Court Opinion

ID: 17518
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:05:08+00
Date Added: 2024-06-11T16:46:45.888815
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT

                            No. 97-21045

GILBERT “BUDDY” DIAL,

     Plaintiff/Counter Defendant/Appellee,

versus

NFL PLAYER SUPPLEMENTAL DISABILITY PLAN,

     Defendant/Counterclaimant/Third-Party Plaintiff/Appellant,

versus

JANICE MARYE,

     Third-Party Defendant/Appellant.

                        - - - - - - - - - -
          Appeals from the United States District Court
                for the Southern District of Texas
                        - - - - - - - - - -
                            May 7, 1999
Before HIGGINBOTHAM, BENAVIDES, and DENNIS, Circuit Judges.

BENAVIDES, Circuit Judge:

     An ERISA-qualified employee benefits plan and a potential

beneficiary challenge a district court’s determination on

distribution of benefits. We vacate and remand to the district

court to render judgment in favor of the defendant/counter-

claimant/third-party plaintiff/appellant and to consider the

third-party defendant/appellant’s request for attorneys’ fees.

                                  I

     Gilbert “Buddy” Dial and Janice Marye married in 1959 and
divorced in 1977. From 1959 until 1968, Dial played professional

football in the National Football League. As an NFL player, Dial

became eligible to receive benefits from the NFL Bert Bell

Retirement Benefit Plan (the “Bell Plan”), which provided both

retirement and disability benefits for players. Upon their

divorce, Dial and Marye entered into a property settlement

agreement, which was incorporated into their divorce decree. The

property set aside for Marye in the agreement included “[o]ne-

half of any interest Buddy Dial has in the Bert Bell NFL Player

Retirement Plan or any consideration, monetary or otherwise, that

presently or hereinafter will flow to Buddy Dial from said plan.”

The 1977 divorce decree also awarded Marye “one-half of any

later-discovered property.”

     Dial began receiving “total and permanent” disability

benefits from the Bell Plan in March 1980. Dial apparently did

not notify Marye that he was receiving such benefits, did not

distribute one-half of the benefits to her, and did not reveal

the existence or terms of the 1977 property settlement agreement

to the Bell Plan. Marye learned in 1991 that Dial was receiving

such benefits. When Dial refused to surrender half of the

benefits to Marye, she filed a motion in state court to clarify

the divorce decree. At that time, Marye asked the court to sign a

qualified domestic relations order (“QDRO”) ordering the Bell

Plan to send payments directly to her. In June 1992, Dial turned

55, and his disability benefits converted to retirement benefits.

                               -2-
In February 1993, Marye and Dial compromised and settled the

state action. Marye agreed to give up the previous years’

benefits due her under the 1977 agreement and accepted a QDRO

ordering the Bell Plan to send 37.5 percent of Dial’s future

benefits directly to her. The QDRO echoed the 1977 agreement’s

language: It provided that Marye would receive 37.5 percent of

“the current distribution of any interest [Dial] has in the Plan

as of October 7, 1977 and any consideration, monetary or

otherwise, that presently or hereafter will flow to [Dial] from

said Plan.” Marye received her first monthly payment from the

Bell Plan in March 1993 for $1,500, or 37.5 percent of Bell’s

$4,000 monthly benefits. Dial continued to receive $2,500

monthly, or the remaining 62.5 percent.

     In July 1993, the NFL Management Council and the NFL Players

Association entered into a collective bargaining agreement

(“CBA”) that increased player benefits and restructured existing

benefits plans. The Bell Plan was merged with the Pete Rozelle

NFL Player Retirement Plan to form the Bert Bell/Pete Rozelle NFL

Player Retirement Plan (the “Bell/Rozelle Plan”). Dial’s benefit

under the Bell/Rozelle Plan was $4,000, the same that it had been

under the Bell Plan. The CBA also required the NFL to create the

new NFL Player Supplemental Disability Plan (the “Disability

Plan”). The Disability Plan provided the bargained-for benefits

increase, paying additional disability benefits to certain

disabled players. The Disability Plan apparently came into

                               -3-
existence only because, owing to IRS regulations, the NFL could

not offer under the existing Bell/Rozelle Plan all the player

benefits resulting from the CBA. The Disability Plan pays

benefits only to players who, like Dial, were already entitled to

receive benefits under the Bell/Rozelle Plan. At that time, Dial

began receiving $2,250 per month from the Disability Plan, in

addition to his $4,000 per month from the Bell/Rozelle Plan. Dial

did not tell Marye about the new, supplemental benefits he was

receiving.

