Court Opinion

ID: 9480054
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:36:33.903941+00
Date Added: 2024-06-11T17:47:27.352121
License: Public Domain

EASTERBROOK, Circuit Judge,
with whom BAUER, Chief Judge, and MANION, Circuit Judge, join, dissenting.
Three reasons might support giving James Brown’s death benefits to his mother Dessie: the order of the state court, the contract between James and his former wife Laurine, and Laurine’s waiver.
The first of these is unsatisfactory because the state court’s order is not a “qualified domestic relations order”, 29 U.S.C. § 1056(d)(3). Matrimonial law does not require one or another disposition of property in an uncontested divorce. James and Lau-rine were free to agree to anything they wanted. There is no state policy about the allocation of death benefits that could be disrupted. The state court’s approval of the private settlement is like a consent decree, which should be treated like a contract. See Firefighters v. Cleveland, 478 U.S. 501, 517-23, 106 S.Ct. 3063, 3072-76, 92 L.Ed.2d 405 (1986). Consent decrees do not alter the legal obligations of strangers (here, of the Fund to enforce its written-designation rule). Martin v. Wilks, — U.S. -, 109 S.Ct. 2180, 104 L.Ed.2d 835 (1989).
The second (contract) is unsatisfactory because it attributes to James’s act an effect other than the one specified by the Fund’s governing documents — which 29 U.S.C. § 1104(a)(1)(D) requires it to follow. I agree with Judge Ripple’s discussion of this statute and join his opinion. See also Central States Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148 (7th Cir.1989) (en banc); Dardaganis v. Grace Capital, Inc., 889 F.2d 1237, 1240-42 (2d Cir.1989).
The third (waiver) is strongest because it bypasses reference to James’s acts. The designated beneficiary may give away the money the instant she receives it. Waiver *283is an anticipatory gift, to whoever is next in line under the Fund’s rules (Dessie). Because an actual gift would be honored, it follows that an anticipatory gift should be given effect. This approach, however, runs into three difficulties. The first is that it, too, requires the Fund to disregard its written-designation rule. Second, under state law (more precisely, federal common law absorbing state law) unilateral promises to make gifts are not enforceable. There are exceptions to the non-enforcement of donative promises, but none is applicable to this case. (Dessie is not a charity!) The majority’s opinion treats the waiver as if it had been signed after James’s death, when Laurine would have had a present right to give the benefits to Dessie. It wasn’t, she didn’t, and the law distinguishes accordingly.
Even if the Plan did not contain a written-designation clause and an anticipatory gift were valid under principles of contract law, however, it would not be valid given the spendthrift clause in ERISA, 29 U.S.C. § 1056(d)(1), which says that “benefits provided under the plan may not be assigned or alienated”. Although the majority holds that this rule applies only to “participants” in a pension plan as 29 U.S.C. § 1002(7) defines that term, it is not so limited. Section 1056(d)(1) bars the assignment of “benefits” — that is, payments under the plan— without regard to the identity of the person making that assignment. Section 1056(d)(2) reinforces this in saying that “a loan made to a participant or beneficiary shall not be treated as an assignment or alienation”, an exemption unnecessary if the anti-alienation clause does not apply to beneficiaries in the first place. So Laurine could not have transferred the money to Dessie in exchange for a sofa — at least, Dessie could not have enforced the promise by attaching the benefits as they came in. Why, then, should Laurine be allowed to transfer the money to Dessie without getting a sofa?
A rule that prevents the beneficiary from giving up her claim is unappealing, but anti-alienation clauses are designed to frustrate individuals’ desires. Equitable considerations are accordingly poor grounds on which to disregard them. Guidry v. Sheet Metal Workers Pension Fund, — U.S. -, 110 S.Ct. 680, 687-88, 107 L.Ed.2d 782 (1990). ERISA does not stand alone in thwarting private choice. Federal insurance and annuity laws often provide that benefits must be paid to the person whose name is on file. These not only undo actual bargains, denying beneficiaries the autonomy to choose what to do with their wealth, but also produce some weird results. Still, we enforce them. E.g., Prudential Insurance Co. v. Parker, 840 F.2d 6 (7th Cir.1988). Although ERISA does not say “pay only the person whose name is on file”, it does say that every plan must act “in accordance with the documents and instruments governing” it, 29 U.S.C. § 1104(a)(1)(D), and this plan has a written-designation rule. Our approach therefore ought to track that of Parker.
Rules requiring payment to named beneficiaries yield simple administration, avoid double liability, and ensure that beneficiaries get what’s coming quickly, without the folderol essential under less-certain rules. Domestic relations orders, even if “qualified”, do not take effect until lodged with a plan, something 29 U.S.C. § 1056(d)(3)(G)(i), (ii)(II) implies in establishing procedures for plans to evaluate orders once they have been lodged; honoring “qualified” orders on file reinforces rather than undermines the inference that pension plans may not look beyond written instructions. Written-designation rules accompany statutes that contain anti-alienation clauses, as ERISA and military insurance laws do. Perhaps this is so to ensure that the designation is an informed choice. Before accepting a change of beneficiary, the plan can provide the employee with an unbiased recap of his options and afford opportunity to reflect. We see designation rules on many other occasions. Think of the Wills Acts, requiring formality to make bequests; as a practical matter death benefits in a pension plan are bequests.
ERISA is full of unyielding rules, designed to simplify administration. Rules have their flaws; loopholes and over-breadth, both producing unpalatable out*284comes in the event of unanticipated circumstances, are among them. But whether to have rules (flaws and all) or more flexible standards (with high costs of administration and erratic application) is a decision already made by legislation. Congress and pension plans elected to use rules rather than standards; patterns of avoidance mean that we transmute the approach Congress chose into the one it rejected.