First Trust Corp. v. Bryant

• Decision Date: 10 June 2005
• Docket Number: No. 02-5941.,02-5941.
• Citation: 410 F.3d 842
• Parties: FIRST TRUST CORPORATION, Plaintiff-Appellee, v. Brenda Fuston Petrey BRYANT, Defendant, Kay Hamlin, Intervening Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 842

410 F.3d 842

FIRST TRUST CORPORATION, Plaintiff-Appellee, v. Brenda Fuston Petrey BRYANT, Defendant, Kay Hamlin, Intervening Defendant-Appellant.

No. 02-5941.

United States Court of Appeals, Sixth Circuit.

Argued: January 28, 2004.

Decided and Filed: June 10, 2005.

ARGUED: Michael Dean, Irvine, Kentucky, for Appellant. John W. Mill, Sherman & Howard, Denver, Colorado, for Appellee. ON BRIEF: Michael Dean, Irvine, Kentucky, for Appellant. John W. Mill, Sherman & Howard, Denver, Colorado, for Appellee.

Before: SUHRHEINRICH, CLAY, and SUTTON, Circuit Judges.

SUHRHEINRICH, J., delivered the opinion of the court, in which CLAY, J., joined.

SUTTON, J. (pp. 857-63), delivered a separate dissenting opinion.

SUHRHEINRICH, Circuit Judge.

In this statutory interpleader action, the district court awarded more than $53,000 in attorney's fees to the interpleader plaintiff, First Trust Corporation ("First Trust"), the former trustee of a pension plan governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"). Appellant, Intervenor-Defendant, Kay Hamlin, ("Kay"), is the beneficiary of that plan. She contends on appeal that the district court abused its discretion in awarding attorney's fees to First Trust and in limiting the amount she received.

For the following reasons, we REVERSE the award of attorney's fees to First Trust. We further hold that although the district court appropriately awarded Kay attorney's fees, it inappropriately limited her to only those associated with her motion to intervene.

I. Facts

W.D. Bryant & Sons, Inc., offered an ERISA-covered pension plan benefit to its employees, known as the "W.D. Bryant & Sons, Inc., Money Purchase Pension Plan" ("Plan"). First Trust served as the nondiscretionary, directed trustee ("directed trustee") of the Plan until shortly after it filed this action and the employer appointed a successor. Elvin Bryant ("Elvin"), a co-owner of the company, serves as the Plan Administrator and authorizes First Trust to make payments to beneficiaries. Marvin L. Bryant, Sr., Elvin's brother, was an employee of the company and a plan participant until his death in 1995.

On July 1, 1982, Marvin designated as his beneficiary his then-wife Kay Bryant, now Kay Hamlin ("Kay"), the Appellant in this case. Marvin and Kay had two sons, Lorren M. Bryant ("Lorren") and Marvin Lee Bryant, Jr. ("Lee"), who were also parties to the action below. Marvin and Kay divorced in June 1985. Marvin later remarried. On the date of his death, he was married to Brenda Fuston Petry Bryant ("Brenda"), also an interpleader defendant. However, Marvin never changed his designated beneficiary after his divorce from Kay. Upon his death, a family dispute arose over who was entitled to his pension benefits, with claims to the pension plan benefit funds ultimately being made by his two sons, his widow, and his first wife.¹

In August 1995, a Kentucky state probate court entered an agreed order between Lorren, Lee, and Brenda that essentially divided the pension plan assets into thirds. However, in March 1996, the state probate court issued a new order that ordered about one half of the funds to be distributed to Brenda and the rest to be split between the sons. The order nevertheless directed that "no party" was to have access to the pension plan benefits "except by a written Court Order executed by a Judge of competent jurisdiction."

After each court order, First Trust received beneficiary distribution election forms from Elvin authorizing First Trust to make payments to Brenda, Lorren, and Lee in the proportions ordered by the court. At some point, First Trust also received a copy of an antenuptial agreement between Marvin and Brenda that provided she would receive all sums in excess of $200,000 in his pension plan should he die during the marriage. Over time, First Trust received repeated telephone calls from all three claimants.

Finally, in January 1997, about a year and one-half after Marvin's death, First Trust wrote to Elvin as the Plan Administrator outlining the multiple requests for distributions and the conflicting court orders. It insisted on a resolution of who was the beneficiary by February 7, 1997, or it would have no alternative but to interplead the assets into court for such a determination.

Prior to actually filing its interpleader suit, First Trust repeatedly discussed venue with the attorney for Marvin's sons, who requested that the action be filed in Kentucky, where one of the sons resided. First Trust attempted, unsuccessfully, to settle the venue issue. First Trust proposed to Lee and Lorren that they sign a release and reimburse First Trust for its attorney's fees, and in exchange, First Trust would bring the interpleader suit in Kentucky. In the sons' view, this proposal was "blackmail" and they refused to accept it.

