Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             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Precedential or Non-Precedential: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

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                 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 ex-

wife, 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 one-

half 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, vice-

president, 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.