On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 03-cv-01035) District Judge: The Honorable Stanley R. Chesler.
The opinion of the court was delivered by: Van Antwerpen, Circuit Judge
BEFORE: FUENTES, VAN ANTWERPEN and BECKER, Circuit Judges
Appellant James M. McGowan, Sr., was employed by Appellee New Jersey Natural Gas Company ("NJNG") for more than 27 years. He participated in NJNG's Plan for Retirement Allowances for Non-represented Employees ("the Plan") and initially designated his second wife, Rosemary, the "joint and survivor contingent beneficiary." On March 5, 2003, McGowan filed an action in the United States District Court for the District of New Jersey, seeking declaratory relief directing NJNG and the Plan to recognize: (1) Rosemary's purported waiver of her rights as beneficiary; and (2) McGowan's subsequent nomination of his present wife, Donna, as the new beneficiary.
Whether the administrators of a retirement plan that is covered by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., are required to recognize an individual's waiver of her beneficiary interest under the plan is an issue of first impression in this Circuit, and there is a split among the courts of appeals that have considered the issue. The District Court below denied McGowan's motion for summary judgment and granted summary judgment in favor of NJNG. The court held that Plan administrators are not required to look beyond Plan documents to determine whether a waiver has been effectuated in a private agreement between the participant and his named beneficiary. For the reasons set forth below, we will affirm.*fn1
I. FACTUAL AND PROCEDURAL HISTORY
McGowan was employed by NJNG from May 12, 1969, until his retirement on November 30, 1996. As of the date of his retirement, McGowan was married to his second wife, Rosemary Byrne. Shortly before his retirement, McGowan elected to receive his retirement benefits in the form of an "automatic surviving spouse option," creating a 50% survivor annuity for Rosemary. This election remained in effect when he began receiving benefits in 1996.
McGowan and Rosemary were divorced in Palm Beach County, Florida, on May 24, 1999. On July 23, 1998, prior to the formal entry of the divorce, they entered into a Marital Settlement Agreement, which was later incorporated into the final judgment of dissolution. The agreement stated that Rosemary "waives any and all rights, title, interest or claims . . . to all bank accounts, life insurance policies and any right to the New Jersey Gas Company Employee Pension Plan of the Husband." (App. at A61.) Shortly after Rosemary signed this purported waiver, McGowan contacted the Plan to change the named survivor beneficiary. On July 27, 1998, Rosemary signed a form consenting to the election of McGowan's first wife, Shirley McGowan, as the replacement beneficiary.
In an August 6, 1998, letter, the Plan's benefits manager, Nancy Renner, informed McGowan that the Plan did not permit changes to his prior contingent beneficiary election once he started receiving benefit payments. Notwithstanding the Plan's denial of his initial request, McGowan sought to change beneficiaries again after his marriage to his current wife, Donna McGowan, on November 3, 2001. NJNG refused to recognize McGowan's nomination of Donna as the new contingent beneficiary and maintained that Rosemary was still the beneficiary under the Plan.
On February 25, 2002, McGowan filed an appeal with the Plan, which was denied by the Plan Claims Administration Committee on April 30, 2002. McGowan subsequently exhausted all administrative appeals and commenced the present action with a two-count Complaint in the United States District Court for the District of New Jersey on March 5, 2003. In Count I, McGowan sought a declaration directing NJNG to recognize Rosemary's waiver and the subsequent nomination of Donna as the new beneficiary. In Count II, McGowan sought the imposition of civil penalties against NJNG for allegedly failing to produce Plan documents within the time period designated by ERISA at 29 U.S.C. § 1132(c).
In its July 26, 2004, Order and Opinion, the District Court denied McGowan's Motion for Summary Judgment and granted NJNG's Cross-Motion for Summary Judgment. Appellant filed a timely Notice of Appeal with this Court on August 23, 2004.
II. JURISDICTION AND STANDARDS OF REVIEW
NJNG's retirement plan is an "employee welfare benefit plan" within the meaning of ERISA, 29 U.S.C. § 1002(1). The District Court thus had federal question jurisdiction over the instant dispute pursuant to 28 U.S.C. § 1331. See also 29 U.S.C. § 1132(a)(1)(B) (a plan participant has the right to bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under terms of the plan"). Pursuant to 28 U.S.C. § 1291, this Court has appellate jurisdiction over the District Court's final order ruling on the parties' cross-motions for summary judgment.
