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Law School Case Brief

Barnett v. Barnett - 67 S.W.3d 107 (Tex. 2001)

Rule:

There is a presumption under the Texas Family Code that property held during marriage is community property: Tex. Fam. Code Ann. § 3.003(a) provides that property possessed by either spouse during or on dissolution of marriage is presumed to be community property. However, the federal Employee Retirement Income Security Act (ERISA) preempts any state laws that "relate to" covered employee benefit plans, 29 U.S.C.S. § 1144(a). State law is defined to include all laws, decisions, rules, regulations, or other state action having the effect of law, of any state. 

Facts:

As part of an Employee Retirement Income Security Act (ERISA) employee benefits plan, the decedent's employer procured life insurance policies for him throughout his employment. Policies were allowed to expire, and the employer obtained new policies from new companies. When the decedent and the wife married, one policy was in effect. It, too, was eventually replaced. When the decedent and his wife began divorce proceedings, he changed the policy beneficiary from her name to his estate. He also executed a new will naming the his mother as executrix and principal estate beneficiary. The decedent died before the divorce proceedings concluded. His mother made gifts to her family members and friends, excluding his children. Had he survived, the wife could have obtained a decree that qualified as an ERISA "qualified domestic relations order." Respondent wife sued petitioners, who were her mother-in-law (the decedent's mother) and her relatives, claiming decedent husband defrauded their community. The wife requested that a constructive trust be imposed on one-half of life insurance proceeds. Petitioners were granted partial summary judgment that ERISA preempted any community interest. The court of appeals (Texas) reversed as to some proceeds. Most petitioners appealed.

Issue:

Did the federal Employee Retirement Income Security Act (ERISA) preempt the estranged wife's claims for constructive fraud on the marital community and for the imposition of a constructive trust on one-half of life insurance proceeds, where decedent husband's life insurance policy was obtained through an ERISA employee benefits plan?

 

Answer:

Yes

Conclusion:

The Supreme Court of Texas held that the Supreme Court of the United States' Egelhoff decision compelled it to conclude that, although the policy was community property, the wife's claim was based on state law that had a connection with an ERISA plan, under 29 U.S.C.S. § 1144(a), and was accordingly preempted. Governance by Texas community property laws of the payment of benefits, would interfere with the national uniformity of a matter central to ERISA plan administration. Her trust claim met the ERISA definition of "state law." The judgment was reversed in part to eliminate recovery by the wife of the proceeds of the policy at issue. The Court noted that had the decedent survived until divorce proceedings were concluded, the wife could have obtained a decree that qualified as a QDRO under ERISA. Because the decedent husband did not survive, the wife is now relegated to a claim for constructive fraud on the community.

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