     In July 1994, Marye discovered that Dial was receiving

supplemental benefits. She submitted the property settlement

agreement from her divorce to the Disability Plan. The Disability

Plan’s administrators (the “Plan administrators”) determined that

the 1977 property settlement agreement gave Marye a one-half

interest in Dial’s supplemental benefits. The Plan administrators

did not rely on the 1993 QDRO that entitled Marye to 37.5 percent

of Dial’s Bell Plan benefits; instead, they found that the

Disability Plan benefits constituted “later discovered” property

to be divided evenly between Dial and Marye under the 1977

divorce agreement. In August 1994, the Disability Plan notified

Dial that it had concluded that Marye was due half of Dial’s

Disability Plan benefits. The Plan administrators stated that if

Dial disputed the Disability Plan’s conclusion before October

1994 it would not begin making the payments to Marye. When Dial

                               -4-
failed to respond, the plan began paying Marye $1,125 per month,

or 50 percent of Dial’s Disability Plan benefits at that time.

(The supplemental payments increased in March 1995 to $3,085 and

in March 1997 to $4,335 monthly.)

     Not until February 1996 did Dial contact the Disability Plan

and ask it to stop paying benefits to Marye. The Plan

administrators refused, stating that the payments complied with

the settlement agreement and that state court would be the

appropriate forum for Dial to resolve with Marye any dispute

concerning the 1977 settlement agreement. On April 25, 1996, Dial

filed this action against the Disability Plan in federal district

court for breach of fiduciary duty and for declaratory judgment

that he is entitled to all of the Disability Plan benefits. Dial

did not name Marye as a party to the action. On February 19,

1997, the district court granted the Disability Plan’s motions

(1) to add Marye as a third-party defendant and (2) to deposit

the disputed benefits into an interest-bearing interpleader

account each month. On May 1, 1997, Marye filed a state-law

cross-claim against Dial, requesting the court to treat the

Disability Plan benefits as community property earned during her

marriage to Dial and to divide the benefits accordingly. The

district court granted summary judgment to Dial on October 28,

1997. At the same time, the court denied as moot the Disability

Plan’s and Marye’s motions for summary judgment and dismissed

Marye’s cross-claim without prejudice. The court also directed

                               -5-
Dial to file a supplemental motion for attorneys’ fees from the

Disability Plan, which it awarded on December 8, 1997. The

Disability Plan and Marye appealed to this Court.

                               II

     The Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. §§ 1001 et seq., governs the Disability

Plan. ERISA includes anti-alienation and anti-assignment clauses

that apply to former spouses’ rights to pension benefits. See 29

U.S.C. § 1056(d)(1), (d)(3)(a). The 1984 Retirement Equity Act

(“REA”) amended these provisions to allow ERISA-qualified

benefits to be assigned pursuant to a QDRO, 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.” 29 U.S.C. § 1056(d)(3)(I)(i). The REA provides

procedures that a plan administrator must follow to determine if

a state-court domestic relations order is “qualified.” An ERISA

plan administrator may treat a domestic relations order signed

before the REA took effect in 1985 as a QDRO even if the order

fails to meet the statutory requirements otherwise applied to

QDRO’s. See Retirement Equity Act, Pub. L. No. 98-397, § 303(d),

98 Stat. 1426, 1453 (1984). The Disability Plan treated Dial and

Marye’s 1977 divorce decree, which incorporated their property

settlement splitting later-discovered property, as a QDRO.

                               -6-
     The district court correctly characterized Dial’s suit as an

ERISA action. The Disability Plan contends that Dial should

instead have brought a state-law claim against Marye for

clarification of the settlement agreement. ERISA § 514(a)

provides in part:

     Except as provided in subsection (b) of this section,

     the provisions of this subchapter and subchapter III of

     this chapter shall supersede any and all State laws

     insofar as they may now or hereafter relate to any

     employee benefit plan described in section 1003(a) of

     this title and not exempt under section 1003(b) of this

     title.

29 U.S.C. § 1144(a). The propriety of Dial’s federal action rests

upon whether it “relates to an[] employee benefit plan” under

ERISA § 514(a). Courts read § 514(a)’s “relates to” provision

very broadly. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97,

103 S. Ct. 2890, 2900 (1983). This Circuit stated in 1990 that

cases preempting state-law claims with ERISA

     have at least two unifying characteristics: (1) the

     state law claims address areas of exclusive federal

     concern, such as the right to receive benefits under

     the terms of an ERISA plan; and (2) the claims directly

     affect the relationship among the traditional ERISA

     entities--the employer, the plan and its fiduciaries,

                               -7-
     and the participants and beneficiaries.

