1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-27-1994

Hullett v.Towers, Perrin, Forster & Crosby, et al.

Precedential or Non-Precedential:

Docket 94-1517

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Recommended Citation

"Hullett v.Towers, Perrin, Forster & Crosby, et al." (1994). 1994 Decisions. Paper 169.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/169
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ____________ 

 NO. 94-1517 

 ____________ 

JOSEPH W. HULLETT, 

 Appellee 

v. 

TOWERS, PERRIN, FORSTER & CROSBY, INC.; 

 TOWERS, PERRIN RETIREMENT INCOME PLAN; 

 TOWERS, PERRIN PENSION RESTORATION PLAN; 

 LESLIE B. TALCOTT 

 Leslie B. Talcott, Appellant 

 ____________ 

 Appeal from the United States District Court 

 for the Eastern District of Pennsylvania 

 D.C. No. 92-cv-01184 

 ____________ 

 Argued September 20, 1994 

 Before: GREENBERG, ROTH, and ROSENN, Circuit Judges

 Opinion Filed October 28, 1994 

 ____________ 

DOUGLAS EVAN RESS, ESQ. (Argued) 

MARGARET LOUD CHARENDOFF, ESQ. 

Kaufman, Coren, Ress & Weidman 

1525 Locust Street - 16th Floor 

Philadlephia, PA 19102 

 Attorneys for Appellant 

GERALD F. MCCORMICK, ESQ. (Argued) 

Duane Morris & Heckscher 

735 Chesterbrook Boulevard - Suite 300 

Wayne, PA 19084 

 Attorneys for Appellee 

 ____________ 

 OPINION OF THE COURT 

ROSENN, Circuit Judge. 
 This case presents an interesting question concerning 

the interpretation of a property settlement agreement entered 

into by a husband and wife in anticipation of their divorce, and 

the application of the Employee Retirement Income Security Act of 

1974 (ERISA), 28 U.S.C. § 1001 et seq., to the agreement. On 

February 26, 1992, Joseph W. Hullett filed suit against his exwife, Leslie B. Talcott, in the United States District Court for 

the Eastern District of Pennsylvania seeking, inter alia, a 

declaration that the settlement agreement did not constitute a 

qualified domestic relations order (QDRO) within the meaning of 

ERISA, and an injunction prohibiting payment of any of Hullett's 

pension benefits to Talcott.1 

 Each of the parties subsequently filed cross-motions 

for partial summary judgment. The district court granted in part 

Hullett's motion for partial summary judgment and denied 

Talcott's motion. The court held that the settlement agreement 

constitutes a QDRO, and that Talcott is entitled to receive onehalf of the pension benefits which Hullett has accrued as of 

December 31, 1983, the date of the settlement agreement, if she 

remains unmarried at the time Hullett actually retires or is 

required to begin receiving pension benefits. Talcott timely 

appealed to this court. We reverse. 

 

1. The district court exercised jurisdiction over this case 

pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1). This 

court has jurisdiction over this appeal from a final judgment 

pursuant to 28 U.S.C. § 1291. 
I. 

 Hullett and Talcott were married on August 19, 1961. 

In 1965, Hullett commenced employment with Towers, Perrin, 

Forster & Crosby, Inc. (Towers, Perrin) in its reinsurance 

division. He thereafter became a manager, stockholder, vicepresident, senior vice-president, a member of the board of 

directors, and a member of the Towers, Perrin executive 

committee. 

 In 1982 or 1983, Hullett and Talcott separated. On 

December 31, 1983, they entered into a property settlement 

agreement (the Agreement), which William H. Lamb, Esq., drafted. 

The parties' subsequent divorce decree incorporated by reference 

the Agreement as part of the decree. At the time of the 

separation, Hullett was a fully vested member of Towers, Perrin 

pension plans which consisted of a Retirement Income Plan 

qualified under Section 401(a) of the Internal Revenue Code (Plan 

or Pension Plan) and a non-qualified Retirement Income 

Restoration Plan which had become effective as of January 1, 

1976. The Agreement provided that in the event that Talcott 

remained unmarried at the time of Hullett's retirement, Hullett 

would pay to her, in the year of his retirement, fifty percent of 

all income received pursuant to his fully vested, accrued pension 

credit under the Plan. 

