ReliaStar Life Insurance Company v. Janice E. Hill

• Court: District Court, C.D. California
• Decided: February 2, 2024
• Docket: 2:22-cv-02476
• Status: Unknown

Opinion

1 2

4 5 6 UNITED STATES DISTRICT COURT 7 CENTRAL DISTRICT OF CALIFORNIA 8

10 Case No. CV 22-2476-KK-RAO RELIASTAR LIFE INSURANCE 11 COMPANY, 12 Plaintiff, FINDINGS OF FACT AND CONCLUSIONS OF LAW 13 v. 14 JANICE E. HILL, ET AL., 15 Defendant(s). 16 17 On April 12, 2022, Plaintiff Reliastar Life Insurance Company (“Plaintiff”) filed 18 a Complaint seeking declaratory relief regarding the rights of interpleader defendants 19 20 Michael Stills and Janice and Kenneth Hill (collectively, “Defendants”) to benefits 21 from decedent Amy Still’s (“Decedent”) life insurance policy. ECF Docket No. 22 (“Dkt.”) 1. On January 8, 2024, the matter was tried before the Court without a jury. 23 Dkt. 93. 24 Having considered all the evidence admitted at trial – including the Pretrial 25 Stipulations of Fact submitted by the Defendants, dkt. 91 – and the briefings 26 submitted by Defendants, dkts. 96 and 97, the Court makes the following Findings of 27 Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52. I. FINDINGS OF FACT 1 2 A. Procedural History and Background 3 1. On April 12, 2022, Plaintiff filed a Complaint seeking declaratory relief 4 regarding the rights of Defendants who are claiming entitlement to the benefits of 5 Decedent’s life insurance policy (the “Policy”). Dkt 1 at 6. The Policy provides that 6 Plaintiff will pay the benefits to the beneficiary named by the insured upon the 7 insured’s death. Id. ¶ 9. 8 2. On October 14, 2022, Plaintiff filed a Motion to Deposit Funds in the 9 amount of $450,000, comprising Death Benefits due under the Policy. Dkt. 32. On 10 December 9, 2022, the Court granted Plaintiff’s Motion to Deposit Funds. Dkt. 34. 11 3. On January 10, 2023, Plaintiff paid to the Clerk of the Court all the 12 available life insurance benefits, totaling $454,095.32. Dkts. 38, 39. 13 14 4. On May 25, 2023, Plaintiff was dismissed with prejudice. Dkt. 50. The 15 Court ordered Plaintiff receive $13,161.50 of the benefits in compensation for its fees 16 and costs and issued a permanent injunction prohibiting any further actions against 17 Plaintiff. Dkt. 55. 18 5. On January 7, 2024, the parties filed joint Pretrial Stipulations of Fact. 19 Dkt. 91. 20 6. On January 8, 2024, the parties appeared before this Court and 21 presented witness testimony. Dkt. 93. 22 7. After the close of evidence, the Court ordered defendants Janice and 23 Kenneth Hill (“defendants Hill”) to file Proposed Facts and Conclusions of Law by 24 25 January 11, 2024. Dkt. 93. The Court ordered defendant Michael Stills (“defendant 26 Stills”) to file Objections by January 16, 2024. Id. 27 8. On January 12, 2024, defendants Hill filed Proposed Findings of Fact Proposed Conclusions of Law. Dkt. 97. Defendant Stills did not object to any of 1 2 defendants Hill’s proposed findings of fact.1 See id. Rather, defendant Stills argues 3 he is entitled to half of the Policy’s benefits under California community property 4 laws. Id. Defendants Hill argue the Employee Retirement Income Security Act of 5 1974 (“ERISA”), 29 U.S.C. Section 1001, preempts California community property 6 law, and thus, they are entitled to the full benefits. Dkt. 96. 7 B. Jointly Stipulated Facts and Evidence 8 9. Decedent was married to defendant Stills for twenty-two years. 9 Decedent’s parents are defendants Janice (“defendant Janice”) and Kenneth Hill. 10 10. In 2013, Decedent was diagnosed with a rare and virulent cancer. Dkt. 11 91. Over time, the cancer progressed and metastasized to Decedent’s brain, causing 12 her excruciating and unbearable pain. Id. 13 14 11. Decedent had Basic Life Insurance coverage totaling $450,000. Dkt. 91. 15 The plan was administered by Plaintiff. Id. The Policy was issued pursuant to 16 ERISA. Id. Prior to January 2021, defendant Stills was the designated beneficiary. 