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KAISER PERMANENTE EMPLES. PENSION v. BERTOZZI

March 23, 1994

KAISER PERMANENTE EMPLOYEES PENSION, PLAN, Plaintiff,
v.
DIANE BERTOZZI, individually and as Trustee of the Murber L. Hodge Trust, and WALTER HODGE, Defendants. AND RELATED ACTIONS.


Orrick


The opinion of the court was delivered by: WILLIAM H. ORRICK

Plaintiff and counterdefendant Kaiser Permanente Employees Pension Plan has moved for summary judgment against defendant and counterplaintiff Dianne Bertozzi. For the reasons stated hereinafter, as well as for the reasons stated at the hearing on February 24, 1994, the motion for summary judgment is denied.

 I.

 This is an action for declaratory relief brought by plaintiff and counterdefendant Kaiser Permanente Employees Pension Plan ("Plan"). The Plan is an employee pension benefit plan as defined under ERISA. Counterdefendant Kaiser Foundation Health Plan, Inc. ("Kaiser") serves as the administrator of the Plan. In its complaint, the Plan alleges that it is faced with two competing and mutually exclusive claims for the same retirement benefit and seeks the Court's guidance as to what its obligations are.

 The case arises as a result of the death of one of the Plan's participants, Mrs. Murber Hodge on February 26, 1992. Mrs. Hodge was a thirty-five year employee of Kaiser Hospital, who worked as an obstetric technician in Oakland, California. During 1991, Mrs. Hodge became ill, and was placed on sick leave. Her illness persisted and she died without ever returning to work.

 At the time of her death, Mrs. Hodge was a non-contributory member of the Plan, i.e. her employer contributed to her retirement fund, but she did not. Under the Plan, a vested participant electing to retire may choose from among various pension payment options, including certain annuity arrangements or a single sum distribution.

 The Plan provides, consistent with ERISA regulations, that any single sum distribution election or election to waive spousal entitlement to an annuity must be (1) in writing; (2) signed by the employee's spouse with an acknowledgement of the consequences of the waiver; and (3) notarized. [Plan Section D-2; Decl. of Ellen Canter, filed Jan. 27, 1994, Ex. A at D-2.] The Plan also provides that "if no election is made or if the required spousal consent is not obtained . . . a married Participant is paid under the Joint and Survivor Annuity method with a 50% continuation to the survivor and with the Participant's spouse as Joint Annuitant." [Plan Section D-2; Canter Decl., Ex. A at D-2.] Finally, the Plan provides that if a vested participant dies prior to retirement, that participant's surviving spouse is entitled to a "Survivor Annuity" or, if the requirements for a Survivor Annuity are not met, "no benefits are payable under the Plan." [Plan Section D-3(a); Canter Decl., Ex. A at D-4.] This is the extent of the facts to which the two sides agree.

 According to Bertozzi, in the weeks prior to her mother's death, Kaiser refused to provide both her and Mrs. Hodge with the forms necessary for her to complete her retirement application and to elect a lump sum award of her pension. Bertozzi claims that she and her mother placed several calls to the personnel office at Kaiser and requested that they mail Mrs. Hodge the forms necessary for retirement. According to Bertozzi, each request was refused and they were both told that, despite her illness, Mrs. Hodge would have to come in and pick up the forms in person.

 On February 18, 1992, Mrs. Hodge allegedly wrote a letter to Kaiser Hospital ("election letter"). In it, she stated that the personnel office had refused to send her her retirement forms, that she was providing notice of her retirement, and that she was electing to collect her pension in one lump sum. The election letter was signed by Mrs. Hodge, her husband Walter Hodge, a co-defendant in this case, Bertozzi and DeMildred Brooks, a family friend. It was not notarized and although Mr. Hodge signed it, he did not explicitly acknowledge the consequences of his waiver of the spousal annuity to which he was otherwise entitled. Both sides agree that the election letter does not meet the Plan's requirements for an effective election and waiver. Despite this, Bertozzi claims that she is entitled to a single sum benefit under the Plan, by way of an inter vivos trust entitled the Murber L. Hodge Trust, under which Bertozzi is the alleged trustee and sole beneficiary.

 Bertozzi states that she placed the election letter in an envelope, along with a form entitled "Request for Estimate," and sent it to Kaiser personnel. Kaiser received the form on February 25, 1992, but claims it did not receive the accompanying letter.

 After her mother's death on February 26, 1992, Bertozzi dealt with Kaiser personnel on a regular basis regarding life insurance benefits, her mother's final paycheck, and the processing of her medical bills. She claims that during her conversations with these individuals, she mentioned her mother's election letter and inquired about the status of her mother's pension.

 On April 1, 1992, Susan Tomczak of Kaiser's Regional Employee Benefits office sent Bertozzi the proceeds of Mrs. Hodge's life insurance. After receiving the proceeds, Bertozzi called Tomczak to inquire about the election letter and her mother's retirement benefits. She told Tomczak that her mother was married to Walter Hodge at the time of her death. Tomczak allegedly took down the information about Mr. Hodge and several days later sent information to him regarding his possible eligibility for a spousal annuity.

 Concerned that Kaiser had either not received or was not intending to honor Mrs. Hodge's election letter, Bertozzi claims to have sent letters to Kaiser on May 29 and August 25, 1992, enclosing a copy of the election letter each time. Kaiser denies receiving these letters. Several Kaiser employees have filed declarations stating they never saw the letters and they are not in the relevant files.

 Finally on November 9, 1992, Bertozzi sent another letter, along with a copy of the election letter via certified mail to Ellen Canter, the retirement administrator. Kaiser admits that it received this letter. In response to it, Ms. Canter wrote to Bertozzi and enclosed a set of forms for Mr. Hodge to fill out so that he could begin receiving his spousal annuity. Canter's letter did not mention the election letter.

 For its part, Kaiser maintains that it never received Mrs. Hodge's election letter until November 1992. *fn1" Kaiser further maintains that at the time of her death, it had no records indicating that Mrs. Hodge had elected to retire or that she wished to receive a single sum pension benefit. In addition, and according to plan records, Mrs. Hodge was not married at the time of her death.

 Based on a subsequent investigation, Kaiser concluded that Mrs. Hodge was married to Walter Hodge sometime prior to the commencement of her employment with Kaiser. The couple then separated and she filed a complaint for divorce. It appears, however, that no judgment of divorce was ever issued. On this basis, Kaiser does not dispute that Walter Hodge was Murber Hodge's legal spouse at the time of her death.

 As a result of the competing and mutually exclusive claims of Bertozzi and Walter Hodge to Murber Hodge's entitlement benefit, and because of the suspicious nature of the election letter, Kaiser filed this action for declaratory relief naming both Bertozzi and Hodge as defendants. Mr. Hodge has never filed an appearance in the case and default has been entered against him by the Clerk of the Court. He has previously executed an affidavit stating that he has no interest in receiving the retirement benefits at issue. [Decl. of Lucia Savage, filed Feb. 10, 1994, Ex. 8.]

 Bertozzi filed two counterclaims seeking (1) benefits under the plan and (2) penalties against Kaiser for failure to respond to her mother's Request for Estimate form, as provided by 29 U.S.C. § 1132 (c). Kaiser maintains that it is entitled to judgment against Bertozzi as a matter of law because the February 18, 1992 letter does not constitute a valid election of a single sum benefit and because her request for penalties is without merit.

 II.

 A.

 Applicable Standards

 Rule 56 of the Federal Rules of Civil Procedure provides that a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving ...


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