 By letter dated January 22, 1986, Hullett wrote 

Talcott, contending that the Agreement contained an error in that 

the pension was suppose to be valued as of December 31, 1983, of 

which value Talcott was suppose to receive fifty percent. 
Talcott responded that the Agreement was correct as written. 

Hullett's attorney then wrote Lamb seeking to confirm Hullett's 

position and to do the necessary to clarify the Agreement. In 

response, Lamb's office disputed Hullett's claim. It emphasized 

that on the original drafts, 100% of all income received from the 

pension plan was to be payable to Talcott upon Hullett's 

retirement and receipt of benefits, but that the valuation date 

was deleted in return for Talcott receiving a full 50% of 

whatever pension was ultimately payable to Hullett. In December 

of 1986, Hullett informed Larry Margel, Chief Actuary at Towers, 

Perrin, that he had signed an agreement which dealt with his 

whole pension instead of with the pension as valued at December 

31, 1983, and Margel provided Hullett with some arguments 

regarding the situation. 

 On February 5, 1990, Towers, Perrin unilaterally 

terminated Hullett's employment. As defined in Hullett's Pension 

Plan, he had an early retirement date of January 1, 1991, and a 

normal retirement date of January 1, 2001. Hullett could receive 

pension benefits as of his early retirement date based upon a 

reduction of benefits of 5% for each year below the normal 

retirement date. Towers, Perrin and Hullett subsequently entered 

into a Release and Agreement, whereby the parties agreed that 

Hullett would receive a pension equal to the one he would have 

earned under the Plan had he remained employed with Towers, 

Perrin on his early retirement date.2 

 

2. This amounted to a pension under the Pension Plan of 

$7,258.37 per month commencing January 1, 2001, plus a social 
 By letter dated August 20, 1991, the administrator for 

the plans, Karl W. Lohwater, determined that the Agreement was a 

QDRO3 within the meaning of ERISA, and that under the terms of 

the Agreement, Talcott was entitled to 50% of all of Hullett's 

pension benefits from both plans, with payment to commence when 

Talcott elected to receive the pension benefits. Hullett 

appealed this initial determination. By letter dated January 15, 

1992, the plan administrator made a final determination to 

recognize the Agreement as a QDRO and to pay Talcott 50% of 

Hullett's pension, without regard to any December 31, 1983 

valuation date and without regard to when Hullett decided to 

commence receipt of his share of the pension monies. 

 On February 26, 1992, Hullett filed a complaint against 

Talcott in federal court seeking, inter alia, a declaration that 

the Agreement did not constitute a QDRO, and an injunction 

prohibiting payment of any of Hullett's pension benefits to 

Talcott. Talcott filed a motion to dismiss Hullett's complaint, 

contending that Hullett had improperly sought de novo review of 

(..continued) 

security supplement under the Plan of $554.14 per month from 

January 1, 2001 through May 31, 2003, plus a supplemental pension 

of $3,220.30 per month commencing January 1, 2001. 

3. A QDRO is defined in 29 U.S.C. § 1056(d)(3)(B)(i). Prior to 

1984, ERISA's provisions failed to clearly delineate the interest 

of a non-employee spouse in pension benefits of the employee 

spouse. Under the 1984 amendments to ERISA, if a domestic 

relations order provides for distribution of part or all of a 

participant's benefits under a qualified pension plan to an 

alternate payee and meets the requirements set forth in the 

statute, then the creation, recognition, or assignment of these 

benefits to the alternate payee is not considered an assignment 

or alienation prohibited by ERISA's spendthrift provisions. 
the plan administrator's determination, which the district court 

denied. Talcott subsequently filed a counterclaim against 

Hullett and a crossclaim against Towers, Perrin, Towers Perrin 

Retirement Plan, and Towers Perrin Pension Restoration Plan 

(collectively, the "Towers, Perrin Defendants"), seeking a 

declaration of the rights of the parties. The Towers, Perrin 

defendants crossclaimed seeking similar relief. Talcott also 

filed a motion in limine seeking the introduction of parol 

evidence, which the district court denied. 

