Ross v. Ross

DAWN ROSS, Plaintiff, v. GRACE ROSS, Defendant.

Case No. 5:19-cv-261-JMH

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION at LEXINGTON

January 14, 2020

MEMORANDUM OPINION AND ORDER***

This matter is before the Court on Defendant Grace Ross's motion to dismiss Plaintiff Dawn Ross's complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). [DE 4]. Plaintiff responded [DE 5] and Defendant replied [DE 8], making the motion ripe for review.

Plaintiff argues that the divorce decree between her and her former husband, who died in 2019, is a qualified domestic relations order exempt from the Employee Retirement Income Security Act of 1974's requirements. While this Act and the terms of the decedent's life insurance policy itself usually govern proceeds paid to beneficiaries, qualified domestic relations orders can supersede those designations. Defendant, who was married to Plaintiff's former husband at the time of his death, claims that the mediation agreement and decree are not specific enough to be a qualified domestic relations order.

For the reasons stated below, all claims against Defendant are hereby dismissed.

I. FACTUAL AND PROCEDURAL BACKGROUND

Clarence Boyd Ross III was previously married to Plaintiff Dawn Ross. [DE 1-3 at 1]. Mr. Ross was married to the Defendant when he died in January of 2019. [Id. at 2]. The Plaintiff and Mr. Ross mediated their divorce and both parties signed a settlement agreement in December of 2012. [DE 1-3]. The Scott County Circuit Court approved and adopted the settlement agreement within its decree of dissolution of marriage. [DE 1-3 at 9]. Following divorce proceedings in April 2013, Mr. Ross married Defendant Grace Ross. [Id. at 1-2].

The parties' disagreement in this matter centers on a dispute about the terms of the settlement agreement, and specifically, its provision regarding Mr. Ross's life insurance proceeds. The agreement states:

Life Insurance: [Mr. Ross] shall name [Plaintiff] the beneficiary of an amount sufficient to cover his support obligation of his life insurance policy through his employer Michelin. Further, [Mr. Ross] shall maintain the current private term insurance policy with a designation of [Plaintiff] as trustee of a trust for the children as the beneficiary until said policy expires.

[DE 1-3 at 6]. Further, the settlement agreement addresses exactly what Mr. Ross's support obligation should be:

Support: Effective within 7 days of [Plaintiff] vacating the marital residence, and subject to the terms of the maintenance statute, [Mr. Ross] shall begin to pay[Plaintiff] $3500 per month total support and shall continue to do so until [Plaintiff] receives full social security benefits and [Plaintiff] has an obligation to apply for said benefits upon the first date [Plaintiff] is eligible to claim social security benefits. Said payment shall be prorated for the first month. All further payments shall be due in 2 equal installments on the 1st and 15th of each month. For tax purposes only, the parties will consider $1500 of this amount to be child support with the no tax consequence and the other $2000 as maintenance with it being income to [Plaintiff] and deductible to [Mr. Ross]. Counsel for [Plaintiff] shall prepare and execute a wage assignment order and until such time as [Mr. Ross] sees that amount being withheld from his check he shall made said payments directly to [Plaintiff].

[DE 1-3 at 5-6]. From these provisions, Plaintiff concludes that she is entitled to life insurance proceeds in an amount equal to the support she received during Mr. Ross's life.

Plaintiff pleads that Mr. Ross's policy was initiated through his employer Camso¹ and was administered by the Unum Life Insurance Company of America.² [DE 1-3 at 2]. Plaintiff states that proceeds from a life insurance policy were paid to Defendant upon Mr. Ross's death. [Id.]. The parties agree that the dispute and insurance policy or policies in this case are governed by the Employee Retirement Income Security Act of 1974. [DE 4 at 1]. Plaintiff seeks a declaration that the divorce decree and settlement agreement are collectively a qualified domestic relations orderunder the Act. [DE 1-3 at 2]. She further argues that she is the proper beneficiary of the proceeds paid to Defendant in an amount equal to the support obligation in the settlement agreement. [Id.]. Plaintiff also alleges a count of "money wrongfully received," stating that Defendant is not entitled to the proceeds except for any amount in excess of what is owed to Plaintiff.

