Petition for Writ of Certiorari — Stencel v. Emard

a Supreme Court, U.8.

FILED

88 846 NOV 181998

IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

ALEX STENCEL,

Petitioner,

vs.

GARY EMARD,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

GREGORY B. BEAM

RALPH R. LOYD

Counsel of Record

HORWITZ & BEAM

Two Venture Plaza, Suite 350

Irvine, California 92618

(949) 453-0300

Attorneys for Petitioner

ALEX STENCEL

Lawyers Brief Service * Appellate Brief Printers * (213) 613-1013 * (949) 720-1510

3

QUESTIONS PRESENTED

1. Does ERISA preempt California community

property law where the application of community prop-

erty law alters the express terms of an ERISA welfare

benefit plan?

2. Is a spouse who is not a plan participant or

beneficiary entitled to assert California community prop-

erty law claims to defeat the payment of an ERISA

plan’s benefits to the participant’s designated

beneficiary?

Ss

PARTIES TO THE PROCEEDING

The Petitioner is Alex Stencel, and the Respondent is

Gary Emard.

The Defendants in the District Court action were Alex

Stencel, Hughes Aircraft Company and Metropolitan

Life Insurance Company. Upon appeal to the Ninth

Circuit, Hughes Aircraft Company and Metropolitan Life

Insurance Company were named as Appellees but did

not participate in the appeal proceedings by filing a brief

or appearing at oral argument.

TABLE OF CONTENTS

APPENDIX A

OPINION, NINTH CIRCUIT COURT OF

APPEALS, FILED AUGUST 20, 1998 . . . A-1

APPENDIX B

ORDER GRANTING SUMMARY JUDG-

MENT, UNITED STATES DISTRICT

COURT CENTRAL DISTRICT OF CALIF-

ORNIA SOUTHERN DIVISION, FILED

ae EE ME UPON rol a es ete bo B-1

APPENDIX C

STATUTES INVOLVED

29 USCS §§ 1002 (8) and 1104 (a)(1)(D) . . C-1

« 1y¥ -

TABLE OF AUTHORITIES

Page

Cases

Boggs v. Boggs,

Pes FB ee Ei. ty Beemer 5,7, 10, 11

Brandon v. Travellers Insurance Co.,

18 F.3d 1321 (Sth Cir. 1994)... ........ 5

Brown v. Connecticut General Life Insurance Co.,

SPS Fae 259s CL, 2998) ck a ene 5

California Division of Labor Standards Enforce-

ment v. Dillingham Construction, N.A., Inc.,

SET BGR OE Gb ee ee ee 5

Cripps v. Life Insurance Co. of North America,

S60 F260 tael Hee Cie. I9NE) 6 ee a SS 6

Equitable Life Insurance Society v. Chrysler, i

OG Fk Pee CO a Se eee es 5

Free v. Bland,

DEP tre Oe Cee ce ae a eS eS 11

Guidry v. Sheetmetal Workers Nat'l

Pension Fund,

ee tee ee on a a es a ee 4

Hisquierdo v. Hisquierdo,

ae Ti te PE Ae eS 11

Krishna v. Colgate Palmolive Co.,

Toe EE Le als Bede ek ee Ae ee ee ee 5

Page

Lyman Lumber Co. v. Hill,

ST? P26 C2 (ON CRD) ns 8 Ss 5

Mackey v. Linear Collection Agency & Svc, Inc.,

SOO Tin B40 119ORe Se kr ee ee 4

MacLean v. Ford Motor Company,

SOT aG tas hs Ge ee. ee se eS 5

Mansell v. Mansell,

OI Si AOR CIE 6 se ECS ee 1]

Marshall v. Manville Sales Corp.,

OF.20 229 AS Ce 99S) oe eS 8

McCarty v. McCarty,

SAF WIG BIO LOU eo re eee 1]

McCune v. Essig,

Ie GG See lige. sk ES ee 1]

McMillan v. Parrott,

913 5.26 FIC 1s Cir. 1990). 5

Metropolitan Life Insurance Co. v. Hanslip,

Jie Fae Poe Cities Cl, 1991) oc ee 5

Metropolitan Life Insurance Company v. Pressley,

82 F.3d 126 (6th Cir. 1996), cert. denied,

bid BAR OOS lOeTs Ca a eee ee 5

Moore v. Philip Morris Companies, Inc.,

SE36 520 (Oe i, 1999) oe es ee 5

Phoenix Mutual Life Insurance Co. v. Adams,

ye toe oe (Ale Cr, 1998) ee 5

° ¥j -

Page

Ridgway v. Ridgway,

454 US GB tipesl ct <a eee es ee ee 11

Wissner v. Wissner,

358 US Goo (idee «6c et OE eee 11

Statutes

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y Bi of By | Peres fear ee ye 1,3

y Gi. of | TPC ree err ere 2

20 Us Oo BOT «6 6 88s SE ee eee » ey

29 UES S IGG GE) «ccc eet we ee ee 1,6

y. Bi oe FBS. To. 4) Py tee 6,9

29 USES § 11G6 (QI MD) 0 6 ko 8 6 ww Be ae 1, 6,9

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PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

The opinion and judgment of the United States Court

of Appeals for the Ninth Circuit, reported at 98 D.A.R.

9544, is reprinted as Appendix A. It reverses the judg-

ment of the United States District Court for the Centra!

District of California, Southern Division, which is

reprinted as Appendix B.

JURISDICTION

The judgment of the United States Court of Appeals

for the Ninth Circuit was entered on August 20, 1998.

This petition is timely filed within ninety (90) days of

that date. The jurisdiction of this court to review the

judgment on Petition for Certiorari rests upon 28 USC

§ 1254(1).

STATUTES INVOLVED

The relevant statutory provisions are the Employee

Retirement Income Security Act of 1974 (“ERISA”), as

amended, 29 USCS §§ 1002 (8) and 1104 (a)(1)(D),

reprinted as Appendix C.

STATEMENT OF THE CASE

Petitioner requests the Court to review the Ninth

Circuit’s decision filed August 20, 1998. The Ninth

Circuit had jurisdiction pursuant to 28 USC § 1291 as an

“.

appeal from a final decision of the District Court. The

Ninth Circuit reversed the decision of the District Court,

which granted Petitioner’s cross-motion for summary

judgment and denied Respondent Emard’s motion for

summary judgment. -

This action arose when Gary Emard (“Emard”) filed

his action for declaratory relief in Orange County

Superior Court, State of California, for benefits under

two ERISA welfare benefit plans. Emard named as

defendants Hughes Aijircraft Company (“Hughes”),

Metropolitan Life Insurance Company (“Met Life”) and

Alex Stencel (“Stencel”).

The action was removed to District Court pursuant to

28 USC §§ 1441 and 1447. The District Court granted

Stencel’s summary judgment motion, who was the desig-

nated beneficiary on the Hughes welfare benefit plans.

The District Court ruled that ERISA preempted the

application of California’s community property law.

Emard appealed and the Ninth Circuit reversed for the

reasons discussed infra.

This case concerns the entitlement to benefits under

two ERISA welfare plans: the Hughes Basic Life and

Optional Life Benefit Plans. Ginger Stencel Emard

(“Ginger”) was a participant in both of these plans of-

fered by her employer, Hughes. Stencel was named as

beneficiary by Ginger on the beneficiary designation

card. The Hughes Basic Life plan benefits totaled

$50,000.00 and the Hughes Optional Life Benefits plan

totaled $138,528.00 in benefits. Ginger filled out the

beneficiary designation form on August 11, 1981 desig-

nating her then spouse, Alex Stencel, as the primary

beneficiary and naming as alternate beneficiaries their

two sons, Alex, Jr. and Jason.

Ginger and Alex Stencel were married in 1975. They

had two children, Jason and Alex, Jr. In 1981 Ginger

ne

went to work for Hughes. As part of her employment,

she was a participant in the Hughes Basic Life Benefits

Plan offered through Hughes. Met Life issued the term

life policy which was paid for by Hughes.

Ginger and Alex Stencel divorced in 1985. The dis-

solution decree was silent concerning Ginger’s employee

life insurance benefits. In 1986, Ginger married Emard.

One child was born of their marriage. In 1988 Ginger

obtained through Hughes benefits under the Hughes

Optional Life Plan. Payments were made by payroll

deductions and subsequently a few payments were made

by personal check. The same beneficiary designation

form remained in effect and was never changed.

Ginger died of cancer in January of 1995. Ginger

died intestate. At the time of her death, Ginger was an

active employee of Hughes and remained covered under

both the Hughes Basic Life and Optional Life plans.

The Met Life policies did not convert to an individual

life insurance policy.

Emard brought his state court action naming Stencel,

Hughes and Met Life as defendants and sought a declara-

tion that he was entitled, under California law, to the

proceeds of Ginger’s “insurance policies.” Hughes and

Met Life removed the action to federal court pursuant to

28 USC § 1447 contending a federal question was pre-

sented and ERISA preemption barred Emard’s claims.

The District Court granted summary judgment in favor

of Stencel and Emard timely filed his appeal.

THE COURT OF APPEALS DECISION

The Ninth Circuit assumed jurisdiction pursuant to 28

USC § 1291.

“a

In reversing the District Court’s granting of summary

judgment in favor of Stencel on the ground that ERISA

preemption prohibited the application of California

community property law, the Ninth Circuit, recognized

this court has not directly addressed the issues raised by

this action.

The Ninth Circuit found that ERISA preemption does

not bar the application of California’s law of con-

structive trust, relying on the decisions of Guidry v.

Sheetmetal Workers Nat’l Pension Fund, 493 US 365,

372 (1990) and Mackey v. Linear Collection Agency &

Sve, Inc., 486 US 825, 837 (1988). The Ninth Circuit

reasoned there was “no meaningful distinction between a

writ of garnishment and a constructive trust remedy.”

Based on the foregoing precedent, the Court concluded

that ERISA does not preempt California law permitting

the imposition of a constructive trust on insurance pro-

ceeds before their distribution to the designated bene-

ficiary.

Proceeding on this course, the Court also found that

ERISA did not prohibit the imposition of a constructive

trust on insurance proceeds after their distribution to the

beneficiary, relying on Guidry v. Sheetmetal Workers

Nat'l Pension Fund, 39 F.3d 1078, 1081-83 (10th Cir.

1994 en banc). The Court concluded that ERISA was

designed to insure that benefits were paid out but is

silent as to the disposition of the funds after their receipt

by the beneficiary notwithstanding that in the instant

case Stencel has not received the funds.

The Ninth Circuit had not previously addressed the

question of whether ERISA preemption bars the applica-

tion of state law that would require the distribution of

ERISA insurance proceeds to a person other than the

designated beneficiary. The Ninth Circuit recognized

that the other circuit opinions that have addressed the

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issue have relied upon this Court’s previous analysis of

ERISA preemption, and those opinions have generally

held that state law provisions “relate to” ERISA and

therefore are preempted. (See Metropolitan Life

Insurance Company v. Pressley, 82 F.3d 126, 129 (6th

Cir. 1996), cert. denied, 117 S.Ct. 243 (1997); Phoenix

Mutual Life Insurance Co. v. Adams, 30 F.3d 554,

559-60 (4th Cir. 1994); Brandon v. Travellers Insurance

Co., 18 F.3d 1321, 1325 (Sth Cir. 1994); Moore v. Philip

Morris Companies, Inc., 8 F.3d 335, 341-42 (6th Cir.

1993); Krishna v. Colgate Palmolive Co., 7 F.3d 11,

15-16 (2nd Cir. 1993); Metropolitan Life Insurance Co.

v. Hanslip, 939 F.2d 904, 906 (10th Cir. 1991); Brown v.

