IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 10-20015

Glenn Brown; Betsy Brown,

Plaintiffs - Appellees

v.

Continental Airlines, Inc.,

Defendant - Appellant

The Continental Pilots Retirement Plan Administrative Committee,

Continental Airlines, Inc.,

Plaintiffs - Appellants

v.

Glenn Brown; Betsy Brown; Jay Ellis; Carol Ellis; Eddie Lindsey; Delores N.

Lindsey; Christine Lockert; James Lockert; Douglas Schull; Marjorie Schull;

James Vial; Brenda M. Vial; Cindy Ernst; James Ernst,

Defendants - Appellees

Appeal from the United States District Court

 for the Southern District of Texas

Before JOLLY, DeMOSS, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

United States Court of Appeals

Fifth Circuit

F I L E D

July 18, 2011

Lyle W. Cayce

Clerk

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This appeal involves the question of whether ERISA allows a

retirement plan administrator to seek restitution of benefits that were paid to

a plan participant’s ex-spouse pursuant to a domestic relations order such as

a divorce decree, if the administrator subsequently determines that the

domestic relations order is based on a “sham” divorce. We agree with the

district court’s holding that the subsection of ERISA at issue here, 29 U.S.C.

§ 1056(d)(3)(D)(i), does not authorize an administrator to consider or

investigate the subjective intentions or good faith underlying a divorce. We

therefore affirm the district court’s dismissal of the appellants’ claims.

I. LEGAL BACKGROUND

The Employee Retirement Income and Security Act (“ERISA”) contains

an anti-alienation provision which requires that “[e]ach pension plan shall

provide that benefits provided under the plan may not be assigned or

alienated.” 29 U.S.C. § 1056(d)(1). This provision is the result of “a

considered congressional policy choice, a decision to safeguard a stream of

income for pensioners []and their dependents.” Guidry v. Sheet Metal

Workers Nat’l Pension Fund, 493 U.S. 365, 376 (1990). However, an exception

to the anti-alienation provision allows retirement benefits to be assigned to

an “alternate payee,” such as an ex-spouse, in accordance with a domestic

relations order (“DRO”) issued by a court. See id. § 1056(d)(3). The statute

defines a DRO as follows:

the term “domestic relations order” means any judgment, decree,

or order (including approval of a property settlement agreement)

which-- 

(I) relates to the provision of child support, alimony payments, or

marital property rights to a spouse, former spouse, child, or other

dependent of a participant, and 

(II) is made pursuant to a State domestic relations law (including

a community property law).

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29 U.S.C. § 1056(d)(3)(B)(ii). A DRO allows for the alienation of pension

benefits only if the plan administrator determines that the DRO is a

“qualified domestic relations order” (“QDRO”), which ERISA defines as

follows:

the term “qualified domestic relations order” means a domestic

relations order-- 

(I) 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, and 

(II) with respect to which the requirements of subparagraphs (C)

and (D) are met.

Id. § 1056(d)(3)(B)(i). Subparagraphs (C) and (D) require that in order to be

qualified, a DRO must clearly specify certain information, and must not

require benefits to be paid in a way that would be inconsistent with the plan

or with a previous QDRO:

(C) A domestic relations order meets the requirements of this

subparagraph only if such order clearly specifies--

(i) the name and the last known mailing address (if any) of the

participant and the name and mailing address of each alternate

payee covered by the order, 

(ii) the amount or percentage of the participant’s benefits to be

paid by the plan to each such alternate payee, or the manner in

which such amount or percentage is to be determined, 

(iii) the number of payments or period to which such order

applies, and 

(iv) each plan to which such order applies. 

(D) A domestic relations order meets the requirements of this

subparagraph only if such order--

(i) does not require a plan to provide any type or form of benefit,

or any option, not otherwise provided under the plan, 

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(ii) does not require the plan to provide increased benefits

(determined on the basis of actuarial value), and 

(iii) does not require the payment of benefits to an alternate

payee which are required to be paid to another alternate payee

under another order previously determined to be a qualified

domestic relations order.

Id. § 1056(d)(3)(C)-(D). Once an administrator determines that a DRO is

qualified, the statute requires that the plan “shall provide for the payment of

benefits in accordance with the applicable requirements of” the QDRO. Id.

