Hartford Life and Accident Insurance Company v. Kowalski et al, No. 3:2021cv06469 - Document 87 (N.D. Cal. 2023)
Court Description: ORDER DENYING 79 MOTION FOR PARTIAL SUMMARY JUDGMENT AND GRANTING 80 MOTION FOR SUMMARY JUDGMENT. Signed by Chief Judge Richard Seeborg on August 22, 2023. (rslc3, COURT STAFF) (Filed on 8/22/2023)
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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA United States District Court Northern District of California 9 10 HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, 11 Plaintiff, 12 Case No. 21-cv-06469-RS ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT v. 13 HAILI KOWALSKI, et al., 14 Defendants. 15 16 17 I. INTRODUCTION This interpleader action turns on one central question: which of the parties is entitled to the 18 proceeds of a $493,000 life insurance policy? Haili Kowalski and Marilyn Valois, both Co- 19 Defendants and Cross-Claimants, have brought cross-motions for summary judgment to resolve 20 this question. Valois argues she is entitled to the policy proceeds because she is the named 21 beneficiary. Meanwhile, Kowalski contends her minor son, E.K., has a superior right to the funds 22 under the terms of a Qualified Domestic Relations Order (“QDRO”), as defined by the Employee 23 Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. This order 24 concludes Kowalski’s position is correct, and as such, her motion is granted, and Valois’ is denied. 25 II. BACKGROUND 26 The factual background of this action was previously summarized, but it is restated here 27 for reference. “Marc Kowalski died on December 30, 2020. Prior to his death, Mr. Kowalski 28 participated in a group life insurance policy sponsored by his employer, Micron Technology, 1 Inc.,” and administered by Hartford Life and Accident Insurance Company (“the Hartford Plan”). 2 Dkt. 57 (“MTD Order”), at 1–2. “At the time of his death, the proceeds of the policy amounted to 3 $493,000. The policy listed Marilyne Valois as the named beneficiary, and on this basis she 4 submitted a claim to Hartford for the proceeds. Haili Kowalski, who was formerly married to 5 Marc Kowalski, submitted a separate claim on behalf of their minor son, E.K.” Id. at 2. Haili 6 Kowalski asserted that E.K. was entitled to the funds pursuant to the terms of a 2010 Legal 7 Separation Agreement (“LSA”), entered by the Santa Clara County Superior Court, that 8 formalized the Kowalskis’ divorce. Of relevance here, one provision of the LSA required 9 Mr. Kowalski to “carry and maintain a life insurance policy of $800,000 and to name [E.K.] as the United States District Court Northern District of California 10 sole beneficiary and to not borrow, assign, or otherwise encumber said policy.” Id. 11 “In the face of these competing claims, Hartford filed the instant Complaint in Interpleader 12 in August 2021. Both Defendants filed answers with cross-claims. Kowalski’s cross-claim seeks a 13 declaratory judgment that she, as legal guardian of E.K., is entitled to the proceeds” because the 14 LSA is a QDRO under ERISA.1 Id. She also seeks an order compelling payment of those funds. 15 In the alternative, she argues Valois is not entitled to any of the benefits because she “exerted 16 undue influence and control over Marc Kowalski such that she was improperly listed as the 17 beneficiary.” Dkt. 63 ¶ 92. Valois similarly seeks a declaratory judgment that she is entitled to the 18 proceeds as the policy’s designated beneficiary, and that Kowalski’s LSA is not a QDRO. 19 Valois moved to dismiss Kowalski’s cross-claims, and that motion was granted in part and 20 denied in part. Kowalski’s undue influence cross-claim was dismissed, along with her cross-claim 21 for conversion, both with leave to amend. Without calling the question, the order also concluded 22 that “the LSA would likely pass muster as a QDRO.” MTD Order at 6. As such, the motion was 23 denied as to Kowalski’s cross-claim for declaratory relief. Kowalski then filed an amended answer 24 with cross-claims, and these cross-motions for summary judgment on the QDRO issue followed. 