Connecticut General Life Insurance Co., 934 F.2d 1193,

1195 (11th Cir. 1991); McMillan v. Parrott, 913 F.2d

310, 311 (6th Cir. 1990); MacLean v. Ford Motor

Company, 831 F.2d 723, 726-27 (7th Cir. 1987); Cf

Equitable Life Insurance Society v. Chrysler, 66 F.3d

944, 948-49 (8th Cir. 1995); Lyman Lumber Co. v. Hill,

877 F.2d 692, 693 (8th Cir. 1989).)

The Ninth Circuit recognized the foregoing authori-

ties to be the majority approach and under that approach,

the application of California law affecting the desig-

nation of a beneficiary has a “connection” with ERISA

and would therefore be preempted. The Ninth Circuit

found that the foregoing circuit opinions provided little

guidance to the issues presented in the instant matter.

The Ninth Circuit instead relied upon this Court’s hold-

ings in California Division of Labor Standards Enforce-

ment v. Dillingham Construction, N.A., Inc., 117 S.Ct.

832, 843 (1997) and Boggs v. Boggs, 117 S.Ct. 1754,

1760 (1997). The Ninth Circuit concluded that Califor-

nia’s community property law does not conflict with

ERISA’s requirement that “a f.duciary shall discharge

his duties with respect to a plan ... in accordance with

+

the documents and instruments governing the plan” (29

USC § 1104(a)(1)(D)). The Court reasoned that § 1104

(a)(1) does not prescribe how conflicting claims to plan

benefits are resolved. The Ninth Circuit however did not

explain how it reached this conclusion in light of the

express language of the plan which states that benefits

are payable to the person designated on the beneficiary

designation card on file with the plan administrator.

Moreover, the Ninth Circuit concluded that the phrase

“documents and instruments governing the plan” does

not refer to an individual participant’s designation of a

beneficiary and further reasoned that such a designation

does not “govern the plan” but merely reflects the par-

ticipant’s intent regarding the distribution of the

proceeds. It concluded that § !104(a)(1) does not

preempt California community property law as it con-

cerns only the rights to proceeds and not the administra-

tion of the plan itself. The Court does not however

reconcile the express plan language requiring payment of

the proceeds to the beneficiary named on the beneficiary

designation form.

The Ninth Circuit also held that a person claiming to

be a beneficiary under state law has standing to bring a

claim pursuant to § 1132(a) citing Cripps v. Life Insur-

ance Co. of North America, 980 F.2d 1261, 1266-67 (9th

Cir. 1992). The opinion does acknowledge that Boggs at

17 S.Ct. 1763-65 imposes a narrow definition of bene-

ficiary. Nonetheless, the Ninth Circuit sidesteps the

narrow definition of beneficiary spelled out in § 1002(8)

and Boggs and concludes that absent specific contrary

provisions in ERISA, an action intended only to enforce

individual rights against a beneficiary does not fall

within the scope of 29 USC § 1132(a) and is not barred

by ERISA’s preemptive effect. The rationale appears to

be that Emard’s claims do not implicate the terms of the

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plan since there is no dispute concerning the amount or

nature of the benefit or whether the benefit is properly

payable. However, the analysis stops short of address-

ing the fact that the Hughes plan requires payment to the

beneficiary designated on the beneficiary designation

form. Accordingly, the plan document must be con-

sulted in order to find out who is to be paid. The plan

administrator could not pay anyone other than Stencel,

the designated beneficiary, and be in compliance with

the express provisions of the Hughes plan.

The Court also rejects Stencel’s argument that

California’s community property law regulates ERISA

relationships by changing the identity of the ERISA

beneficiaries as designated by the plan participant. The

Ninth Circuit Court draws the distinction that the instant

case concerns rights to a one-time distribution of insur-

ance proceeds as opposed to pension plan proceeds

which would be required to be administered for the

benefit of persons not designated as beneficiaries as in

Boges. See Boggs at 7117 S.Ct. at 1776-65. However,

in Boggs, the administration of assets would have been

the same irrespective of who the beneficiary was. Ac-

cordingly, the rationale in Boggs should apply in the

instant case since the effect is simply to change par-

ticipant’s beneficiary by operation of state law.

Having concluded that ERISA does not preempt

California law of constructive trust or of community

property, the Ninth Circuit next turned to the issue of

whether removal was proper.

The state court action was removed to District Court

pursuapt to 28 USC § 1447 (federal question jurisdic-

tion). Based on the analysis that California community

property law is not preempted by ERISA and that ERISA

does not preempt California’s law of constructive trust,

the Court reached the conclusion that Emard’s complaint

.

did not present a federal question on its face and federal

law did not preempt Emard’s state law cause of action

and therefore the action was not properly removable.

Based upon Marshall v. Manville Sales Corp., 6 F.3d

229, 232 (4th Cir. 1993) the Ninth Circuit remanded the

action to state court because the District Court did not

have original jurisdiction of the case.

The Court concluded that the instant case concerns

only the rights of individual persons to the proceeds of

life insurance policies and that the case’s resolution will

not effect the statutory scheme envisioned by Congress

when enacting ERISA nor ERISA preemption prohibit

the application of California’s law of constructive trust

or its community property laws in this instance. The

Court also concluded that Emard’s complaint did not

raise a federal question on its face and his causes of

action were not preempted by ERISA. Met Life’s re-

moval was also concluded to be improper. The judgment

of the District Court was reversed and remanded with

instructions to remand to the State Court. No stay of the

mandate is currently in effect.

REASONS FOR GRANTING THE WRIT

This is a case of first impression in that this Court has

never addressed the issue of ERISA preemption in the

context of community property law’s conflict with the

provisions of an employee welfare benefit plan.

The decision of the Ninth Circuit is at variance with

the majority of the circuit courts treatment of plan docu-

ments and beneficiary designations.

Up until the Ninth Circuit’s ruling:

¢ Administrators were required to pay the desig-

nated beneficiaries pursuant to plan documents

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* State laws that alter beneficiary designations

were recognized to impose obligations on plan

administrators that are inconsistent with ERISA

* Questions of entitlement to plan benefits raised

a federal question which could be determined

in District Court.

The practical effect of the Ninth Circuit’s decision is

to deprive Stencel of benefits under the Hughes plan

where he is the designated beneficiary. This decision is

in direct conflict with 29 USC § 1104(a)(1)(D) which

requires the plan administrator to administer the plan “in

accordance with the documents and instruments govern-

ing the plan.”

In this case, the Hughes summary plan description

(“SPD”) under “Basic Life — Core Coverage” states,

“you are automatically covered for $50,000.00 for basic

life insurance starting .... Benefits will be paid to your

beneficiary if you die from any cause while covered.”

The SPD continues under the heading — NAMING A

BENEFICIARY, “your beneficiary is the person you

name to receive your life and accident insurance benefits

if you die. You may name one person or designate how

the benefits are to be divided among more than one

person. Contact your employee benefits office anytime

you would like to change or review your beneficiary

designation ....” It is undisputed Stencel is the named

beneficiary. He is entitled to receive the Hughes plan

benefits in the majority of jurisdictions; however, now in

the Ninth Circuit, such is no longer the law.

The Ninth Circuit’s decision also erroneously con-

cludes that there is no conflict between California’s law

of community property and § 1104. If this case is

allowed to stand, California law will alter beneficiary

designations and impose obligations upon plan admin-

istrators other than discharging their duties in

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accordance with the documents and instruments govern-

ing the plan.

Not only is there a direci conflict between California

community property law and ERISA but a conflict exists

between the application of California community prop-

erty law and the congressional intent in inacting ERISA

that plans be uniform in their interpretation and simple

in their application. It places a burden upon admin-

istrators to look beyond the plan documents for distri-

buting benefits. Administrators would be required to

consult state law before undertaking benefit distribu-

tions. The congressional intent in uniform interpretation

and simple application would be frustrated. Admin-

istrators would not only have to look to state law and not

the controlling plan documents but would also be forced

to initiate interpleader proceedings in the event there are

conflicting claims. While this burden may not appear

too great in a single instance, if looked at it in its

totality, the disharmony caused in the uniform admin-

istration of ERISA plans could lead employers to reduce

plan benefits and/or eliminate the plan benefits.

The congressional intent that ERISA plans be uniform

in their interpretation and simple in their application is

carried out only by allowing the plan documents to de-

termine the proper beneficiary. (See case citations at

page 5.)

The Ninth Circuit’s decision also ignores this Court’s

holding in Boggs, supra. For example, this Court in-

structs that ERISA confers beneficiary status on a non-

participant spouse or a dependent spouse only in narrow

circumstances delineated by ERISA’s provisions con-

cerning QDROs or it’s survivor annuity provisions. It is

‘ undisputed in this case that no QDRO exists or was

argued to exist by Emard. The Ninth Circuit also

ignores the decision in Boggs to the extent that the sons

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in Boggs were found to have no claim under ERISA to

share in any of the retirements benefits at issue and were

found to be neither participants nor beneficiaries. The

Same is true for Emard in this case. Emard, just as the

sons in Boggs, is not a participant or beneficiary within

the meaning of § 1002.

Moreover, as Boggs instructs, community property

laws have in past been preempted in order to ensure the

implementation of a federal Statutory scheme. See

Boggs citing McCune v. Essig, 199 US 382 (1905);

Wissner v. Wissner, 338 US 655 (1950); Free v. Bland,

369 US 663 (1962); Hisquierdo v. Hisquierdo, 439 US

572 (1979); McCarty v. McCarty, 453 US 210 (1981);

Mansell v. Mansell, 490 US 581 (1989); cf. Ridgway v.

Ridgway, 454 US 46 (1981).

If state law is not preempted in this instance, Califor-

nia community property law will be allowed to change

the terms of the Hughes ERISA plan or alternately effec-

tively divert the benefits to a nonbeneficiary by virtue of

a constructive trust. If allowed to stand, the Ninth Cir-

cuit’s decision will effectively require future plan ad-

ministrators to consult California law before making

distributions and ultimately file interpleader actions

where there are competing claims for plan benefits. The

congressional intent in enacting ERISA is clear that the

administrator need not be concerned with such burdens

but instead simply look to the plan documents and dis-

tribute benefits pursuant to those documents.

Se

CONCLUSION

The Ninth Circuit’s decision demonstrates a com-

pelling need for this Court to exercise its power of

supervision and summarily reverse on the questions

presented by this petition.

Alternately, this petition should be granted in order to

address the Ninth Circuit’s decision departing from the

mandate of ERISA requiring plan administrators to

discharge their duties “in accordance with the documents

and instruments governing the plan” and to reconcile this

decision with the other Circuit’s decision on the same

point. This Court should further grant the petition so

that ERISA’s mandate of uniformity can be addressed by

this Court as this presents a case of first impression with

respect to ERISA welfare benefit plans upon which this

Court has not yet spoken.

Respectfully submitted

GREGORY B. BEAM

RALPH R. LOYD

Counsel of Record

HORWITZ & BEAM

Attorneys for Petitioner

ALEX STENCEL

APPENDIX A

re

CORRECTED REPRINT TO INCLUDE

PARTIAL CONCURRENCE AND PARTIAL DISSENT

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Bees,

Gary Emarp,

Plaintiff-Appellant,

Vv.

No. 96-56584

HuGues Aircrart Company, a , D.C. No.

corporation; METROPOLITAN LIFE CV-95-00410-AHS

INSURANCE ComPANY, a OPINION

corporation; ALEX STENCEL,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

Alicemarie H. Stotler, District Judge, Presiding

Argued February 2, 1998

Pasadena, California

Submitted February 12, 1998

Filed August 20, 1998

Before: Harry Pregerson, Robert R. Beezer and

Cynthia Holcomb Hall, Circuit Judges.

