United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

No. 96-4166

_____________

John Hill, *

*

Appellant, * Appeal from the United States

* District Court for the

v. * Western District of Missouri.

*

AT&T Corporation, *

*

Appellee. *

_____________

Submitted: June 10, 1997

Filed: September 18, 1997

_____________

Before BOWMAN, FLOYD R. GIBSON, and MORRIS SHEPPARD ARNOLD,

Circuit Judges.

_____________

BOWMAN, Circuit Judge.

John Hill appeals from the decision of the District Court granting summary

judgment to AT&T Corporation on Hill's claim under the Employee Retirement Income

Security Act (ERISA) for benefits allegedly due him as beneficiary of his former wife's

employee savings plan. We reverse.

Judy and John Hill were married in 1970 in Missouri. At the time, Judy had

been an AT&T employee for a short time. The couple moved to Washington state in

1978, where Judy continued her employment with AT&T. On July 31, 1979, Judy 
On June 11, 1992, AT&T sent a registered letter to Hill informing him of its

1

decision to pay the funds to Long, but because Hill accepts registered mail from no one,

the letter was returned to the company. When Hill wrote AT&T on August 26, 1992,

to check on the status of his request for payment, and at that time advised the company

that he did not accept registered mail, a copy of the June letter was sent to him via

ordinary mail.

-2-

executed a beneficiary designation form for her employee savings plan (at that time

called the Bell System Savings and Security Plan), naming John as primary beneficiary

and Sharron Long, Judy's sister, as contingent beneficiary.

In July 1986 the couple separated and John returned to Missouri. Judy filed for

divorce and a Washington state court granted a decree of dissolution in November

1986. John acknowledged in his deposition taken in this case that he was dealing with

a drug problem when the couple separated, which in turn was causing financial

difficulties for the couple. John was unrepresented by counsel during the dissolution

proceedings and did not appear or contest the divorce. In other words, the dissolution

was granted as to him by default. After the divorce, Judy was diagnosed with breast

cancer, and she died on June 17, 1991, in Rhode Island, where she had moved. She

still was employed by AT&T at the time of her death.

After Judy's death, both John Hill and Sharron Long claimed they were entitled

to all the funds in Judy's employee savings plan. Hill based his claim on the beneficiary

designation form completed by Judy in 1979. Long's competing claim apparently was

based on the Hills' divorce decree and the fact that Hill was not Judy's spouse at the

time of her death. Notwithstanding the obvious conflict between two parties claiming

the right to collect the same funds, AT&T did not file for judgment in interpleader as

it indicated it would in correspondence to Hill dated October 1991. Instead, in May

1992, AT&T advised Long that it would be paying the funds to her, citing the Hills'

divorce decree. By the time Hill was notified of the decision in September 1992,1
2

It is unclear whether the check actually was made out to Judy Hill's estate or to Sharron

Long. The parties do not agree; AT&T claims it paid the estate and Hill claims AT&T paid

Long, who was designated as the contingent beneficiary. Although the canceled check is not

in the record, it appears that the check was mailed to Long, who was the executrix and sole

legatee of Judy's estate. Whether or not Long as an individual was the payee is another

matter. Resolution of the question is not necessary to our decision, however, as AT&T will

be responsible for paying Hill, regardless of whom they paid in 1992.

3

Hill also claims the District Court erred when it disregarded as hearsay certain statements

Judy made in post-divorce conversations between Judy and John Hill wherein she allegedly

told him it was her intent that he receive the money in her employee savings plan upon her

death. It strikes us that the District Court likely was correct, but because of our holding on

the merits we need not and do not reach the issue.

Hill would have us adopt as controlling authority Washington state law, which 4

recognizes divestiture of beneficiary interests upon divorce only if the dissolution

decree specifically so states and "the policy owner formally executes this previously

stated intention to change the beneficiary within a reasonable time (but no longer than

1 year) after dissolution." Aetna Life Ins. Co. v. Wadsworth, 689 P.2d 46, 47 (Wash.

1984) (en banc). It is true that we "may look to state law for guidance in developing

federal common law" unless it "conflicts with ERISA or its underlying policies."

Mohamed v. Kerr, 53 F.3d 911, 913 (8th Cir.), cert. denied, 116 S. Ct. 185 (1995).

But it is unnecessary for us to decide whether the holding of the Washington Supreme

Court should be incorporated into the federal common law of this Circuit, as we reach

the same conclusion that Washington state law would compel without adopting the per

se rule of Wadsworth.