 The parties then filed cross-motions for partial 

summary judgment. The district court granted in part Hullett's 

motion, and denied Talcott's motion regarding the QDRO 

determination but granted relief on other grounds. The court 

held that the Agreement constituted a QDRO, and that Talcott was 

entitled to receive one-half of the pension benefits which 

Hullett had accrued as of December 31, 1983 if she remains 

unmarried at the time Hullett actually retires or is required to 

begin receiving pension benefits from Towers, Perrin. Talcott 

filed a motion to alter or amend the judgment and for 

reconsideration, which the district court denied. 

II. 

 This court exercises plenary review over a grant of 

summary judgment, and we apply the same test the district court 

should have utilized initially. Oritani Sav. and Loan Ass'n v. 

Fidelity and Deposit Co., 989 F.2d 635, 637 (3d Cir. 1993). 

Summary judgment is appropriate only when it is demonstrated that 

there is no genuine issue as to any material fact and the moving 
party is entitled to judgment as a matter of law. Celotex Corp. 

v. Catrett, 477 U.S. 317, 322-32 (1986); Fed.R.Civ.P. 56(c). An 

issue of material fact is genuine "if the evidence is such that a 

reasonable jury could return a verdict for the nonmoving party." 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In 

deciding a motion for summary judgment, all reasonable inferences 

must be drawn in favor of the non-movant. Oritani, 989 F.2d at 

638. 

 For purposes of interpretation, a property settlement 

agreement is treated the same as any other contract under 

Pennsylvania law. See e.g., Lower v. Lower, 584 A.2d 1028, 1030 

(Pa.Super. 1991). A court's purpose in examining a contract is 

to interpret the intent of the contracting parties, as 

objectively manifested by them. Mellon Bank, N.A. v. Aetna 

Business Credit, Inc., 619 F.2d 1001, 1009 (3d Cir. 1980). The 

process of interpreting a contract requires the court to make a 

preliminary inquiry as to whether the contract before it is 

ambiguous. Stendardo v. Federal Nat'l Mortgage Ass'n, 991 F.2d 

1089, 1094 (3d Cir. 1993). A contract provision is ambiguous if 

it is susceptible of two reasonable alternative interpretations. 

Mellon, 619 F.2d at 1011. Where the written terms of the 

contract are not ambiguous and can only be read one way, the 

court will interpret the contract as a matter of law. Stendardo, 

991 F.2d at 1094. If the contract is determined to be ambiguous, 

then the interpretation of the contract is left to the 

factfinder, to resolve the ambiguity in light of extrinsic 

evidence. Id.; Mellon, 619 F.2d at 1011. 
 Pennsylvania courts apply the "plain meaning rule" of 

interpretation of contracts which assumes that the intent of the 

parties to an instrument is "embodied in the writing itself, and 

when the words are clear and unambiguous the intent is to be 

discovered only from the express language of the agreement." 

County of Dauphin v. Fidelity & Deposit Co., 770 F. Supp. 248, 

251 (M.D.Pa.) (quotation omitted), aff'd, 937 F.2d 596 (3d Cir. 

1991). Nevertheless, a determination whether the language of an 

agreement is unambiguous may not be apparent without examining 

the context in which the agreement arose. Steuart v. McChesney, 

444 A.2d 659, 662 (Pa. 1982). Thus, a court is not always 

confined to the four corners of the written document in 

determining whether an ambiguity exists. Mellon, 619 F.2d at 

1011. Rather, the judge must "consider the words of the 

contract, the alternative meaning suggested by counsel, and the 

nature of the objective evidence to be offered in support of that 

meaning." Id. 