Opinion by Judge Beezer; Partial Concurrence and

Partial Dissent by Judge Hall

10151]

BY ‘ey >

EMARD v. HuGHEes AIRCRAFT COMPANY 10157

COUNSEL

Gerald N. Shelley, Costa Mesa, California, for the plaintiff-

appellant.

Ralph R. Loyd, Horwitz & Beam, irvine, California, for

defendant-appellee Alex Stencel.

OPINION

BEEZER, Circuit Judge:

Gary Emard (“Emard”) filed an action in California state

court seeking a declaration that, under California law, he is

entitled to at least half of the proceeds of two term insurance

policies insuring the life of his deceased wife, Ginger Emard

(“Ginger”). The policies were issued as an employee benefit

under the Hughes Aircraft Company plan, which is governed

by the Employee Retirement Income Security Act (“ERISA”),

29 U.S.C. §§ 1001-1461. The action was removed to district

court pursuant to 28 U.S.C. § 1441. The district court granted

summary judgment in favor of Alex Stencel (“Stencel’), Gin-

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10158 EMARD v. HuGHES AIRCRAFT COMPANY

ger’s former husband and the designated policy beneficiary,

on the ground that ERISA preemption prohibits application of

California’s community property law. Emard appealed. We

have jurisdiction. 28 U.S.C. § 1291. We hold that ERISA pre-

emption does not bar the application of the California law on

which Emard relies and that removal was improper. We

reverse the judgment of the district court and remand with

instructions to remand to state court.

I

Ginger and Stencel married in 1975. Two children were

born of their marriage. In 1981 Ginger was hired by Hughes

Aircraft Company (“Hughes”). Incident to her employment

she was entitled to a $50,000 Basic Life Insurance policy pro-

vided through Hughes’ employee benefit program. This term

life policy was issued by Metropolitan Life Insurance Com-

pany (“Met Life”) and paid for by Hughes. On August 8,

1981, Ginger filled out a designation of beneficiary form

naming “Aleksander Stencel, husband,” as primary benefi-

ciary and their two sons as contingent beneficiaries.

Ginger and Stencel divorced in 1985. The dissolution

decree was silent as io Ginger’s employee life insurance pol-

icy. In 1986 Ginger married Emard. Ginger’s two sons from

her marriage to Stencel lived with Ginger and Emard. One

child was born of the Emard marriage. In 1988 Ginger pur-

chased through Hughes an optional term life insurance policy

($138,000 coverage). Met Life issued the policy. The policy

premiums were paid through after-tax payroll deductions and,

later, by personal check. Ginger did not fill out a new desig-

nation of beneficiary form.

Ginger died intestate in January 1995. The designation of

beneficiary form signed in 1981 remained the only document

directing the distribution of the insurance proceeds. Emard

brought a state court action naming Stencel, Hughes and Met

Life as defendants and seeking a declaration that he is enti-

-A 4-

EMARD v. HuGHES AIRCRAFT COMPANY 10159

tled, under California law, to all or part of the proceeds of

Ginger’s insurance policies. Hughes and Met Life removed

the action to federal court pursuant to 28 U.S.C. § 1441, con-

tending that ERISA preemption barred Emard’s claims.’ The

district court granted summary judgment in favor of the

defendants. This timely appeal followed.

II

We review de novo a grant of summary judgment. Babikian

v. Paul Revere Life Ins. Co., 63 F.3d 837, 839 (9th Cir. 1995).

“We also review de novo the district court’s interpretation and

application of ERISA provisions and its determination that

ERISA preempts a state law.” Aloha Airlines, Inc. v. Ahue, 12

F.3d 1498, 1500 (9th Cir. 1993). Removal is an issue of fed-

eral subject matter jurisdiction reviewed de novo. Harris v.

Provident Life and Accident Ins. Co., 26 F.3d 930, 932 (9th

Cir. 1994). We “must consider whether federal jurisdiction

exists, even if no objection is made to removal . . . and even

if both parties stipulate to federal jurisdiction.” Rains v. Crite-

rion Systems, Inc., 80 F.3d 339, 342 (9th Cir. 1996) (citations

omitted).

III

This case was removed to the district court pursuant to 28

U.S.C. § 1441? (federal question jurisdiction). In general, “‘a

"Hughes and Met Life have otherwise taken no stand on the merits of

Emard’s claims. As of March 18, 1998, the policy proceeds were still in

the possession and control of Met Life.

Section 1441 provides in relevant part that

(a) ... any civil action brought in a State court of which the

district courts of the United States have original jurisdiction, may

be removed by the defendant or the defendants, to the district

court of the United States for the district and division embracing

the place where such action is pending... .

(b) Any civil action of which the district courts have original

jurisdiction founded on a claim arising under the Constitution,

Pah Sern a a eae ae

leigh

<<.

10160 Emarp v. HuGHes Arrcrarr Company

cause of action arises under federal law only when the plain-

tiff's well-pleaded complaint raises issues of federal law.”

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987).

Some federal statutes, though, “may so completely pre-empt

a particular area that any civil complaint raising this select

group of claims is necessarily federal in character.” Jd. at 63-

64. Such complete preemption occurs under ERISA if (1)

ERISA preempts the plaintiff’s cause of action and (2) the

cause of action falls within the scope of 29 U.S.C. § 1132(a).

Harris v. Provident Life and Accident Ins. Co., 26 F.3d 930,

934 (9th Cir. 1994).

[1] Emard’s state court complaint did not raise issues of

federal law on its face, but instead relied solely on state law

to establish Emard’s rights to the proceeds of Ginger’s two

life insurance policies. A life insurance policy provided as

part of an ERISA benefits package is part of an er:ployee

welfare benefit plan and is therefore governed by ERISA. See

29 U.S.C. § 1002(1) (defining “employee welfare benefit

plan”). Ginger’s life insurance policies were provided as part

of an ERISA benefits package and are therefore governed by

ERISA. If Emard’s claims to the proceeds of those policies

are preempted by ERISA and fall within the scope of

§ 1132(a), then removal was proper. See Harris, 26 F.3d at

934. We must first determine, therefore, whether ERISA pre-

emption bars application of the California law on which

Emard relies.

IV

[2] By its terms, ERISA “supersede[s] any and all State

laws insofar as they may now or hereafter relate to any

treatics or laws of the United States shall be removable without

regard to the citizenship or residence of the partics. Any other

such action shall be removable only if none of the parties in inter-

est properly joined and served as defendants is a citizen of the

State in which such action is brought.

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EMARD v. HuGHes AircrAFr COMPANY 10161

employee benefit plan” covered by the statute. 29 U.S.C.

§ 1144(a).° “The term ‘State law’ includes all laws, decisions,

rules, regulations, or other State action having the effect of

law....” Id. § 1144(c)(1).

Initially, the Supreme Court interpreted ERISA’s preemp-

tion statute as creating a “deliberately expansive” preemption

of state law. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46

(1987). In Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,

139 (1990), the Court stated that “a state law may ‘relate to’

a benefit plan, and thereby be pre-empted, even if the law is

not specifically designed to affect such plans, or the effect is

only indirect.”

Recently, “the Court has come to recognize that ERISA

preemption must have limits when it enters areas traditionally

left to state regulation,” Operating Engineers Health and Wel-

fare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 677

(9th Cir. 1998) (citing De Buono v. NYSA-ILA Medical and

Clinical Svcs. Fund, 117 S. Ct. 1747, 1751 (1997)); see also

Toumajian v. Frailey, 135 F.3d 648, 654 n.3 (9th Cir. 1998)

(“Recently, the scope of this broad ‘relate to’ preemption was

markedly narrowed.”).

Under this new approach to preemption, courts “must go

beyond the unhelpful text and the frustrating difficulty of

defining its key term [‘relate to’], and look instead to the

objectives of the ERISA statute as a guide to the scope of the

state law that Congress understood would survive.” New York

State Conference of Blue Cross & Blue Shield Plans v. Trav-

elers Ins. Co., 514 U.S. 645, 656 (1995). The Court has aiso

SERISA specifically exempts from preemption any state law that

“regulates insurance.” 29 U.S.C. § 1144(b)(2)(A). “[I]n order to regulate

insurance, a law must not just have an impact on the insurance industry,

but must be specifically directed toward that industry.” Pilot Life Ins. Co.

v. Dedeaux, 481 U.S. 41, 50 (1987). The California law of constructive

trusts and community property is not specifically directed toward the

insurance industry and therefore is not saved by § 1144(b)(2)(A).

tthe tenia: Binet

ay eS

10162 Emarp v. HuGues Aircrarr Company

directed the courts to look “to the nature of the effect of the

state law on ERISA plans.” California Div. of Labor Stan-

dards Enforcement vy. Dillingham Constr., N.A., Inc., 117 S.

Ct. 832, 838 (1997). Taken together, these recent cases dem-

onstrate, as Justice Scalia noted in his concurrence in

Dillingham, that the Court now applies “ordinary field pre-

emption, and, of course, ordinary conflict pre-emption” analy-

sis to ERISA preemption questions. 117 S. Ct. at 843 (Scalia,

J., concurring). See also John Hancock Mut. Life Ins. Co. v.

Harris Trust and Sav. Bank, 510 U.S. 86, 99 (1993) (“[W]e

discern no solid basis for believing that Congress, when it

designed ERISA, intended fundamentally to alter traditional

preemption analysis.”).

[3] To guide our preemption analysis within the specific

context of ERISA, we ask whether the state law at issue has

(1) a “reference to” or (2) a “connection with” an ERISA

plan. Operating Engineers, 135 F.3d at 677 (quoting District

of Columbia, 506 U.S. at 129, and Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 96-97 (1983)). A state law has “reference

to” ERISA plans where it “acts immediately and exclusively

upon ERISA plans, . . . or where the existence of ERISA

plans is essential to the law’s operation.” Dillingham, 117 S.

Ct. at 838 (citations omitted). The California laws at issue

here do not “act[ ] immediately and exclusively upon ERISA

plans,” nor is “the existence of ERISA plans . . . essential to

the [laws’] operation.” See id. We therefore limit our analysis

to the question whether those laws have “a connection with”

ERISA benefit plans.

V

[4] Emard seeks first to have a constructive trust imposed

on the proceeds of Ginger’s life insurance policies. Under

California law, “a constructive trust is an equitable remedy

imposed where the defendant holds title or some interest in

certain property which it is inequitable for him to enjoy as

against the plaintiff.” Kraus v. Willow Park Public Golf

eye

Emarp v. HuGues AircrAFT COMPANY 10163

Course, 140 Cal. Rptr. 744, 756 (Ct. App. 1977); see also Cal.

Civ. Code § 2224.* Emard argues that Ginger’s failure to alter

the Hughes designation of beneficiary form was a mistake.* In

the absence of that mistaken designation, he continues, Cali-

fornia law would entitle him to all of the proceeds of the

insurance policies. See Cal. Prob. Code § 6401(a). Emard

concludes that it would be inequitable for Stencel to enjoy the

proceeds and therefore that a constructive trust should be

imposed, either while the proceeds are still retained by Met

Life or after they are distributed to Stencel. Stencel counters

that application of the California law on which Emard relies

is barred by ERISA preemption.

[5] Although the Supreme Court has not directly addressed

this issue, its holdings in two cases lead us to the conclusion

that ERISA preemption does not bar application of Califor-

nia’s law of constructive trusts. The Court has held that

ERISA does not preempt state laws permitting garnishment of

an ERISA employee welfare benefit plan by a participant’s

creditor before distribution of the proceeds to the beneficiary.

Mackey v. Lanier Collection Agency & Svc., Inc., 486 U.S.