"The standard of review in an appeal from an order resolving cross-motions for summary judgment is plenary." Cantor v. Perelman, __ F.3d __, 2005 WL 1620323, *3 n.2 (3d Cir. July 12, 2005) (citing Int'l Union, United Mine Workers of Am. v. Racho Trucking Co., 897 F.2d 1248, 1252 (3d Cir. 1990)). In reviewing the propriety of a summary judgment ruling, we apply the same standard that the District Court should have applied.Bucks County Dep't of Mental Health/Mental Retardation v. Pennsylvania, 379 F.3d 61, 65 (3d Cir. 2004). Under Fed. R. Civ. P. 56(c), summary judgment should be granted where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The material facts of this case are not in dispute, and the issue presented is purely legal: whether NJNG should be compelled to recognize Rosemary's waiver of her rights as a beneficiary under the Plan.
With respect to McGowan's claim that NJNG failed to provide Plan documents in a timely manner, we review the District Court's denial of civil penalties under 29 U.S.C. § 1132(c) for abuse of discretion. See Bruch v. Firestone Tire & Rubber Co., 828 F.2d 134, 153 (3d Cir. 1987), rev'd in part on other grounds, 489 U.S. 101 (1989).
A. Waiver of Benefits Under ERISA
As noted, there is a circuit split on the issue of whether administrators of an ERISA plan are required to recognize a beneficiary's waiver of his or her benefits. The majority of circuits that have addressed this issue have held that such waivers are valid under certain circumstances. See, e.g., Altobelli v. Int'l Bus. Mach. Corp., 77 F.3d 78 (4th Cir. 1996); Mohamed v. Kerr, 53 F.3d 911 (8th Cir. 1995); Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir. 1994); Metro. Life Ins. Co. v. Hanslip, 939 F.2d 904 (10th Cir. 1991); Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir. 1990) (en banc). Only two courts of appeals have disagreed, holding that plan administrators need not look beyond the documents on file with the plan to determine whether there has been a valid waiver effectuated in outside private documents. Krishna v. Colgate Palmolive Co., 7 F.3d 11 (2d Cir. 1993); McMillan v. Parrott, 913 F.2d 310 (6th Cir. 1990).*fn2
"ERISA is an intricate, comprehensive statute." Boggs v. Boggs, 520 U.S. 833, 841 (1997). It is so designed in order to protect "the interests of participants in employee benefit plans and their beneficiaries[.]" 29 U.S.C. § 1001(b); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). The majority approach is largely based on the premise that, despite the comprehensive nature of the statute, there are "gaps" that may be filled by reliance on federal common law. See, e.g., Altobelli, 77 F.3d at 80; Brandon, 18 F.3d at 1325; Fox Valley, 897 F.2d at 278; Lyman Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989); see also Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257 n.8 (3d Cir. 1993) ("Firestone authorizes the federal courts to develop federal common law to fill gaps left by ERISA." (citing Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989))).
According to the majority approach, because ERISA does not explicitly address "waiver" by a beneficiary, we may turn to federal common law to determine whether, and under what circumstances, an individual may validly waive her benefits in an ERISA plan. See Altobelli, 77 F.3d at 81; Brandon, 18 F.3d at 1326; Fox Valley, 897 F.2d at 281; Lyman Lumber, 877 F.2d at 693. Under the federal common law that has developed, an individual's waiver is valid if, "upon reading the language in the divorce decree, a reasonable person would have understood that she was waiving her beneficiary interest. . . ." Clift v. Clift, 210 F.3d 268, 271-72 (5th Cir. 2000); see also Mohamed, 53 F.3d at 914-15 ("a property settlement agreement entered into pursuant to a dissolution may divest former spouses of beneficiary rights in each other's [ERISA benefits], if the agreement makes it clear that the former spouses so intend."). Moreover, "any waiver must be voluntarily made in good faith." Clift, 210 F.3d at 272.
We disagree with McGowan's argument that the situation presented by this case is not resolved by looking to the express terms of ERISA, and we therefore decline to follow the federal common law approach.