III. 

 We begin our analysis by examining the language of the 

Agreement, which states in relevant part: 

 The retirement income plan listed in Schedule 

"A" is payable to Husband upon his 

retirement. The parties agree that in the 

event Wife remains unmarried at the time of 

Husband's retirement that fifty percent (50%) 

of all income received pursuant to said 

pension plan shall be paid by Husband to Wife 

in the year of his retirement. It is 

understood by both parties, that this pension 

benefit is payable to Husband only if he 

survives to his early retirement date of 

January 1, 1991, and Husband, or Husband's 
estate, are only bound hereby if Husband does 

so survive. 

* * * 

 Schedule "A"

 (1) Seventy (70) shares of Towers, Perrin 

Common Stock with a total current value of 

$63,700.00 on the date of valuation, December 

31, 1983. 

 (2) Two thousand three hundred and ten 

(2,310) shares of Towers, Perrin Preferred 

Stock with a total current value of 

$231,000.00 on the date of valuation, 

December 31, 1983. 

 (3) Fully vested, accrued pension credit 

under the Towers, Perrin Retirement Income 

Plan (hereinafter referred to as Towers, 

Perrin RIP). 

 The district court found that the above contractual 

language was susceptible to only one interpretation. The court 

held that Talcott was entitled to 50% of the pension credit 

vested and accrued as of December 31, 1983, the date of the 

Agreement. In so holding, the court relied on the past tense 

form of the words "vested" and "accrued". However, this language 

also can be interpreted to refer to the pension credit "vested 

and accrued" at the time of Hullett's retirement. 

 The record in this case shows that the district court 

erred in holding that the language of the Agreement was not 

ambiguous. The evidence supports as reasonable Talcott's 

alternative interpretation that she was to receive 50% of "all" 

of Hullett's pension, without being limited to only 50% of the 

pension credit vested and accrued at the time of the Agreement. 
Schedule A was specific in providing valuation dates for the 

other two assets identified on it, Talcott's share of the common 

and preferred stock, and the body of the Agreement specifically 

states that these assets are valued as of December 31, 1983. In 

contrast, the parties did not provide a valuation date for the 

Pension Plan. Lamb, the scrivener of the Agreement, testified 

that the draft version of the Agreement provided that Talcott was 

to receive 100% of the pension valued as of December 31, 1983, 

but that the valuation date was deleted in subsequent drafts and 

the final Agreement in return for Talcott receiving a full 50% of 

whatever pension was ultimately payable to Hullett. 

 Moreover, unlike the pension language, Talcott's 

entitlement to the other assets on Schedule A is in no way 

contingent upon her remaining unmarried. Talcott argues that 

this is because she was only getting the shares of stock that 

were rightfully hers as of the time of the divorce, but that 

Hullett did not want to continue increasing her share of his 

pension if she then chose to remarry. This interpretation of the 

contractual language is a reasonable one. 

 The district court observed that its interpretation was 

further supported by Paragraph 12 of the Agreement, which states 

that neither party has any claim to any personal property, 

tangible or intangible, thereafter acquired by the other. The 

inclusion of Paragraph 12, a standard contractual provision, does 

not preclude Talcott's interpretation of the Agreement as a 

reasonable one. As testified by the scrivener, Lamb: 
 [Paragraph 12 is] a standard clause which is 

intended to cover the situation where after 

this agreement is signed husband goes out and 

buys a car or wife goes out and buys an 

airplane or a townhouse or whatever, neither 

party has any claim on any of those assets 

after this agreement is signed. 

Similarly, the two contractual provisions cited by Hullett, 

concerning the freedom to live apart and engage in any employment 

and the release of claims against each other, are standard 

contractual provisions which serve separate and distinct 

purposes. These provisions are not inherently inconsistent with 

Talcott's suggested interpretation of the Agreement. 