825, 837 (1988). The Court has held further that there is “no

meaningful distinction between a writ of garnishment and [a]

constructive trust remedy.” Guidry v. Sheet Metal Workers

““One who gains a thing by fraud, accident, mistake, undue influence,

the violation of a trust, or other wrongful act, is, unless he has some other

and better right thereto, an involuntary trustee of the thing gained, for the

benefit of the person who would otherwise have had it.” Cal. Civ. Code

§ 2224.

*Emard also contends that, pursuant to Cal. Family Code § 1100(c), he

is entitled to the insurance proceeds because Ginger's designation of Sten-

cel as beneficiary constituted a breach of the fiduciary duty owed by one

spouse to another under Cal. Family Code § 1100(c). But see Polk v. Polk,

39 Cal. Rptr. 824, 835 (Ct. App. 1964) (surviving spouse is entitled to set

aside only half of the proceeds of an insurance policy obtained with com-

munity property); see also discussion infra, section VI (reviewing Califor-

nia’s law of community property and the designation of beneficiaries of

insurance policies).

i th mee

‘A.

10164 Emarp v. Hucues Aircrarr Company

Nat'l Pension Fund, 493 U.S. 365, 372 (1990). Given these

precedents, we conclude that ERISA does not preempt Cali-

fornia law permitting the imposition of a constructive trust on

insurance proceeds before their distribution to the designated

beneficiary.

[6] ERISA also would not prohibit the imposition of a con-

structive trust on insurance proceeds after their distribution to

the beneficiary. See Guidry v. Sheet Metal Workers Nat’! Pen-

sion Fund, 39 F.3d 1078, 1081-83 (10th Cir. 1994) (en banc)

(Guidry Il) (ERISA does not prevent imposition of construc-

tive trust on proceeds of pension plan after distribution to ben-

eficiary). As the Tenth Circuit noted in Guidry Il, Congress

has prohibited attachment or garnishment of benefits paid out

under the Social Security Act and the Veterans’ Benefits Act.

Id. at 1083 (citing Philpott v. Essex County Welfare Bd., 409

U.S. 413 (1973) (Social Security Act), and Porter v. Aetna

Casualty & Sur. Co., 370 U.S. 159 (1962) (Veterans’ Benefits

Act)).* Those statutory prohibitions, though, are explicit. Jd.

By contrast, ERISA lacks any provision prohibiting garnish-

ment or attachment of benefits after they have been received

by the beneficiary. Jd. The absence of such language from

ERISA indicates that Congress did not intend such a prohibi-

tion here. Jd.”

*See also Ridgway v. Ridgway, 454 U.S. 46, 60-61 (1981) (state law

permitting imposition of constructive trust on proceeds of insurance paid

under Servicemen’s Group Life Insurance Act (SGLIA) preempted by

contrary provision in SGLIA).

"The Eighth Circuit has rejected the imposition of a constructive trust

on proceeds of pension and profit sharing plans. National Automobile

Dealers and Assocs. Retirement Trust v. Arbeitman, 89 F.3d 496, 502 (8th

Cir. 1996). In Arbeitman, a former wife argued that the plan participant's

subsequent wife waived her right to a survivor's annuity by executing a

prenuptial agreement. /d. at 501-02. The Eighth Circuit held that the pre-

nuptial agreement failed to satisfy ERISA’s Statutory requirements for

waiver of a spouse’s rights to plan benefits. /d. at 502. The opinion does

not discuss the distinction between imposition of a constructive trust on

bencfits before distribution and imposition after distribution. See id.

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EMARD v. HuGHues AIRCRAFT COMPANY 10165

We agree with the Tenth Circuit’s analysis. ERISA is

designed to ensure that benefits are paid out. It is silent as to

the disposition of those funds after their receipt by the benefi-

ciary. ERISA does not preempt California law permitting the

imposition of a constructive trust on insurance proceeds after

their distribution to the designated beneficiary.

VI

In the alternative, Emard contends that, even if Ginger

intended to maintain Stencel as the beneficiary of the two

Hughes insurance policies, California’s law of community

property entitles Emard to half of the insurance proceeds.

[7] Under California law, “[g]enerally, all property

acquired by a spouse during marriage before separation is

community property.” Marriage of Lehman, 74 Cal. Rptr. 2d

825, 828 (Cal. 1998) (citing Cal. Family Code §§ 760, 771).

Community property includes all property obtained through

the exercise of a spouse’s labor and skills. Weinberg v. Wein-

berg, 432 P.2d 709, 713 (Cal. 1967). Because a fringe benefit

is part of an employee’s earnings, a fringe benefit is commu-

nity property to the extent that it is earned through employ-

ment during marriage. Marriage of Brown, 544 P.2d 561, 565

(Cal. 1976).

[8] A life insurance policy obtained with community funds

is an asset of the community. Life Ins. Co. of North America

v. Cassidy, 676 P.2d 1050, 1053 (Cal. 1984) (citing Patillo v.

Norris, 135 Cal. Rptr. 210, 215 (Ct. App. 1976)); see also

Marriage of Harrison, 225 Cal. Rptr. 234, 239 (Ct. App.

Moreover, in Arbeitman the imposition of a constructive trust would have

contradicted specific statutory requirements. /d. at 502 (citing 29 U.S.C.

§ 1055(c)). By contrast, ERISA does not contain an explicit statutory pro-

hibition against alienation of welfare benefit proceeds. Arbeitman is not on

point, and we decline to apply its analysis to the distinct issue of welfare

benefit plans.

Ain dit shales dy Peal en EO A ONS Ween

-A 11-

10166 EMARD v. HuGues AIRCRAFT COMPANY

1986) (life insurance paid for by an employer as a benefit of

employment is community property). A spouse’s community

interest in the proceeds of a policy obtained with community

funds “may not be defeated by a gift of the policy proceeds

to a third party named as beneficiary without the spouse’s

consent.” Cassidy, 676 P.2d at 1053. The surviving spouse is

therefore entitled to set aside his or her community share in

life insurance proceeds even where the decedent spouse desig-

nated another person as beneficiary. Jd.; Tyre v. Aetna, 353

P.2d 725, 728-29 (Cal. 1960).* This rule applies to term life

insurance policies as well as “whole life” policies. See Estate

of Logan, 236 Cal. Rptr. 368, 372 (Ct. App. 1987); Lorenz v.

Lorenz, 194 Cal. Rptr. 237, 239 (Ct. App. 1983) (citing Biltoft

v. Wootten, 157 Cal. Rptr. 581 (1979), and Patillo, 135 Cal.

Rptr. at 215).

Relying on these principles of California law, Emard

argues that he is entitled to set aside his community share in

the proceeds of the Met Life policies insuring Ginger’s life.

The district court held that ERISA preemption bars applica-

tion of California’s law of community property where that

law would require distribution of ERISA insurance proceeds

contrary to the participant’s designation of beneficiary. We

disagree.

*See also Cal. Family Code § 1100(b) (“A spouse may not make a gift

of community personal property, or dispose of community personal prop-

erty for less than fair and reasonable valuc, without the written consent of

the other spouse.”); Cal. Prob. Code § 5020 (“A provision for a nonpro-

bate transfer of community property on death executed by a married per-

son without the written consent of the person’s spouse . . . is not effective

as to the nonconscnting spouse’s interest in the property . . . .”); Cal. Prob.

Code § 5021(a) (“In a proceeding to sct aside a nonprobate transfer of

community property on death made pursuant to a provision for transfer of

the property executed by a married person without the written consent of

the person’s spouse, the court shall sct aside the transfer as to the noncon-

scnting spouse’s interest in the property, subject to terms and conditions

or other remedies that appear equitable under the circumstances of the

cas¢c, taking into account the rights of all interested persons.”).

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Emarp v. Hucues Aircrarr COMPANY 10167

A

We have not previously addressed the question whether

ERISA preemption bars application of state law that would

require the distribution of ERISA insurance proceeds to a per-

son other than the designated beneficiary.°

The circuit opinions that have addressed this issue have

relied on the Supreme Court’s previous analysis of ERISA’s

preemption language. Using that earlier analysis, those opin-

ions have generally held that the state law provisions “relate

to” ERISA and are therefore preempted. See Metropolitan

Life Ins. Co. v. Pressley, 82 F.3d 126, 129 (6th Cir. 1996),

cert. denied, 117 S. Ct. 2431 (1997); Phoenix Mut. Life Ins.

Co. v. Adams, 30 F.3d 554, 559-60 (4th Cir. 1994); Brandon

*Cripps v. Life Ins. Co. of North America, 980 F.2d 1261 (9th Cir.

1992), presented facts similar to those at issue here. In Cripps, a dece-

dent’s surviving spouse claimed that under California law she was entitled

to at least a portion of the decedent's ERISA insurance proceeds cven

though another person (the decedent's first wife) was the designated benc-

ficiary. /d. at 1263. We held that the second wife, as a person claiming to

be a beneficiary of an ERISA plan insurance policy, had standing to bring

an action under ERISA’s civil enforcement provision, 29 U.S.C.

§ 1132(a). Id. at 1267. We also held that a default judgment in favor of

the second wife was Icgally insupportable because her complaint had not

made out a claim for relief under California law. Jd. at 1268. We did not

decide whether ERISA preempted the California law on which the sccond

wife relied. See id. Cripps therefore does not provide guidance for our

decision in this case. We note further that our decision in Cripps has

implicitly been called into doubt by Boggs v. Boggs, 117 S. Ct. 1754, 1763

(1997) (“ERISA confers beneficiary status on a nonparticipant spousc . . .

in only narrow circumstances delineated by its provisions.”).

In Ablamis v. Roper, 937 F.2d 1450, 1458-59 (9th Cir. 1991), we held

that ERISA’s anti-alicnation provision preempts California community

property law to the extent that California law would permit a predeccasing

nonemployee spouse to bequcath a portion of her husband's pension bene-

fits. Ablamis concerned rights to pension bencfits governed by specific

ERISA provisions. By contrast, this case concerns rights to welfare bene-

fits not governed by specific ERISA provision. Ablamis therefore does not

provide substantial guidance for our decision in this case.

ON Atel a tie ot sted Oe Ng ot ante ee

Ba lanes «noth cea

-A 13-

10168 Emarp v. HuGcues Aircrarr ComPANy

v. Travelers Ins. Co., 18 F.3d 1321, 1325 (Sth Cir. 1994);

Moore v. Philip Morris Cos., 8 F.3d 335, 341-42 (6th Cir.

1993); Krishna vy. Colgate Palmolive Co., 7 F.3d 11, 15-16

(2d Cir. 1993); Metropolitan Life Ins. Co. v. Hanslip, 939

F.2d 904, 906 (10th Cir. 1991); Brown v. Connecticut Gen-

eral Life Ins. Co., 934 F.2d 1193, 1195 (11th Cir. 1991);

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

MacLean v. Ford Motor Co., 831 F.2d 723, 726-27 (7th Cir.

1987). Cf. Equitable Life Assur. Soc. v. Crysler, 66 F.3d 944,

948-49 (8th Cir. 1995) (looking to state law for guidance in

fashioning federal common law); Lyman Lumber Co. v. Hill,

877 F.2d 692, 693 (8th Cir. 1989) (same).

Under the majority approach of those opinions, application

of California law concerning the designation of a beneficiary

has a connection with ERISA and would therefore be pre-

empted. Those opinions, though, rely on the Supreme Court’s

former approach to ERISA preemption, and their analyses

therefore provide us little guidance. Applying the preemption

approach required by the Court’s recent cases, we hold that

ERISA does not preempt California’s law of community

property in this instance.

B

As noted in section IV, supra, the Supreme Court’s recent

cases apply the principles of conflict and field preemption.

