Ragan v. Ragan

2021 COA 75

• Court: Colorado Court of Appeals
• Decided: June 4, 2021
• Docket: 20CA0038
• Status: Published

Opinion

The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.

SUMMARY May 27, 2021

2021COA75

No. 20CA0038 Ragan v. Ragan — Employment Law — ERISA; General Provisions Concerning Probate and Nonprobate Transfers — Revocation of Probate and Nonprobate Transfers by Divorce

This appeal concerns the interplay between Colorado’s divorce

revocation statute, section 15-11-804, C.R.S. 2020, under which

any beneficiary designation of a former spouse is automatically

revoked upon divorce, and the Employee Retirement Income

Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, under which

an ERISA plan administrator must distribute plan proceeds to the

beneficiary named in the plan. In In re Estate of MacAnally, 20 P.3d

1197, 1203 (Colo. App. 2000), a division of this court held that

ERISA preempts the divorce revocation statute in the

“pre-distribution” context by requiring plan proceeds to be

distributed to the named beneficiary. A division of the court of appeals now recognizes that ERISA preemption extends to

post-distribution lawsuits pursuant to section 15-11-804(8)(b). The

division therefore concludes as a matter of first impression in

Colorado that, absent an express waiver of rights to the proceeds,

ERISA precludes a lawsuit against a former spouse to recover

insurance proceeds that were distributed to her as the named

beneficiary. COLORADO COURT OF APPEALS 2021COA75

Court of Appeals No. 20CA0038 El Paso County District Court No. 19CV31274 Honorable Gregory R. Werner, Judge

Rozalyn Ragan, Personal Representative of the Estate of Charles Phillip Ragan, Deceased,

Plaintiff-Appellant,

v.

Melissa Ragan, a/k/a Melissa Hudson,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division V Opinion by JUDGE YUN J. Jones and Navarro, JJ., concur

Announced May 27, 2021

The Drexler Law Group, LLC, Matthew B. Drexler, Brian Melton, Stephen A. Brunette, Colorado Springs, Colorado, for Plaintiff-Appellant

The Gasper Law Group, PLLC, Kenneth H. Gray, Jack Roth, Colorado Springs, Colorado, for Defendant-Appellee ¶1 At the time of Charles Phillip Ragan’s death, his ex-wife,

Melissa Ragan, a/k/a Melissa Hudson, remained the named

beneficiary of his employer-sponsored life and accidental death

insurance policies. After the insurance proceeds were distributed to

Ms. Ragan, Mr. Ragan’s estate (Estate) sued her to recover those

proceeds.

¶2 The Estate’s case implicates the interplay between Colorado’s

divorce revocation statute, section 15-11-804, C.R.S. 2020, and the

Employee Retirement Income Security Act of 1974 (ERISA),

29 U.S.C. §§ 1001-1461, which the parties agree governs the

insurance policies. On one hand, ERISA provides that an employee

benefit plan “shall . . . specify the basis on which payments are

made to and from the plan,” 29 U.S.C. § 1102(b)(4), and that the

fiduciary shall administer the plan “in accordance with the

documents and instruments governing the plan,” 29 U.S.C.

§ 1104(a)(1)(D), and make payments to a beneficiary who is

“designated by a participant, or by the terms of an employee benefit

plan,” 29 U.S.C. § 1002(8). ERISA also provides that it “shall

supersede any and all State laws insofar as they may now or

1 hereafter relate to any employee benefit plan” covered by ERISA.

29 U.S.C. § 1144(a).

¶3 On the other hand, section 15-11-804(2)(a)(i) (subsection (2))

of Colorado’s divorce revocation statute provides that any

beneficiary designation of a then-spouse is automatically revoked

upon divorce. Section 15-11-804(8)(b) (subsection (8)(b)) further

provides that if “any part of this section is preempted by federal

law,” a former spouse “who . . . received a payment . . . to which

that person is not entitled under this section is obligated to return

that payment” or “is personally liable for the amount of the

payment . . . , to the person who would have been entitled to it were

this section or part of this section not preempted.”