 The extrinsic evidence presented by Talcott shows that 

her interpretation is a reasonable alternative one, and thus the 

language regarding the amount of pension benefits to which 

Talcott is entitled is ambiguous. See e.g., Lower, 584 A.2d at 

1032 (holding that failure to define "alimony" and "support" 

created ambiguity to be resolved by factfinder); Lohmann v. 

Piczon, 487 A.2d 1386, 1389 (Pa.Super. 1985) (finding "net income 

after taxes," 25% of which husband was to pay wife, was ambiguous 

as to whether it included any of husband's tax deductions); De 

Witt v. Kaiser, 484 A.2d 121, 126 (Pa.Super. 1984) (finding term 

"income" in context of husband's support obligations to be 

ambiguous, thus requiring extrinsic evidence to define term). 

Therefore, we must remand this case to allow a factfinder to 

resolve the ambiguity in light of the extrinsic evidence. 

IV. 
 The second dispute focuses on the following contractual 

language: 

 The retirement income plan listed in Schedule 

"A" is payable to Husband upon his 

retirement. The parties agree that in the 

event Wife remains unmarried at the time of 

Husband's retirement that fifty percent (50%) 

of all income received pursuant to said 

pension plan shall be paid by Husband to Wife 

in the year of his retirement. It is 

understood by both parties, that this pension 

benefit is payable to Husband only if he 

survives to his early retirement date of 

January 1, 1991, and Husband, or Husband's 

estate, are only bound hereby if Husband does 

so survive. 

 The district court attempted to examine the use of the 

word "retirement" as used in the Plan to determine what the 

parties meant, but found that the Plan does not provide a single 

definition of the word. Rather, the Plan describes three 

separate retirement dates, early, normal, and postponed. The 

court thus turned back to the Agreement to determine which 

definition the parties intended to control. The court concluded 

that the parties intended that Talcott be entitled to her 

benefits when Hullett elects to and does receive his pension 

benefits, or when he is required to commence receipt of his 

pension benefits under the terms of the Plan, in the event that 

Talcott remains unmarried at that time. 

 Before the district court, Hullett argued that Talcott 

is entitled to 50% of the pension benefits which he accrued prior 

to December 31, 1983, only if she remains unmarried at the time 

he actually retires from the workplace in general. On appeal, 
Hullett now adopts the district court's interpretation of the 

Agreement. 

 Talcott argues that the district court misconstrued the 

Agreement, and notes that the use of the term "retirement" in the 

Agreement directly follows a sentence in which the parties 

defined retirement as that point at which the retirement income 

plan was "payable" to Hullett. She contends that "payable" means 

the point at which the money may be paid on demand, not the point 

at which payment actually commences. See Black's Law Dictionary

(5th ed. 1979) at 1016 (defining payable as "[c]apable of being 

paid; suitable to be paid; admitting or demanding payment; justly 

due; legally enforceable"). Talcott asserts that this date would 

be January 1, 1991, when Hullett reached his early retirement 

date under the Plan, and that the court erred in construing the 

Agreement to empower Hullett to hold her pension money hostage to 

her remaining unmarried until he turns 60, in the year 2001. 

Talcott describes various scenarios where the district court's 

interpretation of the Agreement could cause her to lose all or 

part of her share in the pension benefits. Thus, Talcott argues, 

because she remained unmarried at the time of Hullett's 

retirement from Towers, Perrin, she is presently entitled to her 

50% share of pension benefits, whatever they might be, and she is 

free to remarry. 

 Again, Talcott's interpretation of the contractual 

language is a reasonable alternative one. It is clear that the 

parties did not foresee or provide for Hullett terminating his 

employment with Towers, Perrin prior to when he was entitled to 
his pension benefits. Thus, the contractual language is 

ambiguous, and its interpretation should be left to the 

factfinder to resolve in light of any extrinsic evidence the 

parties may present on remand. 

V. 

 The parties' final dispute concerns the district 

court's appropriate standard of review of the plan 

administrator's determinations. In Firestone Tire & Rubber Co. 

v. Bruch, 489 U.S. 101 (1989), the United States Supreme Court 

held that challenges under section 1132(a)(1)(B) of ERISA are to 

be reviewed under a de novo standard unless the plan gives the 

administrator discretionary authority to determine eligibility 

for benefits or to construe the terms of the plan. Id. at 115. 