§ 1056(d)(3)(A). The Supreme Court has observed that “[a] QDRO enquiry [by

a plan administrator] is relatively discrete, given the specific and objective

criteria for a domestic relations order that qualifies as a QDRO, . . .

requirements that amount to a statutory checklist working to spare [an

administrator] from litigation-fomenting ambiguities.” Kennedy v. Plan

Adm’r for DuPont Sav. & Inv. Plan, 129 S. Ct. 865, 876 (2009).

II. FACTS

In this case, the Continental Pilots Retirement Plan Administrative

Committee and Continental Airlines, Inc. (collectively “Continental”) filed

suit against nine pilots and their spouses, asserting claims for equitable 1

relief under 29 U.S.C. § 1132(a)(3), a provision of ERISA. Continental seeks

restitution of pension benefits that it paid to the spouses on the basis of DROs

that, Continental argues, did not meet all the statutory criteria for QDROs

because they were based on “sham” divorces.

Continental alleges that the pilots and spouses obtained “sham”

divorces for the purpose of obtaining lump sum pension distributions from the

Continental Pilots Retirement Plan (“the Plan”), which they otherwise could

not have received without the pilots’ separating from their employment with

Two of those couples have been dismissed from the suit and are not parties to this 1

appeal.

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Continental. By getting divorced, the pilots and spouses were able to obtain

DROs from state courts, which assigned 100% (or, in one instance, 90%) of the

pilots’ pension benefits to the spouses. The Plan provides that, upon divorce,

if the pilot is at least 50 years old (as all the pilots in this case were), an exspouse to whom pension benefits are assigned can elect to receive those

benefits even though the pilot continues to work at Continental. Thus, the

pilots and spouses presented the DROs to Continental and requested the

payment of lump-sum pension benefits to the spouses. After the spouses

received the benefits, the couples remarried.

According to Continental, the reason behind this stratagem was that

the pilots were worried that financial troubles in the airline industry might

result in the Plan being taken over by the federal Pension Benefit Guaranty

Corporation (“PBGC”), and this might lead to their receiving less than the full

amount of the benefits they expected to receive upon retiring. Also, a PBGC

takeover would prevent the pilots from receiving their benefits as a lump sum

instead of an annuity. Thus, by divorcing and having state courts assign

their pension benefits to their spouses, the pilots were able to ensure that

they would receive all the benefits owed to them, without having to retire at

that time.

The couples’ divorces were “sham” divorces, according to Continental,

because they did not otherwise intend to dissolve their marriages, they

obtained the divorces solely to get the pension benefits, and — as the district

court phrased it — they “essentially conducted themselves as if the divorce

had never happened.” Brown v. Continental Airlines, Inc., Nos. H-9-1148, H9-1529, 2009 WL 3365911, *1 (S.D. Tex. Oct. 19, 2009). “Many of the pilots

continued to cohabitate [with their ex-spouses, and] [i]n many instances they

did not inform any of their family or friends that they had gotten a divorce.” 

Id.

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After the Plan paid out the benefits and the pilots and spouses

remarried, Continental found out about the scheme. It filed suit against the

pilots and spouses, seeking relief under 29 U.S.C. § 1132(a)(3), which

authorizes a fiduciary to bring suit “(A) to enjoin any act or practice which

violates any provision of this subchapter or the terms of the plan, or (B) to

obtain other equitable relief (i) to redress such violations.” Continental

sought equitable relief in the form of restitution of the lump sum benefits it

had paid to the spouses while they and the pilots were divorced.

The pilots filed a motion to dismiss for failure to state a claim, which

the district court granted. The district court held that under § 1056(d)(3), a

retirement plan’s administrator may not refuse to treat a DRO as a QDRO on

the basis that the administrator believes the DRO was not obtained in good

faith from the court that issued it. The district court reasoned that “under

the plain language of the statute, the Administrator may not refuse to qualify

a DRO except based on reasons enumerated in the statute,” and that “the

motivation or good faith of the divorce and resulting DRO is not an

enumerated requirement.” Brown, 2009 WL 3365911, at *4.

III. ANALYSIS

“We review a district court’s grant of a motion to dismiss for failure to

state a claim de novo, ‘accepting all well-pleaded facts as true and viewing

those facts in the light most favorable to the plaintiff.’” Bustos v. Martini

Club Inc., 599 F.3d 458, 461 (5th Cir. 2010) (quoting True v. Robles, 571 F.3d

412, 417 (5th Cir. 2009)). The federal courts do not owe deference to

Continental’s interpretation of either ERISA or the DROs obtained by the

pilots and spouses. Dial v. NFL Player Supplemental Disability Plan, 174

F.3d 606, 611 (5th Cir. 1999) (“A court reviews a plan administrator’s

statutory and legal conclusions de novo. . . . Likewise, the district court here

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did not owe deference to the Disability Plan administrators’ interpretation of

a domestic relations order, a contract judicially approved by a state court.”).