¶4 The Estate concedes that ERISA preempts subsection (2) and

that the plan administrator properly distributed the insurance

proceeds to Ms. Ragan. But the Estate argues that

subsection (8)(b) allows the Estate to recover those proceeds from

Ms. Ragan, who, by operation of subsection (2), was not entitled to

those proceeds. The district court disagreed, concluding that

subsection (8)(b), like subsection (2), is preempted by ERISA and

2 that the Estate therefore had “no legal interest” in the insurance

¶5 We affirm the district court’s judgment. In In re Estate of

MacAnally, 20 P.3d 1197, 1203 (Colo. App. 2000), a division of this

court held that ERISA preempts Colorado’s divorce revocation

statute in the “pre-distribution” context by requiring an ERISA plan

administrator to distribute plan proceeds to the beneficiary named

in the plan. We now recognize that ERISA preemption extends to

post-distribution lawsuits. Based on our analysis of legal authority

from other jurisdictions, we conclude as a matter of first impression

in Colorado that, absent an express waiver of rights to the proceeds,

insurance proceeds that were distributed to him or her as the

named beneficiary.

I. Background

¶6 Charles and Melissa Ragan were married in 2012 and divorced

in December 2016. Less than five months later, on May 13, 2017,

Mr. Ragan died in a car-bicycle accident. Before the dissolution of

the Ragans’ marriage, Mr. Ragan took out several life and

accidental death insurance policies through his employer, Federal

3 Express, all of which named Ms. Ragan as the beneficiary.

Mr. Ragan did not change the beneficiary of these policies after his

divorce from Ms. Ragan.

¶7 Shortly after Mr. Ragan’s death, Ms. Ragan was notified of the

existence of the policies and received benefits in the amount of

approximately $535,000. Ms. Ragan contends, and the Estate does

not dispute, that she was unaware of the existence of the policies

before Mr. Ragan’s death. No party asserts that Ms. Ragan waived

or voluntarily relinquished her right to receive the insurance

¶8 Following a hearing, a domestic relations court found that the

insurance proceeds were not a material asset or liability of the

marital estate, that no maintenance or child support obligations

had to be secured with the proceeds, and that, therefore, the

Estate’s claim for recovery of the proceeds from Ms. Ragan was not

within that court’s continuing jurisdiction.

¶9 In May 2019, the Estate filed a complaint in district court

against Ms. Ragan and her businesses,1 seeking to recover the

1The complaint alleges that Ms. Ragan used the insurance proceeds to establish her businesses.

4 insurance proceeds pursuant to subsection (8)(b) and asserting

related claims for breach of contract, breach of the covenant of good

faith and fair dealing, unjust enrichment, civil theft, and piercing

the corporate veil. The primary basis for the Estate’s claims is that

DECEDENT’s designations of FORMER SPOUSE as beneficiary of said policies were revoked as a matter of law upon entry of the above-referenced Decree of Dissolution on December 28, 2016, under C.R.S. § 15-11-804(2)(a), with the same effect as if FORMER SPOUSE had disclaimed said beneficiary designations, under C.R.S. § 15-11-804(4).

Thus, the Estate alleges that “FORMER SPOUSE was not entitled to

receive the insurance benefits specified above, and is obligated to

return or repay same to the ESTATE, together with any benefits

arising from payment of said benefits to her, under C.R.S.

§ 15-11-804(8).”

¶ 10 Ms. Ragan filed a motion for declaratory relief pursuant to

C.R.C.P. 57 and a motion to dismiss pursuant to C.R.C.P. 12(b)(5).

She argued that because ERISA preempts subsection (2) by

requiring the insurance proceeds to be distributed to her, it likewise

preempts subsection (8)(b) by precluding a post-distribution lawsuit

against her to recover those proceeds. In response, the Estate

5 argued that although ERISA preempts subsection (2), it does not

preempt subsection (8)(b) because attempting to recover benefits

before they have been distributed to the beneficiary differs from

attempting to recover benefits from the beneficiary after they have

been disbursed.