17 Id. 18 12. In approximately October 2020, defendant Janice moved to Los Angeles 19 from Tulare, California, to be closer to Decedent, her daughter. Dkt. 96 at 4. During 20 that month, Decedent was admitted into the hospital due to increased levels of pain. 21 Defendant Janice was unable to visit Decedent while she was in the hospital because 22 COVID hospital protocols permitted only one visitor. 23 13. As a result of the visitation issues, on October 19, 2020, Decedent filled 24 25 out and signed her Advance Healthcare Directive (“Health Directive”) and had it 26 notarized that same day. Ex. 10. The Health Directive named defendant Janice as her 27 healthcare agent and permitted defendant Janice to visit Decedent in the hospital. Id. 1 2 14. On November 2, 2020, Decedent asked her friend, attorney Devre Ross 3 (“Ross”), to assist with filing a restraining order against defendant Stills. Dkt. 96 at 4. 4 15. On November 5, 2020, Decedent signed a Physician Order for Life- 5 Sustaining Treatment directing defendant Janice make medical decisions for her if she 6 was not able to do so. Ex. 10; Dkt. 96 at 4. At this point, defendant Stills would no 7 longer have any say in Decedent’s medical treatment or ability to visit Decedent in the 8 hospital. 9 16. On November 6, 2020, Decedent filed a Request for Domestic Violence 10 Restraining Order against defendant Stills. Dkt. 91. Defendant Stills moved out of 11 the apartment he shared with Decedent after being served with the restraining order. 12 Dkt. 96 at 4. From this date until Decedent’s death, defendant Stills never saw 13 14 Decedent again. Id. Decedent and defendant Stills stipulated to a mutual stay away 15 order, hence, no formal hearing was held on the restraining order. Id. Decedent 16 asked defendant Janice to move into the apartment. From that time to the time of 17 Decedent’s death, defendant Janice was companion and caregiver to Decedent. 18 17. Before the end of 2020, Decedent contacted Ross about her will. 19 18. On January 2, 2021, Ross and defendant Janice were with Decedent at 20 Decedent’s apartment. With Ross and defendant Janice present, Decedent executed 21 her will appointing an executor and her parents as beneficiaries, Ex. 11; signed the 22 Power of Attorney appointing defendant Janice as her attorney-in-fact, Ex. 3; signed a 23 change of beneficiary form for her AAA Life Insurance policy, Ex. 4; and signed a 24 25 change of beneficiary form for her two ReliaStar Life Insurance policies making 26 defendants Hill beneficiaries in place of defendant Stills, Ex. 5. 27 19. Decedent arranged to have a notary present to notarize the will and documents that did not require notarization – specifically, the change of beneficiary 1 2 forms. The will and Power of Attorney form, appointing defendant Janice to act as 3 attorney-in-fact, were subsequently signed and notarized. 4 20. On February 2, 2021, Decedent filed for divorce from defendant Stills. 5 Dkt. 91; Ex. 13. 6 21. On March 6, 2021, Decedent passed away. Dkt. 96. 7 C. Witnesses Testimony 8 22. Defendants Hill presented four witnesses: (1) Sharon Osterholt, (2) 9 Mariah Mahortz, (3) Devre Ross, and (4) Janice Elaine Hill. Defendant Stills testified 10 on his own behalf and did not present any other witnesses. 11 1. Sharon Osterholt 12 23. Sharon Osterholt (“Osterholt”) was Decedent’s friend and former 13 14 employment supervisor. Osterholt testified that she visited Decedent for two days on 15 or about February 2, 2021. During that time, Osterholt observed Decedent did not 16 have any problems understanding or communicating. She additionally testified she 17 observed Decedent and defendant Janice interact and did not see anything she felt 18 was inappropriate between the two. 19 24. The Court finds Osterholt was an honest, candid, and believable witness 20 and that her testimony was consistent with the evidence presented. 