Kennedy v. Du Pont De Nemours--Plan Administrator

With all the complexity in life, it is salutary to recall that most disputes among people, and many legal actions, are motivated by the triad of sex, power and money. Unfortunately, the first isn't in view here. This is, seemingly, a straight case about money. The issue has to do with who gets Mr. Kennedy's $402,000 in pension benefits--the ex-wife or the Estate of Mr. Kennedy, which is managed by his daughter. I guess that daughter and ex-wife weren't exactly in harmonious relation when the lower court decided that the money should go to ex-wife, else they could just have sat down, had tea, sung "Kum Ba Yah" and given the money to the daughter.

Any time you see the words "Plan Administrator" in a case caption (the official title of this case is "E.I. Du Pont De Nemours and Company and Plan Administrator..."), you know you are entering into the murky and forbidding paludal forest of ERISA law. ERISA is a 1974 federal law purporting, among other things, to make pension plans more secure. In this case, however, we have broken through the bosky wood and into a clearing bathed in bright sunlight. In other words, we have a clear issue presented for consideration here.

In a nutshell, the issue is whether to remove your ex-spouse as the beneficiary on your employee pension account (governed by ERISA), you need to fill out what is called a "Qualified Domestic Relations Order" under 29 USC sec. 1056(d)(3)(B)(i) or whether a statement in a divorce decree in which the wife/ex-wife declares that she waives all rights to the money in the husband/ex-husband's account suffices to remove her from being a beneficiary. The case is as simple as that.

So, let's get to the facts and relevant law, so that we can massage the issue properly.

Meet the Kennedy's

Relevant facts, taken from the Petition for Certiorari, are here:

"On June 30, 1971, the late William Patrick Kennedy while working for DuPont, married Liv Kennedy. While married, Kennedy signed a DuPont beneficiary designation form on December 6, 1974 (and again on July 21, 1980) that identified Liv, his then-wife, as the sole beneficiary of his SIP account. Decedent Kennedy named no other or contingent SIP beneficiaries.

An SIP account is a "Savings and Investment Plan" account-i.e., a company pension plan. So far so good. Happily married couple, husband with nice and predictable pension, all is right with the world. Then, of course, things fall apart.

"Kennedy divorced his wife Liv on June 2, 1994, resulting in a Final Decree of Divorce. Under that divorce decree, Ex-Wife Kennedy voluntarily agreed to her divestment of “all right, title, interest, and claim in and to … the proceeds there-from, and any other rights related to any … retirement plan, pension plan, or like benefit program existing by reason of [decedent's] employment.”

Sounds like a reasonable thing to do, doesn't it? If you are no longer with your wife, might as well slice her out of the retirement plan, especially if she agrees to it. Who knows what she got "in compensation" for her share of that amount? In any case, that isn't the concern of the Court. Suffice it to note that those were the words of the divorce decree.

The Petition for Certiorari goes on to say one other sentence, which is really the most important sentence for this case: "The divorcing Kennedys did not prepare a separate QDRO for the SIP in this appeal."

ERISA Enters

Well, what's the big deal? If you have already stated unequivocally in your divorce decree that you waive all interest in your ex-husband's pension plan, why should filling out another form, with complex instructions, matter? Well, because ERISA, that complex law of tentacular grasp, provides:

"Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated," 29 USC sec. 1056(d)(1).

But, for most laws, as for ERISA, there are some exceptions. One of them is called the "qualified domestic relations order." The law says:

"Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph (1) shall not apply if the order is determined to be a qualified domestic relations order," 29 USC sec. 1056(d)(3)(A).

So, now the law is differentiating between a "domestic relations order" and a "qualified domestic relations order." See why people make lawyer jokes? Well, so far we know that if you have a qualified domestic relations order then the usually inalienable pension plan proceeds are alienable. What, then, is a QDRO?

"For purpose of this paragraph--
(i) the term "qualified domestic relations order" means a domestic relations order--
(I) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to; receive all or a portion of the benefits playable with respect to a participant under a plan; and
(II) with respect to which the requirement of subparagraphs (C) and (D) are met...

Before you reach for your Dickens, we ought to quote relevant sections of the subparagraphs:

"(C) A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies--
(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
(ii) the amount or percentage of the participant's benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,
(iii) the number of payments or period to which such order applies, and
(iv) each plan to which such order applies.

No, this isn't a torture memo--I leave it to Professor Yoo and Judge Bybee for that. It just goes to show you what the law requires. What still isn't clear through all of this is whether there is a simple ERISA QDRO form that you have to fill out or why a divorce decree doesn't suffice (or may not suffice) to express beneficiary change....

Kennedy Dies--Conclusion

Well, you see what is coming. Kennedy retired in 1998, died in 2001 and the $402,000 in his pension plan needed to be distributed. Rather than filing an interpleader action (which Du Pont probably wishes it now did; indeed one of the issues in the Petition for Cert. is whether Du Pont ought to pay the legal fees for this case because they screwed up in giving the money to ex-Mrs. Kennedy. Of course, Du Pont only screwed up if the Supreme Court reverses the lower court) to let the court determine where the money should go, Du Pont just gave the dough to ex-wife Kennedy. She has since died, but law goes on. The lower court at first awarded the money to the daughter, the appellate court to ex-wife. The Supremes will be called upon to determine if the words of the divorce decree will be honored in this case.

I think the Justices ought to clarify this by stating that a divorce decree will be considered a qualified domestic relations order for the purposes of ERISA. After all, when you are getting divorced, you don't always think of filling out multiple copies of different forms. You often aren't thinking of much of anything. And, courts ought to honor clearly expressed intentions in official (i.e., legally-recognized) documents. That is my two cents...what is yours?

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