¶ 11 The district court granted both of Ms. Ragan’s motions. It

concluded that precedent from the United States Supreme Court

and other courts, including a division of this court, makes clear

that ERISA preempts any revocation statute — like section

15-11-804 — that automatically revokes a beneficiary designation

upon divorce. The only exception, the court explained, is in the

context of waiver by private agreement between the parties.

Because “no facts have been pled in this case that such an

agreement exists” and “the Estate does not reference any such

waiver in this case,” the court concluded that ERISA preempts the

Estate’s post-distribution claims against Ms. Ragan to recover

funds that were properly distributed to her as the named

beneficiary.

¶ 12 The Estate filed a motion to alter or amend the judgment. The

court denied the motion, noting that “all of the cases cited by [the

6 Estate] involve a purported voluntary relinquishment of a claim by

the beneficiary” while this case, in contrast, involves the revocation

of a beneficiary’s interest by operation of state law.

II. Analysis

¶ 13 The Estate contends that the district court erred by

concluding that ERISA preempts subsection (8)(b).2 Specifically, the

Estate argues that ERISA does not preempt its claims because they

are “for post-distribution recovery of insurance proceeds paid to a

decedent’s former spouse, and [are] not an action against an ERISA

plan administrator to attempt to recover insurance proceeds prior

to distribution by the ERISA plan administrator.” Ms. Ragan

contends that the Estate’s appeal is frivolous and requests an

assessment of fees and costs as sanctions pursuant to C.A.R. 38(b).

After setting out the standard of review, we turn first to Colorado’s

divorce revocation statute, then to ERISA and the body of case law

surrounding ERISA preemption. We then address Ms. Ragan’s

request for sanctions.

2The Estate does not argue on appeal that its claims for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, civil theft, and piercing the corporate veil survive if ERISA preempts subsection (8)(b).

7 A. Standard of Review

¶ 14 We review the district court’s summary judgment ruling on a

declaratory judgment claim under C.R.C.P. 57 de novo. Fire House

Car Wash, Inc. v. Bd. of Adjustment for Zoning Appeals, 30 P.3d 762,

766 (Colo. App. 2001). We also review the district court’s ruling on

a motion to dismiss under C.R.C.P. 12(b)(5) de novo. Scott v. Scott,

2018 COA 25, ¶ 17. And we review the district court’s statutory

interpretation de novo. In re Estate of Johnson, 2012 COA 209, ¶ 8.

B. Colorado’s Divorce Revocation Statute

¶ 15 Subsection (2) provides that, with certain exceptions not

applicable here, a divorce revokes any revocable disposition or

appointment of property made by a divorced individual to the

individual’s then-spouse in a governing instrument, including a

beneficiary designation in an insurance policy. § 15-11-804(2)(a)(i);

Estate of Johnson, ¶ 9.

¶ 16 Subsection (8)(a) then provides that “a former spouse . . . who,

not for value, received a payment . . . to which that person is not

entitled under this section is obligated to return the payment . . . ,

or is personally liable for the amount of the payment . . . , to the

8 person who is entitled to it under this section.” Subsection (8)(b)

further provides that

[i]f this section or any part of this section is preempted by federal law with respect to a payment . . . covered by this section, a former spouse . . . who, not for value, received a payment . . . to which that person is not entitled under this section is obligated to return that payment . . . , or is personally liable for the amount of the payment . . . , to the person who would have been entitled to it were this section or part of this section not preempted.

§ 15-11-804(8)(b).

C. ERISA

¶ 17 “ERISA is a comprehensive statute regulating employee

pension and welfare plans.” Estate of MacAnally, 20 P.3d at 1199.

“The purpose of ERISA is ‘to protect the interests of employees and

their beneficiaries in employee benefit plans and to ensure that

plans and plan sponsors are subject to a uniform body of benefit

law . . . .’” Id. at 1201 (quoting Barrett v. Hay, 893 P.2d 1372, 1380

(Colo. App. 1995)).

¶ 18 ERISA provides that an employee benefit plan “shall . . .

specify the basis on which payments are made to and from the

plan,” 29 U.S.C. § 1102(b)(4), and that the fiduciary shall

9 administer the plan “in accordance with the documents and

instruments governing the plan,” 29 U.S.C. § 1104(a)(1)(D).