21 2. Mariah Marhotz 22 25. Mariah Marhotz (“Marhotz”), a Registered Nurse, worked with 23 Decedent as her clinic nurse in the oncology clinic at Cedars Sinai Hospital since 24 25 2019. Marhotz testified that, as Decedent’s clinic nurse, she was responsible both for 26 providing treatment and emotional support during the management of Decedent’s 27 cancer. Marhotz testified she would see Decedent on a weekly or monthly basis, oriented, and the sole decision-maker and advocate for her treatment. On January 8, 1 2 2021, the clinic team celebrated Decedent’s birthday. Marhotz testified that on that 3 day, Decedent was fully cognitively aware and oriented. Marhotz testified that the last 4 time she saw Decedent was in mid-February 2021 to discuss stopping her treatment. 5 On that last visit in February, Marhotz testified that Decedent, for the first time, did 6 not appear to be functioning at her typical cognitive level. However, she was able to 7 have conversations with the clinic team and understand that her treatment was going 8 to be stopped. 9 26. The Court finds Marhotz was a credible, honest, and forthright witness 10 and that her testimony was consistent with the evidence presented. 11 3. Devre Ross 12 27. Devre Ross is an attorney and long-time friend of Decedent’s. Ross 13 14 testified that Decedent told her about issues she had with her husband, defendant 15 Stills, including a few times where she had to call the police based on his concerning 16 behavior. Ross testified that in 2018, Decedent asked for a referral for a divorce 17 attorney for herself, which Ross provided. In November 2020, Decedent called Ross 18 saying Decedent needed to leave the house and get a restraining order against 19 defendant Stills. Ross assisted Decedent in getting a restraining order. Ross testified 20 Decedent also reached out to discuss her will. 21 28. On January 2, 2021, Ross testified she met with Decedent to assist in 22 finalizing her will and executing the change in beneficiary forms and Power of 23 Attorney form. Ross testified Decedent had arranged to have a notary present for 24 25 execution of the will and Power of Attorney form. Ross testified that while waiting 26 for the notary to arrive, Decedent filled out and signed the change in beneficiary 27 forms. Ross testified that Decedent appeared mentally competent and did not appear 29. The Court finds Ross was a credible, forthright, and candid witness and 1 2 that her testimony was consistent with the evidence presented. 3 4. Defendant Janice Hill 4 30. Defendant Janice, Decedent’s mother, testified regarding her 5 relationship with Decedent. In approximately October 2020, defendant Janice moved 6 to Los Angeles from Tulare, California, to be closer to Decedent and eventually to be 7 her fulltime caregiver. Defendant Janice moved into Decedent’s apartment after 8 defendant Stills was served with the restraining order. 9 31. Defendant Janice testified Decedent made her own decisions right up to 10 the end of her life. Defendant Janice testified that, although she signed the Power of 11 Attorney form, she never signed any documents as Decedent’s attorney. Defendant 12 Janice testified that on January 2, 2021, the date Decedent executed her will, change of 13 14 beneficiary forms, and Power of Attorney, Decedent appeared competent and of 15 sound mind. Defendant Janice testified she did not provide any input to Decedent 16 regarding the will, Power of Attorney, or change in beneficiary forms. Defendant 17 Janice further testified she did not coerce Decedent, nor did she do anything to 18 influence her actions. Finally, Defendant Janice testified she did not notice any 19 changes to Decedent’s mental capacity until a little over one week before Decedent 20 died. 21 32. The Court finds defendant Janice was a credible witness. Although 22 defendant Janice has a financial interest in the outcome of the action, her testimony 23 was candid, forthright, and supported and consistent with the evidence and testimony 24 25 presented. 26 5. Defendant Stills 27 33. Defendant Stills testified his marriage with Decedent was a happy the life insurance policies due to either coercion from or the undue influence of 1 2 defendant Janice. However, defendant Stills did not present any witness to support 3 the allegations of undue influence or coercion. Defendant Stills testified Decedent 4 could not make these decisions on her own because of the effects Decedent’s 5 medications had upon her mental capacity. However, defendant Stills did not present 6 any evidence from medical providers to support this assertion. 