA preempts state

law with respect to determining beneficiary status under an

ERISA-regulated benefits plan, ERISA does not preempt an explicit

waiver of interest by a nonparticipant beneficiary of such plan.”

Id. at 945. Similarly, in Metropolitan Life Insurance Co. v.

Johnson, 297 F.3d 558, 567 (7th Cir. 2002), the Seventh Circuit

stated that “[t]he Supreme Court has recognized, in situations

where ERISA preempts state law but is silent on a topic, that

courts would have to develop a body of federal common

law . . . .” A number of federal district courts and state

courts have reached similar conclusions. See, e.g., Flinkstrom,

303 F. Supp. at 39-43; Metro. Life Ins. Co. v. Palmer, 238 F.

Supp. 2d 821, 824-26 (E.D. Tex. 2002); Keen v. Weaver, 121 S.W.3d

721, 725 (Tex. 2003) (“We do not believe that Egelhoff precludes

the application of federal common law to this dispute.”); Silber

v. Silber, 99 N.Y.2d 395, 404 (N.Y. 2003) (“[T]he weight of

federal authority now favors the view that a named beneficiary

may waive its rights as a designated beneficiary through a waiver

that meets common-law requirements.”).

Thus, for all of the foregoing reasons, Egelhoff does not

undermine this court’s longstanding approach of relying on

federal common law to determine if an ERISA plan’s beneficiary

has effected a common law waiver. Accordingly, the district

court did not err when, following Fifth Circuit precedent, it

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relied on federal common law to grant summary judgment in favor

of Eddie Lee Galaway because Finch had effected a valid waiver of

her rights under the life insurance plan.

IV. CONCLUSION

For the foregoing reasons, this court AFFIRMS the judgment

of the district court.

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