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1 IN THE SUPREME COURT OF THE UNITED STATES

2 - - - - - - - - - - - - - - - - X

3 DONNA RAE EGELHOFF, :

4 Petitioner :

5 v. : No. 99-1529

6 SAMANTHA EGELHOFF, A MINOR, BY :

7 AND THROUGH HER NATURAL :

8 PARENT KATE BREINER, AND DAVID :

9 EGELHOFF :

10 - - - - - - - - - - - - - - - - X

11 Washington, D.C.

12 Wednesday, November 8, 2000

13 The above-entitled matter came on for oral

14 argument before the Supreme Court of the United States at

15 11:02 a.m.

16 APPEARANCES:

17 WILLIAM J. KILBERG, ESQ., Washington, D.C.; on behalf of

18 the Petitioner.

19 BARBARA J. McDOWELL, ESQ., Assistant to the Solicitor

20 General, Department of Justice, Washington, D.C.; on

21 behalf of the United States, as amicus curiae,

22 supporting the Petitioner.

23 THOMAS C. GOLDSTEIN, ESQ., Washington, D.C.; on behalf of

24 the Respondents.

25

1

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 WILLIAM J. KILBERG, ESQ.

4 On behalf of the Petitioner 3

5 ORAL ARGUMENT OF

6 BARBARA B. McDOWELL, ESQ.

7 On behalf of the United States, as amicus curiae,

8 supporting the Petitioner 16

9 ORAL ARGUMENT OF

10 THOMAS C. GOLDSTEIN, ESQ.

11 On behalf of the Respondents 26

12 REBUTTAL ARGUMENT OF

13 WILLIAM J. KILBERG, ESQ.

14 On behalf of the Petitioner 51

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2

1 P R O C E E D I N G S

2 (11:02 a.m.)

3 CHIEF JUSTICE REHNQUIST: We'll hear argument

4 next in Number 99-1529, Donna Rae Egelhoff v. Samantha

5 Egelhoff.

6 Mr. Kilberg.

7 ORAL ARGUMENT OF WILLIAM J. KILBERG

8 ON BEHALF OF THE PETITIONER

9 MR. KILBERG: Mr. Chief Justice, and may it

10 please the Court:

11 Washington State's divorce revocation law

12 strikes at the very heart of ERISA's comprehensive

13 regulatory scheme for employee benefit plans. It does so

14 by purporting to revoke ERISA plan beneficiary

15 designations upon divorce.

16 We submit that the Washington statute is

17 preempted by ERISA on two independent grounds. First,

18 because it relates to an ERISA plan within the meaning of

19 ERISA's express preemption provision, section 514(a) and

20 second, because it conflicts with ERISA's other

21 provisions.

22 Turning first to section 514, this Court has

23 made clear that a State law relates to an employee benefit

24 plan if it mandates employee benefit structures or their

25 administration or binds plan administrators to particular

3

1 choices. Washington's divorce revocation statute has

2 precisely that forbidden effect.

3 As applied by the courts below, the statute

4 invalidates the beneficiary determination and benefit

5 payment scheme provided for by the terms of the ERISA

6 plans here and instead mandates payment according to a

7 different State-imposed scheme. Moreover, the

8 determination of beneficiary status, and the payment of

9 plan benefits, lie at the very heart of ERISA's concerns.

10 Indeed, the determination whether particular

11 alleged beneficiaries are entitled to obtain plan benefits

12 is so crucial to the entire Federal scheme created by

13 ERISA that such benefits claims are deemed to arise under

14 Federal law under this Court's decision in Metropolitan

15 Life v. Taylor even if they purport to raise only State

16 law claims.

17 QUESTION: Of course, what you say applies

18 exactly similarly, I take it, to a State statute that

19 would say, if A murders B, A shall be treated as having

20 predeceased B for purposes of inheriting from B, or in a

21 word, A can't inherit from B. All that you've said would

22 apply to that similarly, so what's the difference?

23 MR. KILBERG: If that were a State law, then it

24 would be preempted.

25 QUESTION: In other words, you're saying that

4

1 basically this ERISA preempts all of what you call the

2 slayer statutes, I guess, that traditionally have said you

3 can't inherit from a person you murder.

4 MR. KILBERG: It preempts the slayer statutes.

5 However, the slayer rule may very well be incorporated

6 into ERISA, because the slayer rule was extant at the time

7 of ERISA's passage in 1974, was a common law rule, and had

8 been applied in numerous cases, Federal cases with regard

9 to a death benefit statute, so it was a gloss on the law.

10 QUESTION: All right. So does it also

11 incorporate statutes where people die simultaneously?

12 There are a complicated set of State rules as to how you

13 treat what assets for purposes of inheritance.

14 MR. KILBERG: It may encompass simultaneous

15 death, a simultaneous death rule.

16 QUESTION: All right, so if it -- now we have it

17 interpreting a considerable area of State probate law. Is

18 there any reason why Congress would have wanted ERISA to

19 preempt a traditionally State-regulated subject like

20 probate and -- you know, at least where it doesn't

21 interfere with some important policy, or -- I don't know.

22 I mean, you see the -- that's what I want you to address.

23 MR. KILBERG: I can imagine where you're headed,

24 Justice Breyer. Yes, the answer, of course it preempts

25 those laws. There's no reason to believe that it doesn't.

5

1 We're talking about employee benefit plans. There's

2 nothing more central to an employee benefit plan than

3 benefits, how it pays them, to whom it pays them, and

4 ERISA has specific provisions with regard to the exception

5 for State law with -- in the context of the payment

6 employee benefit plans in a divorce situation.

7 QUESTION: I'm not sure about you -- how you

8 distinguish the slayer statute. You say it's been around,

9 it's part of the common law, it's part of the background.

10 Why -- suppose the case we have here has been around a

11 long time.

12 MR. KILBERG: Well, the difference, Justice

13 Kennedy, is that the slayer -- the slayer rule was part of

14 the common law, was part of the common law of trust at the

15 time that ERISA was enacted, and it may be presumed that

16 the Congress, seeing that as a backdrop, incorporated,

17 impliedly incorporated the slayer rule into ERISA.

18 QUESTION: But not simultaneous death statutes,

19 because they vary from State to State, or --

20 MR. KILBERG: Well, I'm not sure about

21 simultaneous death statutes, quite frankly. They may,

22 too, have been incorporated, but with regard to a divorce

23 revocation rule, that was not the state of the common law

24 in 1974. Indeed, it's not the state of the law now. Very

25 few States, fewer than a third of the States have any sort

6

1 of divorce revocation rule. Only 10 States have

2 developed --

3 QUESTION: May I just -- is your point that it

4 was the law before ERISA was passed, or that it's part of

5 the common law.

6 MR. KILBERG: That's correct.

7 QUESTION: I mean, which is true? In other

8 words, supposing this statute had been passed before

9 ERISA. Would that make a difference?

10 MR. KILBERG: No, not the statute. If -- if the

11 divorce revocation rule had been commonly accepted in the

12 common law at the time ERISA was passed and had been used

13 as a gloss --

14 QUESTION: So your point is that --

15 MR. KILBERG: -- on similar Federal statutes --

16 QUESTION: Your point is, the other was a common

17 law rule, not the timing. The timing is --

18 MR. KILBERG: That's correct. Well, it's really

19 both, Justice Stevens. It is that it is a common law rule

20 and it was a common law rule at the time of ERISA's

21 passage in 1974.