Additionally, each ERISA-governed plan must “provide that benefits

provided under the plan may not be assigned or alienated.”

29 U.S.C. § 1056(d)(1). With certain exceptions not relevant here, a

plan fiduciary must “discharge his duties with respect to a plan

solely in the interest of the participants and beneficiaries.”

29 U.S.C. § 1104(a)(1).

¶ 19 ERISA further contains an express preemption provision,

29 U.S.C. § 1144(a), which states that ERISA “shall supersede any

and all State laws insofar as they may now or hereafter relate to any

employee benefit plan” covered by ERISA.

D. Law Governing ERISA Preemption

¶ 20 Two types of preemption — statutory or express preemption

and direct or conflict preemption — have been used to conclude

that ERISA preempts state divorce revocation statutes.

¶ 21 Statutory or express “preemption occurs when a statute

expressly states that it preempts other law.” Estate of MacAnally,

20 P.3d at 1201. “In the ERISA context, ERISA preempts a state

law pursuant to statutory [or express] preemption where a state law

10 relates to any employee benefit plan covered by ERISA.” Id.; see

29 U.S.C. § 1144(a). A state law “‘relates to’ an employee benefit

plan . . . if it has a connection with or reference to such a plan.”

Barrett, 893 P.2d at 1376 (quoting Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 96-97 (1983)).

¶ 22 Direct or conflict preemption, in turn, occurs where

“compliance with both federal and state regulations is a physical

impossibility, . . . or where state law stands as an obstacle to the

accomplishment and execution of the full purposes and objectives

of Congress.” Boggs v. Boggs, 520 U.S. 833, 844 (1997) (citation

omitted). “In the face of [a] direct clash between state law and the

provisions and objectives of ERISA, the state law cannot stand.” Id.

¶ 23 In Estate of MacAnally, 20 P.3d at 1203, a division of this

statute in the “pre-distribution” context — that is, before benefits

are distributed to a named beneficiary by an ERISA plan

administrator. At the time of Richard MacAnally’s death, his former

spouse, Imogene Levin, remained the named beneficiary of his

ERISA-governed annuity contracts. Id. at 1199. MacAnally’s estate

argued that Levin’s designation as the beneficiary was revoked by

11 operation of law. Id. The division noted that, under 29 U.S.C.

§ 1104, an ERISA plan administrator must pay a death benefit to

the beneficiary named in the plan (Levin) if the plan participant dies

before retirement, while the divorce revocation statute, in contrast,

changed the beneficiary to whom benefits must be paid from Levin

to an unnamed beneficiary (MacAnally’s estate). Id. at 1203. Under

these circumstances, the division concluded, the divorce revocation

statute directly conflicted with ERISA, and based on principles of

direct or conflict preemption, ERISA preempted the divorce

revocation statute. Id.

¶ 24 The year after Estate of MacAnally, the United States Supreme

Court reached a similar conclusion. See Egelhoff v. Egelhoff,

532 U.S. 141 (2001). In Egelhoff, a husband designated his wife as

the beneficiary of an ERISA-governed life insurance policy provided

by his employer. After the couple divorced, the husband failed to

change the beneficiary of the life insurance policy. Id. at 144.

When the husband died, the plan proceeds were paid to his ex-wife

according to the pre-divorce beneficiary designation. The

decedent’s children from a previous marriage sued the ex-wife to

recover the proceeds, citing a Washington statute that provided for

12 automatic revocation upon divorce of the designation of a former

spouse as beneficiary. Id. at 144-45. Based on ERISA’s express

preemption provision, 29 U.S.C. § 1144(a), the Court held that

ERISA preempted the Washington statute. Egelhoff, 532 U.S. at

146.

¶ 25 The Court reasoned that the Washington statute required plan

administrators to pay benefits to the beneficiaries chosen by state

law rather than to those identified in the plan documents. Id. at

147. This outcome, the Court said, contradicts ERISA’s

requirements that a plan “shall . . . specify the basis on which

payments are made to and from the plan,” 29 U.S.C. § 1102(b)(4),

and that the fiduciary shall administer the plan “in accordance with

the documents and instruments governing the plan,” 29 U.S.C.