7 34. Defendant Stills testified that in October 2020, Decedent seemed less 8 like herself. Defendant Stills testified that the last time he spoke to Decedent about 9 her change of beneficiary form was on or about October 31, 2020, and the last time 10 he saw Decedent was on November 2, 2020. 11 35. The Court notes defendant Stills has a financial interest in the outcome 12 of this case. The Court additionally notes defendant Stills had no contact with 13 14 Decedent from the end of October 2020 until Decedent passed away in March 2021. 15 Defendant Stills, therefore, had no opportunity to observe Decedent’s physical, 16 mental, or cognitive condition during these last five months. Thus, the Court finds, 17 to the extent defendant Stills testified to relevant issues, his testimony is given limited 18 weight because of his financial interest and lack of contact with Decedent beginning 19 in November 2020. 20 D. Factual Findings 21 36. The evidence establishes, based on testimony from Ross, that the change 22 in beneficiary forms were signed before the will and durable power of attorney were 23 executed and notarized. Thus, the change in beneficiary form from defendant Stills to 24 25 defendants Hill are valid and enforceable. 26 37. Based on the testimony presented, there is no evidence of mental 27 incompetency, duress, or undue influence upon Decedent as it relates to changing the Hill, through witness testimony, shows that Decedent was making her own decisions 1 2 and mentally competent until approximately one week before she passed in March. 3 38. The evidence further establishes that Decedent was not subject to any 4 unlawful duress or coercion. The evidence shows that Decedent had been 5 considering changes to defendant Stills’s access and involvement beginning as early as 6 October 2020 when she executed her Advance Healthcare Directive. Further, witness 7 testimony from Osterholt, Marhotz, Ross, and defendant Janice all reflect consistent 8 observations of Decedent with full mental capacity in January 2021 to make decisions 9 related to her will, Power of Attorney, and change in beneficiaries. There was no 10 evidence presented to suggest defendant Janice acted inappropriately or that Decedent 11 was subjected to coercion or undue influence of any kind. 12 13 II. CONCLUSIONS OF LAW 14 A. Jurisdiction 15 1. This is an interpleader action brought pursuant to 28 U.S.C. § 1332 16 (“Section 1332”) and 28 USC § 1331 (“Section 1331”). The Court has jurisdiction 17 under Section 1332 because there is diversity of citizenship between Plaintiff, a 18 corporation incorporated under the laws of the State of Minnesota, and Defendants, 19 citizens of the States of California and Texas, and the amount in controversy exceeds 20 $75,000. The Court additionally has jurisdiction under Section 1331 because the 21 Policy is part of an employee welfare benefits plan governed by the Employee 22 Retirement Income Security Act of 1974, 29 U.S.C. § 1001. 23 2. Venue is proper in the Central District of California, pursuant to 28 24 25 U.S.C. §§ 1397 and 1391, because Decedent resided and was employed in the judicial 26 district, a substantial part of the events giving rise to the action occurred in the judicial 27 district, and defendant Stills resides in the judicial district. B. ERISA Preempts State Community Property Laws 1 2 3. The parties stipulated the Policy is issued and controlled by ERISA. 