22 QUESTION: Yes, but you've said that if there

23 had been a statute which is in effect that wouldn't have

24 done the trick.

25 MR. KILBERG: That's correct.

7

1 QUESTION: Well, when you say a common law rule,

2 we're dealing with a country with 50 different States. I

3 mean, don't you think the law might have been different in

4 some of those States?

5 MR. KILBERG: Not with regard to the slayer

6 rule, in fact, and indeed what is important here is that

7 the slayer rule had been applied in Federal cases as a

8 gloss to death benefit statutes, and so one can assume

9 that the Congress, or one can rule that the Congress had

10 impliedly incorporated that common law rule into ERISA.

11 QUESTION: Even in the face of a provision in

12 ERISA that says benefits have to be paid to the named

13 beneficiary?

14 MR. KILBERG: With regard to the slayer rule, if

15 it had been incorporated into ERISA, then it would be

16 incorporated as an implied exception.

17 QUESTION: What is the mechanics of the working

18 of a plan? Supposing that you have a designated

19 beneficiary, and the insurance company or whoever goes and

20 pays -- goes on and pays out to the beneficiary. In fact,

21 the beneficiary killed someone and he's disqualified from

22 inheriting. If he's still the named beneficiary, is the

23 insurance company responsible for that sort of an error?

24 MR. KILBERG: Yes, they would be responsible

25 under those circumstances. The plan administrator has to

8

1 make a decision as to whether a benefit is to be paid out.

2 The plan administrator does so by looking both to ERISA

3 and to the terms of the plan.

4 QUESTION: Well, does he have to look into a

5 whole bunch of factual matters like, you know, whether

6 this beneficiary might be disqualified by some State,

7 State statute like the slayer's --

8 MR. KILBERG: No. No. He would not look at

9 State law. He would not have to look at State rules

10 unless, not finding the answer in his plan, and not

11 finding the answer in ERISA he may choose to look to State

12 law, but --

13 QUESTION: It seems to me that would be a much

14 narrower ground for ruling in your favor here, rather than

15 these general assertions about the incorporation in the

16 common law, that perhaps if a State statute actually

17 directly affects the designation of a beneficiary, the way

18 the Washington statute does, it may be different than the

19 slayer statute.

20 MR. KILBERG: But we believe that State law, Mr.

21 Chief Justice, that a State law like this, which is

22 essentially a rule of decision for employee benefit plan,

23 is preempted both as a matter of express preemption and as

24 a matter of conflict preemption under ERISA.

25 QUESTION: But you agree that your argument is

9

1 stronger -- let's assume that the statute does not

2 incorporate slayer statutes, or simultaneous death

3 statutes --

4 MR. KILBERG: Yes.

5 QUESTION: -- or simultaneous death rules.

6 Would you agree that your argument is much stronger than

7 if you rely on conflict preemption than if you rely on

8 statutory relating-to preemption?

9 MR. KILBERG: I believe it's equally strong.

10 QUESTION: Well, if it's a flat conflict

11 preemption, it seems to me relatively easy for us to say,

12 look, the statute says, beneficiaries or plans designate

13 the --

14 MR. KILBERG: Participants.

15 QUESTION: -- participants or plans designate

16 beneficiaries. This says they don't. Clear conflict.

17 But if you get to relating-to preemption, which

18 we do not find it easy to understand, then it seems to me

19 the force of the argument for anomalous results which my

20 colleagues were making is simply a stronger argument,

21 because the concept of preemption is a comparatively

22 weaker concept.

23 MR. KILBERG: Well, obviously, we believe that

24 there is both conflict preemption and express preemption

25 here, and the Court can certainly, as it did in Boggs, not

10

1 reach the question of express preemption and go off on

2 conflict preemption, but --

3 QUESTION: Well, except your -- I think the

4 point being made is that your preemption is stronger if

5 you're willing to swallow the bitter pill of not including

6 the slayer statutes, but once you say the slayer statutes

7 don't pose any conflict, it's hard to see why they pose

8 any more of a conflict than -- or, excuse me, any less of

9 a conflict than the statute here.

10 MR. KILBERG: In Ridgeway v. Ridgeway, which was

11 a decision of this Court involving the Servicemen's Group

12 Life Insurance Act, the Court noted the slayer rule and

13 determined that it did not have to deal with it in the

14 context of that case and that it was an extreme example.

15 The Court certainly is free to do the same in this context

16 and that, I believe, was also an express preemption.

17 QUESTION: Mr. Kilberg --

18 QUESTION: But is -- is the answer that you gave

19 in talking about the administrative burden -- my

20 understanding, and correct me if I'm not right, that this

21 statute says that if a trustee of a plan doesn't know

22 about this problem, he doesn't have to pay, and if he does

23 know about the problem, he doesn't have to pay until the

24 State courts resolve it, and if that isn't good enough, he

25 can opt out of the whole thing just by putting a sentence

11

1 in the plan that says, I opt out, in effect.

2 So where is the administrative burden, and is it

3 the same -- they also say there are 47 other States that

4 have similar statutes, and so I'm trying to get an idea

5 for what this administrative burden is.

6 MR. KILBERG: Oh, indeed, as we point out in our

7 brief, I believe it's at footnote 8 on page 20 of

8 petitioner's brief.

9 QUESTION: Yes.

10 MR. KILBERG: It's also described in amicus

11 briefs for the National Coordinating Committee and in the

12 Western Conference of Teamsters. In fact, the State rules

13 vary dramatically. Most States do not have a divorce

14 revocation rule at all.

15 Most States, more than two-thirds of the States,

16 the rule is simply that you go with the main beneficiary.

17 It is in a handful of States that you have divorce

18 revocation rules, and they vary among themselves, so there

19 is that burden that plaintiffs would have to deal with.

20 Moreover, the opt-out provision that you're

21 referring to in this State law merely adds another layer

22 of complexity. Now, in order to opt out you have to meet

23 yet another State standard, so at the end of the day --

24 QUESTION: Which is?

25 MR. KILBERG: Well, which is that you have to

12

1 specifically opt out, and you have to opt out in the

2 manner in which the State tells you you have to opt out.

3 QUESTION: And you may not know which State is

4 the State that will govern.

5 MR. KILBERG: That's correct, Justice Ginsburg.

6 QUESTION: But before we get into that, I'm

7 still a little confused on the nature of the common law

8 that we're talking about. As I understand you,

9 Mr. Kilberg, you are not talking about the common law of

10 California or Massachusetts or anything.

11 MR. KILBERG: That's correct.

12 QUESTION: You're talking -- and you're not

13 talking about the pre-Erie general common law, either.