Defendant filed a motion to dismiss the complaint for failure to state a claim, in lieu of an answer. [DE 4]. Plaintiff timely responded [DE 5] and Defendant replied. [DE 8]. Several months after the motion to dismiss was fully briefed, Plaintiff filed a motion for summary judgment. [DE 9]. Defendant responded [DE 10] and Plaintiff did not reply.

II. STANDARD OF REVIEW

A motion to dismiss³ pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the plaintiff'scomplaint. The Court views the complaint in the light most favorable to the plaintiff and must accept as true all well-pleaded factual allegations contained within it. Thompson v. Bank of Am., N.A., 773 F.3d 741, 750 (6th Cir. 2014). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible when it contains facts that allow the court to draw the reasonable inference that the defendant is liable for the alleged misconduct. Id. "The plausibility standard ... asks for more than a sheer possibility that a defendant has acted unlawfully." Id.

III. DISCUSSION

A. Qualified domestic relations order ERISA exemption

The Employee Retirement Income Security Act of 1974, better known by its acronym "ERISA," is a federal statutory scheme that regulates private retirement and health plans. 29 U.S.C. § 1103(c)(1). Under ERISA, participants and beneficiaries of these plans are determined "in accordance with the documents and instruments governing the plan." Id. § 1104(a)(1)(D). In 1984, Congress realized that ERISA's preemptive effect on state law could greatly impact the ability of spouses and dependents to receiveplan proceeds as intended following divorce. See Sun Life Assurance Co. of Canada v. Jackson, 877 F.3d 698, 700 (6th Cir. 2017); 29 U.S.C. § 1104(a)(1)(D)(discussing ERISA's preemptive effect on state law). Congress's solution was a new exemption for "qualified domestic relations orders." 29 U.S.C. § 1144(b)(7).

"A qualified domestic relations order includes any state 'judgment, decree, or order' relating to the provision of 'child support, alimony payments, or marital property rights' that recognizes an 'alternate payee's right to ... benefits' and meets a number of other requirements." Sun Life, 877 F.3d at 700-01 (quoting 29 U.S.C. § 1056(d)(3)(B)(i)-(ii)). A domestic order meets the requirements of this exemption only if the order clearly specifies:

(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,

(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,

(iii) the number of payments or period to which such order applies, and

(iv) each plan to which such order applies.

29 U.S.C. § 1056(d)(3)(C)(emphasis added).

Because the settlement agreement was drafted with less-than-perfect detail, the issue becomes the level of specificity requiredto honor the state court decision, while also adhering to the requirements and purpose of ERISA. Plaintiff, in response to Defendant's motion to dismiss, states that "drafting perfection is not required" and that "substantial compliance with the requirements is all that is necessary." [DE 5 at 2].

The relaxed "substantial compliance" standard is only applicable to domestic orders drafted before the exemption's effective date of January 1, 1985. Sun Life, 877 F.3d at 701 (citing Metro. Life Ins. Co. v. Marsh, 119 F.3d 415, 422 (6th Cir. 1997)(divorce decree written before ERISA was amended led the court to demand less than literal compliance)).⁴ Because the Plaintiff and Mr. Ross divorced nearly two decades after 1985, she must show that the terms of the agreement and order clearly specify the requirements listed in the statute. Id. While this standard demands more than substantial compliance, it does not require "rigidity" or "magic words." Id. In fact, as the United States Sixth Circuit Court of Appeals explained in Sun Life, "one may 'clearly specify' something by implication or inference so long as the meaning isdefinite." Id. (citing Oxford English Dictionary 159 (2d ed. 1989)). Further, "the statute does not require that a particular provision of the divorce decree clearly specify the relevant details. It requires the entire 'domestic order' to do so, examined in full, not silo by silo." Id. at 702 (citing Russell v. Citigroup, Inc., 748 F.3d 677, 681 (6th Cir. 2014)).

The most disputed of the four requirements will be addressed first. As indicated above, Plaintiff must demonstrate that the life insurance plan in dispute is clearly specified in the order. The agreement specifically states that Plaintiff shall be the beneficiary of Mr. Ross's life insurance policy "through his employer Michelin." [DE 1-3 at 6]. Defendant argues that because Mr. Ross indisputably worked at a company called Camso at the time of his death, and pled that Camso distributed the policy, the policy at issue is not clearly identified in the agreement. [DE 4 at 4].

Following the Sixth Circuit's decision in Sun Life, a handful of federal district courts addressed this...