See California Div. of Labor Standards Enforcement v. Dil-

lingham Constr, N.A., Inc., 117 S. Ct. 832, 843 (1997) (Scalia,

J., concurring). Under this approach we ask first whether

application of California law would conflict with ERISA. See

Boggs v. Boggs, 117 S. Ct. 1754, 1760 (1997). This is itself

a two-step analysis in which we ask (1) whether California.

law conflicts with any specific provision of ERISA and then

(2) whether application of California law would frustrate Con-

gress’ purposes in enacting ERISA. Having proceeded

through the conflict analysis, we ask next whether Congress

has indicated an intent to occupy the field so completely that

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Emarp v. HuGues AircRAFT COMPANY 10169

California law is necessarily preempted. See id. at 1760;

Dillingham, 117 S. Ct. at 843 (Scalia, J., concurring).

l

No ERISA provision expressly governs disputes between

claimants to insurance proceeds. See Equitable Life Assur.

Soc. v. Crysler, 66 F.3d 944, 948 (8th Cir. 1995) (citing

cases). We must determine whether any ERISA provisions

implicitly conflict with California’s law of community prop-

erty.

(a)

[9] Stencel contends that California’s community property

law conflicts with ERISA’s requirement that “a fiduciary shall

discharge his duties with respect to a plan . . . in accordance

with the documents and instruments governing the plan,” 29

U.S.C. § 1104(a)(1). In Stencel’s view, Ginger’s designation

of beneficiary is one of the “documents or instruments gov-

erning the plan,” and the plan administrator must distribute

the insurance proceeds in accordance with that designation.

California’s law of community property, Stencel concludes,

would require that the plan administrator distribute the insur-

ance proceeds in contravention of one of the “documents or

instruments governing the plan” and is therefore preempted.

Stencel is mistaken. Section 1104(a)(1) “does not prescribe

how to resolve conflicting claims” to welfare plan benefits.

Crysler, 66 F.3d at 948. The phrase “documents and instru-

ments governing the plan” does not refer to an individual par-

ticipant’s designation of a beneficiary: such a designation

does not “govern[ ] the plan,” but merely reflects the partici-

pant’s intent regarding distribution of the proceeds. Section

1104(a)(1) thus does not preempt California’s law of commu-

nity property, which concerns only the rights to the proceeds

and not the administration of the plan.

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10170 Emarp v. Hucues Aircrarr CompaANy

(b)

[10] Similarly, Emard’s state law causes of action are not

preempted by ERISA’s civil enforcement provision, 29

U.S.C. § 1132(a)(1). That section provides, in pertinent part,

that “[a] civil action may be brought . . . by a participant or

beneficiary . . . to recover benefits due to him under the terms

of his plan... .” A state law cause of action that falls within

the scope of § 1132(a) is preempted. Metropolitan Life Ins.

Co. v. Taylor, 481 U.S. 58, 62-63 (1987).

[11] We have held that a person claiming to be a benefi-

Clary under state law has standing to bring a claim pursuant

to § 1132(a). Cripps v. Life Ins. Co. of North America, 980

F.2d 1261, 1266-67 (9th Cir. 1992); but see Boggs, 117 S. Ct.

at 1763-65 (imposing a narrow definition of “beneficiary” in

a pension benefits case). But Cripps does not stand for the

proposition that a suit to obtain proceeds of a life insurance

policy otherwise governed by ERISA necessarily falls under

§ 1132(a). An action falls within the scope of that section only

where the plaintiff seeks “to recover benefits due to him under

the terms of his plan.” Emard’s claims do not implicate the

terms of the plan. There is no dispute regarding the amount

or nature of the benefit or whether the benefit is properly pay-

able. The dispute concerns only the ultimate ownership of the

proceeds. That dispute can be decided without reference to the

terms of the plan or the provisions of ERISA. Indeed, neither

Hughes nor Met Life need be involved in the action beyond

the simple matter of distributing the proceeds to the appropri-

ate recipient or depositing them with the court.

[12] In enacting ERISA, Congress intended to safeguard

the rights of plan participants and beneficiaries as against

employers, insurers and administrators of employee benefit

plans. See 29 U.S.C. § 1001 (setting forth Congress’ findings

and declaration of policy). ERISA therefore preempts state

laws that concern those matters. But we see no indication that

Congress iniended to safeguard an individual beneficiary’s

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EmMarD v. HuGHes AIRCRAFT COMPANY 10171

rights to the proceeds of an ERISA insurance plan as against

another person claiming superior rights, under state law, to

those proceeds. Absent specific contrary provisions in

ERISA, an action intended only to enforce such individual

rights against a beneficiary does not fall within the scope of

§ 1132(a), and state laws on which such an action relies are

not barred by ERISA preemption.

(c)

[13] California’s law of community property also does not,

in this instance, conflict with any other specific ERISA provi-

sions. Cf. Boggs, 117 S. Ct. at 1761-66 (Louisiana’s law of

community property conflicts with, and therefore is pre-

empted by, ERISA’s survivor’s annuity and anti-alienation

provisions and by ERISA’s definition of “beneficiary”). We

therefore turn to the next step of analysis.

2

[14] In undertaking the second step of the conflict analysis,

we ask whether California’s law of community property has

a connection with ERISA such that application of the state

law would frustrate ERISA’s purposes. See id. at 1760;

Operating Engineers Health and Welfare Trust Fund v. JWJ

Contracting Co., 135 F.3d 671, 678 (9th Cir. 1998). To help

determine whether a state law “has a connection with” an

ERISA benefit plan, we consider four factors set out in Aloha

Airlines, Inc. v. Ahue, 12 F.3d 1498, 1504 (9th Cir. 1993):

(1) whether the state law regulates the types of ben-

efits of ERISA employee welfare benefit plans;

(2) whether the state law requires the establishment

of a separate employee benefit plan to comply with

the law;

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10172 EmarpD v. HuGues Aircrarr ComMPANY

(3) whether the state law imposes reporting, disclo-

sure, funding, or vesting requirements for ERISA

plans; and

(4) whether the state law regulates certain ERISA

relationships, including the relationships between an

ERISA plan and employer and, to the extent an

employee benefit plan is involved, between the

employer and employee.

Quoted in Operating Engineers, 135 F.3d at 678.

[15] The first three Aloha factors are not at issue. Califor-

nia’s community property law does not “regulate[ ] the types

of benefits of ERISA employee welfare benefit plans”; it does

not “require[ ] the establishment of a separate emp!oyee bene-

fit plan”; and it does not “impose ] reporting, disclosure,

funding, or vesting requirements for ERISA plans.” See

Aloha, 12 F.3d at 1504. Stencel argues, though, that Califor-

nia law does “regulate[{] certain ERISA relationships” by

altering the administrative process for plans in California and

by altering the designation of beneficiaries. We disagree.

(a)

Stencel argues first that application of California’s commu-

nity property law would frustrate Congress’ intent to establish

a uniform process for administering employee benefit plans.

Stencel relies in part on Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 9 (1987). The Court there stated:

An employer that makes a commitment systemati-

cally to pay certain benefits undertakes a host of

obligations, such as determining the eligibility of

claimants, calculating benefit levels, making dis-

bursements, monitoring the availability of funds for

benefit payments, and keeping appropriate records in

order to comply with applicable reporting require-

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EMARD v. HuGHes AIRCRAFT COMPANY 10173

ments. The most efficient way to meet these respon-

sibilities is to establish a uniform administrative

scheme, which provides a set of standard procedures

to guide processing of claims and disbursement of

benefits. Such a system is difficult to achieve, how-

ever, if a benefit plan is subject to differing regula-

tory requirements in differing States. A plan would

be required to keep certain records in some States

but not in others; to make certain benefits available

in some States but not in others; to process claims in

a certain way in some States but not in others; and

to comply with certain fiduciary standards in some

States but not in others.

Id. See also Moore v. Philip Morris Cos. Inc., 8 F.3d 335,

341-42 (6th Cir. 1993) (a Kentucky domestic relations statute

that would have required forfeiture of an ERISA insurance

policy by a deserting spouse would impose administrative

burdens on the ERISA plan and is therefore preempted).

[16] As Fort Halifax makes clear, ERISA preempts state

regulations that affect the administration of plans. See Fort

Halifax, 482 U.S. at 9. But the state law at issue here does not

affect the administration of plans; instead, it affects merely

the ultimate ownership of distributed benefits. Under Califor-

nia law an ERISA administrator may pay insurance proceeds

to the named beneficiary unless a contending claimant prop-

erly notifies the plan of his or her claim to the proceeds. See

Cal. Family Code § 755(b). In the absence of such a claim,

payment to the named beneficiary absolves the plan of liabil-

ity for further claims. /d. California law therefore does not

alter plan administration. The plan administrator need not

maintain different records in California than in other states;

similarly, the administrator has no duty under California law

to determine whether someone other than the named benefi-

ciary has a claim to the proceeds. Cf. Fort Halifax, 482 U.S.

at 9. Instead, the administrator may simply disburse the pro-

ceeds in accordance with the participant’s designation of ben-

I ee te, ee en Oe CS enn ee ee

pporere nen any

hy a ae RP ol la? AI GY

-A 19-

10174 EmMarpD v. HuGHes Arrcrarr ComMPANy

eficiary. If a contending claim is made before disbursement,

the administrator can leave the determination of the proper

recipient of the proceeds to the parties through the application

of state property law, just as Hughes and Met Life have done

in this instance.

[17] We recognize that, in the circumstances of a case such

as this, the plan administrator must take certain steps to

answer the complaint and either disburse the disputed funds

to the prevailing claimant or deposit the funds with the court.

But this burden on the administrator is too slight to overcome

the presumption against preemption of state family and family

property law." See Boggs, 117 S. Ct. at 1760; Hisquierdo v.

Hisquierdo, 439 U.S. 572, 581 (1979); see also De Buono v.

NYSA-ILA Medical and Clinical Svcs. Fund, 117 S. Ct. 1747,

1752 (1997) (ERISA does not preempt generally applicable

state laws “that impose some burdens on the administration of

ERISA plans but nevertheless do not ‘relate to’ them within

the meaning of the governing statute”) (citing New York State

Conference of Blue Cross & Blue Shield Plans v. Travelers

Ins. Co., 514 U.S. 645, 668 (1995), and Dillingham, 117 S.

Ct. at 841-42); District of Columbia v. Greater Washington

Board of Trade, 506 U.S. 125, 130 n.1 (1992) (state law is not

preempted if it “has only a ‘tenuous, remote, or peripheral’

connection with covered plans”) (citations omitted).

[18] The flaw in Stencel’s argument is clearer in two analo-

gous situations. ERISA contains no provision regarding the

distribution of benefits to a named beneficiary who kills a

plan participant in order to obtain those benefits. Given the

analysis offered by Stencel and by other circuits, a state slayer

Since 1991, the Hughes designation of beneficiary form has contained

the following language: “If you reside in California or Arizona, your

spouse’s consent will be required if you designate someone other than

your spouse to receive more than fifty percent of your life insurance bene-

fits ....” The Hughes plan administrators have voluntarily shouldered the

burden at issue here. That fact suggests that they do not find this burden

excessive.

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EMARD v. HuGHES AIRCRAFT COMPANY 10175

statute would not apply in such a case."’ Unless state law was

borrowed to fashion federal common law, the plan adminis-

trator would be required to distribute the insurance proceeds

to the slayer. Similarly, unless state law was borrowed, Sten-

cel’s approach to preemption would require a plan administra-

“As of 1993, forty-four states and the District of Columbia had slayer

statutes; four other states applied a common law bar, and matters were

unclear in the other two jurisdictions. Jeffrey G. Sherman, Mercy Killing

and the Right to Inherit, 61 U. Cin. L. Rev. 803, 805, 876 n.12 (1993).

Two district courts have held that state slayer statutes are not preempted

by ERISA. New Orleans Elec. Pension Fund v. DeRocha, 779 F. Supp.

