U.S. District Judge Phyllis J. Hamilton ruled on January 4 in Schuett v. FedEx Corporation, 2015 U.S. Dist. LEXIS 244, 2015 WL 39890 (N.D. Cal.), that the Supreme Court’s 2013 decision in U.S. v. Windsor, striking down Section 3, a key provision of the Defense of Marriage Act (DOMA), could be applied retroactively to allow Stacey Schuett, a lesbian widow, to sue her late spouse’s employer for a survivor annuity. Although the judge rejected a claim that the lawsuit could be brought directly under the company’s pension plan or as a breach of fiduciary duty action against the plan’s administrators, she accepted the argument that the plan could be sued for violating the Employee Retirement Income Security Act (ERISA) by failing to authorize the annuity for the plaintiff.
The story is complicated. This account is based on what Stacey Schuett alleged in her complaint, as summarized by Judge Hamilton.
Schuett lived together in a committed relationship for 27 years with Lesly Taboada-Hall, who passed away from cancer on June 20, 2013, just a week before the Supreme Court’s momentous June 26 decisions rejecting an appeal of the federal court ruling that struck down California Proposition 8 and striking down Section 3 of DOMA. For almost the entire length of their relationship, Taboada-Hall had been employed by Federal Express (FedEx), and she was a fully-vested participant in the FedEx Pension Plan.
As required by ERISA, the plan states that if an employee with a vested pension dies before retiring, their surviving spouse is eligible to receive a “qualified joint and survivor annuity” for the rest of their life. The written pension plan uses the federal definition of spouse, directly referring to Section 3 of DOMA, which defined a spouse as “a person of the opposite sex who is a husband or wife.” This is the definition that the Supreme Court declared unconstitutional on June 26, 2013.
Ms. Taboada-Hall was diagnosed with cancer in February, 2010, and as her condition worsened she took a medical leave of absence from FedEx in November 2012. In February 2013, facing the fact that she would not be able to resume working, she contacted a FedEx human resources representative about her pension and other employee benefits, since she was eligible for early retirement under the terms of the pension plan. The representative advised her not to retire, since she could continue on medical leave and have her medical expenses covered under the FedEx employee benefits plan. She was asked about her other benefits, and was advised to name Schuett as her sole beneficiary on the other plans. She also asked whether Schuett would get the “defined pension benefit” to which Taboada-Hall would be entitled, if Taboada-Hall died before retiring. The representative said he did not know the answer to that and said “ask someone else.”
On June 3, 2013, the doctor advised that Taboada-Hall was terminal and did not have long to live. Schuett and Taboada-Hall looked again through the benefits package, and noticed that the plan defined “spouse” with reference to DOMA. Between June 3 and June 13, they had several conversations with FedEx human resources personnel trying to find out what would happen to Taboada-Hall’s benefits, and on June 13 they received the answer: Schuett would not receive a surviving spouse benefit because only opposite-sex partners could be recognized under the plan.
They quickly arranged with a Sonoma County Supervisor to come to their home and perform a civil marriage ceremony, even though they could not get a marriage license because Proposition 8 was still in effect. The ceremony was witnessed by friends and family members on June 19. The next day Taboada-Hall died, and six days later Prop 8 and DOMA were declared unconstitutional.
What to do next? Two days after the Prop 8 decision, the 9th Circuit Court of Appeals lifted its stay and Judge Vaughan Walker’s 2010 ruling holding Prop 8 unconstitutional went into effect. Of course, the logical implication of the Supreme Court’s decision that the proponents of Prop 8 did not have standing to appeal Judge Walker’s decision was that Walker’s ruling should have been in effect from the summer of 2010 when it was issued, so by rights Taboada-Hall and Schuett should have been able to get a marriage license at any time since then. Furthermore, the logical implication of the DOMA decision was that the federal definition of marriage was unconstitutional from the date it was enacted in 1996.
Schuett went into Sonoma County Superior Court on August 6, 2013, filing a Petition to Establish the Fact, Date, and Place of Marriage, contending that the June 19 marriage should be retroactively validated. That court agreed, ruling on September 18, 2013, that the marriage was valid as of June 19, 2013, issuing a delayed certificate of marriage carrying that date. This means that Schuett was a surviving widow when Taboada-Hall died on June 20, and thus she should be entitled to be treated as a surviving spouse by FedEx.
