The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER
This is an interesting case, apparently of first impression, involving
principles of ERISA law. The case arises out of a levy by Defendant
Internal Revenue Service ("IRS") against the Individual Retirement
Account ("IRA") of Defendant Donald Kopec ("Donald") for unpaid taxes.
Helen Kopec ("Helen"), the Plaintiff and Donald's wife, seeks to vacate
the levy as to one-half of the proceeds of that IRA on the grounds that
she, as Donald's spouse, is entitled to those funds under ERISA as her
potential survivorship benefit arising out of Donald's pension through the
Defendant DAK Pension Plan ("DAK" or "the plan"). Presently before the
Court are motions by Helen and the IRS for summary judgment.
The facts are undisputed and can be stated succinctly. In 1996 and
1997, the IRS made assessments against Donald for tax deficiencies in
excess of $1 million. Incident to these assessments, the IRS levied on
Donald's assets, including an IRA he had opened in his own name. The
contents of the IRA are funds that were rolled over directly from
Donald's pension with DAK. The Plaintiff's brief claims that the plan was
terminated on Dec. 31, 1990, but that fact is not alleged in the parties'
rule 56.1 statements or supporting affidavits. Helen alleges that, since
she never waived her survivorship rights in Donald's pension, she retains
survivorship rights in one-half of the contents, of the IRA, and seeks to
dissolve the IRS levy as to her share of the assets.
Helen filed this action pursuant to ERISA, citing jurisdiction based on
29 U.S.C. § 1451 (c). Her complaint alleges that she was never
provided with the information required by 29 U.S.C. § 1055 (a)(1)(2),
and never signed the spousal waiver provided for in 29 U.S.C. § 1055
(d). She contends that, as a result, this lack of consent "negates the
rollover made to [Donald's] Individual Retirement Account," and that
"Plaintiff's spousal rights entitle her to fifty percent (50%) of the
proceeds contained within Defendant's Individual Retirement Account." She
challenges the IRS levy against her husband's
IRA as wrongful on the ground that it fails to recognize her spousal
right to one-half of the funds.
Helen moved for summary judgment, claiming that the provisions of ERISA
entitle her to an interest in her husband's pension, and that his rolling
over of the pension distribution into an IRA did not extinguish her
right. She further argues that she is protected by the "innocent spouse
rule" in 26 U.S.C. § 6013 (e)(1)(3), which prevents her from being
held liable for her husband's tax liabilities.
The IRS cross-moved for summary judgment, contending that Helen has no
rights to the contents of Donald's IRA, because she has no vested right
to the pension distribution. The IRS contends that because her rights to
Donald's pension benefits are in the nature of a survivor annuity, the
fact that Donald is still alive makes her interests in the pension fund
merely contingent. Moreover, the IRS argues that any ERISA rights Helen
may have had were extinguished upon the distribution of the pension
funds. Further, the IRS rejects any contention that Donald's receipt of
benefits created a constructive trust for the benefit of his wife. The
IRS asserts that it has shown a sufficient nexus between Donald and the
IRA funds, and that a levy against such funds with regard to Donald's tax
liabilities is proper.
Summary judgment is appropriate if the record "show[s] that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also
Wilkinson v. Russell, 182 F.3d 89, 96-97 (2d Cir. 1999); In Re: Blackwood
Associates, L.P., 153 F.3d 61, 67 (2d Cir. 1998) (citing Fed.R.Civ.P.
56[c] and the seminal cases of Celotex Corp. v. Catrett, 477 U.S. 317,
322, 106 S.Ct. 2548, 91 L.Ed.2d 265  and Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 ).
Because the parties are in agreement here regarding all material facts,
this case requires the Court to make a finding as a matter of law.
The Plaintiff's cause of action against the IRS merely asserts that the
IRS levy against the full amount of Donald's IRA is "wrongful."
Presumably, although the Plaintiff's complaint fails to so state, her
cause of action is being alleged under 26 U.S.C. § 7426 (a)(1), which
provides that a person claiming an interest in property that the IRS has
levied upon may bring a civil action in the federal courts to dissolve
that levy. An action for wrongful levy under section 7426(a)(1)
initially requires the plaintiff to prove title to or an ownership
interest in the property levied upon, which would then shift the burden
to the Government to demonstrate a nexus between the property and the
taxpayer, after which the plaintiff would have the ultimate burden to
prove the levy was wrongful. LiButti v. U.S., 107 F.3d 110 (2d Cir.