14 You're talking about what Judge Friendly called, in praise

15 of Erie and the new Federal common law. That is, Federal

16 common law that fills in the interstices of Federal

17 statute, so you would not be incorporating any particular

18 State's slayer rule.

19 MR. KILBERG: That's correct.

20 QUESTION: But it would be a Federal, a true

21 Federal common law rule.

22 MR. KILBERG: That's correct.

23 QUESTION: And that with all Federal statutes,

24 or most Federal statutes, there will be a penumbral area,

25 and what would fill that in would not be the law of any

13

1 particular -- common law of any particular State, but

2 Federal common law.

3 MR. KILBERG: That's correct. I'm talking about

4 the common law of trusts, Federal common law, which in

5 prior decisions of this Court has been understood to apply

6 to ERISA but, more importantly, or as importantly --

7 QUESTION: I mean, if there is such a Federal

8 common law I suppose we could invent a -- you know, the

9 same spousal substitution rule that the State has done by

10 statute here. I mean, if there is -- if we have that

11 common law power to say, fill in the interstices in

12 statutes --

13 MR. KILBERG: I'm afraid not, Justice Scalia.

14 QUESTION: No?

15 MR. KILBERG: I was moving on from Justice

16 Ginsburg's question to distinguish between Federal common

17 law which is incorporated into a statute, because it is

18 the common law against which the Congress legislates,

19 which is what I would be referring to with regard to the

20 slayer rule, and that would be the common law in extant in

21 1974 that had been applied in other Federal cases to other

22 Federal death benefit statutes.

23 There is also a notion that if a statute does

24 not answer a question, if there are interstices that the

25 Court -- a court may apply a Federal common law rule, but

14

1 that's not the case here. Here, ERISA speaks specifically

2 to the issue at hand, and I believe --

3 QUESTION: Well, of course, that's the question

4 in the case, whether it does.

5 But suppose there's an ambiguity in the

6 designation, that there's a State rule of law that would

7 resolve, would the trust look to the State rule of law or

8 would it look to some Federal common law rule about

9 ambiguities. For example, say the beneficiary named my

10 son Joseph, and it turns out that the -- that he has -- he

11 gave the middle name Joseph to four different sons, and

12 how would you go about resolving that? Would you look to

13 a State rule or a Federal rule?

14 MR. KILBERG: It looked -- it would be the plan

15 administrator's choice. It would not be a decision under

16 State law, and the plan administrator would look to see if

17 there were any guidance in the plan, in Federal common

18 law, and then the plan --

19 QUESTION: He would confine his inquiry entirely

20 to the terms of the plan itself?

21 MR. KILBERG: He -- no. He may -- in making a

22 decision he may, of course, look to State law if he

23 chooses.

24 QUESTION: Mr. Kilberg, the Washington supreme

25 court seems to have analyzed the decedent's life insurance

15

1 policy separately from the pension plan in doing the

2 preemption analysis. Do we have to consider those two

3 plans separately, or do we apply the same analysis to both

4 of them?

5 MR. KILBERG: I believe we can apply -- the

6 Court can apply the same analysis for both of them with

7 one exception. One of our arguments is that there is a

8 conflict with ERISA's antialienation provision. That

9 provision, which is found in section 206 of the statute,

10 applies only to pension plans, but all of our other

11 arguments would apply to both welfare and pension plans.

12 If the Court has no further questions, I would

13 like to reserve the remainder --

14 QUESTION: Very well, Mr. Kilberg.

15 Ms. McDowell, we'll hear from you.

16 ORAL ARGUMENT OF BARBARA B. McDOWELL

17 ON BEHALF OF THE UNITED STATES, AS AMICUS CURIAE,

18 SUPPORTING THE PETITIONER

19 MS. McDOWELL: Mr. Chief Justice, and may it

20 please the Court:

21 The Washington statute relates to employee

22 benefit plans within the meaning of ERISA's express

23 preemption provision and also conflicts with several

24 specific provisions with ERISA. Accordingly, whether

25 viewed as a matter of express preemption, conflict

16

1 preemption, or appeal preemption, the Washington statute

2 in its application to ERISA plans is preempted.

3 QUESTION: Suppose, Ms. McDowell, you have a

4 trustee under an ERISA plan who has a designated

5 beneficiary and so forth and perhaps, you know, ambiguity

6 as suggested by Justice -- something else -- and then you

7 have simply a trust company that has exactly the same

8 provisions but it's not an ERISA plan. Are -- does -- are

9 their duties different? Say when you come to an

10 ambiguity -- you're both sitting in Seattle.

11 MS. McDOWELL: As a practical matter, they may

12 do essentially the same thing interpreting the terms of

13 the plan, or whatever instrument governs it. The key

14 question is what happens after the plan makes the decision

15 in the ERISA context. That decision is subject to review

16 and an action under ERISA section 502(a). In that sort of

17 action the Federal court would apply common law.

18 QUESTION: So -- but would the Federal common

19 law likely be different from the State of Washington's

20 law, or is it just up for grabs, kind of?

21 MS. McDOWELL: In many instances the appropriate

22 rule would presumably be for the plan administrator of the

23 ERISA plan to look to State law for guidance, for example,

24 in determining who was a spouse, who was a child, et

25 cetera. It would only make sense for the ERISA plan to

17

1 essentially require looking to the relevant State law that

2 creates the relationship. That's not so, however, where

3 the State law is one that conflicts with the provisions of

4 an ERISA plan such as the one here, which --

5 QUESTION: May I ask two questions? First, do

6 you agree that the State law here is a law of general

7 applicability?

8 MS. McDOWELL: Yes, it is. It refers to

9 insurance, but it's more general.

10 QUESTION: My second question is, in weighing

11 the various interests at stake here, should we give any

12 weight at all to the interests in carrying out the wishes

13 of the former employee who -- whose assets are being

14 distributed?

15 MS. McDOWELL: No, we shouldn't

16 QUESTION: We shouldn't.

17 MS. McDOWELL: In the first place, we don't know

18 his wishes. In the second place --

19 QUESTION: Well, we know he presumably was

20 advised by a lawyer, who was a State lawyer who told him

21 what the State rule of law was, and presumably he was told

22 he could rely on the fact that he didn't have to change

23 his designation for his sons to get the property. Isn't

24 that the normal thing you would expect a divorce lawyer in

25 that State to tell him?

18

1 MS. McDOWELL: This individual in fact was not

2 represented. It was a pro se divorce. One would assume

3 that a participant in an ERISA plan would look at a

4 variety of sources, most specifically including his

5 summary plan description, which in this case made quite

6 clear that the only way to change a beneficiary is to file

7 the required form, that such documents as divorce decrees

8 would not --

9 QUESTION: Of course, unless as a matter of law,

10 there is a rule of law that automatically changed the --

11 such as the slayer rule. Don't you think there's a

12 reasonable probability here that the plan participant

13 thought the money would not go to his divorced wife?

14 MS. McDOWELL: I don't think there's any way to

15 say what the plan participant intended at this point.

16 QUESTION: Because normally in the divorce

17 settlement -- they did have a divorce settlement -- don't

18 they provide otherwise? If there's a specific intent to

19 save that particular asset for the divorced wife, isn't

20 that normally set forth in the agreement providing for the

21 property settlement?

22 MS. McDOWELL: Well, certainly there is the

23 possibility under ERISA to obtain a qualified domestic

24 relations order. In this case the children's interests

25 could have been protected if such an order had been

19

1 obtained at any point in the process since the first

2 wife's divorce. That wasn't done.

3 QUESTION: Your basic -- you think he really

4 wanted the money to go to his divorced wife. That's your

5 suggestion.

6 MS. McDOWELL: My point is, we don't know, and

7 an ERISA plan --

8 QUESTION: What about ordinary common sense,

9 that a person who just divorces his wife, gives her half

10 the property, might prefer that the other half of the

11 property go to his children, rather than this wife, who's

12 now going to get more than her fair share, and whom he's

13 just divorced?

14 I mean, suppose I thought the common sense of it

15 in my knowledge of human nature is that people would

16 prefer their half share to go to their children rather

17 than the just-divorced wife.