But not so fast! FedEx turned her down for the benefit, arguing that eligibility depended on the terms of the written plan, which was limited to surviving different-sex spouses. In Schuett’s federal lawsuit against FedEx for the benefit, Judge Hamilton agreed with FedEx that Schuett could not sue for the benefit directly, since only beneficiaries under a plan can sue for benefits and under the terms of the written plan she was not a beneficiary. Furthermore, Judge Hamilton agreed with FedEx that the administrators of the plan had not violated their fiduciary duty, which required them to follow a reasonable interpretation of the written plan’s terms. The judge granted FedEx’s motion to dismiss Schuett’s claims under these two legal theories.
However, plan administrators are required to administer plans “in accordance with applicable law,” wrote Judge Hamilton. ERISA provides that a plan must provide an annuity benefit to the spouse of an employee who has a fully vested pension benefit but dies before they have retired and begun to receive retirement benefits. Schuett argued that since California recognized her as being married on June 19, 2013, the day before Taboada-Hall died, she should be considered a surviving spouse for purposes of this ERISA provision. She pointed out that in the Windsor case, the Supreme Court not only declared DOMA unconstitutional but also ordered that the federal government refund with interest the money Edie Windsor had paid to cover estate taxes of her wife, Thea Speyer, which would not have been due if the federal government recognized their Canadian marriage. Thus, the ruling in Windsor was itself retroactive.
Judge Hamilton accepted Schuett’s argument, finding that “ERISA requires a fiduciary to follow plan documents insofar as such documents are consistent with Title I of ERISA. ERISA requires defined benefit plans such as the Plan at issue to provide a qualified preretirement survivor annuity to all married participants who are vested and die before the annuity starting date, unless the participant has waived the benefit and the spouse consented to the waiver.” Furthermore, the Department of Labor had issued a “guidance” document making clear that “ERISA’s mandatory benefits provisions apply to all spouses, including same-sex spouses.”
Among the cases Judge Hamilton relied upon were Cozen O’Connor P.C. v. Tobits, 2013 U.S. Dist. LEXIS 105507, 2013 WL 3878688 (E.D. Pa. 2013), specifically on an ERISA survivor benefits claim involving a same-sex couple, and Harper v. Virginia Dep’t of Taxation, 509 U.S. 86 (1993), on retroactivity when the Supreme Court announces a new rule of federal law and applies it retroactively to the parties in the case.
Hamilton found that the Windsor decision “appears to invalidate Section 3 of DOMA retroactive to 1996, the date of enactment. Notably, the decision in Windsor applied retroactively.”
“In the present case,” she wrote, “although California denied recognition of the term ‘spouse’ to same-sex couples at the time of Ms. Taboada-Hall’s death on June 20, 2013, the Sonoma County Superior Court determined that plaintiff and Ms. Taboada-Hall were married on June 19, 2013, and issued a delayed marriage certificate. . . [T]his court defers to the California court’s certification of the marriage. . . The court finds that plaintiff has adequately alleged that FedEx has violated Title I of ERISA by acting contrary to applicable federal law and failing to provide plaintiff with a benefit mandated by ERISA, and that she is entitled to pursue equitable relief to remedy that violation.” She concluded on this point that she was not persuaded “under the facts alleged in the complaint that there is any basis for denying retroactive application of Windsor.” Thus, Judge Hamilton denied FedEx’s motion to dismiss Schuett’s claim under the ERISA violation theory.
Stacey Schuett is represented by Nina Rachel Wasow, an attorney with Feinberg, Jackson, Worthman & Wasow (Oakland); Amy Whelan, Christopher Francis Stoll, and Shannon Minter of the National Center for Lesbian Rights (San Francisco); Julie Wilensky of Civil Rights Education & Enforcement Center (Berkeley); and Tate A. Birnie (Sebastopol). FedEx used in-house counsel to litigate its motion to dismiss, but would probably retain outside counsel if it seeks to appeal this ruling to the 9th Circuit. Since the FedEx plan administrators are under a fiduciary duty not to pay out any benefits that are not required by the plan or the law, they might conclude that they have to appeal this ruling, although the pragmatic approach could be to avoid the costs of litigation and grant Schuett’s claim for the annuity. Of course, it is also open to Schuett to appeal the court’s order dismissing her claim on the other legal theories.