25 26 27 As the Ninth Circuit has observed, this particular field of law, “unfortunately, requires some tolerance for acronyms.” Trs. of Dirs. Guild of Am.-Prod. Pension Benefits Plans v. Tise, 234 F.3d 415, 419 (9th Cir. 2000), opinion amended on denial of reh’g, 255 F.3d 661. 1 ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 2 III. LEGAL STANDARD United States District Court Northern District of California 1 2 Under Federal Rule of Civil Procedure 56, summary judgment is appropriate when “there 3 is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of 4 law.” Fed. R. Civ. P. 56(a). “In reviewing cross-motions for summary judgment, each motion must 5 be considered on its own merits.” Acosta v. City Nat’l Corp., 992 F.3d 880, 885 (9th Cir. 2019) 6 (citation omitted). Pure questions of law are appropriate for resolution on a motion for summary 7 judgment. See Blue Lake Rancheria v. United States, 653 F.3d 1112, 1115 (9th Cir. 2011). 8 IV. DISCUSSION 9 The parties agree that the relevant question presented by the cross-motions is simply 10 whether the LSA is a QDRO. If it is, Kowalski (as E.K.’s guardian) is entitled to the proceeds of 11 the Hartford Plan; if it is not, then the funds belong to Valois. The parties similarly agree this is a 12 question of law, not fact, making it suitable for resolution here. While the prior order examined 13 this question in some detail (and, as noted above, came to a tentative conclusion on it), this order 14 considers the question anew, drawing on the prior order as appropriate. See Peralta v. Dillard, 744 15 F.3d 1076, 1088 (9th Cir. 2014) (en banc). 16 17 A. Statutory Background Put as succinctly as possible, Congress enacted ERISA “to protect participants in private 18 employee benefit plans.” In re Gendreau, 122 F.3d 815, 817 (9th Cir. 1997). In pursuit of this 19 goal, ERISA prohibits the assignment or alienation of these benefits. 29 U.S.C. § 1056(d)(1). 20 Separately, ERISA also broadly preempts state law affecting employee benefit plans. 29 U.S.C. 21 § 1144(a). The interaction of these two concepts — ERISA preemption and its anti-assignment 22 provisions — for some time presented a challenging question: did ERISA preempt domestic 23 relations orders that purported to reassign benefits? Stewart v. Thorpe Holding Co. Profit Sharing 24 Plan, 207 F.3d 1143, 1149 (9th Cir. 2000). Many courts found it did not, but Congress “resolved 25 any uncertainty,” id., by passing the Retirement Equity Act of 1984 (“REA”), 26 U.S.C. § 417. 26 “The REA amended ERISA by creating an exception to its anti-assignment provisions for state 27 ‘domestic relations orders’ (commonly known as marriage dissolution orders) that meet the ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 3 1 requirements of a ‘qualified domestic relations order’ or QDRO.” Stewart, 207 F.3d at 1149. Thus, 2 “a QDRO has the effect of ‘elevat[ing] a plan participant’s legal obligations, commonly to a 3 former spouse or children of a previous marriage, over the participant’s express wishes to provide 4 for other individuals as designated beneficiaries.’” MTD Order at 4 (alteration in original) 5 (quoting Trs. of Dirs. Guild of Am.-Prod. Pension Benefits Plans v. Tise, 234 F.3d 415, 425 (9th 6 Cir. 2000)). To qualify as a QDRO under 29 U.S.C. § 1056(d), an order must clearly specify: 7 (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, 8 (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, 9 10 United States District Court Northern District of California 11 (iii) the number of payments or period to which such order applies, and 12 (iv) each plan to which such order applies. 