845, 850 (E.D. La. 1991); Mendez-Bellido v. Board of Trustees of Div.

1181, A.T.U. New York Employees Pension Fund and Plan, 709 F. Supp.

329, 331 (E.D.N.Y. 1989). In Mendez-Bellido, the district court found no

preemption of New York’s slayer statute in part because “state laws pro-

hibiting murderers from receiving death benefits are relatively uniform

{such that] there is little threat of creating a ‘patchwork scheme of

regulation.’ ” 709 F. Supp. at 332 (quoting Fort Halifax, 482 U.S. at 11).

In fact, slayer statutes “vary considerably from jurisdiction to

jurisdiction.” Sherman, Mercy Killing, 61 U. Cin. L. Rev. at 876 n. 12.

Even if slayer statutes are relatively uniform, application of a slayer statute

would require the plan administrator to determine, according to state law,

whether ERISA insurance proceeds should be distributed to a person other

than the named beneficiary. Such a burden is too slight to overcome the

presumption against preemption of state law. See De Buono, 117 S. Ct. at

1752; Hisquierdo, 439 U.S. at 581.

Metropolitan Life Ins. Co. v. Hanslip, 939 F.2d 904 (10th Cir. 1991),

has been cited, incorrectly, for the proposition that ERISA preempts state

slayer statutes. See Grayson M.P. McCouch, Will Substitutes Under the

Revised Uniform Probate Code, 58 Brook. L. Rev. 1123, 1194 n.235

(1993). In Hanslip, the Tenth Circuit held that ERISA preempted an Okla-

homa statute revoking on divorce the designation of the decedent’s former

spouse as beneficiary of a life insurance policy. Hanslip, 939 F.2d at 906.

Hanslip does not concern a slayer statute.

“(T]he IRS has recognized that [an ERISA] plan must conform to a

state’s ‘slayer’ statute, and not pay benefits to the person who murdered

the participant, even if that person is named as the beneficiary.” Natalie

B. Choate, Qualified Plan and IRA Distributions: The Year of Death, CA

43 ALI-ABA 191, 196 (1996) (citing IRS Letter Ruling 8908063

(11/30/88)). This provision is external to ERISA. It does not alter the anal-

ysis in the text above.

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10176 EmarpD v. HuGues Aircrarr ComPANy

tor to distribute insurance proceeds to a designated

beneficiary even though that beneficiary obtained the designa-

tion through fraud or undue influence. Cf. Free v. Bland, 369

U.S. 663, 670 (1962) (regulations governing U.S. savings

bonds “are not intended to be a shield for fraud”). Congress

could not have intended that ERISA displace state law in such

instances. Similarly, it did not intend the preemption of state

law for which Stencel argues here.

(b)

Stencel argues further that California’s community property

law regulates ERISA relationships by changing the identity of

ERISA beneficiaries. See Aloha, 12 F.3d at 1504. He is mis-

taken.

[19] A state’s community property law can regulate ERISA

relationships by changing the identity of an ERISA benefi-

ciary. See Boggs, 117 S. Ct. at 1764-65. In Boggs, the applica-

tion of Louisiana’s law of community property would have

required that pension plan assets be administered for the bene-

fit of persons not designated as beneficiaries. See id. at 1765.

By contrast, this case concerns rights to a one-time distribu-

tion of insurance proceeds. The determination of the rights to

the proceeds will have no effect on the plan itself. The

employer, plan trustee and plan administrator are still bound

by the same fiduciary obligations and can fulfill those obliga-

tions by administering the plan in compliance with the plan

documents and the provisions of ERISA. The relationships

between ERISA entities remains unchanged. Because Califor-

nia’s community property law does not affect the relation-

ships between ERISA entities, it does not conflict with

Congress’ purpose in enacting ERISA and is not preempted.

(c)

As applied in this instance, California’s community prop-

erty law does not “regulate[ ] the types of benefits of ERISA

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Emarpb v. HuGHes AIRCRAFT COMPANY 10177

employee benefit plans”; does not “require[ ] the establish-

ment of a separate employee benefit plan”; does not

“impose[ ] reporting, disclosure, funding, or vesting require-

ments for ERISA plans”; and does not “regulate[ ]... ERISA

relationships.” See Aloha, 12 F.3d at 1504. California’s com-

munity property law therefore does not have a “connection

with” an ERISA plan. Nor does it otherwise conflict with

Congress’ purposes in enacting ERISA. We thus turn to the

final step of the preemption analysis.

3

In continuing our preemption analysis, we ask whether

Congress has completely occupied the field such that all state

laws are preempted. See Boggs, 117 S. Ct. at 1760;

Dillingham, 117 S. Ct. at 843 (Scalia, J., concurring).

We recently held that “ERISA plans no longer have a

Midas touch that allows them to deregulate every product

they choose to buy as part of their employee benefit plan.”

Washington Physicians Svc. Assoc. v. Gregoire, No. 97-

35536, slip op. at 6099 (9th Cir. June 18, 1998), petition for

reh’g and suggestion for reh’g en banc filed July 10, 1998

(citing Travelers, 514 U.S. at 661). Similarly, ERISA’s pre-

emption clause no longer has the power to transmute into a

federal question every issue that brushes against the periphery

of an ERISA plan. We must identify instead Congress’ pur-

poses in enacting ERISA to determine in what fields state law

is preempted. See Travelers, 514 U.S. at 656.

[20] In enacting ERISA, Congress intended to occupy the

field of regulation of employee welfare and pension benefit

plans. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58,

64 (1987). This occupation is compiete, however, only as to

regulation of ERISA plans as plans. See Fort Halifax, 482

U.S. at 11 (noting that “Congress pre-empted state laws relat-

ing to plans, rather than simply to benefits”) (emphasis in

original). As applied in this case, California’s law of commu-

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10178 Emarp v. HuGues Aircrart Company

nity property has no effect on the Hughes plan as such: it does

not affect the duties of the employer or the plan entity, nor

does it alter the rights of participants and beneficiaries as

against the other plan entities. Because California’s commu-

nity property law does not regulate ERISA plans as such, its

application is not barred by field preemption.

C

We reiterate that this dispute concerns the rights only of

individual persons to insurance proceeds. Over the course of

several decades, state legislative enactments and judicial deci-

sions have established rules governing the distribution of

insurance proceeds in such disputes. See section VILA, supra

(citing cases regarding ERISA preemption of state laws gov-

erning distribution of insurance proceeds). These rules repre-

sent the belief of state decision makers that equity sometimes

outweighs the mechanical application of a designation of ben-

eficiary. Many insurance policie, are now provided by

employers and are therefore governed by ERISA. If ERISA

governs the right to insurance proceeds, then it preempts all

State laws permitting alternate distribution of insurance pro-

ceeds.

We believe that Congress did not preempt state rules in this

regard. State community property laws “implement policies

and values lying within the traditional domain of the States.”

Boggs v. Boggs, 117 S. Ct. 1754, 1760 (1997). The courts

therefore require that “State family and family-property law

must do ‘major damage’ to ‘clear and substantial’ federal

interests before the Supremacy Clause will demand that state

law be overridden.” Hisquierdo vy. Hisquierdo, 439 U.S. 572,

581 (1979) (citing United States v. Yazell, 382 U.S. 341, 352

(1966)); see also Boggs, 117 S. Ct. at 1760 (citing Hisquierdo

with approval). California’s law of community property does

not do major damage to a clear and substantial federal inter-

est. Its application is not barred by ERISA preemption.

-A 24-

Emarp v. HuGues AIRCRAFT COMPANY 10179

Vil

Having determined that ERISA does not preempt Califor-

nia’s law of constructive trusts or of community property, we

now return to the issue whether removal was proper.

[21] Emard’s state court action was removed to district

court pursuant to 28 U.S.C. § 1447 (federal question jurisdic-

tion). Where federal jurisdiction is premised on the existence

of a federal question, removal is proper only (1) where a fed-

eral question appears on the face of the plaintiff's well-

pleaded complaint or (2) where federal law so completely pre-

empts the plaintiff's state law cause of action that the com-

plaint necessarily arises under federal law. Metropolitan Life

Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). Emard’s com-

plaint did not present a federal cause of action on its face, and

federal law did not preempt Emard’s state law causes of

action. The action was not removable.

Emard failed to object to removal. Where a litigant fails to

object to removal and there has been a final judgment on the

merits, we will not order the remand of an improvidently

removed case if, at the entry of judgment, “the federal district

court would have had original jurisdiction of the case had it

been filed in that court.” Grubbs v. General Elec. Credit

Corp., 405 U.S. 699, 702 (1972); see also Local Union 598

v. J.A. Jones Constr. Co., 846 F.2d 1213, 1215 (9th Cir. 1988)

(Grubbs doctrine applies where a district court has entered

summary judgment disposing of the merits of a case).

[22] The Grubbs doctrine does not apply, though, where a

circuit court reverses a district court’s grant of summary judg-

ment such that there has been no judgment on the merits. See

Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir.

1993). In such an instance, an improperly removed action

must be remanded to state court. Jd. Because we reverse the

judgment of the district court, there has been no judgment on

the merits. This case was improperly removed and must be

-A 25-

10180 Emarpb v. HuGues AircrAFT ComPANY

remanded to state court. See id.; Harris v. Provident Life and

Accident Ins. Co., 26 F.3d 930, 934 (9th Cir. 1994).

VII

The dispute in this case concerns only the rights of individ-

ual persons to the proceeds of life insurance policies. Its reso-

lution will not affect any right or procedure addressed by

Congress within the framework of ERISA. ERISA preemp-

tion does not prohibit application in this instance of Califor-

nia’s law of constructive trusts or its law of community

property. Emard’s complaint did not raise a federal question

on its face, and his causes of action were not preempted by

ERISA. Removal was improper. We reverse the judgment of

the district court and remand with instructions to remand to

state court.

REVERSED AND REMANDED.

HALL, Circuit Judge, concurring in part and dissenting in

part.

I agree with the majority that ERISA would not prevent

imposition of a constructive trust in the circumstances of this

case. I write separately, however, to express my disagreement

with its treatment of California’s law of community property.

Because the application of community property law would

require the ERISA plan administrator to distribute the pro-

ceeds of Ginger’s life insurance policy to someone other than

the named beneficiary, ERISA preemption should apply.

The preemption question raised in this case has implica-

tions well beyond the community property context. It is not

infrequently alleged, for instance, that beneficiary designa-

tions under ERISA welfare plans are altered by state laws

governing domestic relations, wills, trusts, or estates. In

-A 26-

Emarp v. Hucues Aircrarr CoMPANY 10181

almost every such case, our sister circuits have held that

ERISA preempts state law. See, e.g., Mattei v. Mattei, 126

F.3d 794, 796 n.2, 809 (6th Cir. 1997), cert. denied, 118 S.

Ct. 1799 (1998); Brandon v. Travelers Ins. Co., 18 F.3d 1321,

1325 (Sth Cir. 1994); Krishna v. Colgate Palmolive Co., 7

F.3d 11, 15 (2d Cir. 1993); Metropolitan Life Ins. Co. v. Han-

slip, 939 F.2d 904, 906 (10th Cir. 1991); MacLean v. Ford

Motor Co., 83i ©.2d 723, 727 (7th Cir. 1987).’ These cases

might be distinguishable in light of recent Supreme Court pre-

cedent if the courts had simply speculated that state laws that

alter beneficiary designations “relate to” ERISA in some

intangible fashion. However, the conflict between such state

laws and ERISA is much more tangible and direct.

