Opinion ID: 790531
Heading Depth: 2
Heading Rank: 2

Heading: The Kentucky Proceedings

Text: 19 After the case was transferred to the Kentucky district court, First Trust tendered an additional $35,959.27 into the court registry because they were additional funds disputed in Brenda's counterclaims. This brought the amount of interpleaded funds to $341,418.55. 20 On April 7, 1998, Kay moved to intervene. First Trust did not oppose her motion to intervene, but did not explain why it failed to join her in the first place. On June 4, 1998, the Kentucky district court granted Kay's motion to intervene. 21 Having successfully intervened, Kay filed an answer and a counterclaim under ERISA. In her counterclaim she sought a declaratory judgment that she was entitled to all the proceeds of Marvin's account because she was his only designated beneficiary. She also sought her attorney's fees and costs pursuant to ERISA, 29 U.S.C. § 1132(g)(1). In response to Kay's counterclaim, First Trust argued it had been replaced as trustee and had no control or authority over the Plan assets. It also argued that the funds had already been deposited into the court's registry so that it therefore could not comply with an order directing it to pay funds to her. 22 On June 15, 1998, Kay moved for summary judgment. She argued there was no genuine issue of material fact that she was entitled to all the funds attributable to Marvin's pension plan account as the only designated beneficiary. Brenda opposed Kay's motion on a number of grounds. 23 On December 31, 1998, First Trust moved for summary judgment on Brenda's counterclaims and for attorney's fees against Brenda, arguing it was entitled to its fees under ERISA's fee-shifting provision, 29 U.S.C. § 1132(g)(1). On January 14, 1999, First Trust also moved separately to be dismissed from the interpleader action, for an injunction, and for attorney's fees. It argued the court had authority to award it fees under the general rule that interpleading plaintiffs are entitled to attorney's fees and that the award should be from the interpleaded funds, as is the general practice. 24 On January 22, 1999, the district court granted Kay's motion for summary judgment, resolving the merits of the interpleader suit. The court held that Kay was entitled to all of Marvin's pension benefits because she was his designated beneficiary. 25 Thereafter, Kay and the sons, along with the Plan and Elvin, jointly opposed First Trust's motion for dismissal. They also opposed First Trust's request for attorney's fees, noting First Trust's improper choice of forum, its decision to file the action under the interpleader statute rather than ERISA, and its failure to name Kay as a defendant. Lastly, they noted the inequity in awarding First Trust fees from Kay's benefits. They asserted that it was First Trust's postures in the case that prolonged the litigation and made it more costly and difficult. On January 29, 1999, Kay moved for final judgment and distribution of the Plan assets, as well as her attorney's fees in the amount of $8,813.69. By separate motion, the sons also sought attorney's fees in the amount of $39,046.89. 26 First Trust objected to the attorney's fees affidavits filed by Kay and the sons. As to Kay's, it insisted that Kay had not prevailed against First Trust, but against Brenda instead, so that she was not entitled to any fees. First Trust also argued that it should not have to pay attorney's fees that Kay incurred in the ordinary course of pursuing her claims because it was not First Trust that caused the dispute over Marvin's pension benefits. 27 On April 23, 1999, the district court issued a series of four orders disposing of most of the remaining issues in the case. In one order, the district court ruled that First Trust would be entitled to its attorney's fees as a disinterested stakeholder who protected the interests of the fund's beneficiary and aided the parties in resolving their ongoing dispute over the decedent's estate. In a second order, the court denied the sons' motion for attorney's fees. In so doing, it found that the bank had not engaged in culpable conduct or other acts constituting bad faith. The court specifically rejected the sons' arguments that filing in the wrong venue or First Trust's attempt to settle evidenced bad faith. 28 In a third order issued on April 23, the district court granted First Trust's motion for summary judgment on Brenda's counterclaims. Although it held that Brenda lacked standing since Kay was the proper owner of the funds, it nonetheless remarked in dicta that First Trust was not a fiduciary of the Plan because, under its terms, First Trust did not have discretionary control over the plan assets, citing 29 U.S.C. § 1002(21)(A). The court also denied Brenda's request for attorney's fees because summary judgment was awarded to First Trust on all her claims. The court then ordered Brenda to pay First Trust's attorney's fees. 29 Finally, in a fourth order, the district court granted Kay's motion for attorney's fees under 29 U.S.C. § 1132(g)(1), and ordered the clerk to disburse to her the funds from Marvin's pension plan that had been deposited with the court, but only after subtracting attorney's fees requested by First Trust. Regarding Kay's fees, the court granted her attorney's fees, but limited her to only those fees accumulated in her efforts to intervene. 30 On May 12, 1999, Kay moved the court to reconsider its April 23 order awarding attorney's fees to First Trust, arguing that the anti-alienation provision in ERISA, 29 U.S.C. § 1056(d)(1), precluded an award out of the pension plan benefits. 