UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

IRM DEFINED BENEFIT PENSION, by
its Trustee, a/k/a Bobby E.
Leonard, Doctor,
Plaintiff-Appellant,
                                                                   No. 95-2029
v.

UNITED STATES LIFE INSURANCE
COMPANY,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
M. J. Garbis, District Judge.
(CA-93-2943-MJG)

Argued: May 6, 1996

Decided: October 1, 1996

Before ERVIN and WILKINS, Circuit Judges, and NORTON,
United States District Judge for the District of South Carolina,
sitting by designation.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Nicholas J. Kallis, Annapolis, Maryland, for Appellant.
Thomas G. Young, III, Baltimore, Maryland, for Appellee. ON
BRIEF: George Z. Petros, Annapolis, Maryland, for Appellant.

_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Bobby E. Leonard, Trustee of IRM Defined Benefit Pension ("the
Plan"), sued in the District of Maryland to recover the death benefit
on a life insurance policy which the Plan purchased for an employee
and then mistakenly left in force after the employee's retirement. Pur-
suant to a separate state court settlement, United States Life Insurance
Company of the City of New York paid the death benefit to the
employee's widow--who was the named beneficiary--and to Insti-
tute for Resource Management ("IRM")--the corporation which
established the pension plan. The Plan itself, however, was not
included in the settlement, and now Leonard contends that U.S. Life
is liable to the Plan for the entire amount of the death benefit.

After a bench trial, the district court found otherwise. The court
rejected Leonard's assertion that the Plan was entitled to the death
benefit because it was the owner of the policy. The court found that,
once Harold Froese--the retired employee--no longer had an interest
in the policy, the Plan's ownership entitled it to surrender the policy
for its cash surrender value or to continue the policy in effect and des-
ignate itself as beneficiary. However, the court concluded that nothing
in the policy or the law entitled the Plan to recover the proceeds sim-
ply by virtue of its status as policy owner.

The court also rejected Leonard's theory that Betty Froese--the
widow of the insured employee--assigned her beneficiary rights to
the Plan by executing a Spousal Consent Form consenting to her hus-
band's election of a lump-sum payment upon his retirement. The
Spousal Consent Form stated only that Mrs. Froese would release her
rights to a joint and survivor annuity in order that her husband may
receive a lump-sum payment, but made no reference to the policy.
The court acknowledged that a valid assignment can exist in the
absence of an express written agreement, but reasoned that, in the
absence of such agreement the intentions of the parties must be clear.

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The court found no evidence that the parties intended that Betty
Froese assign her beneficiary rights to U.S. Life. At the same time
that Betty signed the Spousal Consent Form, Harold signed* an Insur-
ance Election Form, advising him that he had the right to continue the
policy, but would be responsible for future premiums. The form also
stated that, if Harold did not wish to assume ownership of the policy,
it would be surrendered and any cash value would be paid to him.
Thus, the district court concluded that neither the Spousal Consent
Form nor the companion Insurance Election Form demonstrated any
intent by the Froeses that the policy would continue in force and Mrs.
Froese would assign her beneficiary rights to the Plan.

Nor did the Plan intend to maintain the policy in force and become
its beneficiary, the court concluded. First, Section 4.04 of the plan
document--providing, in part, that "[the Trustees] shall not pay pre-
miums for Policies on the lives of Participants who have terminated
employment"--suggests that the terms of the plan itself prohibit the
maintenance of life insurance policies on retired employees. Second,
the court reasoned that to continue a life insurance policy on a former
employee would be an improper and imprudent use of Plan assets.
Finally, the Plan took no actions comporting with a belief that it was
a beneficiary of the policy or with a desire to become a beneficiary.
In particular, it did nothing to change the named beneficiary after
Harold's retirement. Finding no entitlement to the death benefits, the
court entered judgment in favor of U.S. Life.

We concur with the basic reasoning of the district court, and reject
Leonard's new contention on appeal that the Employee Retirement
Income Security Act of 1974, 29 U.S.C. §§ 1011 et seq. ("ERISA"),
compels a contrary result. ERISA preempts state law pertaining to the
designation of beneficiaries. Phoenix Mut. Life Ins. Co. v. Adams, 30
F.3d 554, 560 (4th Cir. 1994). The Act requires plan administrators
_________________________________________________________________
*Although the district court stated that Harold"signed" an Insurance
Election Form, the form actually requested a participant's signature to
indicate a desire to continue the policy. Accordingly, the president of the
pension firm hired to administer the plan testified that Harold indicated
his desire to surrender the policy by not signing the Insurance Election
Form. Nevertheless, the district court's reasoning is not affected by the
distinction.

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to discharge their duties "in accordance with the documents and
instruments governing the plan . . . . " Leonard founds his argument
on the non-controversial premise that, under the terms of the plan
document, Mrs. Froese surrendered her right to receive the death pro-
ceeds when her husband opted to cash out of the policy. However,
Leonard fails to show that Betty Froese's lack of entitlement created
a corresponding right in the Plan to receive the benefit. Leonard
points to Section 4.03 of the plan documents, which provides that "the
Trustees shall be the beneficiary of each Policy provided hereunder."
However, Section 4.03, by its title, applies to policy dividends. In
contrast, the plan provisions concerned with death benefits and the
designation of beneficiaries contain no such language.

We are aware of no provision of ERISA, the plan documents, or
the policy that entitles the Plan to claim the death benefit under these
circumstances. The Plan had the right, as the policy's owner, to
change the designated beneficiary. Under federal common law of sub-
stantial compliance, this court will honor an incomplete beneficiary
change where the participant or policy owner (1)"inten[ded] to make
the change and (2) attempt[ed] to effectuate the change by undertak-
ing positive action which is for all practical purposes similar to the
action required by the change of beneficiary provisions of the policy."
Phoenix, 30 F.3d at 564 (quoting Phoenix Mut. Life Ins. Co. v.
Adams, 828 F. Supp. 379, 388 (D.S.C. 1993)). However, it is undis-
puted that the Plan never took any step to make itself the beneficiary
and, indeed, never intended to do so. Compare First Capital Life Ins.
v. AAA Communications, 906 F. Supp. 1546, 1559-60 (N.D.Ga. 1995)
(after employee left employ without vested rights, employer com-
pleted beneficiary designation form, which insurance agent failed to
forward to insurer). Rather, the intentions and expectations of all par-
ties involved--including the Plan--was that the Plan would surrender
the policy to recover its cash value. Instead, the Plan slept on its rights
and allowed the surrender value of the policy to dissipate. While the
Plan possibly could have sought redress for the cash surrender value
from Betty Froese or from its fiduciary, IRM, see, e.g., Provident Life
and Acc. Ins. Co. v. Waller, 906 F.2d 985, 993 (4th Cir.) (recognizing,
under ERISA, a limited federal common law of unjust enrichment),
cert. denied, 498 U.S. 982 (1990), U.S. Life need not now pay the
death benefit twice because of the Plan's negligent failure to surren-
der a policy which no one--including the Plan itself--intended to be

                     4
continued in force after the employee's retirement and under which
the Plan was never named as beneficiary. The judgment of the district
court is, accordingly,

AFFIRMED.

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