§ 1104(a)(1)(D), making payments to a beneficiary who is

“designated by a participant, or by the terms of an employee benefit

plan,” 29 U.S.C. § 1002(8). Egelhoff, 532 U.S. at 147. Further, the

Court concluded that the Washington statute interfered with

ERISA’s objective of nationally uniform plan administration, which

enables employers to “establish a uniform administrative scheme”

and provide “a set of standard procedures to guide processing of

13 claims and disbursement of benefits.” Id. at 148 (quoting Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987)). No such

uniformity can exist if plans are subject to different legal obligations

in different states because plan administrators would need to know

every state’s law on this subject to determine whether the

designation of a beneficiary had been revoked by operation of law.

Id. at 149.

E. ERISA Preempts Subsection (8)(b)

¶ 26 The Estate acknowledges that, under Estate of MacAnally and

Egelhoff, subsection (2) is preempted by ERISA and that the plan

administrator thus properly distributed the insurance proceeds to

Ms. Ragan. However, the Estate contends that ERISA does not

preempt the Estate’s “post-distribution” suit under subsection (8)(b)

to recover those funds.

¶ 27 The Estate bases its argument on Kennedy v. Plan

Administrator for DuPont Savings & Investment Plan, 555 U.S. 285

(2009), and Andochick v. Byrd, 709 F.3d 296 (4th Cir. 2013). In

Kennedy, the Supreme Court held that an ERISA plan

administrator must distribute benefits to the beneficiary named in

the plan, notwithstanding the fact that the named beneficiary

14 signed a waiver disclaiming her right to the benefits. 555 U.S. at

288. But the Court left open the question of whether, once the

benefits were distributed by the administrator, the plan

participant’s estate could enforce the named beneficiary’s waiver

against her. Id. at 299 n.10 (“Nor do we express any view as to

whether the Estate could have brought an action in state or federal

court against [the named beneficiary] to obtain the benefits after

they were distributed.”).

¶ 28 In Andochick, the Fourth Circuit took up the question left open

by Kennedy and held that ERISA does not preempt

“post-distribution suits to enforce state-law waivers” against ERISA

beneficiaries. 709 F.3d at 299-301; see also, e.g., Estate of

Kensinger v. URL Pharma, Inc., 674 F.3d 131, 132 (3d Cir. 2012)

(after ERISA plan administrator distributes funds to named

beneficiary who waived her right to plan proceeds, plan

participant’s estate can sue named beneficiary to enforce her waiver

and recover the funds); Sweebe v. Sweebe, 712 N.W.2d 708, 710

(Mich. 2006) (“While a plan administrator is required by ERISA to

distribute plan proceeds to the named beneficiary, the named

15 beneficiary can then be found to have waived the right to retain

those proceeds.”).

¶ 29 The Estate argues that, if ERISA does not preempt

post-distribution suits to enforce express waivers by named

beneficiaries of their rights to ERISA plan proceeds, neither should

it preempt a post-distribution suit based on a state statute that

purports to divest a named beneficiary of her right to plan proceeds

by operation of law. For three reasons, we are not persuaded.

¶ 30 First, none of the cases relied on by the Estate allows a

state-law-based post-distribution claim for ERISA benefits in the

absence of a waiver by the named beneficiary.3 Indeed, several of

3 During oral argument, counsel for the Estate appeared to argue that Evans v. Diamond, 957 F.3d 1098 (10th Cir. 2020), Stillman v. Teachers Insurance & Annuity Ass’n College Retirement Equities Fund, 343 F.3d 1311 (10th Cir. 2003), and Walsh v. Montes, 388 P.3d 262, 265 (N.M. Ct. App. 2016), allow post-distribution claims for ERISA-governed benefits based on a state statute. But none of these cases supports this proposition. Evans, 957 F.3d at 1104-05, held that a different federal statute, the Federal Employee Retirement Systems Act, preempted an estate’s lawsuit to enforce a beneficiary’s waiver and, in doing so, decided that Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285, 299 n.10 (2009), was inapplicable. Stillman, 343 F.3d at 1314-23, did not involve ERISA preemption or ERISA-governed benefits. And Walsh, 388 P.3d at 266, involved a claim for recovery of ERISA-governed benefits based on an express waiver, not a state statute.