13 14 29 U.S.C. § 1056(d)(3)(C). In addition, a QDRO must not “require the plan to provide increased 15 benefits (determined on the basis of actuarial value).” Id. § 1056(d)(3)(D)(ii).2 16 While the statute itself is quite clear as to what is required for a domestic relations order to 17 be a QDRO, the Ninth Circuit (along with several other circuits) has held that an order will qualify 18 as a QDRO so long as it “substantially complies” with the enumerated requirements. In a pair of 19 cases from 2000 — Stewart and Tise — the Court observed that Congress enacted the QDRO 20 provisions specifically “to protect the financial security of ex-spouses” and dependent children 21 following a divorce or separation. Stewart, 207 F.3d at 1149; accord Tise, 234 F.3d at 420. It thus 22 rejected reading these requirements in an “unduly narrow” fashion, given that doing so “has the 23 24 25 26 27 It should be noted that, under ERISA, “[w]hether a state court’s order meets the statutory requirements to be a QDRO . . . is a matter determined in the first instance by the pension plan administrator, and, if necessary, by a court of competent jurisdiction.” Tise, 234 F.3d at 421 (citing 29 U.S.C. § 1056(d)(3)(H)(i)). This does not appear to have occurred here, as Hartford simply filed the instant Complaint in Interpleader without expressing a view on the QDRO issue. Because neither party suggests that remand to Hartford is necessary (and given that the losing party would likely seek redress in this Court anyway), the motions will still be decided here. 2 ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 4 United States District Court Northern District of California 1 potential to frustrate” Congress’s intent “by making it unreasonably difficult for domestic relations 2 orders to qualify as QDROs.” Stewart, 207 F.3d at 1155 (quoting Hawkins v. Comm’r, 86 F.3d 3 982, 991 (10th Cir. 1996)). At the same time, these provisions were designed to “spar[e] plan 4 administrators the grief they experience when because of uncertainty concerning the identity of the 5 beneficiary they pay the wrong person, or arguably the wrong person, and are sued by a rival 6 claimant.” Stewart, 207 F.3d at 1150 (emphasis omitted). Relying on the Seventh Circuit’s opinion 7 in Metropolitan Life Insurance Co. v. Wheaton, 42 F.3d 1080 (7th Cir. 1994), and the Sixth 8 Circuit’s opinion in Metropolitan Life Insurance Co. v. Marsh, 119 F.3d 415 (6th Cir. 1997), the 9 Stewart and Tise Courts thus concluded that substantial compliance with these requirements was 10 appropriate. The Ninth Circuit reiterated these principles a few years later in Hamilton v. Wash. 11 State Plumbing & Pipefitting Indus. Pension Plan, 433 F.3d 1091 (9th Cir. 2006). In the 12 meantime, district courts have played their traditional role of applying this standard in myriad 13 circumstances. See, e.g., Hartford Life & Accident Ins. Co. v. Premium Escrow Servs., Inc., Civ. 14 No. 04-1768-PA, 2005 WL 6217077 (D. Or. Aug. 3, 2005); Ret. Plan for Emps. of Hawaiian Elec. 15 Indus., Inc. & Participating Subsidiaries v. Kailiponi, No. CV 07-00206 HG BMK, 2007 WL 16 9711168 (D. Haw. Dec. 4, 2007); Sun Life Assurance Co. of Canada v. Kimble, No. CIV S-06- 17 2041 EFB, 2007 WL 3313448 (E.D. Cal. Nov. 6, 2007); Vyas v. Vyas, No. CV 15-02152 RSWL 18 (DFMx), 2017 WL 3841809 (C.D. Cal. Sept. 1, 2017). 19 20 B. Analysis Valois first argues that the LSA is not a QDRO because it does not “clearly specify” the 21 plan to which it applies, that is, the Hartford Plan. Not only that, the LSA does not specify any 22 plan at all “and provides no basis to do so.” Dkt. 79, at 20. Kowalski contends “it is undisputed 23 that there are no other plans at play in this case,” and therefore “the LSA can only apply to the 24 Hartford Plan, making the LSA ‘specific enough to serve ERISA’s purposes.” Dkt. 84, at 3 25 (quoting Stewart, 207 F.3d at 1154 n.8 (discussing Wheaton)); accord Dkt. 80, at 14–15. The 26 parties effectively agree that the LSA need not include the name of the Hartford Plan, and, indeed, 27 case law supports this. See Wheaton, 42 F.3d at 1084 (“[T]he stipulation does specify ‘the life ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 5 1 insurance which is presently carried through his/her employer,’ and this designation permits the 2 identification of the plans to which the decree applies without significant ambiguity. Any life 3 insurance provided under an employer’s policy at the time of the stipulation is covered.”); Sun Life 4 Assurance Co. of Canada v. Jackson, 877 F.3d 698, 700 (6th Cir. 2017) (divorce agreement 5 required husband to “maintain, unencumbered, all employer-provided life insurance, now in 6 existence at a reasonable cost, or later acquired at a reasonable cost, naming [couple’s] minor child 7 as primary beneficiary during her minority”); cf. Hartford Life, 2005 WL 6217077, at *7 (divorce 8 order met QDRO requirements and identified plan as “$250,000 face value life insurance policy 9 written in connection with his employment at Costco”). Thus, the LSA’s failure to name the 10 Hartford Plan is not an obstacle to concluding it is a QDRO. The more troublesome feature of the LSA is that, as Valois notes, there is no information United States District Court Northern District of California 11 12 on the face of the document from which one could draw an immediate connection to the Hartford 13 Plan. Other district courts reviewing divorce orders with similarly “open-ended, indefinite” 14 language have concluded they cannot qualify as QDROs. Unicare Life & Health Ins. Co. v. 15 Phanor, 472 F. Supp. 2d 8, 13 (D. Mass. 2007); see Sun Life Assurance Co. of Canada v. Sullivan, 16 206 F. Supp. 2d 191, 197 (D. Mass. 2002) (no QDRO where divorce agreement called for husband 17 “to maintain $150,000.00 of ‘his group life insurance’” for benefit of ex-wife); Deaton v. Cross, 18 184 F. Supp. 2d 441, 442–43 (D. Md. 2002) (divorce agreement that required husband to “name 19 the children of the parties as the irrevocable beneficiaries of any policy of [life] insurance 20 available to him through his employer” was “obvious[ly]” not a QDRO). Indeed, the Middle 21 District of Georgia recently concluded that a divorce order with language virtually identical to that 22 of the LSA was “not specific enough” to meet the fourth QDRO requirement. Jackson ex rel. 23 H.D.P. v. Pressley, No. 22-CV-00311-TES, 2023 WL 2695099, at *3 (M.D. Ga. Mar. 29, 2023); 24 see also USAble Life v. Brown, No. 208-CV-442-WKW WO, 2009 WL 798950, at *3 (M.D. Ala. 25 Mar. 24, 2009) (same).3 26 27 3 Kowalski does not meaningfully address or distinguish these cases. ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 6 United States District Court Northern District of California 1 On the other hand, some courts have taken a more functional approach. In Festini-Steele v. 2 ExxonMobil Corp., a husband and wife undergoing a divorce filled out a standard, state-issued 3 form that provided “a series of check-box options regarding life insurance and instruct[ed] the 4 parties to ‘check all that apply.’” 846 Fed. App’x 680, 682 (10th Cir. 2021) (alteration omitted). 5 The husband and wife checked the first box, which corresponded to the statement: “The parties 6 agree to the following terms relating to all life insurance accounts.” Id. (emphasis omitted). They 7 also checked an “Other” box and wrote in the following: “[Husband] will carry life insurance on 8 [Wife] as beneficiary until daughter A.S. is 18 years of age.” The district court concluded this 9 form failed clearly to identify the plan involved, but the Tenth Circuit reversed. It reasoned that, 10 by checking the first box, the parties had “clearly specified that [Husband] was required to name 11 [Wife] as the beneficiary of all life insurance plans or policies insuring his life until their daughter 12 A.S. turned eighteen.” Id. at 686. Because the form clearly applied to “all” such policies, and 13 because “‘all’ means just that — all,” the form “eliminate[d] the need for the plan administrator to 14 conduct an ad hoc subjective inquiry into the parties’ true intentions.” Id. at 688 (internal 15 quotation marks omitted) (quoting in part Hawkins, 86 F.3d at 992) (citing Jackson, 877 F.3d at 16 704). It was, therefore, a QDRO. 17 As may be evident by this point, there is precedent to support both parties’ contentions. 18 However, in view of all the relevant authority, and keeping in mind the congressional purposes 19 underpinning the QDRO provisions, Kowalski’s position is more persuasive — at least on the 20 facts of this case. There really is no question as to what life insurance policy is implicated by the 21 LSA. Marc Kowalski was required to maintain “a life insurance policy” (that is, one life insurance 22 policy) for E.K.’s benefit. A plan administrator could conclude that the Hartford Plan, the only 23 policy out there with Marc Kowalski’s name on it, must be the policy in question. This is not a 24 case in which, for instance, a party is attempting to parlay a divorce order’s general obligation to 25 provide child support into an entitlement to the proceeds of a life insurance policy. See Kimble, 26 2007 WL 3313448, at *5. Rather, the mandate of the LSA was clear, and Marc Kowalski was not 27 entitled to designate any other than E.K. as the beneficiary on his life insurance policy. ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 7 1 2 without the assistance of counsel. To the extent ERISA already presents “a drafting morass for the 3 lawyer,” Hamilton, 433 F.3d at 1096, it’s fair to say this is doubly (if not triply or quadruply) so 4 for laypeople; and if it already “is asking too much of domestic relations lawyers and judges to 5 expect them to dot every i and cross every t in formulating divorce decrees that have ERISA 6 implications,” Wheaton, 42 F.3d at 1085, it would be unfair to expect that level of diligence here. 7 Requiring Haili Kowalski to have, for instance, returned to state court each time Marc switched 8 jobs or life insurance policies is simply unrealistic — especially if she (quite reasonably) could 9 have concluded the language they agreed on in the LSA was already sufficient. 10 United States District Court Northern District of California This conclusion is buttressed by the fact that the Kowalskis apparently drafted the LSA It should be noted that this conclusion arises from the specific facts of this case and the 11 fortuity, for Kowalski, that only one life insurance policy is implicated. It is very easy to imagine 12 different factual scenarios in which the language of the LSA would not clearly support a particular 13 distribution. Suppose, for instance, that Marc Kowalski had taken out another life insurance policy 14 for $500,000, also naming Marilyn Valois as the beneficiary. The LSA refers only to “a life 15 insurance policy of $800,000,” so which of the two plans would Kowalski be entitled to? Or, since 16 each of these two plans would be under $800,000, could Kowalski argue E.K. was entitled to 17 $800,000 across both plans? These and other questions would readily abound — and that’s only 18 with two plans in play. E.g., Vyas, 2017 WL 3841809, at *3 (six retirement plans at issue). 19 On these facts, however, the language is clear when read in the appropriate context, and the 20 fourth QDRO requirement is thus satisfied. Valois’ additional argument that the LSA need not 21 provide increased benefits is a non-starter. The LSA in no way requires Hartford to “affirmatively 22 afford a type or form of benefit not established under [the] plan.” DeFazio v. Hollister, Inc., 636 F. 23 Supp. 2d 1045, 1078 (E.D. Cal. 2009). To the extent this QDRO provision is designed to shield 24 plan providers from being forced to shoulder higher burdens, this simply is not a problem here. As 25 the prior order noted, “Hartford evidently does not view itself at risk of paying any increased 26 amount, having already interpleaded the disputed funds.” MTD Order, at 5; cf. Wheaton, 42 F.3d 27 at 1084–85. Thus, the LSA also does not fail as a QDRO under the bar on increased benefits. ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 8 1 V. CONCLUSION 2 Taking Valois’ position would require elevating form over substance and minimizing 3 Congress’s intent of providing security for former spouses and dependent children — both counter 4 to the Ninth Circuit’s instructions. The 2010 LSA is thus a QDRO as a matter of law. Kowalski’s 5 motion for summary judgment is granted, and Valois’ motion for summary judgment is denied. 6 7 IT IS SO ORDERED. 8 9 10 United States District Court Northern District of California 11 Dated: August 22, 2023 ______________________________________ RICHARD SEEBORG Chief United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT CASE NO. 21-cv-06469-RS 28 9
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