Where a plan administrator is given discretionary authority to 

determine eligibility for benefits or to construe the terms of 

the plan, the appropriate standard of review of the 

administrator's determinations is an arbitrary and capricious 

standard. Id. at 114-15. Discretionary powers need not be 

expressly granted; they may be implied by the plan's terms. Luby 

v. Teamsters Health Welfare & Pension Trust Funds, 944 F.2d 1176, 

1181 (3d Cir. 1991). 

 Neither party has appealed the district court's ruling 

that the Agreement constitutes a QDRO, and therefore it is not 

necessary for this court to determine whether the district court 

erred in reviewing de novo the plan administrator's finding that 

the Agreement is a QDRO. The district court did not err in 

holding that it should review de novo the plan administrator's 
construction of the Agreement, which involved issues of contract 

interpretation under the Agreement and not the Plan. However, as 

discussed above, the Agreement is ambiguous and thus the issues 

of the amount of Talcott's share of pension benefits, the time of 

Hullett's retirement, and the effect of Talcott's marital status 

are for the factfinder to resolve on remand in light of the 

extrinsic evidence. 

 Additionally, the district court erred in refusing to 

give deference to the plan administrator's determination that he 

would segregate Talcott's QDRO monies and commence payment at the 

time she elects to receive her share. That is, when Talcott 

elects to begin her benefit payments, the administrator will 

calculate the amount she is entitled to receive by making an 

actuarial calculation converting the present value of one half of 

Hullett's pension, valued as of the date determined by the 

factfinder, to a pension payable over Talcott's lifetime. In 

contrast, the court held that Talcott may continue receiving 

monthly benefits only as long as Hullett receives them pursuant 

to the Plan. 

 In making his determination regarding the distribution 

of payments, the plan administrator exercised his discretionary 

authority to construe the terms of the Plan. Section 8.1(h) of 

the Plan provides, "If the [plan administer] receives a QDRO with 

respect to a Member's divorce from his Spouse, it will comply 

with such Order and reduce the benefits otherwise payable to or 

on behalf of such Member under this Plan or the Actuarial 

Equivalent of any benefits payable to his Spouse under this Plan 
pursuant to such QDRO." Additionally, the Plan Procedures for 

Domestic Relations Orders provides that any amount that would be 

payable to an alternate payee under a QDRO will be separately 

accounted for under the Plan and will remain segregated while the 

plan participant or alternate payee appeals the administrator's 

QDRO determination. At the end of this appeal period, "the 

segregated amounts, adjusted for investment results, will be paid 

to the plan participant or the alternate payee (or credited to 

the account of the plan participant or alternate payee) in 

accordance with the determination of the [plan administrator]." 

Thus, the district court erred in refusing to give deference to 

the administrator's holding that Talcott's pension is payable 

over her lifetime, and instead holding that payments to Talcott 

will terminate when Hullett's pension payments terminate. The 

court was required to uphold the administrator's determination as 

to QDRO payments unless it was arbitrary and capricious. It was 

not. 

 In summary, the district court erred by granting in 

part Hullett's motion for partial summary judgment. Talcott has 

presented reasonable alternative interpretations of the 

contractual language regarding the distribution of Hullett's 

pension and the provision requiring payment upon Hullett's 

retirement if Talcott remains unmarried. Thus, these provisions 

are ambiguous and are appropriate for a factfinder's resolution 

upon remand. Finally, although the district court properly 

reviewed the plan administrator's interpretation of the Agreement 

on a de novo basis, it erred in refusing to give deference to the 
plan administrator's determination regarding the payment of 

benefits under the QDRO. 

VI. 

 Accordingly, the district court's grant of partial 

summary judgment in favor of Hullett will be reversed and the 

case remanded for proceedings consistent with this opinion.