16 the cases explicitly distinguish between post-distribution suits to

enforce waivers and post-distribution suits based on state divorce

revocation statutes. In Sweebe, for example, the Michigan Supreme

Court emphasized that its holding that a valid waiver is not

preempted by ERISA was consistent with the principle that parties

have a broad freedom to contract, 712 N.W.2d at 712, while, in

contrast, a state statute that automatically revoked a beneficiary

designation upon divorce would “clearly invade[] an area that is

covered by ERISA,” id. at 713. In Culwick v. Wood, 384 F. Supp. 3d

328, 345 (E.D.N.Y. 2019), the court noted that a former spouse’s

contention that ERISA preempted New York’s divorce revocation

statute was “a red herring” because the claim against her was

based on her express waiver of her right to plan proceeds, not on

the state statute. And in Hennig v. Didyk, 438 S.W.3d 177, 183

(Tex. App. 2014), the court determined that it need not resolve

whether ERISA preempted a post-distribution suit under Texas’s

divorce revocation statute because the named beneficiary expressly

waived her rights to plan proceeds. Thus, while the Estate cites

these and other cases holding that ERISA does not preempt

17 beneficiaries, it fails to show how those cases support its contention

that ERISA should not preempt a post-distribution suit based on a

divorce revocation statute.

¶ 31 Second, the Washington Court of Appeals examined a case

almost identical to this one and held that ERISA “preempts a

party’s reliance on [Washington’s divorce revocation statute] for

recovery of ERISA funds in the hands of the designated beneficiary.”

Estate of Lundy v. Lundy, 352 P.3d 209, 215 (Wash. Ct. App. 2015).

The Lundy court emphasized that, while Kennedy recognized an

open question in the context of waiver by private agreement

between the parties, it did “not recognize an open question in the

context of a state-law-based claim to . . . ERISA benefits” after they

had been distributed to the named beneficiary. Id. at 214.

¶ 32 In reaching its conclusion, the Lundy court looked to a Ninth

Circuit case, Carmona v. Carmona, 603 F.3d 1041 (9th Cir. 2010).

In Carmona, a husband designated his then-wife as his survivor

beneficiary under two ERISA-governed pension plans. Id. at 1048.

When the husband remarried, he petitioned the family court to

revoke his designation of his ex-wife as survivor beneficiary and

substitute his new wife. Id. at 1049. After the husband’s death,

18 the court ordered the plan administrator to change the survivor

beneficiary from his ex-wife to his new wife or, in the alternative,

ordered that the funds his ex-wife received be placed in a

constructive trust with his new wife as beneficiary. Id. The Ninth

Circuit held that the plan administrator was not required to redirect

the surviving spouse benefits to the new wife and that the

constructive trust was impermissible because “state law doctrines

(including constructive trusts) may not be invoked to assign

benefits to parties other than those designated as beneficiaries

under ERISA.” Id. at 1061. “Any alternative rule,” the court

observed, “would allow for an end-run around ERISA’s rules and

Congress’s policy objective of providing for certain beneficiaries,

thereby greatly weakening, if not entirely abrogating, ERISA’s broad

preemption provision.” Id.

¶ 33 Thus, as the Lundy court noted, Carmona “explicitly

disapprove[d] of state law ‘end-runs’ around ERISA imposed by

state courts.” Lundy, 352 P.3d at 214. Accordingly, the court held

that ERISA preempts claims under Washington’s divorce revocation

statute both before and after plan proceeds are distributed to the

named beneficiary. Put another way, the plan participant’s estate

19 could not “revive” the preempted statute “simply by applying it in a

postdistribution argument.” Id.

¶ 34 We, like the Lundy and Carmona courts, agree that

subsection (8)(b) cannot be used as a statutory end-run around

preemption and “cannot be used to contravene the dictates of

ERISA.” Carmona, 603 F.3d at 1061. Accordingly, we conclude

that subsection (8)(b) cannot revive the preempted subsection (2)

simply by effecting the same result after ERISA plan proceeds have

been distributed to the named beneficiary.

¶ 35 Third, addressing a different federal law in Hillman v. Maretta,

569 U.S. 483 (2013), the United States Supreme Court concluded

that the law preempted a provision of Virginia’s divorce revocation

statute very similar to Colorado’s subsection (8)(b). Although the

federal law at issue in Hillman was the Federal Employees’ Group

Life Insurance Act of 1954 (FEGLIA), 5 U.S.C. §§ 8701-8716, not

ERISA, we nonetheless find the Court’s reasoning persuasive on the

issue of whether a state statute can sidestep preemption. See

Lundy, 352 P.3d at 212 (stating that although Hillman is not

controlling, it “make[s] clear that the account proceeds go to the

20 federally determined beneficiary regardless of state law to the

contrary”).

¶ 36 The Virginia statute at issue in Hillman provided, first, that a

divorce or annulment revokes a “beneficiary designation contained

in a then existing written contract owned by one party that provides

for the payment of any death benefit to the other party.” Va. Code

Ann. § 20-111.1(A) (West 2011) (Section A). In a provision

equivalent to Colorado’s subsection (8)(b), the Virginia statute then

provided that,

[i]f this section is preempted by federal law with respect to the payment of any death benefit, a former spouse who, not for value, receives the payment of any death benefit that the former spouse is not entitled to under this section is personally liable for the amount of the payment to the person who would have been entitled to it were this section not preempted.

Va. Code Ann. § 20-111.1(D) (Section D).

¶ 37 In Hillman, the husband named his then-wife as the

beneficiary of his Federal Employees’ Group Life Insurance (FEGLI)

policy. 569 U.S. at 488. They subsequently divorced, and the

husband remarried. At the time of the husband’s death, however,

his ex-wife remained the named beneficiary of his FEGLI policy. Id.

21 at 488-89. After the proceeds were distributed to the ex-wife, the

new wife sued the ex-wife, arguing that the ex-wife “was liable to

her under Section D for the proceeds of her deceased husband’s

FEGLI policy.” Id. at 489. The ex-wife, however, argued that she

should be allowed to keep the insurance proceeds because

Section D — like Section A — was directly preempted by FEGLIA.

Id.

¶ 38 The Supreme Court agreed. Id. at 490. In reaching its

decision, the Court noted that FEGLIA provides that, upon an

employee’s death, life insurance benefits are paid in accordance

with a specified “order of precedence.” Id. at 486 (quoting 5 U.S.C.

§ 8705(a)). The proceeds accrue “[f]irst, to the beneficiary or

beneficiaries designated by the employee in a signed and witnessed

writing received before death.” 5 U.S.C. § 8705(a). “[I]f there is no

designated beneficiary,” the benefits are paid “to the widow or

widower of the employee.” Id. Thus, FEGLIA creates a scheme that

gives highest priority to an insured’s designated beneficiary.

Hillman, 569 U.S. at 493. The Court concluded that

Section D interferes with Congress’ scheme, because it directs that the proceeds actually “belong” to someone other than the named

22 beneficiary by creating a cause of action for their recovery by a third party. It makes no difference whether state law requires the transfer of the proceeds, as Section A does, or creates a cause of action, like Section D, that enables another person to receive the proceeds upon filing an action in state court. In either case, state law displaces the beneficiary selected by the insured in accordance with FEGLIA and places someone else in her stead.

Id. at 494 (citations omitted).

¶ 39 In his concurrence, Justice Thomas observed that “[t]he direct

conflict between Section D and FEGLIA is . . . evident in the fact

that Section D’s only function is to accomplish what Section A

would have achieved, had Section A not been pre-empted.” Id. at

501 (Thomas, J., concurring in the judgment). Though Section D

does not directly preclude the payment of benefits to the designated

beneficiary, Justice Thomas noted, “it accomplishes the same

prohibited result by transforming the designated party into little

more than a passthrough” for the individual state law has

designated as the true beneficiary. Id. at 501-02.