Most importantly, state laws that alter beneficiary designa-

tions impose obligations on plan administrators that are incon-

sistent with the obligations imposed by ERISA. Under 29

U.S.C. § 1104(a)(1)(D), plan administrators must discharge

their duties “in accordance with the documents and instru-

ments governing the plan.” Only the Eighth Circuit has sug-

gested that beneficiary designations are not among the

documents and instruments governing a plan. See Crysler, 66

F.3d at 948 (holding that § 1104(a)(1)(D) provides no more

than “important guidance” in settling beneficiary disputes).

The majority of courts to consider the issue have held or

assumed that § 1104(a)(1)(D) establishes a “clear mandate”

that plan administrators follow plan documents, including

beneficiary designations, in identifying the proper beneficiary.

*At least one district court has disagreed. See Metropolitan Life Ins. Co.

v. Pearson, 848 F. Supp. 1326, 1333 (E.D. Mich. 1994). While the Eighth

Circuit, in Equitable Life Assurance Soc’y v. Crysler, 66 F.3d 944 (8th

Cir. 1995), found no conflict between a state divorce law and ERISA, it

recognized that “ERISA preemption makes the designation of plan bencfi-

ciaries . . . [a] question{]} of federal law,” and the court uitimately utilized

the state law only in fashioning federal common law. /d. at 948-49.

-A 27-

10182 EMARD v. Hucues Aircrarr CompANy

Metropolitan Life Ins. Co. v. Marsh, 119 F.3d 415, 420 (6th

Cir. 1997). I agree.?

Even if there were no direct conflict between California’s

law of community property and a specific ERISA provision,

a somewhat lesser conflict exists between the application of

State law and “the intent of Congress that ERISA plans be

uniform in their interpretation and simple in their

application.” McMillan y. Parrott, 913 F.2d 310, 312 (6th Cir.

1990). Requiring plan administrators to look not only to for-

mal beneficiary designations, but also to state law, before dis-

bursing benefits would undermine the efficient functioning of

ERISA plans and the certainty of both plan administrators and

designated beneficiaries as to who is entitled to benefits. The

burden on plan administrators is not so onerous if plan admin-

istrators are required to do no more than initiate interpleader

proceedings in the event of conflicting claims. Yet, even this

burden might, in the aggregate, discourage the use of inter-

pleader or similar procedural devices, disrupt the uniform

administration of ERISA plans, and perhaps lead employers

to reduce plan benefits or eliminate some benefits altogether.

See Krishna, 7 F.3d at 16.

*In Crysler, the Eighth Circuit reasoned that because “no . . . ERISA

provision . . . expressly governs th{c] dispute between benefit claimants,”

State law may be used to resolve conflicting claims. 66 F.3d at 948. Yct,

the very fact that § 1104(a)(1) includes a blanket requirement that plan

administrators distribute benefits to the named beneficiary and says noth-

ing about conflicting claims should make an administrator's obligations

when conflicting claims arise abundantly clear—distribute benefits to the

named beneficiary. The absence of any express provision dealing with

conflicting claims thus bolsters, rather than weakens, the majority position

that the beneficiary designation on file is controlling.

It is also worth noting that ERISA defines a “beneficiary” as “a person

designated by a participant, or by the terms of an employee bencfit plan,

who is or may become cniiticd to a benefit thercunder.” 29 U.S.C.

§ 1002(8). This definition docs not reference state laws governing domes-

tic relations, wills, trusts, or estates.

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Emarp v. HuGHes AIRCRAFT COMPANY 10183

I am not persuaded by the majority’s slayer statute analogy.

While no circuit has decided whether state slayer statutes are

preempted by ERISA, I would not hesitate to find preemption

in the bulk of cases in which a slayer statute would require an

ERISA plan administrator to distribute benefits to someone

other than the named beneficiary. Moreover, neither of the

district court cases that the majority cites for the proposition

that slayer statutes are not preempted supports a similar ruling

in the community property context. In New Orleans Elec.

Pension Fund v. DeRocha, 779 F. Supp. 845, 850 (E.D. La.

1991), the court’s ruling that ERISA does not preempt Louisi-

ana’s slayer statute hinged on application of ERISA’s savings

clause for state insurance law. /d.; see 29 U.S.C. § 1144(b)(2)

(A). Unlike Louisiana’s slayer statute, which was expressly

limited to the insurance context, see DeRocha, 779 F. Supp.

at 850, California’s law of community property cannot avoid

preemption under ERISA’s savings clause.

In Mendez-Bellido v. Board of Trustees of Div. 1181,

A.T.U. New York Employees Pension Fund and Plan, 709 F.

Supp. 329 (E.D.N.Y. 1989), the court found no preemption of

New York’s slayer statute, this time without resorting to

ERISA’s savings clause. Jd. at 331. It was important to this

court’s decision, however, that “state laws prohibiting mur-

derers from receiving death benefits are relatively uniform

{such that] there is little threat of creating a ‘patchwork

scheme of regulation.’ ” /d. at 332 (footnote and citation omit-

ted). Because state laws governing domestic relations and tes-

tamentary transfers are far more varied, and would thus

undermine Congress’ intent that ERISA plans be uniform in

their interpretation and simple in their application, Mendez-

Bellido, like DeRocha, actually supports finding preemption

in the present community property context.”

*When ERISA preempts a state statute, we generally resort to federal

common law in place of the preempted state law. See McClure v. Life Ins.

Co. of N. Am., 84 F.3d 1129, 1133 (9th Cir. 1996). Both the DeRocha and

Mendez-Bellido courts looked to federal common law as an alternative

-A 29-

10184 Emarp v. Hucues Aircrarr Company

Because application of California’s law of community

property would create a conflict with a specific provision of

ERISA and with Congress’ objectives in enacting ERISA, the

district court did not err in deeming it preempted.‘

basis for denying benefits to a slayer in the event ERISA did preempt state

law. DeRocha, 779 F. Supp. at 850; Mendez-Bellido, 709 F. Supp. at 332-

33. While federal common law may preclude a murderer from recovering

under his victim's insurance policy or will, there is no federal common

law that would require the plan administrator in the present case to distrib-

ute benefits to anyone other than the named beneficiary.

“Because ERISA preempts the application of California community

property law, federal subject matter jurisdiction exists. See Buster v. Grei-

Sen, 104 F.3d 1186, 1188 (9th Cir.) (finding “complete preemption” of a

State law claim, and thus a basis for federal jurisdiction, “only when

[ERISA] both preempts the claim . . . and displaces the claim with its civil

enforcement provision, 29 U.S.C. § 1132(a)”), cert. denied, 118 S. Ct. 44]

(1997); Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1266-67 (9th Cir.

1992) (holding that a plaintiffs claim that she is a beneficiary by virtue

of state law presents a federal question under § 1132(a)).

APPENDIX B

. oe

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

ENTERED FILED

SEP 11 1996 SEP 6 1996

Clerk, U.S. District Court Clerk, U.S. District Court

Central District of California Central District of California

Santa Ana Office Santa Ana Office

By Deputy By /s/ Deputy

| hereby certify that this document was

served by first class mail postage prepaid,

to all counsel (or parties) at their respec-

tive most recent address of record in this

action on this date.

Dated: SEP 11 1996

Deputy Clerk /s/

GARY EMARD,

Plaintiff,

v.

HUGHES AIRCRAFT CO. et al.

Defendants.

SA CV 95-410 AHS (EEx)

ORDER GRANTING SUMMARY

JUDGMENT IN FAVOR OF

DEFENDANT ALEX STENCEL

PROCEDURAL HISTORY

On November 22, 1995, plaintiff Gary Emard

(“Emard”) filed a motion for summary judgment. On

December 11, 1995, defendant Alex Stencel (“Stencel”)

filed opposition. Emard filed his reply on December 11,

1995. On December 8, 1995, Stencel filed a cross-

motion for summary judgment. On January 8, 1996,

Emard filed opposition. Stencel filed his reply on

January 12, 1996. The matters were noticed for hearing

on the Court’s January 22, 1996, calendar. The Court

issued an Order Taking Matters Under Submission on

January 18, 1996.

On January 25, 1996, the Court issued an Order

Directing Parties to Submit Additional Evidence regard-

ing the status of Ginger Emard’s employment with

Hughes at the time of her death and whether her insur-

ance policy had converted to an individual policy. On

February 21, 1996, Stencel filed a Supplemental Decla-

ration of Ralph R. Loyd. On February 26, 1996,

Metropolitan Life Insurance Company (“Met Life’) filed

a Response, and on February 28, 1996, Met Life filed a

Supplemental Response.

On June 4, 1996, the Court issued an Order Setting

Oral Argument for June 28, 1996, and Vacating the

Pretrial Conference. The June 4, 1996, Order also

requested further briefing regarding recent ERISA

decisions in other courts of appeals, and the extent to

which ERISA governs the disposition of the insurance

proceeds. On June 14, 1996, Stencel filed his Sup-

plemental Brief. On June 17, 1996, Met Life filed its

Response. On June 20, 1996, Emard filed his Sup-

plemental Brief. The Court heard oral argument on June

se

28, 1996, and once again took the motions under

submission.

Il.

FACTUAL BACKGROUND

Ginger Emard died of cancer in January 1995. Her

husband Gary Emard and her former husband Alex

Stencel each contend that they are the proper bene-

ficiaries to the proceeds of her Basic and Optional Life

Insurance policies, obtained through her employer

Hughes Aircraft, totalling together approximately

$188,000.

Ginger and Stencel were married in 1975 and

divorced in 1985; they had two children. In 1981,

Ginger went to work for Hughes Aircraft, where she

automatically acquired a $50,000 Basic Life Insurance

policy (Policy No. 75310) (“Basic Life”) through the

Hughes Aircraft employee benefit program. The policy

was issued by Met Life and was paid for by Hughes. On

August 8, 1981, Ginger filled out a Beneficiary Designa-

tion form designating her then-husband Stencel as

primer beneficiary with their two sons, Jason and

Alexander, as contingent beneficiaries. Ginger and

Stencel divorced in 1985, Ginger married Emard in

1986.

In 1988, Ginger and Emard decided that they each

would take out additional life insurance from their

respective employers, and each would designate the

other as beneficiary. Ginger purchased $138,000 in

Optional Life Insurance (Policy 74311) (“Optional

Life”) through Hughes, issued by Met Life. The

Optional Life was paid through after-tax payroll

deductions.

-B 4-

At the time Ginger died, she was an, active employee

of Hughes. Consequently, she remained covered under

the Hughes Basic Life and Optional Life Insurance

Plans, and her life insurance did not convert to an

individual life insurance policy. After Ginger died, the

parties learned that her former husband, Stencel, contin-

ued to be listed as the primary beneficiary on the

beneficiary designation form.

Ill.

DISCUSSION

A. Emard’s Contentions

Emard acknowledges that ERISA applies to the

Hughes Life Insurance Plan but contends that ERISA

does not preempt California community property law.

Emard argues that the administrator of an ERISA plan

must determine whether there are any parties with

community property interests in the proceeds of an

insurance policy and, if so, must distribute the proceeds

according to California community property law. Here,

Emard claims that he is entitled to a one-half community

property interest in the life insurance proceeds under

California community property law.

Alternatively, Emard contends that according to

“general equitable principles,” he is entitled to all of the

life insurance proceeds because (1) Ginger left Stencel’s

name on the beneficiary designation by mistake — she

really intended and agreed to name Emard as the

beneficiary, (2) Stencel would be unjustly enriched if he

were to receive the proceeds because his sons never

lived with him and because he waived any rights to

Ginger’s pension in the divorce dissolution, and (3)

-B §-

Ginger breached her fiduciary duty to Emard by not

designating him beneficiary.

B. Stencel’s Contentions

Stencel contends that ERISA preempts California

community property law, and that he is entitled to the

insurance proceeds because ERISA, 29 U.S.C. § 1104(a)

(1)(D), requires the plan administrator to administer the

plan “in accordance with the documents and instruments

governing the plan ....” Stencel contends that he is

entitled to the insurance proceeds under ERISA because

the terms of the Hughes Insurance Plan state that the

named beneficiary on the beneficiary designation card is

entitled to the insurance proceeds.

