337 F.Supp.2d 343 (2004) | Cited 3 times | D. Massachusetts | September 23, 2004


The plaintiffs in crossclaim, Sandra, Daniel and ThomasZaldivar, request that the court place an equitable lien on theproceeds of their father's life insurance policy, which weredistributed to Beverly Zaldivar, their father's widow, inviolation, they claim, of the divorce decree between their fatherand their mother. The life insurance policy is governed by theFederal Employees Group Life Insurance Act, 5 U.S.C. §§ 8701 etseq. ("FEGLIA"). Beverly Zaldivar, the defendant in crossclaim,argues in her motion for summary judgment that FEGLIA preemptsall state common law claims, as well as all equitable remedies. For the reasons set forth below, the court agrees with thedefendant's position. Beverly Zaldivar's motion for summaryjudgment will therefore be allowed.


To succeed in a motion for summary judgment, the moving partymust show that there "is no genuine issue as to any material factand that the moving party is entitled to judgment as a matter oflaw." Fed.R. Civ. P. 56(c); see Houlton Citizens' Coalitionv. Town of Houlton, 175 F.3d 178, 184 (1st Cir. 1999). The courtmust consider the facts "and all reasonable inferences therefromin the light most hospitable" to the non-moving party. Id.

Albert Zaldivar worked as an employee of the United StatesPostal Service. He was twice married, with three children fromhis first marriage: Sandra, Daniel and Thomas ("Zaldivarchildren"). As part of his divorce settlement from his firstmarriage, Albert agreed to maintain a life insurance policy andmake his three children the beneficiaries. This agreement wasmemorialized in an order entered by the Supreme Court of theState of New York, Queens County, on July 2, 1982. Additionally,on January 10, 1989, the Superior Court of the State of NewHampshire, Hillsborough County, ordered Albert to continue thelife insurance coverage for the benefit of his three children. Despite his agreement and the court orders, Albert changed thebeneficiary of his life insurance policy once his children wereadults, naming his second wife, Beverly, as beneficiary instead.As a result, at the time of Albert's death on June 25, 2001,Beverly was the sole beneficiary listed for Albert's lifeinsurance policy. When Albert died, his children submitted to theinsurance company, Metropolitan Life Insurance Company("MetLife"), a copy of the court order and sought payment of theproceeds to them and not Beverly.

MetLife brought an interpleader action against the Zaldivarchildren and Beverly Zaldivar seeking guidance as to the properpayment of the life insurance proceeds. The Zaldivar childrenbrought a counterclaim against MetLife and a crossclaim againstBeverly. MetLife then filed a motion for summary judgment.Beverly filed a motion purporting to support MetLife's motion.

In ruling on Metlife's motion, the court noted that the lifeinsurance policy, issued through Albert's employment, wasgoverned by FEGLIA. The court found that, pursuant to FEGLIA andits regulations, MetLife's sole obligation was to pay theproceeds of the life insurance policy to the named beneficiary.Accordingly, the court granted MetLife's motion,1 thuspermitting the disbursement of the life insurance policy proceedsto Beverly.

As for Beverly's motion in "support" of Metlife's motion, thecourt treated it as a separate motion for summary judgment on thecrossclaim filed by the children. Because the contractual andequitable arguments for the crossclaim against Beverley differedsomewhat from the arguments favoring MetLife, the court deniedBeverly's motion without prejudice. Since then, Beverly has fileda Supplemental Motion for Summary Judgment that the Zaldivarchildren oppose and which the court must now consider.


The parties agree that the disputed life insurance policy isgoverned by FEGLIA and that Albert Zaldivar made a designation ofBeverly as the beneficiary in accordance with FEGLIA and itsregulations. The Zaldivar children argue that the court shouldnow impose a constructive trust on these funds because, as theyallege in their crossclaim, payment of the life insurance fundsto Beverly constitutes a breach of the divorce settlement, incontravention of the two state court orders, and would thereforeunjustly enrich Beverly. The question before the court is whateffect the New York and New Hampshire court orders have onBeverly's receipt of the life insurance funds. In other words,does FEGLIA preempt these common law and equitable claims?

