Opinion ID: 790531
Heading Depth: 2
Heading Rank: 1

Heading: The Colorado Proceedings

Text: 9 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]. 10 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. 11 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. 12 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. 13 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. 14 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). 15 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. 16 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. 17 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. 18 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 because none of the true claimants resided in Colorado. The court therefore ordered the case transferred to the Eastern District of Kentucky. The court denied as moot First Trust's motion to for dismissal and for an injunction and roughly $16,000 in attorney's fees. The Colorado court never ruled on Brenda's motion to join Kay as a defendant.