Memorial Hospital System v. Northbrook Life Insurance Co., 904
F.2d 236, 245 (5th Cir. 1990). In the instant case, Dial’s claim

concerns “traditional ERISA entities”: himself (a Plan

participant), Marye (a potential Plan beneficiary), the Plan, and

the NFL (administrator and employer).   Dial seeks benefits that,

in the absence of QDRO, he is due; paying him those benefits is

among the Plan administrators’ ERISA-governed responsibilities.

Dial’s suit was proper under ERISA. Cf., e.g., Brandon v.

Travelers Insurance Co., 18 F.3d 1321, 1325 (5th Cir. 1994)

(“[T]he designation of a beneficiary ‘relates to’ the provision

of an ERISA plan to a sufficient degree to be preempted by that

statute.”); Carland v. Metropolitan Life Insurance Co., 935 F.2d
1114, 1121 (10th Cir. 1991) (holding that an ex-wife’s state

claim to recover ERISA-qualified insurance benefits pursuant to a

divorce decree amounted to an ERISA § 504 claim for breach of

fiduciary duty against the plan administrators); Brown v.

Connecticut General Life Insurance Co., 934 F.2d 1193, 1195 (11th

Cir. 1991) (holding that ERISA preempted a state action for a

declaration of the rightful beneficiary of an ERISA-qualified

group life insurance policy pursuant to a divorce agreement);

McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir. 1990) (holding

that ERISA preempts a state-law claim for designation of

beneficiary).

                               -8-
                               III

     The Disability Plan gives its administrators discretionary

authority to interpret the Plan provisions, such that a court

should review the administrators’ factual determinations and plan

interpretations for abuse of discretion. See Sweatman v.

Commercial Union Insurance Co., 39 F.3d 594, 597 (5th Cir. 1994).

In this case, however, the Plan administrators neither made

factual determinations nor interpreted the Disability Plan.

Instead, the Plan administrators interpreted the meaning of a

separate contract between Dial and Marye; they had to answer two

questions: (1) whether the 1974 property settlement agreement

constitutes a QDRO for Plan purposes, and (2) if so, what the

distribution of benefits should be under the settlement

agreement. A court reviews a plan administrator’s statutory and

legal conclusions de novo. See Penn v. Howe-Baker Engineers,

Inc., 898 F.2d 1096, 1100 (5th Cir. 1990) (reviewing de novo plan

administrators’ determination as to whether an employee was an

independent contractor for coverage purposes). Likewise, the

district court here did not owe deference to the Disability Plan

administrators’ interpretation of a domestic relations order, a

contract judicially approved by a state court. See Matassarin v.

Lynch, --- F.3d ---, --- (5th Cir. 1999); see also Hullett v.

Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 114 (3d Cir.

1994) (stating that the district court “did not err in holding

                               -9-
that it should review de novo the plan administrator’s

construction of the [divorce agreement], which invoked issues of

contract interpretation under the Agreement and not the plan”).

The district court erred in reviewing the Plan administrators’

decision for abuse of discretion only and should instead have

employed de novo review.

                               IV

     In deciding to pay one-half of Dial’s Disability Plan

benefits to Marye, the Plan administrators relied on the 1977

property settlement. According to the Plan administrators, Dial’s

Disability Plan benefits fall within the settlement agreement’s

provision that “in the event the parties are mistaken and there

exists any other property, separate or community, which is not

listed herein which is later discovered, then the same shall be

divided fifty percent (50%) to Wife and fifty percent (50%) to

Husband.”1 The Plan administrators did not find that the

Disability Plan benefits were governed by the separate agreement,

the 1993 QDRO, which awarded Marye just 37.5 percent of benefits

     1.   The Plan administrators argued to the district court:
     At the time they entered into the Property Settlement
     Order in 1977, Mr. Dial and Ms. Marie [sic] mistakenly
     believed that all of the rights to deferred benefits
     Mr. Dial had earned during his career as an NFL Player
     from the 1959 through 1968 football seasons were
     embodied in the Bert Bell Plan. With the establishment
     of the Bert Bell/Pete Rozelle Plan and the Disability
     Plan in 1993, it became apparent that this belief was
     mistaken. Ms. Marie [sic] discovered the existence of
     the additional property--Mr. Dial’s benefit under the
     Disability Plan--in 1994.