Numerous federal courts have held that, where state laws conflict with FEGLIA's provisions, FEGLIA preempts state law.Prudential Ins. Co. v. Hinkel, 121 F.3d 364, 367 (8th Cir.1997) ("It has been consistently held in regard to FEGLIA that adivorce decree cannot operate as a waiver or restriction of aninsured's right to change the beneficiary when federalregulations conflict."); Metropolitan Life Ins. Co. v.Sullivan, 96 F.3d 18, 20 (2d Cir. 1996) ("To the extent that NewYork law allows for a change of beneficiaries by third parties,it conflicts with FEGLIA and is preempted."); Metropolitan LifeIns. Co. v. Christ, 979 F.2d 575, 580 (7th Cir. 1992) (". . .FEGLIA preempts the divorce decree and constructive trustremedy. . . ."); Dean v. Johnson, 881 F.2d 948, 949 (10th Cir.1989) ("The state domestic relations court order ostensiblyrestricts the federal insured's right to designate a beneficiaryand thus cannot be valid under FEGLIA."); O'Neal v. Gonzalez,839 F.2d 1437, 1440 (11th Cir. 1988) (". . . Congress intended toestablish . . . an inflexible rule that the beneficiarydesignated in accordance with the statute would receive thepolicy proceeds, regardless of other documents or the equities ina particular case.").2 These federal authorities,particularly the Seventh Circuit's Christ decision, powerfully underline the unavoidableconclusion that FEGLIA completely preempts state laws, includingequitable remedies, with the effect, in this case, that BeverlyZaldivar's motion must be allowed.

The doctrine that federal law preempts state law derives fromthe Supremacy Clause of the United States Constitution. U.S.Const. Art. VI, cl. 2 ("[T]he laws of the United States . . .shall be the supreme Law of the Land . . . any Thing in theConstitution or the Laws of any State to the Contrarynotwithstanding."). Whether a particular federal law preemptsstate law "depends `on statutory intent.'" Christ,979 F.2d at 578. Accordingly, the first place to start is the language of thestatute itself. Id.

Enacted in 1954, FEGLIA provides low-cost group life insuranceto federal employees. Section 8705 of FEGLIA "sets out preciselyto whom insurance benefits are to be paid when a participatingemployee dies." Id. at 576. The order of preference specifiesthat the insurance "shall be paid" first to "the beneficiary. . . designated by the employee in a signed and witnessedwriting received before death in the employing office."5 U.S.C. § 8705(a). If the insured does not designate a beneficiary, thestatute provides a distribution order among the insured's surviving family. See id. This section also spellsout how beneficiary designations are to be executed. The writingmust be signed, witnessed, and received by the employer beforethe death of the insured, and a designation or a change indesignation in a will or other document "not so executed andfiled has no force or effect."3 Id.

As the Seventh Circuit stated in Christ, the language of thestatute is unambiguous; it expressly dictates to whom theinsurance proceeds should be paid, both when there is a properdesignation and when no designation is made. A state court ordermandating to whom FEGLIA insurance policies are to be designatedconflicts with the language of FEGLIA. Id. at 579. In addition,the imposition of the constructive trust on the proceeds alsoconflicts with FEGLIA's statutory scheme. A constructive trustwould require that the proceeds of the policy be distributed tosomeone other than the beneficiary, who, pursuant to FEGLIA'sorder of preference, is the person who "shall be paid." Id.; §8705(a). "This, in turn, gives `force and effect' to abeneficiary designation not made according to FEGLIA'srequirements. . . ." Id. Contra Kidd v. Pritzel, 821 S.W.2d 566, 569 (Mo.App. 1991) (stating that the order of preferenceprovisions serve the "sole purpose" of providing for "the speedyand economical settlement of claims"). Thus, the court mustconclude that FEGLIA preempts state laws, including any claims ofa constructive trust; to conclude otherwise would be contrary tothe language of the statute.

Section 8709(d) of the act further supports this conclusion.This section provides that the payment provisions of contractsmade pursuant to FEGLIA preempt state laws which relate to grouplife insurance to the extent that the two are inconsistent. Thisbroad preemption clause "reinforces the conclusion that FEGLIA'sorder of precedence preempts the constructive trust remedy."Id. at 579. Contra Sedarous v. Sedarous, 666 A.2d 1362, 1365(N.J.Super. 1995) (finding that the preemption provision ofFEGLIA is not so broad as to support the conclusion that Congressintended FEGLIA to preempt state laws in an area — namelydomestic relations — that has been traditionally left to thestates).