-3-

AT&T had disbursed the funds, approximately $19,000.2

In June 1995, Hill brought an action in three counts against AT&T in circuit court in Jackson

County, Missouri. AT&T removed the case to federal court, and the District Court dismissed Counts

II and III, Hill's pendent state law claims, holding that they were preempted by ERISA. Hill does

not appeal from that ruling. On cross-motions for summary judgment, the District Court granted

AT&T's motion, holding that, under the law of this Circuit, the divorce decree operated as Hill's

waiver of his beneficiary rights to the money in Judy's employee savings plan. Hill appeals, claiming

that the divorce decree lacks the specificity necessary to divest him of his beneficiary rights. Upon 3

de novo review, we agree with Hill's position.

The issue of whether and how a divorce decree may divest a person of beneficiary rights is

not explicitly considered in ERISA and thus is a question of federal common law. See Mohamed 4

v. Kerr, 53 F.3d 911, 913 (8th Cir.), cert. denied, 116 
-4-

S. Ct. 185 (1995). In the Eighth Circuit, as regards ERISA-governed pension plans,

life insurance, and profit sharing plans, it is the law that a former spouse may be

divested of a beneficiary interest, notwithstanding a written beneficiary designation

naming the former spouse, if the former spouse was designated before the dissolution

of marriage and a property settlement agreed to pursuant to the dissolution operates as

a waiver of beneficiary rights. See National Auto. Dealers & Assocs. Retirement Trust

v. Arbeitman, 89 F.3d 496, 500 (8th Cir. 1996); Mohamed, 53 F.3d at 914; Lyman

Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989). The language of any such

provision in a dissolution decree, while not required to include the term "beneficiary,"

nevertheless must be sufficiently specific to convey the intent of the parties to divest

one or the other, or both, of a beneficiary interest. See Mohamed, 53 F.3d at 915. Our

review of the cases and of all the relevant "facts and circumstances before us,"

Arbeitman, 89 F.3d at 500, convinces us that the Hills' dissolution decree did not divest

Hill of his beneficiary interest in Judy's employee savings plan. We first review the

case law.

In Lyman Lumber, the divorce decree stated that the husband "shall have as his

own, free of any interest of [the wife], his interest in the profit-sharing plan of his

employer." Lyman Lumber, 877 F.2d at 693 (quoting divorce decree) (alteration

added). Few other details of the circumstances surrounding the marriage and divorce
-5-

were noted in the opinion, but the Court held that this language did not divest the

former spouse, that is, the named beneficiary, of her beneficiary interest in the plan.

Compare the language of the termination agreement in Mohamed:

That each of the parties shall be awarded full right, title, interest and

equity in and to the bank accounts, stocks, bonds, savings accounts,

pensions, retirement plans, combined IRAs, mutual funds, life insurance

policies with any cash value thereon, limited and general partnership

interests, and any other assets which are held in their name or for their

benefit as of the date of this Marriage Termination Agreement, free and

clear of any claim by the other party.

Mohamed, 53 F.3d at 912-13 (quoting Marriage Termination Agreement). We quote

the provision in full to demonstrate that this language is significantly more inclusive

than that in Lyman Lumber. The spouses in Mohamed were mutually awarded "full

right, title, interest and equity in and to" their own assets as enumerated, "free and clear

of any claim by the other party" (emphasis added). The Court concluded that the

termination agreement divested the parties of "any beneficiary interests or rights,

notwithstanding that they are not expressly mentioned." Id. at 915. Moreover, the

facts and circumstances in Mohamed were "especially compelling for our conclusion

that the agreement evidenced a mutual intent to divest." Id. at 916. The wife, who

claimed the right to the proceeds of the life insurance policy at issue, divorced her

husband after just a little more than three years of marriage, a few months after he was

diagnosed with Alzheimer's disease. The couple had no children and the wife was not

responsible for the costs of her husband's last illness or for his funeral expenses. In

fact, she remarried soon after the divorce and apparently never saw her former husband

or spoke to him after she divorced him. As the Court noted, "[S]he abandoned him to

his illness." Id.
-6-

In a 1996 case from this Court, the parties "agreed to relinquish 'any right, title

or interest in and to any earnings, accumulations, pension plans, profit sharing plans,

future investments, money or property of the other.'" Arbeitman, 89 F.3d at 498

(quoting separation agreement). The former wife, who had custody of the couple's two

children, was the designated beneficiary of one of her former husband's pension plans.

(She actually received only half the value of the pension under the terms of the plan;

the current wife received the rest.). The divorced couple had maintained a friendly

relationship, notwithstanding the former husband's remarriage, and he provided support

to the family beyond his legal obligations. The Court held that "[t]he separation

agreement did not waive [the former wife's] rights as the designated plan beneficiary"

and concluded from its review of the record that the deceased intended his former wife

to be the beneficiary of the retirement plan. Id. at 501.

We consider now the relevant facts and circumstances of this case. We begin

with the language of the Hills' dissolution decree, which is not at all expansive.

