Firestone v. Fed. Ret. Thrift Inv. Bd.

Citation: 375 F. Supp. 3d 102Docket: Civil Action No. 16-1810 (CKK)

Court: Court of Appeals for the D.C. Circuit; March 25, 2019; Federal Appellate Court

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Cai-Yen Firestone claims to be the designated beneficiary of her deceased brother Bernard Hsieh's Thrift Savings Plan (TSP) account. However, the court finds that she cannot prove that Mr. Hsieh effectively designated her as a beneficiary before his death, as one witness on the necessary form failed to date her signature. Consequently, Mrs. Firestone is denied the proceeds, which will instead go to Mr. Hsieh's surviving spouse, Melissa Wang, according to statutory precedence. 

The court grants motions to dismiss or for summary judgment from Mrs. Wang and the Federal Retirement Thrift Investment Board (FRTIB) and TSP, ruling that Mrs. Wang is a necessary party in this litigation. Mrs. Firestone filed her lawsuit on September 9, 2016, after being informed by FRTIB and TSP that she was not recognized as a beneficiary. The amended complaint includes four claims: a request for a declaratory judgment asserting her beneficiary status, an allegation of breach of contract against FRTIB and TSP, a request for specific performance regarding the distribution of funds to her, and a claim of equitable estoppel to prevent the defendants from distributing the assets to anyone else.

In June 2017, at the request of Mrs. Firestone and Mrs. Wang, the Court postponed the deadline for Mrs. Wang's response to the Amended Complaint to facilitate mediation, as noted in Order ECF No. 26. After mediation failed, Mrs. Wang filed a motion to dismiss or, alternatively, for summary judgment, followed by similar motions from FRTIB and TSP. The briefing for these motions is now complete and ready for resolution.

Regarding the legal standard, under Federal Rule of Civil Procedure 12(b)(1), a court must dismiss a case if it lacks subject-matter jurisdiction. In assessing jurisdiction, the court can review the complaint alongside undisputed facts in the record or disputed facts resolved by the court. Complaints, whether counseled or pro se, are to be interpreted liberally to favor the pleader's factual allegations. Nevertheless, the burden of proving subject-matter jurisdiction lies with the plaintiff, who must do so by a preponderance of the evidence. While a court accepts all factual allegations as true when evaluating a 12(b)(1) motion, these allegations are subject to more stringent scrutiny compared to a 12(b)(6) motion concerning the failure to state a claim.

Summary judgment is granted under Federal Rule of Civil Procedure 56 when the movant demonstrates that no genuine dispute exists regarding any material fact and is entitled to judgment as a matter of law. A mere factual dispute is insufficient to preclude summary judgment unless it concerns a material fact that could affect the case's outcome under applicable law. To establish a genuine dispute, the non-movant must provide sufficient admissible evidence to support a jury verdict. Conclusory assertions without factual backing do not suffice to create a genuine dispute. If a party fails to support or address a fact, the court may treat that fact as undisputed. The court must analyze evidence favorably toward the non-movant without weighing credibility or evidence. Summary judgment is inappropriate if material facts are contested or allow for different inferences. The non-movant must demonstrate more than a mere metaphysical doubt regarding material facts; evidence that is merely colorable or not significantly probative can lead to summary judgment being granted.

In Mrs. Firestone's case, her claims must be dismissed for lack of subject-matter jurisdiction under Rule 12(b)(1), as she has not established jurisdiction under 5 U.S.C. 8477(e)(7)(A) or the Declaratory Judgment Act, which does not independently confer jurisdiction. Furthermore, she has not pled diversity or supplemental jurisdiction, leading the court to conclude that she has waived these claims. The court need not address Rule 12(b)(6) grounds for dismissal, and alternatively, the defendants are entitled to summary judgment on all claims.

Mrs. Firestone's legal issue is rooted in the Federal Employees' Retirement System Act of 1986 (FERSA), specifically regarding the Thrift Savings Plan (TSP) of Mr. Hsieh. The TSP functions similarly to private sector 401(k) plans. Jurisdiction for FERSA claims is exclusively granted to federal district courts, including the U.S. District Court for the District of Columbia, under 5 U.S.C. § 8477(e). Actions permitted under this jurisdiction involve recovering benefits or enforcing rights related to the TSP. 

For the Court to consider jurisdiction under § 8477(e), Mrs. Firestone must prove her status as a participant or beneficiary of Mr. Hsieh's TSP account. It is established that she is not a participant, as defined by the statute, but claims to be the designated beneficiary. The Court will assess her claim under Rule 12(b)(1) to determine federal-question jurisdiction.

The term "beneficiary" is defined as someone entitled to payment from the Thrift Savings Fund, distinct from a participant. In cases where an employee dies without an election regarding their TSP account, the account value is paid in accordance with the statutory order of precedence outlined in § 8424(d). Payments are first made to beneficiaries designated in a signed and witnessed document filed before the employee's death, followed by the surviving spouse if no designation exists. Thus, the legitimacy of Mrs. Firestone's claim hinges on whether she meets the statutory requirements for being a beneficiary under these provisions.