31 Meanwhile, First Trust submitted its fee request in the amount of $68,588.91. It argued that $12,455.72 of the fees it incurred were attributable directly to Brenda's counterclaim and should be paid by her. It argued that the remainder, $56,133.19, should be paid from the funds deposited into the court. In justifying its high requested award, First Trust laid the blame for the protracted proceedings at the feet of the sons and Brenda. First Trust did not accuse Kay of improper conduct in the case, however. 32 Kay then submitted her fee request in the amount of $3,184.37, which reflected the court's order restricting her fees request to those incurred in intervening. She also requested an upward adjustment, as is done in civil rights cases, to reflect the success she obtained, arguing that an upward adjustment of 100% was appropriate. Her total request was therefore $6,368.74. Her attorney's affidavit acknowledged that some billing entries did not specify that work was done on behalf of Kay alone and may represent work also done for his other clients, the sons, Elvin, and the Plan. However, he averred that $1,000 was incurred for work done solely on Kay's behalf. He did not mention a contingency fee agreement. 33 On July 6, 1999, by agreed order, the district court ordered the pension plan benefits and interest to be disbursed to Kay, except for $56,133.19, the amount of attorney's fees still at issue. On July 29, 1999, by agreed order, the court dismissed all claims, counterclaims, and cross-claims among Brenda, the sons, Elvin, the Plan, and Kay. 34 On September 29, 1999, the court reversed itself regarding the award of fees to First Trust on April 23, 1999, granting Kay's motion for reconsideration based on ERISA's anti-alienation provision. In denying attorney's fees to First Trust, the court ruled that § 1056(d)(1)'s prohibition on the assignment or alienation of pension benefits barred an award of attorney's fees here. 35 On October 18, 1999, First Trust moved for reconsideration of the September 29 order, arguing that ERISA's anti-alienation provision did not apply because the funds had been deposited into the court's registry. Alternatively, First Trust argued that ERISA's provisions clearly allow for plan administration costs and attorney's fees. Thus, First Trust requested that the court reinstate its earlier decision of April 23, 1999. 36 On May 18, 2000, the district court reversed itself again, this time granting First Trust's motion for reconsideration. It concluded that § 1056(d)(1) was inapplicable on the ground that ERISA's anti-alienation provision was not implicated once pension funds are removed from the fiduciary responsibility of the plan manager. The court held that the deposit into the court's registry was equivalent to benefits having been paid to and received by the beneficiary, and therefore, a fee award would not be a right enforceable against the Plan. The district court further reasoned that an award was permissible notwithstanding the provision because the case had always been tried as an ERISA case, despite the fact that the complaint did not specifically mention ERISA, and Kay herself sought attorney's fees under § 1132. The court therefore held: 37 The record, as detailed above, clearly shows that this case was practiced under § 1132 and that statute controlled the substantive disposition of the case. § 1132 does not bar an award of attorneys' fees such as those granted in the court's order of April 23, 1999 and, in fact, authorizes fee awards. 29 U.S.C. § 1132(g)(1). Thus, the court will reinstate its April 23, 1999 order granting First Trust attorneys' fees. 38 The court further remarked that ERISA expressly authorized plan assets to be used for plan administration costs in a number of provisions, citing 29 U.S.C. §§ 1103(c)(1) (authorizing plan assets to be used for plan administration costs), 1104(a)(1)(A)(ii) (to defray reasonable expenses of administering the plan), and 1108(c) (for compensating a fiduciary for services rendered in performance of his duties with the plan), and that these provisions permit a reasonable award of attorney's fees for service to the plan. The court concluded that because First Trust had filed the interpleader action as part of its plan administration duties, the lawsuit's costs were incurred as part of plan administration and it was therefore entitled to its fees. Finally, the court reiterated that Kay's award of fees was limited to the expenses of intervening. 39 On May 22, 2002, after a period of inaction by the court, Kay moved for distribution of her remaining assets still held by the court. First Trust had also moved for a decision on the amount of attorney's fees. 40 On July 3, 2002, the district court entered judgment, dismissed the case, and assessed fees and costs in a supplemental order. The order directed that First Trust be paid $53,555.29, plus interest, out of the funds in the court's registry. The order further directed that all sums remaining in the registry be disbursed to Kay Hamlin. It held that the amount requested by First Trust was reasonable as to time spent and hourly rates charged, but reduced First Trust's request to the extent that the fees sought trying to recover its attorney's fees were excessive. The court also shifted some of the amounts First Trust requested from Kay to Brenda because they were attributable to work pertaining to Brenda's counterclaims. Finally, the court offset First Trust's award by the amount awarded to Kay. The court determined that her fee award, which the court had previously limited to those fees associated with her efforts to intervene, amounted to $1,000 for her motion to intervene, answer and counterclaim. This amount was based on ten hours of work at an hourly rate of $100. In so doing, the court noted that Kay had failed to rebut the various objections raised by First Trust. Finally, the court ordered Brenda to pay $18,559.50 to First Trust. 41 Kay appeals.