According to the order of the Washington state court entering the decree of dissolution,

Judy was to receive "[a]ny retirement, social security, or pension benefits earned by

[her] through her employment" and "[a]ny checking, savings or other accounts in her

name." (Hill received the same, as to benefits earned through his employment and

accounts in his name.) If Judy's employee savings plan comes within one of these

categories, there nevertheless is no indication in this perfunctory language dividing

community property that her beneficiary designation to Hill was waived by operation

of the decree. Under the terms of the decree, Judy did retain the plan and upon the

occurrence of certain events (e.g., the end of her employment with AT&T) she would

have received the funds; Hill would have had no claim to them. But her interest in the

savings plan also left her free to maintain Hill as the designated beneficiary, or to name

anyone else. There was no inclusive release of future "claims" to the plan, as we saw

in Mohamed.
Hill's brief states that Judy actually changed the beneficiary designation on her 5

life insurance from Hill to Long. Although this seems likely, the original form naming

Hill is not in the record. Hill's counsel also told the Court at oral argument that Judy

changed the beneficiary of an AT&T stock ownership plan from Hill to Long, but this

is not in the record either.

At oral argument, counsel for AT&T represented to the Court that, under

6

ERISA, Judy could not legally have removed Hill as beneficiary of the plan at the time

she changed the insurance beneficiary, and that this explains why she did not do so.

He stated that she needed Hill's permission to remove him as beneficiary for so long as

the couple was still legally married. It is true that ERISA requires spousal consent

before a participant may "waive the qualified joint and survivor annuity form of benefit

or the qualified preretirement survivor annuity form of benefit" available under certain

employee benefit plans. 29 U.S.C. § 1055(c)(1)(A)(i) (1994); see id. § 1055(c)(2)

(1994). The official plan documents are not part of the record, and we are not prepared

to conclude, based on the information we do have, that the employee savings plan at

issue here is a plan to which § 1055 applies. But even if it is, Judy could have changed

the beneficiary on the plan ten days later, when the divorce was final, or any time after

that. There is no indication in the record that Judy was not competent after the divorce.

She executed her last will and testament on July 20, 1987, eight months after the

divorce, and could have changed the savings plan beneficiary at that time. As her

illness progressed, she certainly had both the opportunity and the incentive to get her

affairs in order so that her wishes regarding the disposition of her assets would be

honored upon her death. Therefore we reject AT&T's explanation for Judy's failure to

change the beneficiary on the employee savings plan.

-7-

In addition, the circumstances of the case support our reading of the dissolution

decree. Just prior to the issuance of the Hills' final decree of dissolution, Judy

designated her sister as primary beneficiary of the life insurance policy that she had

acquired as a benefit of her employment with AT&T. Notwithstanding this deliberate 5

act, Judy did not change the beneficiary on the savings plan. Further, the savings plan 6

was valued at approximately $19,000. Sharron Long received the proceeds of Judy's

$100,000 life insurance policy and was the sole legatee named in Judy's will. In other

words, Long received the bulk of Judy's assets upon her death. Thus she was in a

position to pay the expenses of Judy's last illness and her funeral (although there is no
-8-

indication in the record that she did so). While it is true that Judy had no post-divorce

obligations to Hill that might explain why she would choose to allocate these funds to

him, we think, "based on the record before us in this fact-driven determination,"

Mohamed, 53 F.3d at 915, it is most likely that Judy did not intend that Hill be divested

of that interest by operation of the dissolution decree.

In sum, we hold that Hill was entitled to summary judgment on his claim that

AT&T should have paid the money in Judy Hill's employee savings plan to him upon

Judy's death, and that the District Court erred in granting summary judgment to AT&T.

Under the law of this Circuit, the Hills' dissolution decree was not sufficiently specific

to divest Hill of his beneficiary interest in Judy's employee savings plan. Those funds

should have gone to John Hill, the person Judy had designated as the primary

beneficiary of the savings plan.

In an argument not raised in the District Court, AT&T contends that we owe

deference to the decision of the plan administrator and should reverse only for an abuse

of discretion. See Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir. 1996). Under

that standard of review, the plan administrator's discretionary decisions as regards the

savings plan are reversible if they are "without reason, unsupported by substantial

evidence or erroneous as a matter of law." Id. at 900 (quoted cases omitted). As

discussed above, the decision to give Long the funds in Judy Hill's employee savings

plan despite a properly executed beneficiary designation naming someone else, if that

is indeed a discretionary decision, is nevertheless a misapplication of federal common

law in this Circuit and thus erroneous as a matter of law.

The judgment of the District Court is reversed and the case is remanded for

further proceedings consistent with our opinion.
-9-

A true copy.

Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT