Maretta v. Hillman

283 Va. 34

722 S.E.2d 32

Judy A. MARETTA

v.Jacqueline HILLMAN.

Record No. 102042.

Supreme Court of Virginia.

Jan. 13, 2012.

George O. Peterson (Tania M. L. Saylor; Peterson Saylor, on briefs), for appellant.

Daniel H. Ruttenberg (SmolenPlevy, on brief), Vienna, for appellee.

Present: All the Justices.

OPINION BY Chief Justice CYNTHIA D. KINSER.

Judy A. Maretta (Maretta), as the named beneficiary of a Federal Employees' Group Life Insurance (FEGLI) policy, received FEGLI benefits upon the death of her ex-husband. The question on appeal is whether federal law preempts Code § 20–111.1(D), which otherwise would make Maretta liable to her ex-husband's widow, Jacqueline Hillman (Hillman), for those benefits.

In the event of a decree of annulment or divorce from the bond of matrimony, Code § 20–111.1(A) revokes “any revocable beneficiary designation contained in a then existing written contract owned by one party that provides for the payment of any death benefit to the other party.” However, Code § 20–111.1(D), the subsection at issue, provides that

[if Code § 20–111.1(A) ] is preempted by federal law with respect to the payment of any death benefit, a former spouse who, not for value, receives the payment of any death benefit that the former spouse is not entitled to under this section is personally liable for the amount of the payment to the person who would have been entitled to it were this section not preempted.

In contrast to these statutory provisions, the Federal Employees' Group Life Insurance Act (FEGLIA), 5 U.S.C. § 8701 et seq. (2006 & Supp. II 2008), contains an order of precedence that directs to whom benefits under a FEGLI policy are paid:

[T]he amount of group life insurance and group accidental death insurance in force on an employee at the date of his death shall be paid, on the establishment of a valid claim, to the person or persons surviving at the date of his death, in the following order of precedence:

First, to the beneficiary or beneficiaries designated by the employee in a signed and witnessed writing received before death in the employing office....

Second, if there is no designated beneficiary, to the widow or widower of the employee.

5 U.S.C. § 8705(a). FEGLIA also contains a preemption provision, which states:

The provisions of any contract under this chapter [5 U.S.C. § 8701 et seq.] which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any law of any State or political subdivision thereof, or any regulation issued thereunder, which relates to group life insurance to the extent that the law or regulation is inconsistent with the contractual provisions.

5 U.S.C. § 8709(d)(1).¹

Because Congress intended for FEGLI benefits to be paid and to belong to a designated beneficiary, we conclude that FEGLIA preempts Code § 20–111.1(D). Therefore, we will reverse the circuit court's judgment.

FACTS AND PROCEEDINGS

The relevant facts are not in dispute. In December 1996, Warren Hillman (Warren) named Maretta, his wife at the time, as the beneficiary of his FEGLI policy. The two divorced in December 1998 and Warren married Hillman in October 2002. Warren, however, never changed the beneficiary designation in his FEGLI policy. Hillman and Warren were still married when, in July 2008, Warren died. After her husband's death, Hillman filed a claim for benefits under Warren's FEGLI policy but was told the proceeds would be distributed to Warren's designated beneficiary, Maretta. Maretta filed a claim for and received the death benefits under the FEGLI policy in the amount of $124,558.03.

Hillman then filed an action against Maretta, claiming that pursuant to Code § 20–111.1(D), Maretta was liable to her for the death benefits received as the beneficiary of Warren's FEGLI policy. Hillman sought an order directing Maretta to pay those proceeds to Hillman or, alternatively, a judgment against Maretta in the amount received from the FEGLI policy. Maretta filed a demurrer and plea in bar. Citing numerous federal cases, Maretta claimed that Code §§ 20–111.1(A) and –111.1(D) are preempted by 5 U.S.C. §§ 8705 and 8709 because the state statutes grant FEGLI benefits to someone other than the named beneficiary in violation of FEGLIA's terms. In a letter opinion, the circuit court overruled Maretta's demurrer and plea in bar, concluding that Code § 20–111.1(D) is not preempted by FEGLIA. Hillman then moved for summary judgment. Finding no material facts in dispute, the circuit court granted Hillman's motion and entered judgment against Maretta in the amount of $124,558.03.

We granted Maretta this appeal. The sole issue is whether the circuit court erred in determining that Hillman's claim under Code § 20–111.1(D) is not preempted by FEGLIA. That issue is a question of law reviewed de novo on appeal. See Johnson v. Hart, 279 Va. 617, 623, 692 S.E.2d 239, 242 (2010).

ANALYSIS

The Supremacy Clause in the United States Constitution provides that the laws of the United States “shall be the supreme law of the land ... any thing in the Constitution or laws of any state to the contrary notwithstanding.” U.S. Const. art. VI, cl. 2. Accordingly, state laws in conflict with federal law are “without effect.” Altria Group, Inc. v. Good, 555 U.S. 70, 76, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008) (internal quotation marks omitted). The preemption doctrine “has its roots” in the Supremacy Clause and “requires us to examine congressional intent.” Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982). “ ‘[T]he purpose of Congress is the ultimate touchstone’ in every pre-emption case.” Altria Group, 555 U.S. at 76, 129 S.Ct. 538 (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996)).

“Pre-emption may be either express or implied, and is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose.” de la Cuesta, 458 U.S. at 152–53, 102 S.Ct. 3014 (internal quotation marks omitted). Even when Congress has stopped short of totally displacing state law in a specific area, state law is nevertheless preempted “to the extent that it actually conflicts with federal law. Such a conflict arises when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. at 153, 102 S.Ct. 3014 (citations and internal quotation marks omitted); see also, Dugan v. Childers, 261 Va. 3, 8, 539 S.E.2d 723, 725 (2001) (“ ‘The pertinent questions are whether the right as asserted conflicts with the express terms of federal law and whether its consequences sufficiently injure the objectives of the federal program to require nonrecognition.’ ”) (quoting Hisquierdo v. Hisquierdo, 439 U.S. 572, 583, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979)); Metropolitan Life Ins. Co. v. Potter, 533 So.2d 589, 591 (Ala.1988) (“Preemption may occur from explicit preemptive language in a statute, from implied congressional intent, or where state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress.”). While there is a presumption against preemption “in areas of traditional state regulation such as family law,” Egelhoff v. Egelhoff, 532 U.S. 141, 151, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001), “[the] relative importance to the State of its own law is not material when there is a conflict with a valid federal law, for the Framers of our Constitution provided that the federal law must prevail.” Ridgway v. Ridgway, 454 U.S. 46, 54, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981) (internal quotation marks omitted).

In addition to the order of precedence set forth in 5 U.S.C. § 8705(a) and the preemption provision in 5 U.S.C. § 8709(d)(1), FEGLIA and the regulations promulgated thereunder contain provisions relevant to the specific preemption question before us. Pursuant to 5 C.F.R. § 870.802(f), an insured under a FEGLI policy can change his or her beneficiary “at any time without the knowledge or consent of the previous beneficiary. This right cannot be waived or restricted.” ² Id. The insured's beneficiary designation takes precedence over any court order for divorce, annulment, or separation unless that order has been received by the appropriate office prior to the insured's death. 5 U.S.C. § 8705(e); 5 C.F.R. § 870.801(d). In addition, any “designation, change, or cancellation of beneficiary in a will or any other document not witnessed and filed as required by [ 5 C.F.R. § 870.802] has no legal effect with respect to [FEGLI] benefits.” 5 C.F.R § 870.802(c).

Contrary to these provisions, Code § 20–111.1(A) revokes a beneficiary designation upon entry of a decree of annulment or divorce from the bond of matrimony and thus alters the order of precedence in 5 U.S.C. § 8705(a), which directs payment of FEGLI benefits first to the designated beneficiary regardless of marital status. As the parties acknowledged before the circuit court, FEGLIA preempts Code § 20–111.1(A). See Metropolitan Life Ins. Co. v. Bell, 924 F.Supp. 63, 65 (E.D.Tex.1995) (holding that 5 U.S.C. § 8709(d)(1) “certainly preempts any direct payment to anyone other than a listed beneficiary when a beneficiary is actually designated”).

Unlike Code § 20–111.1(A), Code § 20–111.1(D) does not alter the direct payment of FEGLI benefits to a designated beneficiary. Instead, it grants a third party the right to recover those benefits from a designated beneficiary who is the former spouse of the insured. Code § 20–111.1(D). If Congress intended for FEGLI benefits to belong to the designated beneficiary to the exclusion of all others, then Code § 20–111.1(D) “stands as an obstacle to the accomplishment and execution of the full power and objectives of Congress” and is therefore preempted by FEGLIA. de...