18 MS. McDOWELL: Well, that's a sensible approach,

19 and ERISA plans could adopt that approach --

20 QUESTION: And is there some reason -- all

21 right, is there any -- so then is there any reason to

22 think that Congress wouldn't have wanted State statutes

23 that don't interfere that much with anything and in fact

24 embody that common sense notion, like you wouldn't like

25 your property to go to the guy who kills you. You know,

20

1 that's another common sense notion.

2 QUESTION: Ms. McDowell, that common sense

3 approach is disagreed with by two-thirds of the States, as

4 I understand it, right? Two-thirds of the States don't

5 think that that's common sense and don't provide for

6 automatic substitution in the event of a divorce.

7 MS. McDOWELL: That's correct, and in many

8 instances --

9 QUESTION: So it's not that much common sense,

10 and I --

11 (Laughter.)

12 QUESTION: And I assume that any -- that once

13 you have a statute like ERISA, which avowedly supersedes

14 State law, if you're dealing with a lawyer who doesn't

15 consult ERISA and knows nothing about ERISA and gives you

16 your advice only on the basis of State law, you're going

17 to get a lot of bad advice.

18 MS. McDOWELL: And you might in fact have a

19 malpractice action.

20 QUESTION: Mine was actually a question. Mine

21 was actually a question. I wasn't just making a comment.

22 (Laughter.)

23 QUESTION: I wanted you to respond to the notion

24 that State statutes, probate -- you know, that traditional

25 State area that embody that kind of a notion, what I'd

21

1 call a notion of trying to carry out the wishes of the

2 testator, or whoever, that those are not preempted unless

3 they impose a real burden upon the ERISA plan.

4 MS. McDOWELL: Well, you began your question

5 with a reference to what Congress would have intended

6 here, and we do know that Congress intended to permit the

7 nationally uniform administration of ERISA plans. That's

8 why it included an express preemption provision.

9 QUESTION: Ms. McDowell, I would like to go back

10 to your prior concession, or maybe I shouldn't use the

11 word concession, but is it not within the realm of the

12 possible that a man who has just divorced a woman, he's

13 tired of her, he's used her up, he's thrown her over, he's

14 off with a young thing but not married, and he's feeling

15 tremendous remorse, so he says, I'm going to leave that

16 pension plan alone.

17 (Laughter.)

18 MS. McDOWELL: Well, that's true, and perhaps

19 the more common situation is where the divorced spouse has

20 custody of the couple's children. In that case, it would

21 probably be a matter of relative indifference to the plan

22 participant whether the money went to the spouse directly

23 or the children, or --

24 QUESTION: Isn't it even more likely, instead of

25 this tender-hearted --

22

1 (Laughter.)

2 QUESTION: -- divorced husband, isn't it more

3 likely that the wife, in striking her deal for the divorce

4 settlement, having an ERISA plan, knowing there's an ERISA

5 plan which names her as the beneficiary, assumes that

6 that's her money?

7 MS. McDOWELL: She may well do so, although she

8 would know that at the time of their divorce the -- her

9 spouse would be free to --

10 QUESTION: And knowing that ERISA supersedes

11 State law, as well --

12 (Laughter.)

13 MS. McDOWELL: With respect to express conflict

14 preemption there are several provisions of ERISA that we

15 submit conflict with the Washington statute. One is the

16 provision that requires that plans be administered in

17 accordance with plan documents. The plan documents, in

18 this case, require payment to the beneficiary designated

19 by the plan participant, rather than by somebody

20 designated under State law.

21 It also conflicts with ERISA's definition of

22 beneficiary as the person designated by the participant or

23 under the terms of the plan. If one looks to the

24 participant's designation and the terms of the plan,

25 petitioner here is the proper beneficiary, not respondent.

23

1 With respect to the pension plan, the Washington

2 statute also conflicts with ERISA's antialienation

3 provision, which prohibits the assignment or alienation of

4 plan benefits. This statute affects an assignment or

5 alienation of benefits by transferring a right to benefits

6 from the petitioner's former spouse.

7 QUESTION: So your view of the murder situation

8 statutes are all preempted, too.

9 MS. McDOWELL: Well, we would submit that the

10 slayer statutes and the underlying slayer rule and the

11 Federal common law reflect a public policy limitation that

12 ERISA plans would not be free to --

13 QUESTION: Despite the express preemption

14 provisions on which you rely here.

15 MS. McDOWELL: That's correct.

16 If there are no further --

17 QUESTION: What is your position if in a divorce

18 decree the decree sets forth that the wife agrees to

19 relinquish her interest in the pension plan and that the

20 husband will name the children as beneficiary, and they

21 both agree to that?

22 MS. McDOWELL: And the husband doesn't do it?

23 QUESTION: Right, and then you have this -- then

24 you have this --

25 MS. McDOWELL: Our position is that under ERISA

24

1 one would continue to enforce the terms of the plan, just

2 as in this case.

3 QUESTION: And the children could not bring a

4 suit, because that would be preempted? The suit would be

5 preempted as well, I take it.

6 MS. McDOWELL: There may be a separate sort of

7 action in that situation under State law.

8 QUESTION: Why couldn't that --

9 QUESTION: Well, I thought the preemption of the

10 plan --

11 QUESTION: -- be a QDRO, though? In the example

12 Justice --

13 MS. McDOWELL: Yes, you're correct. It might be

14 recognized as a QDRO --

15 QUESTION: -- Kennedy gave you, why isn't that

16 covered by the QDRO section --

17 QUESTION: Can --

18 QUESTION: -- if it comes up in a divorce

19 matter?

20 MS. McDOWELL: That's correct, it could

21 constitute a QDRO, depending on whether it meets the

22 procedural requirements.

23 QUESTION: But the QDRO has to be forwarded to

24 the plan administrator, I take it?

25 MS. McDOWELL: That's correct, and presumably

25

1 the children with an interest in the benefits would do

2 that.

3 Thank you.

4 QUESTION: Thank you, Ms. McDowell.

5 Mr. Goldstein, we'll hear from you.

6 ORAL ARGUMENT OF THOMAS C. GOLDSTEIN

7 ON BEHALF OF THE RESPONDENTS

8 MR. GOLDSTEIN: Mr. Chief Justice, and may it

9 please the Court:

10 I will turn quickly to the mistaken notion that

11 the Washington statute at issue in this case conflicts

12 with ERISA, but I want to explain from the outset exactly

13 what this statute does and why it does it.

14 Washington, like a number of States, as a number

15 of the questions have reflected, recognizes the

16 unsurprising proposition and, Justice Scalia, it is

17 recognized by an increasing number of States very rapidly,

18 that when two people divorce they try to give each other

19 less money, not more.

20 Particularly relevant here, the designation of

21 one spouse as a death beneficiary, whether in a will, and

22 there are will statutes in 49 out of the 50 States, or in

23 some other asset, is premised on the idea that at the time

24 of death the couple will still be married.

25 Applied to this case, and I think it very

26

1 important that we talk about the facts of this case, the

2 statute rests on the idea that when petitioner sought and

3 received a divorce from David Egelhoff, and after they

4 entered a very detailed divorce decree, to the level of,

5 he got the tan area rug and she got the Exercycle, that he

6 did not walk out of the courthouse thinking, oh, and I

7 want her to get the pension and the life insurance, too.

8 QUESTION: Maybe she thought she got it.

9 MR. GOLDSTEIN: That is --

10 QUESTION: Maybe she had a good lawyer who read

11 ERISA --

12 (Laughter.)

13 QUESTION: -- and said that, you know, there is

14 this statute, but it ain't going to affect whether you get

15 your ERISA payment. You have that one. Now, maybe he

16 doesn't know that, but boy, we're walking away with a good

17 settlement here.

18 MR. GOLDSTEIN: Fortunately --

19 QUESTION: You really can't predict what the

20 expectations were. It's hard to do.

21 MR. GOLDSTEIN: With respect, we can here for

22 two reasons. First, the divorce decree itself explicitly

23 says that he gets the pension. It says so, and there's no

24 doubt that that was the parties' intent.

25 And second, there is a declaration

27

1 uncontradicted in the record that she basically went

2 around telling people that David would roll over in his

3 grave at the notion that she was going to get this money.

4 QUESTION: Well, just addressing the first, the

5 fact that the husband has the property interest means that

6 he simply has the power to designate the beneficiary.

7 That's quite consistent with his wanting to let her remain

8 the beneficiary.

9 MR. GOLDSTEIN: With respect, in terms of just

10 what the parties understood would happen to the money, and

11 in particular, Justice Scalia, what Donna's expectation

12 was, he got the pension benefits. The death benefit is

13 the entirety of the pension benefit, and she could not

14 have an expectation that she would ever get the money,

15 because she knows that he could change it the next day.

16 Moreover, this is a community property State.

17 They had to divide up the marital property, which included

18 the value of the pension at the time of divorce, and she

19 had to get equivalent assets at the time of divorce. This

20 is nothing more than a double recovery in the purest

21 sense.

22 QUESTION: Well, maybe it is, but I guess the

23 point that I don't seem to grasp is why it makes a dime's

24 worth of difference.

25 We've got a statute. If the statute means what

28

1 they say it does, you lose. If it doesn't, maybe you win,

2 but the particular expectations of the parties in a

3 particular divorce, even if there's an evidentiary basis

4 for it, seems to me irrelevant.

5 MR. GOLDSTEIN: It is relevant in the sense --

6 in two senses, Justice Souter. The first is that I'm

7 trying to explain to you the rationale and why it is so

8 rational that Washington did what it did, and second, it

9 goes to the question now speaking to the statute, what the

10 standard is for finding a conflict and finding preemption,

11 and that is that in this area, from cases like Hisquidero

12 on, there must be a clear and manifest conflict.

13 And now let me turn directly to the notion of

14 whether or not there is a conflict.

15 QUESTION: Before you do that, can you just

16 clarify -- you said that this is a galloping thing in the

17 States. How many States have these statutes now?

18 MR. GOLDSTEIN: There are 20 States that have

19 the statute now -- the number has been growing rapidly --

20 with respect to nonprobate assets. It was --

21 QUESTION: So the majority of States still do

22 not.

23 MR. GOLDSTEIN: They do not.

24 QUESTION: Is this the case: 47 States had

25 divorce revocation when the instrument is a will --

29

1 MR. GOLDSTEIN: Exactly.

2 QUESTION: -- and about 20 have it when divorce

3 revocation is a nonprobate asset, and it's not

4 nonuniform -- that is, the States that have it are copying

5 the Uniform Probate Code, which has such a provision in

6 it? Is that right?

7 MR. GOLDSTEIN: Yes.

8 QUESTION: All right. If that is right, do

9 these 20 States all say, or most of them say, like

10 Washington, that if you expressly deny the applicability

11 of a divorce revocation statute, you're home free? Do

12 they all say that?

13 MR. GOLDSTEIN: They do not --

14 QUESTION: Some of them? They all say that?

15 MR. GOLDSTEIN: They do not all say that, but

16 almost all do, because that's in the UPC.

17 QUESTION: All right. Do almost all of them

18 provide, as Washington does, that if a trustee doesn't

19 know about a conflict among beneficiaries, he needn't pay?

20 MR. GOLDSTEIN: The majority do.

21 QUESTION: All right. Do the majority also

22 provide that if the trustee does find out about it he also

23 need not pay until the State courts resolve the matter?

24 MR. GOLDSTEIN: Yes.

25 QUESTION: All right.

30

1 MR. GOLDSTEIN: Justice Breyer has helpfully

2 just identified three different opt-out provisions that go

3 directly to the question of whether or not there's an

4 actual burden on the plan.

5 Chief Justice Rehnquist --

6 QUESTION: Now, is it the case that -- does the

7 preemption provision at issue here say that preemption

8 only occurs when there's an administrative burden on the

9 plan?

10 MR. GOLDSTEIN: The courts --

11 QUESTION: Is that the criterion? I mean --

12 MR. GOLDSTEIN: It is a principal criterion.

13 Whether or not there's an --

14 QUESTION: Oh, I have no doubt that if there is

15 an administrative burden you will be much more likely to

16 find preemption, but if, on the face of it, there is

17 preemption, does there need to be an administrative

18 burden?

19 MR. GOLDSTEIN: We do not believe so, and Boggs

20 is an example, that the Court did not reach the question.

21 Four justices of the Court in Justice Breyer's opinion

22 explained that there really wasn't a burden and there

23 wasn't field preemption. The majority said there is

24 conflict preemption here, but it is worth noting that

25 Justice Kennedy's opinion in that case did explain why

31

1 there would be real administrative trouble if you

2 recognized nonparticipant interest.

3 Chief Justice Rehnquist -- so if I could

4 continue for the moment to focus on the practicalities of

5 what happens to an ERISA plan, turn to the specific

6 alleged conflicts with the statute in just a moment.

7 Chief Justice Rehnquist, you asked how this

8 worked in operation, and I'd like to refer to you -- refer

9 you to the respondent's lodging for a moment.

10 Respondent's lodging at tab 3 has the designation form for

11 the life insurance plan, and it explains that David

12 Egelhoff designated Donna R. Egelhoff, wife -- I

13 apologize. There may be some confusion. This is an

14 8-1/2 X 11 lodging that may not have come upstairs.

15 QUESTION: What is the tab that you --

16 MR. GOLDSTEIN: I'm starting at tab 3, Justice

17 Kennedy.

18 QUESTION: On this so-called lodging --

19 MR. GOLDSTEIN: Yes.

20 QUESTION: -- this isn't part of the joint

21 appendix, apparently.

22 MR. GOLDSTEIN: That is correct, Justice

23 O'Connor.

24 QUESTION: And it's not a brief of yours, and by

25 what authority did you file it, if I may ask?

32

1 MR. GOLDSTEIN: We conferred with the Clerk's

2 Office and received permission to file a lodging.

3 Let me explain also that these are materials --

4 it's particularly important, because this is not something

5 that translates at all well into --

6 QUESTION: Well, normally things that the

7 parties intend to refer to are incorporated in a joint

8 appendix, and I did not know that we accepted these

9 independently submitted supplemental documents. I

10 couldn't believe it when it came in.

11 QUESTION: The fact that the Clerk's Office

12 gives you leave to file it doesn't mean that it's a

13 desirable or even a permissible thing to do so far as the

14 Court is concerned.

15 MR. GOLDSTEIN: That point is well-taken, Mr.

16 Chief Justice. Let me just specify for the benefit of the

17 Court that the documents that I am about to refer to are

18 part of the record.

19 I understand the point is well-taken that

20 counsel are much preferred at the beginning of the case

21 within the joint appendix to have one consolidated

22 document. It is the case, however, that as the case moves

23 along, for example, after we received the petitioner's

24 brief, other documents become relevant that we want to

25 bring to the Court's attention.