3 Dkt. 91. ERISA “commands that a plan shall ‘specify the basis on which payments 4 are made to and from the plan,’ § 1102(b)(4), and that the fiduciary shall administer 5 the plan ‘in accordance with the documents and instruments governing the plan,’ § 6 1104(a)(1)(D), making payments to a ‘beneficiary’ who is ‘designated by a participant, 7 or by the terms of [the] plan.’” 29 U.S.C. § 1002(8); Egelhoff v. Egelhoff ex rel. 8 Breiner, 532 U.S. 141, 147-48 (2001). Thus, the ERISA statute “governs the payment 9 of benefits, a central matter of plan administration.” Id. 10 4. Under 29 U.S.C. § 1144(a), ERISA shall supersede “any and all State 11 laws insofar as they may now or hereafter relate to any employee benefit plan” 12 covered by ERISA. Carmona v. Carmona, 603 F.3d 1041, 1061 (9th Cir. 2010). The 13 14 Supreme Court has repeatedly observed “that this broadly worded provision is ‘clearly 15 expansive.’” Egelhoff, 532 U.S. at 146 (quoting New York State Conference of Blue 16 Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995)). A state 17 law “relates to” an ERISA plan “if it has a connection with or reference to such a 18 plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983). “[T]o determine 19 whether a state law has the forbidden connection, [courts] look both to ‘the objectives 20 of the ERISA statute as a guide to the scope of the state law that Congress 21 understood would survive,’ as well as to the nature of the effect of the state law on 22 ERISA plans[.]” California Div. of Labor Standards Enforcement v. Dillingham 23 Constr., N. A., Inc., 519 U.S. 316, 325 (quoting Travelers, 514 U.S. at 656 (citation 24 25 omitted)). 26 5. “The basic thrust of the pre-emption clause . . . [is] to avoid a 27 multiplicity of regulation in order to permit the nationally uniform administration of of the principal goals of ERISA is to enable employers to establish a uniform 1 2 administrative scheme, which provides a set of standard procedures to guide 3 processing of claims and disbursement of benefits.”). 4 6. The Supreme Court has “not hesitated to find state family law pre- 5 empted when it conflicts with ERISA or relates to ERISA plans.” Egelhoff, 532 U.S. 6 at 151-52; see, e.g., Boggs v. Boggs, 520 U.S. 833 (1997) (holding that ERISA pre- 7 empts a state community property law permitting the testamentary transfer of an 8 interest in a spouse’s pension plan benefits). Thus, ERISA preempts “state laws that 9 mandate[ ] employee benefit structures or their administration,” or that “provid[e] 10 alternative enforcement mechanisms.” Travelers, 514 U.S. at 658. 11 7. Here, ERISA preempts any state law that “governs the payment of 12 benefits” of an ERISA-controlled plan. Egelhoff, 532 U.S. at 147-48. As an initial 13 14 matter, the parties agree the Policy is issued and controlled by ERISA, and the Court 15 finds the change in beneficiary form is valid because the form was properly executed 16 and there is no evidence of duress or undue influence. 17 8. Despite the valid designation of beneficiary form, defendant Stills argues 18 he is entitled to half of the Policy benefits because California’s community property 19 laws designate these benefits as “benefits from a spouse’s earnings and employment.” 20 Dkt. 88 at 4. However, the Supreme Court is clear that payment of benefits is “a 21 central matter of plan administration,” and thus, any state law that conflicts or relates 22 to the administration of benefits is preempted. Egelhoff, 532 U.S. at 147-48, 151-52. 23 9. To the extent defendant Stills argues preemption does not apply because 24 25 this is the second stage of an interpleader action whereby the insurance company has 26 been dismissed, the procedural posture does not change the outcome of this case. 27 The question is whether the state law “directly conflicts with ERISA’s requirements 1 documents|.|” Egelhoff, 532 U.S. at 150. Providing 50% of the benefits to defendant 9 | Stills under California’s community property laws conflicts with the designated 3, | beneficiary detailed in the ERISA-governed Policy in this case. 4 10. Hence, because Decedent properly changed her beneficiary designation 3 | from defendant Stills to defendants Hill, defendants Hill are the recognized © | beneficiaries of the Policy and are entitled to the full amount of the life insurance proceeds. For the reasons set forth above, the Court orders that Judgment be entered in favor of defendants-in-interpleader Janice and Kenneth Hill. 9

11 | Dated: February 2, 2024 12 HONORABLE Ff LY KTYA KATO United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28