Barnett v. Barnett

Rule of Law:

The Employee Retirement Income Security Act (ERISA) preempts state community property laws and claims for constructive fraud seeking to impose a constructive trust on employee welfare benefit plan proceeds, as such state laws have a 'connection with' an ERISA plan by interfering with nationally uniform plan administration.

Facts:

• Christopher Barnett was employed by HL & P for eleven years when he married Marleen Barnett.
• As part of an ERISA employee benefits plan, HL & P procured life insurance policies for Christopher throughout his employment, eventually settling on a new term life policy from Prudential Life Insurance Company during his marriage to Marleen.
• The premiums for the Prudential policy were paid by deductions from Christopher’s payroll, using community funds.
• Christopher and Marleen began experiencing marital discord, separated, and initiated divorce proceedings.
• Christopher changed the beneficiary of the Prudential life insurance policy from Marleen to his estate and executed a new will naming his mother, Dora Barnett, as the executrix and principal beneficiary of his estate.
• Before the divorce proceedings concluded, Christopher died.
• The Prudential policy proceeds ($169,770.93) and other life insurance proceeds, totaling $637,955.93, were paid to Christopher's mother, Dora Barnett.
• Dora Barnett subsequently made gifts from these proceeds to various family members and friends.

Procedural Posture:

• Marleen Barnett sued Christopher’s estate, Dora Barnett (executrix and principal beneficiary), and other recipients of the proceeds, asserting that the life insurance policies were community property, Christopher committed fraud on the community, and a constructive trust should be imposed on one half of all policy proceeds.
• Marleen moved for partial summary judgment, seeking a declaration that the policies were community property, that ERISA did not preempt her interest, and that a constructive fraud had been committed.
• Dora Barnett and other defendants moved for partial summary judgment, contending the policies were separate property and ERISA preempted any community interest.
• The trial court denied Marleen’s motion and granted the defendants’ motions for partial summary judgment.
• At the close of Marleen’s evidence, the trial court granted a directed verdict in favor of Dora on the constructive trust issue and for all defendants on all claims not resolved by the partial summary judgment.
• The trial court rendered judgment on the jury verdict for Marleen on other claims not at issue here, and incorporated the prior partial summary judgments.
• Marleen, Dora, the West defendants, and Dyess appealed to the court of appeals.
• The court of appeals reversed the trial court’s judgment with regard to the Prudential policy, holding that the policy was community property and that ERISA did not preempt Marleen’s claims.
• The court of appeals further held that Christopher’s gift of the proceeds of the Prudential policy to Dora was constructive fraud and that Marleen was entitled to summary judgment against all defendants, jointly and severally, for one half the proceeds.
• The court of appeals also concluded that the trial court needed to establish a family allowance for Marleen and affirmed the award of attorney’s fees to Marleen.
• Dora Barnett, the West defendants, and Dyess filed petitions for review with the Supreme Court of Texas.