                              -10-
that “flowed to” Dial from the Bell Plan.2

     The district court, reviewing for abuse of discretion, found

that the Disability Plan’s benefits interpretation was both

legally incorrect and arbitrary and capricious. The court stated

that, under the administrators’ reading, the disability benefits

need not have been in existence in 1977 in order to constitute

     2. Curiously, however, the Plan administrators state in
their brief that Article III of the 1977 divorce decree--the
“flow to” provision--supports their decision to pay one-half of
the Disability Plan benefits to Marye. The Plan administrators
offer no explanation as to why the 1977 “flow to” provision would
support their decision but the identical language in the 1993
QDRO would not apply. According to Dial, the Disability Plan’s
failure to apply the 1993 QDRO to the Disability Plan precludes
it from relying on the 1977 settlement’s “flow to” language. We
agree with Dial. But the record reveals, and the district court’s
order granting summary judgment recognizes, that the Plan
administrators neither needed to rely upon nor did rely primarily
on the 1977 “flow to” provision. On August 11, 1994, the Plan
wrote to Marye’s counsel:
     Although . . . the property settlement agreement refers
     specifically only to benefits under the [Bell/Rozelle
     Plan], we think the language on page 3 of that document
     to divide 50/50 “any other property, separate or
     community, which is not listed herein which is later
     discovered” is sufficient to provide Ms. [Marye] with
     50% of the benefit otherwise payable under the
     Supplemental Disability Plan to Mr. Dial.
The district court’s opinion states:
     NFL did not grant Marie [sic] the lower percentage
     share of 37.5 percent as stipulated in the 1993 QDRO
     because that order explicitly stated that it related to
     the Bert Bell NFL Player Retirement Plan (Memorandum in
     Support of NFL’s Motion, Instrument No. 43, Exh. 7, at
     1). Thus, NFL reasoned, limiting Marie’s [sic] award to
     37.5 percent of Dial’s benefits under the new
     disability plan based on the later 1993 QDRO would be
     improper.
We agree with the district court’s implication that the Plan
administrators based their decision on the “later discovered”
property clause.

                              -11-
“later discovered” property. This interpretation, the district

court found, conflicted with the 1977 settlement agreement’s

“purpose and intent” clause. That clause states:

     Husband and Wife have caused this Article to be added

     to and made a part of this Agreement in an effort to

     clarify the purposes of the parties and with a view of

     aiding any Court before which this Agreement should

     come for interpretation or enforcement. . . . The

     parties have attempted to divide their marital property

     in a manner which conforms to the “just and right”

     standard. . . . The parties believe that . . . [a just

     and right] standard is best met by an equal division

     and partition of the marital property in existence as

     of the date . . . [the settlement agreement] is

     executed.

Implicit in the court’s conclusion that the “purpose and intent”

clause conflicted with the administrators’ interpretation of

“later discovered property” are two assumptions: (1) that the

administrators’ interpretation in fact dictates that property

need not have existed in 1977 in order to come within the “later

discovered” clause; and (2) that because the Disability Plan did

not exist in 1977, Dial’s benefits paid by the Plan did not exist

in 1977. We find neither assumption defensible. Dial’s disability

benefit was in existence by the 1977 divorce, insofar as he had

already finished his NFL career, thereby earning his right to the

                              -12-
benefits, and had nothing left to do but wait for his benefits to

vest. The disability benefit did not yet exist in 1977 only if

Dial’s later act of “becoming disabled” could be said to have

earned or created the benefit. Dial did nothing after 1977 to

earn disability benefits. Instead, a contingent disability

benefit--contingent upon the development of the disabling

condition from injuries already assumed while Dial played

football--belonged to Dial as of the time he ended his football

career. What changed in 1993 was not the fact or existence of the

disability benefit, but merely the benefit’s payment size and the

source from which the payments came. Under this reading, the Plan

administrators’ decision does not require any property created

after the 1977 settlement agreement to fall within the “later

discovered” provision, and the district court’s reason for

finding legal untenableness vanishes.

     Reviewing the Plan administrators’ interpretation de novo,

as the district court should have done, we find the

interpretation legally correct. Because no material facts are

disputed, we vacate the district court’s decision and direct the

entry of judgment for the Disability Plan.

     Our decision should not be extended beyond this case’s

specific circumstances. Dial and Marye are now long divorced.

Dial, and not Marye, must deal with the consequences, including

medical bills and loss of alternate income, attributable to his

football-related disability, for which the disability benefits

                              -13-
are intended to compensate. We recognize that problems could

arise if we were to create a general rule that disability

benefits are later-discovered property subject to division under

a divorce agreement. Had Dial, for example, worked during his

marriage in a factory and years later unexpectedly developed

respiratory problems found to be attributable to the factory

environment, we would not contemplate awarding one-half of any

settlement therefrom to Marye on the basis of the “later

discovered” clause. The result we reach in this case is mandated

because Dial’s contingent disability benefit existed at the time

of the divorce and because Dial and Marye entered their divorce

agreement after the enactment of ERISA but before the 1984

Retirement Equity Act. The REA allows the splitting of ERISA-

qualified disability benefits by specific intent of the parties,

i.e., by reference to the plan and to the benefits in a

judicially approved QDRO. But Congress in enacting the REA also

allowed pre-1984 agreements to suffice as QDROs even without the

panoply of statutory protections. Such is the case here. Had Dial

and Marye entered their property settlement agreement after the

REA became effective, then the Plan administrators could not have

treated the “later discovered” clause as a QDRO. Because they

entered the agreement in 1977, and because they later discovered

the Disability Plan would pay a larger benefit that constitutes

“later discovered” property, the Plan administrators’ decision

was legally correct.