1. ERISA's Requirement that Plans Be Administered in Accordance with the Plan Documents
ERISA imposes a fiduciary duty on plan administrators to discharge their duties "in accordance with the documents and instruments governing the plan. . . ." 29 U.S.C. § 1104(a)(1)(D). As such, the statute dictates that it is the documents on file with the Plan, and not outside private agreements between beneficiaries and participants, that determine the rights of the parties. McMillan, 913 F.2d at 311-12 ("This clear statutory command, together with the plan provisions, answer the question; the documents control. . . ."); cf. Egelhoff v. Egelhoff, 532 U.S. 141, 150 (2001) (noting "ERISA's requirements that plans be administered, and benefits be paid, in accordance with plan documents.").
The Plan documents in this case designate Rosemary as the beneficiary, and any requirement imposed on Plan administrators to look beyond these documents would go against the specific command of § 1104(a)(1)(D). Because this case is resolved by reference to the terms of ERISA and the Plan documents alone, federal common law should simply have no place in our analysis.
Our holding is not only required by the terms of § 1104(a)(1)(D), but it is also necessary to promote one of the principal goals underlying ERISA -- ensuring that "plans be uniform in their interpretation and simple in their application." McMillan, 913 F.2d at 312 (citing H.R. Rep. No. 93-533 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4650); see also Krishna, 7 F.3d at 16 (noting the "strong interest in uniform, uncomplicated administration of ERISA plans."). This extremely important policy goal is best served by the conclusion that, under § 1104(a)(1)(D), outside waivers are not binding on Plan administrators. Cf. Fox Valley, 897 F.2d at 284 (Ripple, J., dissenting) (noting that § 1104(a)(1)(D) "embodies a strong federal policy that all parties -- participant, trustee, and beneficiary -- be able to ascertain their rights and liabilities with certainty."). As Judge Wilkinson stated in his dissenting opinion in Altobelli: Strict adherence to § 1104(a)(1)(D) ensures that all interested parties, including participants, beneficiaries, and plan administrators, can identify their rights and duties with certainty, a primary objective of ERISA. This in turn limits costly disputes over the effect of outside documents on the distribution of plan benefits.
Altobelli, 77 F.3d at 82 (Wilkinson, C.J., dissenting) (internal citations omitted).
The Supreme Court similarly relied on the need for certainty and uniformity in the administration of ERISA plans when it held in Egelhoff, 532 U.S. at 148-51, that ERISA preempts a state statute whereby a former spouse's beneficiary designation was automatically revoked upon divorce. The Court also relied on "the congressional goal of 'minimiz[ing] the administrative and financial burden[s]' on plan administrators. . . ." Id. at 150 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990)). The Court noted that, if ERISA did not preempt the state law at issue, a burden would be created for administrators to "familiarize themselves with state statutes so that they can determine whether the named beneficiary's status has been 'revoked' by operation of law" rather than "simply . . . identifying the beneficiary specified by the plan documents." Id. at 148-49. These same concerns counsel against requiring administrators to familiarize themselves with the various private agreements that might exist between participants and beneficiaries to determine whether they contain valid waivers under federal common law.
My colleagues accept McGowan's assertion that requiring Plan administrators to recognize waivers does not in fact undermine certainty or uniformity, and that it would not create any administrative burden that is not already imposed by ERISA itself. McGowan points to 29 U.S.C. § 1056(d)(3), which allows the designation of an alternate payee by obtaining a qualified domestic relations order ("QDRO").*fn3 Administrators are already required to review domestic relations orders, such as divorce decrees and property settlement agreements,*fn4 to determine whether they are "qualified" under the requirements set forth in 29 U.S.C. §§ 1056(d)(3)(C) & (D). Thus, McGowan claims that the enforcement of waivers would place no burden on administrators that does not already exist. Cf. Altobelli, 77 F.3d at 81; Fox Valley, 897 F.2d at 282 ("No such additional burdens will be imposed. . . . Our decision only requires plan administrators to continue their current practice of thoroughly investigating the marital status of a participant.").
I disagree. Sections 1056(d)(3)(C) & (D) provide very specific, objective elements that must be present for a domestic relations order to be "qualified." Thus, to determine if a document is a QDRO, administrators can essentially utilize a checklist and easily ascertain whether, for example, the document "specifies 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," 29 U.S.C. § 1056(d)(3)(C)(i). Under the majority approach, on the other hand, administrators have to interpret documents that could otherwise be summarily discarded as non-QDROs, applying less concrete standards, to determine whether they were (1) voluntarily entered into, (2) in good faith, and (3) specific enough that a "reasonable person" would see them as valid waivers. It cannot be denied that requiring administrators to review contractual language under an ...