¶ 40 The Estate argues that Hillman’s rationale does not apply to

this case because ERISA, unlike FEGLIA, does not contain a

statutory order of precedence. While the Supreme Court

23 determined that the federal interest in FEGLIA was “to ensure that

a duly named beneficiary will receive the insurance proceeds and be

able to make use of them,” Hillman, 569 U.S. at 491, the Estate

contends that the federal interest in ERISA is “to simply ensure that

employers and plan administrators act in accordance with the

plan’s written terms,” Walsh v. Montes, 388 P.3d 262, 265 (N.M. Ct.

App. 2016); see also Evans v. Diamond, 957 F.3d 1098, 1104-05

(10th Cir. 2020). But the Estate construes ERISA’s purpose too

narrowly. Although ERISA does not contain a statutory order of

precedence, “the protection of beneficiaries . . . [is] a paramount

ERISA objective.” VanderKam v. VanderKam, 776 F.3d 883, 886

(D.C. Cir. 2015). As the District of Columbia Circuit has explained,

ERISA protects retirement benefits for millions of pension plan participants and their beneficiaries. 29 U.S.C. § 1001(b). Finding that the stability of retirement benefits directly affects the national economy, id. § 1001(a), Congress acted to ensure that accrued benefits remain unaltered by individuals and states alike. It accomplished this by prohibiting participants from assigning or alienating their own benefits, id. § 1056(d)(1), and, with limited exceptions, superseding state laws that “relate to any employee benefit plan,” id. § 1144(a).

Id. at 885.

24 ¶ 41 Notably, Congress created an exception from ERISA’s

preemption and anti-alienation provisions for a narrow category of

state court orders known as qualified domestic relations orders.

29 U.S.C. § 1056(d)(3)(A). “Where Congress explicitly enumerates

certain exceptions to a general prohibition, additional exceptions

are not to be implied, in the absence of evidence of a contrary

legislative intent.” Andrus v. Glover Constr. Co., 446 U.S. 608,

616-17 (1980). As the district court in this case noted in its

well-reasoned order,

Congress could have put in place a default rule providing that insurance proceeds accrue to a widow or widower and not a named beneficiary. Congress could have put in place a provision that a divorce decree operates to control over the designation of a beneficiary. Congress could have put in place a provision whereby a decedent’s will is more reliable evidence of the decedent’s intention than a beneficiary designation form executed years earlier. Congress could have provided that the benefits automatically revert to the estate of the participant upon the participant’s divorce from the beneficiary. Congress did none of that. Instead, Congress established a clear and predictable procedure for an employee to indicate who the intended beneficiary of his life insurance shall be.

25 ¶ 42 To sum up, the Estate presents no authority supporting a

state-law-based claim — rather than one based on waiver by private

agreement between the parties — to recover ERISA plan proceeds

after their distribution to the named beneficiary. Further, Lundy

and Carmona explicitly disapprove of state law “end-runs” around

ERISA preemption. And finally, we are persuaded by the reasoning

in Hillman that federal law preempts a state statute similar to

subsection (8)(b). Accordingly, we agree with the district court’s

conclusion that ERISA preempts the Estate’s post-distribution

claims to recover the insurance proceeds from Ms. Ragan.

F. Sanctions

¶ 43 Ms. Ragan contends that the Estate’s appeal is frivolous and

requests an assessment of fees and costs pursuant to C.A.R. 38(b).

That we ultimately disagree with the Estate’s arguments does not

mean the appeal was frivolous as filed or argued. See City of Aurora

v. Colo. State Eng’r, 105 P.3d 595, 620 (Colo. 2005) (“Meritorious

actions that prove unsuccessful and good faith attempts to extend,

modify, or reverse existing law are not frivolous.”). No prior

Colorado case has addressed the enforceability of subsection (8)(b).

And because the Estate raised arguably meritorious contentions on

26 an issue of first impression in Colorado, we deny Ms. Ragan’s

request for fees and costs.

III. Conclusion

¶ 44 We affirm the judgment and deny Ms. Ragan’s request for fees

and costs pursuant to C.A.R. 38(b).

JUDGE J. JONES and JUDGE NAVARRO concur.