                              -14-
                                V

     A district court may in its discretion award attorneys’ fees

to any party in an ERISA suit. See 29 U.S.C. § 1102(g)(1). We

review for abuse of discretion the district court’s decision to

grant attorneys’ fees to Dial. See Todd v. AIG Life Insurance

Co., 47 F.3d 1448, 1458 (5th Cir. 1995). We find that the

district court abused its discretion.

     In deciding whether to award attorneys’ fees, a district

court applies the five-factor test set forth in Iron Workers

Local No. 272 v. Bowen, 624 F.2d 1255 (5th Cir. 1980). The court

considers:

     (1) the degree of the opposing parties’ culpability or

     bad faith; (2) the ability of the opposing parties to

     satisfy an award of attorneys’ fees; (3) whether an

     award of attorneys’ fees against the opposing parties

     would deter other persons acting under similar

     circumstances; (4) whether the parties requesting

     attorneys’ fees sought to benefit all participants and

     beneficiaries of an ERISA plan or to resolve a

     significant question regarding ERISA itself; and (5)

     the relative merits of the parties’ positions.

Id. at 1266; see Todd, 47 F.3d at 1459. The district court cited

Bowen and offered this discussion of whether to award attorneys’

fees:

                              -15-
     In the instant case, the Court finds that an award of

     attorneys’ fees and costs would be proper. First,

     although the Court stops short of accusing NFL of

     acting in bad faith, NFL is clearly responsible for its

     erroneous interpretation that was in direct conflict

     with the plain meaning of the settlement agreement.

     Second, NFL has the ability to pay an award of

     attorneys’ fees. Third, an award of attorneys’ fees in

     the instant case would deter other administrators from

     straining to justify an interpretation of a QDRO that

     is clearly inconsistent with other provisions in the

     order. With respect to the last factors [of the Bowen

     test], even though Dial’s suit was limited to the

     vindication of his own claim under the plan and did not

     address significant legal questions regarding ERISA,

     Dial presented a demonstrably stronger or more

     meritorious case. At least four of the Bowen factors

     support an award of reasonable attorneys’ fees and

     costs to Dial. Accordingly, the Court finds that an

     award of attorneys’ fees and costs would promote

     ERISA’s remedial purpose of protecting beneficiaries.

Our opinion today renders inaccurate the district court’s

determination that Dial presented a more meritorious case. We

note also that any imputation of bad faith in this case to the

                              -16-
Plan administrators is simply unreasonable. The Plan

administrators’ decision did not save the Disability Plan any

money; the Plan paid the same amount it would have paid under

Dial’s reading, only to a second beneficiary as well. The Plan

administrators had no reason or incentive to interpret the

settlement agreement one way or the other. They allowed Dial the

opportunity to respond before the Plan began paying benefits to

Marye. Moreover, the district court’s award of attorneys’ fees

would have no deterrent effect. The Plan administrators merely

chose to interpret an outside document in the way they found

correct. Plan administrators must do this with every QDRO they

receive. No matter what the outcome of this litigation, punishing

the Disability Plan administrators would at most encourage other

administrators to interpret documents in favor of the original

beneficiary, regardless of a valid QDRO. The only Bowen factor

favoring attorneys’ fees for Dial was the Supplemental Plan’s

ability to pay, and the district court’s opinion mentions no

relevant non-Bowen factors.

     Marye has requested this Court to award her reasonable

attorneys’ fees for defending her beneficiary rights.

Acknowledging that the outcome of this case was a “close call,”

we direct the district court to consider Marye’s request on

remand.

                               VI

                              -17-
     The judgment of the district court is VACATED and the case

is REMANDED to the district court for entry of judgment in favor

of the defendant/counterclaimant/third-party plaintiff/appellant

NFL Player Supplemental Disability Plan in accordance with this

opinion. The dismissal of third-party defendant/appellant Janice

Marye’s community-property claim is AFFIRMED, as the issue is now

moot. We direct the district court on remand to consider Marye’s

request for attorneys’ fees.

                               -18-