Continental’s claims against the pilots and spouses depend on, inter

alia, the proposition that a plan administrator has the authority to refuse to

deem a DRO to be a QDRO based on its determination that the underlying

divorce is a “sham.” We reject this assertion, as the district court did, 2

because § 1056(d)(3) requires an administrator to determine that a DRO is a

QDRO if it satisfies all the statutory criteria, and the participants’ good faith

in obtaining a divorce is not among those criteria.

Continental argues that the DROs in this case did not satisfy one of the

statutory criteria — that they must “not require [the Plan] to provide any

type or form of benefit, or any option, not otherwise provided under the plan,”

29 U.S.C. § 1056(d)(3)(D)(i). Under Continental’s reasoning, the DROs in this

case provided an “option . . . not otherwise provided under the plan” because

they enabled the couples to obtain retirement benefits while the pilots were

still working at Continental.

There is no question that the Plan generally permitted the ex-spouses

of pilots to obtain retirement benefits under DROs while the pilots continued

to work. In an ordinary case in which a pilot obtained a divorce, a DRO

would be consistent with the Plan (and would satisfy § 1056(d)(3)(D)(i)) even

though it allowed the ex-spouse to receive pension benefits while the pilot

continued to work. Thus, at bottom, Continental’s argument is that the

DROs in this case failed to satisfy § 1056(d)(3)(D)(i) not simply because they

required the Plan to pay out retirement benefits while the pilots continued to

The parties also dispute whether a plan administrator can retroactively determine 2

that a DRO is not qualified, when it has already previously determined that the DRO was

qualified and has accordingly paid out benefits. We do not decide this issue.

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work, but because the couples in this case did not obtain their divorces in

good faith.

We do not accept Continental’s broad interpretation of

§ 1056(d)(3)(D)(i). Continental does not cite any authorities, and we have not

found any, which have interpreted the subsection as authorizing an

administrator to consider the good faith of the underlying divorce, or any

similar question, when determining whether a DRO is qualified. On the

contrary, the courts that have interpreted § 1056(d)(3)(D)(i) have understood

it as simply allowing an administrator to determine that a DRO is not

qualified when it would require benefits to be paid in a specific manner or

time frame that is not provided for in the terms of the plan. See, e.g., Patton

v. Denver Post Corp., 326 F.3d 1148, 1152 (10th Cir. 2003) (“[B]enefits of a

type or form not otherwise provided is best understood as referring to a lump

sum payout rather than regular payments over a period of years.”); Fox v.

Fox, 167 F.3d 880, 882-83 (4th Cir. 1999) (considering whether a plan

administrator abused his discretion by refusing to qualify a DRO under

§ 1056(d)(3)(D)(i) on the grounds that the ex-spouse sought two lump-sum

payments whereas the plan allowed for only one); Johnson v. Nanticoke

Memorial Hosp., Inc., 700 F. Supp. 2d 670, 678-79 (D. Del. 2010) (holding that

a divorce order that gave the ex-spouse “the option to seek an annuity or

lump sum payment” was a QDRO because it did “not require any option to be

added [to the plan] that d[id] not already exist”); DeFazio v. Hollister, Inc.,

636 F. Supp. 2d 1045, 1078 (E.D. Cal. 2009) (“The plain language of this

provision only bars a QDRO from requiring a plan to affirmatively afford a

type or form of benefit not established under that plan.”); Smith v. Estate of

Smith, 248 F. Supp. 2d 348, 358 (D.N.J. 2003) (holding that a property

settlement agreement incorporated into a judgment of divorce was a QDRO

because the plan specifically granted the type of benefit that was assigned to

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the ex-spouse). If the divorces in this case were indeed shams, that would not

mean the spouses received any type or form of benefit, or option, that the

Plan did not provide for; rather, they received lump-sum pension benefits, as

provided by DROs issued by state courts assigning those benefits to them, at

a time when the pilots were at least 50 years old, as permitted by the terms of

the Plan.