FRTIB and TSP are required to make a distribution under the relevant provision, eliminating the need for the Court to analyze definitions of "lump-sum benefits." The TSP record keeper, not the Office of Personnel Management (OPM), is identified as the proper recipient for designating beneficiaries. To designate a beneficiary for a TSP account, a participant must file a TSP designation of beneficiary form with the TSP record keeper. For Mrs. Firestone to qualify as a beneficiary, Mr. Hsieh must have designated her in a signed and witnessed writing submitted before his death. Without such a designation, the benefit will go to his widow, Mrs. Wang, per the order of precedence. 

The regulations specify that a valid beneficiary designation must be signed, dated, and witnessed properly. The version of the regulations in effect when Mr. Hsieh completed his form required it to be signed and dated by two witnesses. It is undisputed that one witness, Ms. Bontje, did not date her signature on the first page of the form, violating the regulation's requirement for a "properly dated" form. Ms. Bontje's later addition of a date on another page does not rectify this omission, and her affidavit claiming she intended to adopt a date from another witness does not satisfy the strict compliance required by the regulations. The Court emphasizes that compliance with the TSP statute and regulations must be strict, and intent cannot compensate for this failure. The distinction made in the regulations concerning "submitted" pages versus "the form itself" supports the necessity for precise adherence to the requirements.

Section 1651.3(c)(3) mandates that both witnesses must date each page of the beneficiary change form. This requirement implies that every page, including the first, must be dated to avoid illogical scenarios where only some pages are dated. The form must adhere to the TSP designation of beneficiary format, reinforcing the need for compliance with the first page. Additionally, instructions on Form TSP-3 explicitly required Ms. Bontje to date page one, stating that "this entire form is valid only if this page is witnessed by two persons." Any failure to meet the witness requirement for this page invalidates the entire submission. The absence of the date in the designated area on page one is a critical defect, undermining the validity of the form despite any dates provided on subsequent pages. Further, explicit reminders on page one reiterated that signatures and dates were necessary from both the participant and witnesses. Although a webpage from FRTIB offers additional guidance on signing and dating each page, its relevance is mitigated by uncertainty regarding its existence at the time the form was completed.

The Court's interpretation of Section 1651.3(c) is supported by the Federal Retirement Thrift Investment Board's (FRTIB) own subsequent interpretation of the regulation, despite the parties' disagreement on the appropriateness of considering this post-enactment interpretation. Mrs. Firestone argues against this approach by citing case law that limits the use of legislative history to instances where the text is unclear. However, the Court finds that the regulation's text is generally clear, with only minor ambiguity regarding the requirements for the form and its submitted pages. 

In a proposed rule published on March 30, 2017, FRTIB clarified that the regulation requires a TSP beneficiary designation form to be witnessed by two individuals and each page must be dated by the participant and both witnesses. The proposed amendments, while changing the number of required witnesses from two to one, reinforced the requirement that all pages of the form must be signed and dated by the same witness, maintaining the existing validity requirements. 

The Court concludes that strict compliance with the beneficiary designation rules in effect when Mr. Hsieh submitted his Form TSP-3 is necessary. This conclusion is supported by various sources, including FRTIB's acknowledgment of the incomplete Form TSP-3 submitted by Mr. Hsieh, which was rejected due to a missing or invalid signature date. Although the issue of whether Mr. Hsieh received the rejection notice is contested, the Court deems it unnecessary to resolve this matter to affirm its interpretation.

A "presumption of regularity" applies to government records unless clear evidence suggests otherwise, as established in Miley v. Lew. The Court lacks detailed information about the record-keeping practices of FRTIB and TSP but sees no indication of fraudulent activity regarding the notice in question. The notice indicates compliance with the requirement for a date next to Ms. Bontje's signature on Mr. Hsieh's Form TSP-3. Mrs. Firestone failed to cite any case law supporting a less than strict compliance standard with the TSP statute or its regulations. While the Court has not found cases interpreting the witness date requirement under Section 1651.3(c), other jurisdictions have applied strict interpretations of related sections. For instance, in Kriebel v. Long, the requirement was that FRTIB must receive Form TSP-3, which could be proven via the mailbox rule. In Hewitt v. Thrift Saving Plan, summary judgment favored FRTIB because the plaintiff could not show the decedent submitted Form TSP-3 prior to death, despite indications of intent. Other cases, such as Faris v. Long and Sharber v. Sharber, acknowledged the validity of beneficiary designations but did not delve into specific witnessing requirements. The Court concludes that, absent contrary case law, strict compliance with the requirements of submitting Form TSP-3 is essential to designate or change a beneficiary, which Mr. Hsieh failed to achieve.

Mrs. Firestone argues for the application of the substantial compliance doctrine in the context of the Employee Retirement Income Security Act (ERISA) based on out-of-circuit authority. However, the cited cases, such as Phoenix Mut. Life Ins. Co. v. Adams, indicate that this doctrine applies only in instances where ERISA lacks a specific rule. The substantial compliance principle is part of federal common law, relevant only when ERISA does not directly address an issue. Unlike the Thrift Savings Plan (TSP), ERISA does not mandate a specific format for changing beneficiary designations. The Fourth Circuit's ruling in Phoenix Mut. was carefully limited to the case at hand, and subsequent courts have questioned the validity of applying this doctrine in the ERISA context. 