In addition to the unambiguous language of the statute, theSupreme Court's decision in Ridgway v. Ridgway, 454 U.S. 46(1981), strongly supports the conclusion that FEGLIA preempts allstate laws and equitable remedies. In Ridgway, the court heldthat a constructive trust could not be imposed on insuranceproceeds from a Serviceman's Group Life Insurance Act ("SGLIA") policy. The same rationale employed by the Supreme Court inholding that SGLIA preempted constructive trusts applies withequal force to FEGLIA.

In Ridgway, the Court concluded that SGLIA's statutory scheme— specifically, its order of preference and beneficiarydesignation section — preempted the state law remedy because thedivorce decree and constructive trust remedy at issue "interferedwith [the insured's] right to designate his beneficiary and withthe statutory order of preference." Christ, 979 F.2d at 580(citing Ridgway, 454 U.S. at 55-57). As noted by the SeventhCircuit, SGLIA is "an insurance program nearly identical toFEGLIA in almost all important respects." Christ,979 F.2d at 580. The similarities between SGLIA and FEGLIA statutory schemesjustify concluding that the Court's reasoning in Ridgwayapplies here to preclude the imposition of a constructive trust.

Finally, the strongest argument in favor of finding that FEGLIApreempts all state law is Congress' recent amendment to the act.In 1998, Congress changed FEGLIA to allow outside documents tochange the order of benefit distribution "in specific, limitedcircumstances." Metropolitan Life Ins. Co. v. Holland,134 F. Supp. 2d 1197, 1200 n. 2 (D. Or. 2001). FEGLIA now provides that"[a]ny amount which would otherwise be paid to a persondetermined under the order of precedence named by subsection (a) shall be paid (in whole or in part) by the Officeto another person if and to the extent expressly provided for inthe terms of any court decree of divorce, annulment, or legalseparation, or the terms of any court order or court-approvedproperty settlement agreement incident to any court decree ofdivorce, annulment, or legal separation." 5 U.S.C. § 8705(e)(1).However, for such a court order to be effective, it must bereceived by the employing agency "before the date of the coveredemployee's death." § 8705(e)(2).

In amending FEGLIA to permit court decrees in divorcesettlements to govern the designation of beneficiaries to FEGLIAlife insurance policies, Congress recognized the importance ofallowing state courts to have power over the disbursement ofFEGLIA insurance proceeds for the benefit of families andchildren under specific, limited conditions. Congress couldjust as easily have amended FEGLIA to allow all state courtdecrees in divorce settlements, as well as other equitableremedies, to change the designation of beneficiaries, regardlessof whether the employing agency received notice of the order.Congress did not do so. The language of the statute explicitlyand clearly provides that the employing agency must (1) receive acopy of the court order (2) before the death of the insured.

To alter the designation of a beneficiary in this case by imposing a constructive trust would directly contradict thelanguage of § 8705(e) that specifically mandates the conditionsthat must be met for a court divorce decree to be given effect.The court therefore finds that FEGLIA preemptsplaintiffs'-in-crossclaim state law claims, including the requestfor the imposition of a constructive trust on the proceeds of thelife insurance policy.


For the reasons set forth above, defendant's-in-crossclaimSupplemental Motion for Summary Judgment is hereby ALLOWED.

The clerk will enter judgment for plaintiff on the complaint,judgment for plaintiff on the counterclaim of Sandra, Daniel, andThomas Zaldivar, and judgment for Beverly Zaldivar on thecrossclaim of Sandra, Daniel, and Thomas Zaldivar. This case maybe closed.

It is So Ordered.

1. Docket No. 30.

2. In contrast, numerous state courts have held to thecontrary. E.g. Kidd v. Pritzel, 821 S.W.2d 566, 575(Mo.Ct.App. 1992) (holding that the plaintiffs' state claims in equitywere not preempted by FEGLIA); Sedarous v. Sedarous,666 A.2d 1362, 1363 (N.J.Super. 1995) (holding that "FEGLIA does notpreempt the power of the state court to impose a constructivetrust on the proceeds of the insurance after the death of theobligor spouse"); Eonda v. Affinito, 629 A.2d 119, 123 (Pa.Super. 1993) (holding that "a state court-imposed constructivetrust [does not] contravene[] any of the federal interestsunderlying FEGLIA" and thus is not preempted by FEGLIA).

3. As noted earlier, there is no dispute that the deceased,Albert, complied with the requirements of this section andvalidly designated, pursuant to FEGLIA, Beverly as thebeneficiary of his life insurance policy.

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