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Cunningham v. Hebert

United States District Court, N.D. Illinois, Eastern Division

November 1, 2016

BETTY CUNNINGHAM, Plaintiff/Counter-Defendant,
v.
ISOBEL A. HEBERT, as Supervised Executor of the Estate of Patrick Kevin Cunningham, Defendant/Counter-Plaintiff.

          OPINION AND ORDER

          JOAN H. LEFKOW, U.S. DISTRICT JUDGE

         This case presents competing claims to funds held in a 401(k) account owned by Patrick Kevin Cunningham at the time of his death. The dispute is between the executor of Patrick Cunningham's estate, Isobel A. Hebert (“the Executor”), and Patrick's ex-wife, Betty Cunningham. Before the court are cross-motions for summary judgment (dkts. 33, 47). For reasons explained below, the court rules in favor of Betty Cunningham on the federal question and dismisses the claim for constructive trust.[1]

         BACKGROUND[2]

         I. Factual Background

         Betty and Patrick were married April 3, 1981. (Dkt. 35, Joint and Stipulated Statement of Undisputed Material Facts ¶¶ 6, 27). They divorced on November 12, 2003. (Id. ¶ 28.) A signed marital settlement agreement was made part of the judgment for dissolution of marriage (the divorce decree). (Id.) Eleven years later, on or about March 29, 2014, Patrick died. (Id. ¶ 1.)

         During the marriage and until Patrick died, Patrick was employed by Loparex LLC (Loparex). (Id. ¶ 8.) Patrick was a participant and account holder in the Loparex LLC 401(k) Plan. (Id. ¶ 11.) Loparex was and is the plan administrator for the Plan. (Id. ¶ 16.) Fidelity Management Trust Company (FMTC) was and is the designated trustee of the Plan, including Patrick's 401(k) account. (Id. ¶ 17.)

         On or around November 6, 1998, upon opening his 401(k) account, Patrick identified his marital status as married and designated Betty as the primary beneficiary on a designation of beneficiary form. (Id. ¶ 13.) This was the only designation of beneficiary form on file with the 401(k) Plan. (Id. ¶¶ 32-33.) Because Patrick did not file a change of beneficiary form after the divorce, at the time of his death, the 1998 Designation of Beneficiary Form incorrectly reflected Patrick's marital status as married and Betty remained the beneficiary. (Id. ¶¶ 31, 35.)

         As reflected in the divorce decree, the parties agreed that each would retain sole ownership of their respective 401(k) retirement accounts, and each granted the other an unequivocal release of any rights to the present or after-acquired property of the other or their estate and agreed never to sue to enforce any rights relinquished under the decree. (Id. ¶ 30.)[3]

         On July 29, 2014, Patrick's will was admitted to probate, and Isobel Hebert was appointed Supervised Executor. (Id. ¶¶ 4-5.) On or about August 15, 2014, the Executor contacted Fidelity Brokerage Service LLC and informed them that Patrick's 401(k) account should not pass to Betty but, rather, to the estate. (Id. ¶ 36.) After reviewing all relevant documents, Loparex and FMTC determined that the estate was the proper beneficiary of the 401(k) account (id. ¶ 38) and caused the transfer of the funds to an account for the benefit of the estate (id. ¶ 40).

         II. Procedural Background

         On October 16, 2014, plaintiff filed in the probate court a complaint for a declaratory judgment that she was the rightful beneficiary of Patrick's 401(k) account. (Dkt. 2, Ex. A.) Loparex and FMTC removed the case to this court under 28 U.S.C. § 1441 (dkt. 2) and filed an interpleader counterclaim asking the court to determine the proper party to be paid from the account proceeds (dkt. 4). The court granted leave to deposit the funds with the registry of the court, and Loparex and FMTC have been dismissed. (Dkt. 21.)

         The Executor filed an answer and a counterclaim for declaratory judgment that the estate is the proper beneficiary of the funds and, alternatively, to enforce Betty's waiver of any claim to the account imposed by the divorce decree. (Dkt. 14.) The material facts are undisputed such that the pending cross-motions for summary judgment are a suitable vehicle for resolving the claims.

         LEGAL STANDARD

         Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually ...


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