33

1 QUESTION: And these are part of the record?

2 MR. GOLDSTEIN: Yes, Mr. Chief Justice, and so

3 let me just be absolutely clear these are not pedagogical

4 devices, anything outside the record. The two documents

5 I'm going to take you now are in the record of the case.

6 Tab 3 is the designation form, and it says that David

7 designated Donna R. Egelhoff, wife.

8 The reason I point to it is that when the

9 administrator receives a claim for death benefits it's

10 common ground that he or she pulls out the designation

11 form. Before paying the benefits, he or she must get the

12 death certificate. We have to be sure that the person is

13 dead. That's common sense.

14 On the death certificate it explains that David

15 Egelhoff died, and on line 14 -- or, excuse me, in cell

16 14, three lines down, it explains that he was divorced,

17 and that is the sum total of the administrative burden

18 that is put on ERISA plan administrators. They look at

19 the exact same documents.

20 QUESTION: Death certificates always say whether

21 you're divorced or not?

22 MR. GOLDSTEIN: So far -- I will not represent

23 to the Court that I have been able to identify every

24 State, but I have not been able to find one that hasn't.

25 There was no easy way of identifying every State's death

34

1 certificate, but yes, because they have to notify

2 next-of-kin, and remember as well, Justice Scalia, that

3 when you try to pay on death the survivor annuity required

4 by ERISA you must make the same inquiry. You have to know

5 if the participant was married at the time of death, and

6 so --

7 QUESTION: But it's not married. I mean, do

8 they put down never married so you know that? You said

9 they must put down divorced.

10 MR. GOLDSTEIN: The question for the survivor

11 annuity, Justice Ginsburg, is, at the time of death was

12 the person married. That -- and if so, there must be a

13 mandatory --

14 QUESTION: So it will say -- it will say either

15 married or divorced.

16 MR. GOLDSTEIN: Exactly. There are two lines in

17 the death certificate. One is married or divorced and the

18 second is, there is, in fact, a surviving spouse, so --

19 Now, a number of the questions have focused on

20 whether or not there is a conflict with the terms of

21 ERISA. Justice Scalia, you pointed out that it may well

22 be that there would be preemption even if there was no

23 additional burden. This is -- Congress said, this is how

24 it's going to work. Washington can't say anything

25 different.

35

1 Justice Souter, earlier you inquired similarly

2 whether or not there might not be conflict preemption,

3 because the statute mandates that you have to pay the

4 benefits to the named beneficiary. The difficulty is that

5 the statute does not say that. The only claimed conflict

6 here is with the term, beneficiary, and with the --

7 QUESTION: I think I was referring to the

8 definition of beneficiary as being the individual

9 designated by the participant or by the plan, and I

10 thought there was an apparent conflict between that and

11 any statute which in effect superseded that.

12 MR. GOLDSTEIN: That occurs, with all due

13 respect to my colleagues, because in their briefs there is

14 an ellipsis of an important phrase, and the definition of

15 a beneficiary is -- and I'm going to now refer to 29

16 U.S.C. 1002 sub (8).

17 QUESTION: Where do we find it?

18 MR. GOLDSTEIN: Mr. Chief Justice, it is at the

19 appendix to the petitioner's brief at page 2, and I --

20 when I refer to statutory section, from henceforth it will

21 always be in that brief.

22 QUESTION: Page 2a?

23 MR. GOLDSTEIN: Yes, Justice Scalia. This is

24 1002, sub (8). The term, beneficiary, means a person

25 designated by a participant or by the terms of an employee

36

1 benefit plan who is or may become entitled to a benefit

2 thereunder, and let me explain how Washington law operates

3 here.

4 Washington law at the time of divorce does not

5 say, if you divorce you are no longer a beneficiary, the

6 money instead goes to the children. It instead says that

7 the designation is ineffective and it is up to the terms

8 of the plan to determine who gets the money, and that's

9 exactly what the children were here. They were persons

10 who may become entitled to a benefit thereunder. They

11 have always been, because the plan specified.

12 QUESTION: Two things -- excuse me. Two things

13 occur to me. One is, doesn't -- first I guess is, just as

14 a matter of Washington law, the children don't become

15 entitled under the plan. They end up becoming entitled,

16 if they are entitled at all, under the Washington -- under

17 the State law of Washington.

18 And number 2, would you comment on what I

19 speculated when I read that last phrase, who are or may

20 become entitled. I assumed that that last phrase was

21 referring to, in effect, a contingent designation. You

22 know, to B or a C if B dies first, something like that. C

23 would be, may become entitled. --

24 MR. GOLDSTEIN: I --

25 QUESTION: And I thought that was all it was

37

1 referring to.

2 MR. GOLDSTEIN: I understand. I have both

3 points firmly in mind. The first, Washington law does not

4 say that the children become entitled because of the

5 statute. All that Washington law says is that the

6 designation -- it reflects, again, the common-sense

7 understanding that the meaning of the designation -- I

8 mean, it's fairly obvious here, when it says Donna R.

9 Egelhoff, wife, but --

10 QUESTION: Well, the form is, first becomes

11 disentitled --

12 MR. GOLDSTEIN: Becomes disentitled, and then --

13 QUESTION: We agree with that, and isn't that

14 enough for the conflict?

15 MR. GOLDSTEIN: No, Justice Souter.

16 QUESTION: Because the participant, or the

17 plan -- I guess the participant in this case -- is

18 designated and the statute says no, that designation is

19 not operative. Isn't that a conflict?

20 MR. GOLDSTEIN: No. The actual conflict, to

21 make it even more specific, the conflict would have to go,

22 if petitioner's position were accepted, ERISA says, pay

23 the beneficiary, which is correct, absent this special --

24 QUESTION: Well, ERISA says, sure, but ERISA

25 says, by means of the definition section, pay the

38

1 beneficiary, who is the designee either of the participant

2 or of the plan.

3 MR. GOLDSTEIN: Well, then we come to your

4 second point, because we have, or may become, because it

5 doesn't say the person who is entitled to receive by that

6 -- under the designation or under the plan. It's, who may

7 become.

8 I agree with you that that is intended to

9 trigger contingent beneficiaries. Our point is that the

10 children are as much contingent beneficiaries in the

11 meaning of that term as is the participant, because --

12 QUESTION: They are if you first assume there is

13 no conflict and therefore the statute prevails.

14 MR. GOLDSTEIN: Well, we are looking --

15 QUESTION: That's -- I mean, that seems to me a

16 circularity in your position.

17 MR. GOLDSTEIN: I will give you an interpretive

18 aid in trying to decide what it means to be, or may

19 become, and that is that it can't be the case that

20 the children -- let me take you to Boggs.

21 Justice Kennedy's opinion for the Court in Boggs

22 explained that there are a class of people that ERISA is

23 intended to protect, participants and beneficiaries. Our

24 position is, is that before the death of David, and before

25 the administrator looked at the alternate beneficiary

39

1 provisions, the children were protected by ERISA.

2 They were in the class of people who could bring

3 an action and say, look, you're misadministering plan

4 assets, just as much as Donna could. They are within the

5 class of people that ERISA intended to protect, and so if

6 you are going to call them not beneficiaries, they are

7 excluded from the rest of the statute entirely and they

8 receive none of the protections.

9 Our understanding is that if Congress wanted to

10 say -- use more limited language than or may become, it

11 could have. It could have said --

12 QUESTION: Yes, but it's also the case that

13 the -- and I will assume the premise of your argument that

14 there may be a considerable class of individuals who may

15 object to plan administration. It does not follow from

16 that that every one of those individuals in fact gets some

17 money in the pocket at the point of distribution.

18 MR. GOLDSTEIN: No, but the first class, the

19 group of people who are protected by the statute, are

20 denominated in the statute as beneficiaries.

21 QUESTION: It seems to me what you're arguing is

22 that it does not pose a conflict with the plan if you

23 require the plan to pay out to a contingent beneficiary

24 instead of to the main beneficiary.

25 I mean, the mere fact that it's somebody who was

40

1 not entitled to it, but would be entitled to it if the

2 person entitled to it weren't around, that's still a

3 conflict, it seems to me. Just because they both are

4 called beneficiaries of some sort, you're still requiring

5 payment not to the beneficiary named.

6 MR. GOLDSTEIN: Well, Justice Scalia, there are

7 many times when an ERISA plan pays benefits to someone

8 other than a named beneficiary, so we're going to have to

9 find the conflict somewhere else.

10 ERISA plans pay benefits out under the spousal

11 annuity. ERISA plans pay ERISA benefits out under the

12 QDRO provisions. It is many times not the case that they

13 pay it out directly to the person whose name is on it. In

14 fact, the plan here reserves the right to determine that

15 the individual named is incompetent, and not to pay them

16 then, either.

17 QUESTION: But the spousal annuity provision, I

18 mean, the spouse at the time of death may not be named,

19 but it's clear on the face of the plan and the

20 accompanying law of ERISA that the spousal annuity goes to

21 the spouse at the time of the beneficiary's death, or --

22 MR. GOLDSTEIN: Let me deal with what I take to

23 be the premise of your point, which is that a conflict

24 with the terms of the plan would be sufficient to cause

25 preemption, if the plan said, you can't do this, and

41

1 second -- so I'll return to that in just a moment, whether

2 or not that would be sufficient to cause ERISA preemption,

3 but let me deal with it on the facts of this case, and it

4 is important to return to the text of the statute again.

5 With the stroke of a pen, you can write into any

6 nonprobate asset, including an ERISA plan, divorce

7 revocation statutes do not apply.

8 Justice Ginsburg, you asked the petitioner's

9 lawyer, wouldn't there also be the problem you wouldn't

10 know which State law applies. The Attorney General of

11 Washington in her brief at footnote 6 has explained under

12 this statute, you don't have to say, Revised Code 1107010

13 doesn't apply, Alabama Code, da-da-da. It is, you just

14 say, divorce revocation statutes don't apply.

15 An earlier question also said, and --

16 QUESTION: Mr. Goldstein, you said the

17 Washington statute, but there are a number of statutes,

18 and they are various, so it wouldn't obviate the conflicts

19 problem.

20 MR. GOLDSTEIN: Justice Ginsburg, it would in

21 one sense and potentially not in another. The Court is

22 asked to pass on a particular statute with three safe

23 harbors that Justice Breyer has identified. I'm not

24 representing to you that the same rationale would save all

25 of them.

42

1 I think, though, your point goes more

2 particularly to what does the administrator do in a

3 conflict of laws problem? There's the hypothetical, for

4 example, that someone's from Oregon, someone from

5 Washington, someone from Texas. The plan operates in a

6 multi-State arena.

7 There are two important points. The first is

8 that there is the safe harbor both under the text of ERISA

9 and under this plan -- under this statute, that says, if

10 you have any doubt, don't pay. You don't have to go to

11 court. Just don't do it. Just send a letter to the

12 people who want the money and say to them, come back to us

13 when you have figured it out or a court has told you what

14 to do.

15 And so in terms of getting to the

16 practicalities, Justice Ginsburg, of how is this going to

17 work for administrators --

18 QUESTION: Doesn't that conflict with ERISA? I

19 mean, isn't he supposed to pay out the money promptly to

20 the person entitled to it, and you're saying it doesn't

21 conflict with ERISA to tell him to sit on his hands until

22 litigation terminates 2 years hence?

23 MR. GOLDSTEIN: Justice Scalia, it is frequently

24 the case, in fact, that ERISA plans have some doubt. The

25 Court discussed probably the most obvious cases, slayer

43

1 statutes, simultaneous death happens actually not

2 infrequently, but there are lots of times -- Justice

3 Stevens, the middle name of all the children is Joseph.

4 There are many times when you don't pay immediately.

5 ERISA provides in its enforcement section, and

6 the circuits uniformly agree, that what the plan should do

7 there is simply put the money aside and wait for the

8 claiming participants to fight it out.

9 QUESTION: Would you refresh my recollection?

10 Does the statute take care of the situation when the

11 beneficiary is incompetent, or a child, or something like

12 that? Does it provide paying to a conservator, or is that

13 done as a matter of State law?

14 MR. GOLDSTEIN: Does -- ERISA does not.

15 QUESTION: It doesn't contemplate that. So if,

16 in fact, the plan administrator knows that the -- say, the

17 beneficiary is in prison, or is having a mental problem or

18 something, he doesn't have to pay out right away?

19 MR. GOLDSTEIN: That's correct.

20 QUESTION: Yes.

21 MR. GOLDSTEIN: There are many times this

22 happens.

23 QUESTION: If -- is there -- you're asking us, I

24 take it, to interpret the statute, ERISA, which

25 effectively says pay the money to the primary beneficiary.

44

1 You want to say, well, pay the money to the primary

2 beneficiary who is a beneficiary and isn't disqualified by

3 certain State laws, and now this is one of the State laws

4 that might disqualify a person, and another one is a

5 slayer statute, and a third one, I take it, is a

6 simultaneous death statute, and are there any others --

7 MR. GOLDSTEIN: Those --

8 QUESTION: -- that anybody's been able to think

9 of?

10 MR. GOLDSTEIN: No, and it is important to

11 understand in terms of what the court is opening the doors

12 to, that the States have been regulating this area for

13 centuries, and that is the -- you know, this is in the

14 area of divorce. There are normal probate areas that they

15 have limited themselves, and if I could just mention one

16 point --

17 QUESTION: Do -- I mean, one of the ways they

18 used to regulate it is that, you know, the wife would get

19 half the estate automatically upon death. Suppose the --

20 a State enacts a law that says, you know, if this benefit

21 is not given to the spouse at the time of death, it must

22 be.

23 MR. GOLDSTEIN: I understand.

24 QUESTION: And this is probate, this is our

25 concern with the family and with marriage and all of that.

45

1 MR. GOLDSTEIN: Yes.

2 QUESTION: Surely you wouldn't say that ERISA

3 would be overcome with that.

4 MR. GOLDSTEIN: That's exactly right, because

5 that's a prohibited alienation. That's Boggs, and let me

6 explain why this is not.

7 Congress provided that there are certain people,

8 participants and their beneficiaries, when it's a spousal

9 annuity, who have an expectation that they are going to

10 live off pension benefits, and it specified when an

11 alienation would occur.

12 This is not a situation where the money is taken

13 away from the participant or anyone else who has a

14 mandated right to it and give -- and let me take you to

15 the definition. The alienation definition is not

16 reprinted in the appendix to any brief -- I apologize --

17 but I will simply read it to you. Well, the statute is,

18 and that is at the appendix to petitioner's brief at page

19 4, and it simply says, not very helpfully, each pension

20 plan shall provide the benefits provided under the plan

21 may not be assigned or alienated.

22 Justice Kennedy's opinion in Boggs looks to the

23 IRS's definition and I will read it to you. This for the

24 record is at 26 C.F.R. section 1.401A-(13)(c)(i) -- (ii).