C. Met Life’s Contentions

Met Life takes no position on the merits of how the

Court should distribute the insurance proceeds. How-

ever, Met Life disputes Emard’s contentions that ERISA

does not preempt California community property laws.

D. Analysis

1. Standard for Summary Judgment

“Summary judgment procedure is properly regarded

not as a disfavored procedural shortcut, but rather as an

integral part of the Federal Rules :as a whole, which are

designed ‘to secure the just, speedy and inexpensive

determination of every action’.” Celotex Corp. v.

Catrett, 477 U.S. 317, 327 (1985). Summary judgment

is properly granted only where there are no genuine

issues of material fact, and the moving party is entitled

ay

to judgment on undisputed facts and the correct applica-

tion of the law. Fed. R. Civ. P. 56(c); Andersen v.

Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

The burden on the moving party “may be discharged

by ‘showing’ — that is, pointing out to the district court

— that there is an absence of evidence to support the

nonmoving party’s case.” Celotex, 477 U.S. at 325. To

create an issue of material fact, the nonmoving party

must then present sufficient evidence that would enable

a reasonable jury to return a verdict in its favor.

Anderson, 477 U.S. at 249. If the evidence is merely

colorable, or is not significantly probative, summary

judgment may be granted. Jd. at 249-250. “The mere

existence of a scintilla of evidence in support of the

plaintiff's position will be insufficient; there must be

evidence on which the jury could reasonably find for the

plaintiff.” Jd. at 252. Where the nonmoving party fails

to establish the existence of an essential element of that

party’s case, summary judgment must be granted

Celotex, 577 U.S. at 322-323.

2. Preemption

ERISA “shal! supersede any and all State laws insofar

as they may now or hereafter relate to any employee

benefit plan” covered by the statute. 29 U.S.C.

§ 1144(a). A law “relates to” an employee benefit plan

in the normal sense of the phrase, if it has a connection

with or reference to such a plan. Shaw v. Delta Airlines,

Inc., 463 U.S. 85, 96-97 (1983). The Supreme Court has

held that “[t]he express preemption provisions of ERISA

are deliberately expansive and designed to ‘establish

pension plan regulation as exclusively a federal con-

cern’.” Pilot Life Insurance Co. v. Dedeaux, 481 U.S.

41, 45-6 (1987).

-B 7.

Emard relies on Cripps vy. Life Ins. Co. of North

America, 980 F.2d 1261 (9th Cir. 1992) to support his

contention that ERISA does not preempt California

community property law. Emard’s reliance is misplaced,

however, since the Ninth Circuit in Cripps did not apply

California community property law to determine entitle-

ment to ERISA benefits. Rather, the court accepted

contentions that one party was a beneficiary under

community property law only for purposes of standing

and applied California community property law to test

the legal sufficiency of the pleadings in order to deter-

mine whether a default judgment was supportable. Jd. at

1267. Emard also cities Boggs v. Boggs, 849 F.Supp.

462, 466 (E.D. La 1994), which held that ERISA did not

preempt Louisiana community property law in determin-

ing entitlement to ERISA plan benefits. The Fifth

Circuit affirmed in Boggs vy. Boggs, 64 USLW 2670,

1996 WL 182952 (Sth Cir.).

Stencel relies on a line of cases from outside the

Ninth Circuit to support his contention that ERISA

preempts equitable claims and community property

claims to pension or life insurance proceeds by the

surviving spouse in favor of the former spouse named as

beneficiary. See Krishna vy. Colgate Palmolive Co.,

7 F.3d 11, 15 (2nd Cir. 1993) (holding that district

court should have applied written terms of life insu-

rance policy governed by ERISA instead of New York

Law where insured attempted to disinherit cousin);

Metropolitan Life Ins. Co. y. Hanslip, 939 F.2d 904, 906

(10th Cir. 1991) (ERISA preempts Oklahoma statute

revoking all provisions in death benefits contract relat-

ing to ex-spouse; benefits paid to ex-spouse designated

beneficiary); McMillan v. Parrott, 913 F.2d 310, 311

(6th Cir. 1990) (benefits of pension plan paid to ex-wife

named as beneficiary in spite of the fact that ex-wife

signed broad waiver of claims against ex-husband’s

-B 8-

assets as term of divorce); Nachwalter v. Christie, 805

F.2d 956 (llth Cir. 1986) (finding impermissible oral

modification of terms of benefit plan regarding valuation

date). However, none of these cases involved claims by

spouses asserting a community property interest; in fact

these cases originated in states that do not have commu-

nity property laws.

Another line of cases from outside the Ninth Circuit

holds that the former spouse waives any right to the

decedent's pension or life insurance benefits if the

parties enter into a mutual waiver of each other's pen-

sion or life insurance benefits as a term of their divorce.

See Metropolitan Life v. Wheaton, 42 F.3d 1080 (7th Cir.

1994); Mohamed v. Kerr, 53 F.3d 911 (8th Cir. 1995);

Estate of Altobelli v. IBM, 77 F.3d 78 (4th Cir. 1996);

Fox Valley & Vicinity Constr. Workers Pension Fund vy.

Brown, 897 F.2d 275 (7th Cir. 1990); Metropolitan Life

v. Fowler, 922 F.Supp. 8 (E.D. MI 1996).

The Ninth Circuit has not provided a definitive

answer as to the extent of ERISA preemption in the area

of California community property law. See Ablamis v.

Roper, 937 F.2d 1450 (9th Cir. 1991) (finding court

order, which was not a qualified domestic relations

order, devising community property interest in pension

benefits to third party was preempted by ERISA aliena-

tion provisions); Allen v. Western Conf. of Teamsters

Pension Trust Fund, 788 F.2d 648 (9th Cir. 1986)

(avoiding preemption issue entirely and holding that

California law does not prohibit contract excluding

putative spouses); Carpenters Pension Trust for South-

ern California vy. Kronschnabel, 632 F.2d 745 (9th Cir.

1980) (prior to ERISA amendments permitting qualified

domestic relations orders, court held that ERISA did not

preempt state court order requiring payment of commu-

nity property funds out of ERISA benefits). See also

Western Conf. of Teamsters Pension Trust Fund vy.

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Jones, 646 F. Supp. 228 (N.D. Cal. 1986) (holding that

ERISA does not preempt community property law);

Francis v. United Technologies Corp., 458 F.Supp. 84

(N.D. Cal. 1978) (ERISA preempts community property

law).

However, in the Ninth Circuit, subsequent to the

amendments excepting Qualified Domestic Relations

Orders (“QDRO”) from ERISA preemption (see 29

U.S.C. § 1144(b)(7), effective 1984), the Court of

Appeals has held that community property laws are

preempted if they do not pertain to QDROs. Ablamis v.

Roper, 937 F.2d 1450 (9th Cir. 1991). In Albamis, the

court distinguished prior conflicting Ninth Circuit

opinions by noting that the earlier decisions placed too

much reliance on the Supreme Court's summary dis-

missal of Jn re Marriage of Campa, 89 Cal.App.3d 113

(1979), appeal dismissed, 444 U.S. 1028 (1980).

Ablamis, 937 F.2d at 1458. The court in Ablamis deter-

mined that ERISA preempts community property law,

with a narrow exception for QDROs, and distinguished

conflicting Ninth Circuit law by Stating that “in no case

did the [Supreme] Court or the Ninth Circuit ever sug-

gest that any exception, implied or otherwise, went

beyond the dissolution and support provisions covered

by the QDRO exception or the REA.” /d.

Here, the parties do not contend that the final order of

dissolution from Ginger and Stencel’s divorce consti-

tutes a QDRO even though plaintiff urges the Court to

find that Stencel waived his rights in the dissolution.

The documentation does not Support this contention.

Therefore, Emard’s community property claims and

claims based on “equitable principles” under California

law are preempted. Emard’s motion for summary judg-

ment is denied and Stencel’s cross-motion for summary

judgment is granted.

-B 10-

IV.

CONCLUSION

Accordingly, and for the foregoing reasons, the Court

denies Emard’s Motion for Summary Judgment and

grants Stencel’s Cross-Motion for Summary Judgment.

The Court has this date modified, signed and filed

Stencel’s Separate Statement of Undisputed Material

Facts in Support of Motion for Summary Judgment.

Emard’s hearsay objections are sustained and _ his

Request for Judicial Notice is granted.

IT IS SO ORDERED. The Clerk is directed to enter

judgment accordingly.

IT IS FURTHER ORDERED that the Clerk shall

serve a copy of this Order on all counsel of record.

Dated: September 5, 1996.

/s/ ALICEMARIE H. STOTLER

ALICEMARIE H. STOTLER

UNITED STATES DISTRICT JUDGE

-B Il-

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

ENTERED FILED

SEP 11 1996 SEP 6 1996

Clerk, U.S. District Court Clerk, U.S. District Court

Central District of California Central District of California

Santa Ana Office Santa Ana Office

By Deputy By = /s/ Deputy

| hereby certify that this document was

served by first class mail postage prepaid,

to all counsel (or parties) at their respec-

tive most recent address of record in this

action on this date.

Dated: SEP 11 1996

Deputy Clerk /s/

GARY EMARD,

Plaintiff,

v.

HUGHES AIRCRAFT CO. et al.

Defendants.

SA CV 95-410 AHS (EEx)

JUDGMENT

The Court, having considered plaintiff Gary

Emard’s Motion for Summary Judgment and

defendant Alex Stencel’s Cross-Motion for

-B 12-

Summary Judgment, and the Honorable

Alicemarie H. Stotler, District Judge, having

duly rendered a decision on September 5, 1996,

in the Court’s Order Granting Summary Judg-

ment in Favor of Defendant Alex Stencel,

IT IS ORDERED AND ADJUDGED that:

the plaintiff take nothing against defendants

in this action, that judgment be entered in favor

of defendants and that defendants recover their

costs of this action.

Dated:- September 5, 1996.

/s/) ALICEMARIE H. STOTLER

ALICEMARIE H. STOTLER

UNITED STATES DISTRICT JUDGE

APPENDIX C

Bg

29 USCS § 1104

§ 1104. Fiduciary duties

(a) Prudent man standard of care.

(1) Subject to sections 403(c) and (d),

4042, and 4044 [29 USCS §§ 1103(c), (d),

1342, 1344], a fiduciary shall discharge his

duties with respect to a plan solely in the

interest of the participants and beneficiaries

and —

(A) for the exclusive purpose of:

(i) providing benefits to participants

and their beneficiaries; and

(ii) defraying reasonable expenses of

administering the plan;

(B) with the care, skill, prudence, and

diligence under the circumstances then prevail-

ing that a prudent man acting in a like capacity

and familiar with such matters would use in the

conduct of an enterprise of a like character and

with like aims;

(C) by diversifying the investments of the

plan so as to minimize the risk of large losses,

unless under the circumstances it is clearly

prudent not to do so; and

(D) in accordance with the documents and

instruments governing the plan insofar as such

documents and instruments are consistent with

the provisions of this title and title IV.

-C 2.

29 USCS § 1002

Labor

(6) The term “employee” means any individual

employed by an employer

(7) The term “participant” means any em-

ployee or former employee of an employer, or

any member or former member of an employee

organization, who is or may become eligible to

receive a benefit of any type from an employee

benefit plan which covers employees of such

employer or members of such organization, or

whose beneficiaries may be eligible to receive

any such benefit.

(8) The term “beneficiary” means a person

designated by a participant, or by the terms of

an employee benefit plan, who is or may

become entitled to a benefit thereunder.