A. The Colorado Proceedings

On May 9, 1997, First Trust filed this statutory interpleader action in the United States District Court of Colorado. It named as defendants Marvin's second wife, Brenda, and his two sons, Lorren and Lee. First Trust invoked the court's jurisdiction under the federal interpleader statute, 28 U.S.C. § 1335, and the diversity statute, 28 U.S.C. § 1332. First Trust contended venue was appropriate in Colorado under 28 U.S.C. § 1397, which governs venue for interpleader actions, because it was a "claimant" to the funds and a citizen of Colorado. First Trust's status as claimant was based solely on its Prayer for Relief requesting attorney's fees to be paid from the Plan assets attributable to Marvin prior to their distribution. In support of its fee request, First Trust alleged that the attorney's fees incurred were "for the ordinary and necessary administration and operation of the Pension Plan, have been reasonably incurred, and have not been paid by [the employer]."

Significantly, First Trust did not name Kay Hamlin as a defendant. It nevertheless acknowledged in the complaint that "[o]n or about July 1, 1982, while he was married to his first wife, Kay Bryant, Mr. Bryant designated Kay Bryant as the primary beneficiary." First Trust attached to its complaint the beneficiary designation form showing that Marvin had designated Kay as his beneficiary. The complaint also explained that Kay had not made any claim to the assets. First Trust later claimed that it did not join Kay because it thought that under Treasury Regulation, 26 C.F.R. § 1.401(a)-20, Marvin's marriage to Brenda invalidated the designation of Kay as the beneficiary.

On First Trust's motion, the court ordered the interpleaded funds to be deposited into the court's registry. Those funds were tendered on May 21, 1997, in the amount of $305,459.28. In its tender, First Trust stated they "represent[ed] all funds ... attributable to Marvin L. Bryant." In filing the complaint and tendering the funds, First Trust incurred modest attorney's fees and costs-about $2,700.

On June 6, 1997, when the interpleader suit was in its initial stages, the employer's board of directors dismissed First Trust as directed trustee of the Plan, effective immediately, and appointed First National Bank and Trust, ("FNBT"), as successor trustee. FNBT was never joined as a party.

On July 14, 1997, Lorren and Lee opposed the interpleader action, seeking its dismissal or a change of venue on the ground that venue was improper in Colorado because no true claimant resided in Colorado. They argued that First Trust was not a claimant to the funds based on its demand for attorney's fees. They also contended that First Trust's request for attorney's fees and costs should be denied.

On August 5, 1997, First Trust opposed a transfer, contending that it was a proper claimant to the funds based on its request for attorney's fees. It further argued that litigation in Kentucky would be inconvenient and would be an "additional expense to be paid out of the Pension Plan assets." J.A. 156 (emphasis added).

On August 14, 1997, Brenda moved to compel First Trust to join as a party Kay Hamlin, Marvin's first wife. She noted that nothing prevented Kay, the only named beneficiary, from challenging the distribution under provisions of ERISA so that without her presence there could not be complete relief.

On September 29, 1997, First Trust moved for its dismissal from the case, an injunction against further suits, and attorney's fees and costs. It further argued that the award of fees should be made out of the funds at issue, as is typical for interpleader suits. Both Brenda and Marvin's sons opposed First Trust's motion. The sons noted that the court had not yet ruled on Brenda's pending counterclaim or the transfer motion. They further argued that an award of attorney's fees would be improper given First Trust's bad faith conduct in the litigation, citing First Trust's selection of an improper venue and demands for attorney's fees in exchange for a settlement. Brenda, on the other hand, argued that First Trust had failed to deposit all the funds at issue into the court's registry. She also alleged that First Trust was an ERISA trustee, and that, as First Trust had violated various provisions of ERISA, it was not entitled to any attorney's fees.

On October 16, 1997, Brenda filed her answer, and asserted counterclaims against First Trust for breach of its fiduciary duties under ERISA. She also sought attorney's fees from First Trust under ERISA, 29 U.S.C. § 1132(g)(1).² In reply to Brenda's counterclaims, First Trust admitted it was the trustee, but asserted the named fiduciary was the president or other designee of the employee. In defense, First Trust stated it did not act as a fiduciary when it filed the interpleader complaint.

On November 12, 1997, the District Court for the District of Colorado rejected First Trust's argument that it was a claimant to the funds based on its demand for attorney's fees and held that venue in Colorado was improper under 28 U.S.C. § 1397...