The Plaintiff's contention that she has an ownership interest in the
IRA funds is based solely on her assertion that her survivorship interest
under the DAK pension plan continues on in Donald's IRA. There is no
dispute that ERISA requires that a pension fund include an annuity for a
surviving spouse, 29 U.S.C. § 1055 (a)(2), and that such a spousal
annuity can only be waived by the spouse in writing, witnessed by a
notary. 29 U.S.C. § 1055 (c)(2)(a); Franklin v. Thornton, 983 F.2d 939
(9th Cir. 1993). There is also no dispute that Helen did not waive her
annuity as required by the statute. The question before this Court, which
appears to be one of first impression, is whether she therefore has an
ownership interest in the funds that were distributed in full to her
husband without her waiver of her interest in them.
The Court's research has not revealed any cases in which a court has
suggested that a distribution of pension benefits prior to a valid
spousal waiver creates an ownership interest in the spouse to some of the
distributed monies. On these facts, courts have routinely held that,
despite the plan's wrongful distribution, it is still required to pay
survivor benefits to the spouse if her husband predeceases her. See e.g.
Rice v. Rochester Laborers' Annuity Fund; 888 F. Supp. 494, 498
(W.D.N.Y. 1995) ("The premature payment to Harold Rice does not relieve
the Fund of its obligation to the plaintiff [spouse]."); Long v. Westgate
Graphic Design, 1996 WL 473400 at *3 (N.D.Ill. 1996); Davis v. College
Suppliers Co., 813 F. Supp. 1234 (S.D.Miss. 1993); see also Hearn v.
Western Conference of Teamsters Pension Fund; 68 F.3d 301 (9th Cir. 1995)
(a spouse's entitlement is subject to offset of benefits already paid out
where the plan was innocently deceived). The Plaintiff could obtain a
judgment against Donald's personal assets by a suit against him in his
capacity as trustee for the DAK pension fund. 29 U.S.C. § 1109
(allowing personal liability for breach of fiduciary duties by plan
trustees); see Varity Corp. v. Howe, 516 U.S. 489 n. 3, 116 S.Ct. 1065,
134 L.Ed.2d 130 (1996). However, the Plaintiff has not sought summary
judgment against Donald in the instant motion.
Thus, on the instant motion, if the Plaintiff is to establish that she
has an existing ownership right in the levied funds, this right must
arise as an automatic consequence of the distribution to Donald as a plan
participant. The Court has not unearthed any authority for the proposition
that a wrongful payment of funds to one beneficiary creates an ownership
right to those funds in the proper recipient. Indeed, cases like Rice,
Long, and Davis cited above, which authorize the wronged spouse to sue
the plan for a declaration that her right to benefits still exists, imply
the contrary. If a spouse could automatically claim an ownership right to
half the monies that were distributed to her husband, allowing her to
also obtain a declaration that the pension plan must honor her survivor
benefit would constitute a double recovery for her.
In fact, the Court is not convinced that a wronged beneficiary has any
cause of action, at least under ERISA, against her participant husband.
While 29 U.S.C. § 1132 (a)(1)(b) authorizes suits "by a beneficiary
to recover benefits due to him under the terms of his plan," the Second
Circuit has suggested that "in a recovery of benefits claim [under §
1132(a)(1)(b)], only the plan and the administrators and trustees of the
plan in their capacity as such may be held liable." Leonelli v. Pennwalt
Corp., 887 F.2d 1195 (2d Cir. 1989). In a number of situations, ERISA has
been interpreted to authorize civil suits against non-fiduciaries, Brock
v. Gerace, 635 F. Supp. 563 (D.N.J. 1986); Freund v. Marshall & Ilsley
Bank, 485 F. Supp. 629 (W.D.Wis. 1979), but such findings invariably
entail non-fiduciary third parties who knowingly assist a fiduciary in
some improper act, resulting in the courts treating the third party as
having assuming a fiduciary role. See e.g. Vilas v. Lyons,
702 F. Supp. 555, 562 (D.Md. 1988). Such a theory of recovery would be
inapplicable here, where Donald was both a participant and the sole
fiduciary of the DAK pension plan, as he could not assist himself in
breaching his ...