25 The terms, assignment and alienation, include any direct

46

1 or indirect arrangement, whether revocable or irrevocable

2 whereby a party acquires from a participant or beneficiary

3 a right or interest enforceable against a plan in or to

4 any or all of the plan benefit payment.

5 QUESTION: That's what I thought alienation

6 means. It means from a participant. This alienation is

7 not from the participant. It's by operation of the State

8 law. You're not getting it from the participant.

9 MR. GOLDSTEIN: We agree. It's not an

10 alienation. That's our point, and that's the difference

11 from the hypothetical you asked. If there was a divorce

12 decree that said, look -- if the divorce decree here said,

13 Donna Egelhoff is going to get 100 percent of David's

14 pension, if that is not, Justice O'Connor, registered as a

15 QDRO that's an alienation. You can't do it.

16 Now, the petitioner --

17 QUESTION: Excuse me, that is an alienation?

18 Why is that an alienation?

19 MR. GOLDSTEIN: Because it takes it from David

20 and gives it to Donna.

21 QUESTION: But David is not alienating himself.

22 He's not taking it from himself and giving it to Donna. I

23 thought you agreed with me that that's what alienate

24 means. It means you can't transfer it to someone else,

25 not that operation of law can't take it away from you and

47

1 give it to somebody else.

2 MR. GOLDSTEIN: I apologize, Justice Scalia. I

3 was focusing on the take it from the person to another.

4 You were focusing on the operation of law. I actually

5 agree with your interpretation of operation of law.

6 Unfortunately, I think it's precluded by Boggs. That was

7 State community property law. I think Justice Breyer

8 might -- some might think he had the better of that

9 argument. That is water under the bridge, and that was

10 community property law.

11 QUESTION: Yes. Yes.

12 MR. GOLDSTEIN: Remember, the second wife,

13 community property law, took it. She -- the community

14 property law is what gave it to her. So what I'm focusing

15 on, though, is that this does not take it from somebody

16 and give it to somebody else.

17 Now, there was the question put before, well,

18 should this have been a QDRO, and there is the negative

19 inference suggested by petitioner that Congress occupied

20 this field, that really these sorts of things are supposed

21 to be done by QDRO's, and I will explain to you why that's

22 not so.

23 Washington law doesn't intend to say that the

24 kids will get the money. That's the whole point, that the

25 plan will decide who gets the money. Washington law wants

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1 David, after the divorce, to decide who will get it. Say

2 there's a third wife. David -- say he's a serial marrier.

3 If there's a third wife, David wants to be able to name

4 her. If there's a QDRO, he can't. If the divorce decree

5 said, the money goes to the kids, he's out of luck.

6 That's a registered decree under Washington State law.

7 All Washington is trying to do here is say,

8 look, when you divorce, the intent is that the spouse,

9 your ex-spouse isn't going to get the money. Go fix the

10 problem some other way, and it says to the plans, or any

11 other nonprobate asset, you don't want to comply, say

12 you're not going to comply. You have any doubts, don't

13 comply. And it says to the participant himself, if you

14 don't want this to be the rule, just say so, either in the

15 divorce decree or even in your designation.

16 There really is nothing going on here that

17 Congress didn't want to happen. There's nobody -- unlike

18 Boggs, where we had the actual spouse who was going to get

19 the spousal annuity, or we had the pension benefits after

20 death in the hands at least of the estate of the

21 pensioner, none of that applies here.

22 We're in a situation where Congress left it up

23 to anybody to name a designee, and unless there's some

24 real practical problem for the ERISA plan, unless

25 something's -- it's just not workable, I could understand

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1 a reason to preempt it. But when you're going to take

2 away simultaneous death, slayer statutes -- in the

3 footnote in which they address the issue in their reply

4 brief, petitioner says, Justice Scalia, that it preempts

5 state law definitions of what it is to die, who's a

6 spouse, what's a child, common law issues frequently

7 regulated by the States.

8 I should make one final point, and that is that

9 there is at the very least one alternative narrow holding

10 that I don't understand the answer to for this Court, and

11 that is that we sued petitioner under a provision of State

12 law that lets us just sue her, and if the problem is the

13 practical administration of this rule, that it will cause

14 a burden for ERISA plans, the rule at the least ought to

15 be that that's not preempted. It's a State law conversion

16 suit. We can go after her for the money.

17 QUESTION: It seems to me, and maybe you have an

18 answer to it, that the manner in which this State law

19 differs from laws that say who a wife is, who a child is

20 and so forth, is that this is a State law that is directed

21 explicitly to the manner in which a contract, an ERISA

22 contract in particular, should be interpreted. It is

23 directed precisely to the intent of the parties to an

24 agreement, and it says this is what they shall be deemed

25 to intend. It operates directly and explicitly upon the

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1 agreement itself.

2 MR. GOLDSTEIN: Two points. The first is that,

3 of course, it doesn't operate in such a fashion if there's

4 any contrary expression of intent by any of the parties,

5 be it the plan or the participant.

6 The second is that I do think in these ERISA

7 cases we get the unfortunate sense that this statute is

8 about ERISA plans, and it's not. There's a separate

9 statute, of course, that deals with every form of will.

10 This statute deals with every conceivable form of

11 nonprobate asset. It's really important under State law.

12 Most of the money that is held by individuals

13 now is either in your home or in a life insurance plan or

14 in a pension, whether qualified or not, and you get the

15 situation that you have here, and that is that Donna

16 Egelhoff already got equivalent assets. She's going to

17 come along and recover again. The children are going to

18 be completely out of luck for no sensible purpose at all.

19 If there are no further questions --

20 QUESTION: Thank you, Mr. Goldstein.

21 Mr. Kilberg, you have 3 minutes remaining.

22 REBUTTAL ARGUMENT OF WILLIAM J. KILBERG

23 ON BEHALF OF THE PETITIONER

24 MR. KILBERG: Thank you, Mr. Chief Justice.

25 Just a few points. The last point that Mr.

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1 Goldstein made, which suggests broader preemption than I

2 think the statute entails, ERISA preempts State law only

3 insofar as it relates to an employee benefit plan. No one

4 is suggesting that the State statute is preempted with

5 regard to other nonprobate assets.

6 Mr. Goldstein also mentioned that they had sued,

7 the respondents here had sued petitioner, not the plan.

8 Well, that is true. That, of course, was true in Boggs as

9 well and, as the Court said in the Boggs decision, there,

10 as here, the premise of the lawsuit is based on a

11 displacement of ERISA provisions and plan provisions.

12 A point with regard to the contingent

13 beneficiary notion. If Mr. Goldstein is correct, and

14 respondents are beneficiaries under ERISA because they

15 have a contingent right, then their only cause of action

16 would be under section 502(a) of ERISA. That would be

17 their exclusive right, and they would have had to sue the

18 plan under those provisions rather than the petitioner

19 under the State statute.

20 With regard to the QDRO point, Qualified

21 Domestic Relations Order point, the fact is that a QDRO

22 could have been fashioned that provided that the spouse

23 had given up any interest that she might have as a

24 beneficiary. The fact here is, that wasn't done. That

25 provision is a relatively easy one to effect. It wasn't

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1 done, and that's the reason that respondents must lose.

2 Unless the Court has any questions for me --

3 CHIEF JUSTICE REHNQUIST: Thank you, Mr.

4 Kilberg. The case is submitted.

5 (Whereupon, at 12:00 noon, the case in the

6 above-entitled matter was submitted.)

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