Our reading of § 1056(d)(3)(D)(i) is in harmony with the reasoning of

the Supreme Court, our court, and other federal appellate courts, which have

described the determination of whether a DRO is qualified as a

straightforward matter that requires the administrator to take DROs at face

value and not to engage in complex determinations of underlying motives or

intent. “[A] QDRO enquiry is relatively discrete, given the specific and

objective criteria for a domestic relations order that qualifies as a QDRO, see

§§ 1056(d)(3)(C), (D), requirements that amount to a statutory checklist

working to ‘spare [an administrator] from litigation-fomenting ambiguities.’” 

Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 129 S. Ct. 865, 876

(2009) (quoting Metro. Life Ins. Co. v. Wheaton, 42 F.3d 1080, 1084 (7th Cir.

1994)). “ERISA’s statutory scheme ‘is built around reliance on the face of

written plan documents.’” Id. (quoting Curtiss-Wright Corp. v.

Schoonejongen, 514 U.S. 73, 83 (1995)). Thus, in Kennedy, the Supreme

Court concluded that the “QDRO enquiry” should not involve “asking a plan

administrator to figure out whether a claimed . . . waiver was knowing and

voluntary, . . . and so forth, on into factually complex and subjective

determinations.” Id. Similarly, our court has reasoned that “ERISA does not

require, or even permit, a pension fund to look beneath the surface of the

order. Compliance with a QDRO is obligatory. . . . This directive would be

empty if pension plans could add to the statutory list of requirements for

‘qualified’ status.” Matassarin v. Lynch, 174 F.3d 549, 568 (5th Cir. 1999)

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(alteration in original) (quoting Blue v. UAL Corp., 160 F.3d 383, 385 (7th Cir.

1998)) (internal quotation marks omitted). It would be inconsistent with

these cases’ approach of eschewing “complex and subjective determinations,”

Kennedy, 129 S. Ct. at 876, for us to permit Continental to seek restitution in

federal court based on its determination regarding the subjective motives and

intentions of the pilots and spouses when they entered into their divorces.

Continental also frames its argument as an application of the “sham

transaction doctrine,” under which sham divorces can be disregarded in tax,

bankruptcy, and immigration law. See Boyter v. C.I.R., 668 F.2d 1382 (4th

Cir. 1981) (tax); In re Atkins, 134 B.R. 936 (B.A.P. 9th Cir. 1992)

(bankruptcy); Matter of Aldecoaotalora, 18 I. & N. Dec. 430 (B.I.A. 1983)

(immigration). We decline the invitation to incorporate the sham transaction

doctrine into § 1056(d)(3). There is a significant difference between allowing

federal tribunals such as the tax, bankruptcy, and immigration courts to

consider whether a divorce is a sham, and authorizing a private entity such

as Continental to make such a determination, which would involve

independently investigating employees’ private lives in order to judge the

genuineness of the intentions behind their divorces. Moreover, the Supreme

Court has “observed repeatedly that ERISA is a ‘comprehensive and

reticulated statute, the product of a decade of congressional study of the

Nation’s private employee benefit system.’” Great-West Life & Annuity Ins.

Co. v. Knudson, 534 U.S. 204, 209 (2002) (quoting Mertens v. Hewitt Assocs.,

508 U.S. 248, 251 (1993)). The Court has “therefore been especially ‘reluctant

to tamper with [the] enforcement scheme’ embodied in the statute by

extending remedies not specifically authorized by its text.” Id. (alteration in

original) (quoting Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147

(1985)). It follows that we ought to be reluctant to extend the sham

transaction doctrine from other areas of law into the QDRO context when

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Congress has not expressly done so. If, as Continental argues, there are

important considerations of public policy that favor allowing plan

administrators to apply the sham transaction doctrine in deciding whether to

qualify DROs, then Continental should ask Congress to amend the statute.

For the foregoing reasons, we conclude that 29 U.S.C. § 1056(d)(3)(D)(i)

does not authorize a plan administrator to determine that an otherwise valid

DRO is not a QDRO because it is based on a “sham” divorce. We therefore

AFFIRM the district court’s dismissal of Continental’s claims for failure to

state a claim on which relief can be granted.3

We emphasize that this holding is a narrow one, and our decision should not be 3

construed to prevent a retirement plan administrator from recouping benefits paid out if a

divorce is declared a sham (or a DRO is otherwise invalidated) by a court or agency of

competent jurisdiction, and thus the doctrine of res judicata precludes further litigation in an

ERISA proceeding on the question of good faith. That scenario is not before this panel.

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