Mrs. Firestone has not demonstrated that Congress or the Federal Retirement Thrift Investment Board (FRTIB) has permitted deviations from statutory or regulatory requirements that necessitate payment to a surviving spouse unless a valid Form TSP-3 is on file. The lack of such a form prevents her from establishing herself as a designated beneficiary, which is essential for invoking the Court's jurisdiction under Section 8477(e). Consequently, her claims for declaratory judgment and specific performance fail due to this jurisdictional defect.

The Court dismisses the declaratory judgment claim against FRTIB, TSP, and Mrs. Wang, as well as the specific performance claim against FRTIB and TSP. Mrs. Firestone asserts a third-party beneficiary right to recover for a breach of contract between FRTIB, TSP, and Mr. Hsieh, relying on Section 8477(e) of the statute. However, she fails to provide legal authority supporting her assertion that Congress intended to grant TSP participants enforceable contractual rights or articulate the elements of a breach of contract claim based on state common law. Additionally, she does not clarify how the statutory definition of a beneficiary fits her argument. The Court finds no jurisdiction over her claim since Section 8477(e) only covers claims by participants or beneficiaries, which does not include Mrs. Firestone, as Mr. Hsieh did not properly designate her as a beneficiary. 

Regarding her equitable estoppel claim, Mrs. Firestone does not adequately establish the Court's jurisdiction or provide substantive arguments in her briefing. Although she initially defends the sufficiency of her equitable estoppel allegations, she later concedes that this case may not fit typical equitable estoppel jurisprudence without offering further justification for recognizing such a claim in this context. The Court notes a lack of counterarguments from Mrs. Firestone in response to challenges from both Mrs. Wang and FRTIB/TSP regarding the equitable estoppel claim, leading the Court to consider treating the issue as conceded.

The Court finds no jurisdiction over Mrs. Firestone's equitable estoppel claims against Mrs. Wang, FRTIB, and TSP due to her lack of beneficiary status under Section 8477(e). As she did not assert any alternative jurisdiction, her claims must be dismissed under Rule 12(b)(1). Consequently, the Court does not need to address issues regarding her standing or the defendants' sovereign immunity, nor does it need to review her claims under Rule 12(b)(6).

Alternatively, assuming jurisdiction could be established, the Court concludes that undisputed facts favor summary judgment for the defendants. The lack of a date next to Ms. Bontje's signature on Mr. Hsieh's Form TSP-3 invalidates the beneficiary designation, leaving Mrs. Firestone without entitlement to a declaratory judgment or specific performance. Additionally, she failed to adequately plead a breach of contract claim and has conceded the merits of her equitable estoppel argument. Discovery is deemed unnecessary as the material facts are undisputed, and any intention by Mr. Hsieh to designate a beneficiary does not alter the outcome. The Court emphasizes the necessity of strict compliance with regulations to ensure proper administration of federal employees' savings plans.

In conclusion, the Court grants the motions to dismiss or for summary judgment from Mrs. Wang, FRTIB, and TSP, reinforcing the importance of adhering to statutory mandates and agency regulations. An appropriate order will follow this memorandum opinion.

FRTIB and TSP filed a Motion to Dismiss or, alternatively, for Summary Judgment, while the plaintiff opposed this motion. There is ambiguity regarding whether TSP is a proper entity to be sued, as previous rulings have identified FRTIB as being misidentified as TSP. Despite this uncertainty, the Court will refer to both FRTIB and TSP as defendants. The Court noted that Mr. Hsieh's Form TSP-3 may have included additional pages, but this issue does not need resolution. A confidentiality concern arose with the partial blurring of witnesses’ names on the form, although a complete version was later submitted.

Under Section 8477(e), the plaintiff is required to serve the complaint to specific officials, including the Executive Director of FRTIB, the Secretary of Labor, and the Secretary of the Treasury. The record indicates that these officials may not have been served, but the defendants did not raise this point, and the Court will not address it independently. 

The relationship between Mr. Hsieh and Mrs. Wang, acknowledged as married but living apart at his death, is not disputed. The Court highlighted a regulatory change effective July 31, 2014, but noted that the relevant statutory provisions remained unchanged when Mr. Hsieh completed his Form TSP-3. Mrs. Wang referenced additional instructions from October 2013, but the Court found no evidence that Mr. Hsieh had access to them, so it declined to consider them further.

The parties presented conflicting interpretations of the Federal Employees Group Life Insurance Act (FEGLIA), but the Court found sufficient grounds for strict compliance without delving into FEGLIA's implications. The plaintiff did not assert jurisdiction over clarifying rights to future benefits under TSP regulations, nor did the Court find precedents supporting claims for establishing beneficiary status. The cited case emphasized that rights under Section 8477(e)(3)(C)(i) are directed towards existing beneficiaries, with only a brief mention of equitable estoppel by the plaintiff in a context unrelated to her primary arguments.