Court Opinion

ID: 9681241
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:46:30.846501+00
Date Added: 2024-06-11T18:17:32.696575
License: Public Domain

GONZALEZ, Justice,
concurring and dissenting.
I agree with the court’s disposition regarding the cause of action against Heights State Bank. However, I disagree that a trustee of a pension and profit-sharing plan organized pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1985), can wiggle out from under federal jurisdiction and/or from the application of federal law by merely terminating the plan before he or she absconds with the funds. To allow this to happen, as the court has done in this case, frustrates the intent of Congress to provide stability and uniformity in this area of the law. Thus, I would reverse that portion of the court of appeals’ judgment which affirms the trial court’s judgment and dismiss the cause as to Roger Michael Ames (Mike).
This case involves a suit for conversion and breach of fiduciary duty brought by beneficiaries of a pension and profit-sharing plan against the trustee of the plan and a third-party bank. R.E. and R.G. Ames were employees of Threaded Steel Products Company (Threaded Steel) and were members of its profit-sharing plan. Their brother, Mike, also an employee and member of the plan, was the sole trustee of the plan. R.E. and R.G. sued Mike after the plan was dissolved, claiming that he did not perform his fiduciary duties and that he and Heights State Bank converted plan benefits.
JURISDICTION
“ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). As a remedial statute, ERISA provides for federal causes of action for recovery of benefits due under pension and welfare plans and for breach of fiduciary duty by plan beneficiaries. 29 U.S.C. §§ 1109, 1132(a)(1)(B) (1985). Jurisdiction over matters involving profit-sharing plans under ERISA is provided in 29 U.S.C. § 1132(e)(1) (1985) which reads:
Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive *160jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section.
Subsection (a)(1)(B) provides:
(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
(B) to recover benefits due him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;
It was Congress’ intent to establish an inclusive statutory scheme to regulate employee benefit plans and to provide stability and uniformity in this area. See 29 U.S.C. §§ 1001(a), (b) (1985). To ensure this goal, ERISA has a preemption clause which provides that the Act “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ...” Id. § 1144(a).1 For purposes of this provision, “state law” includes a state’s decisional law. Light v. Blue Cross & Blue Shield of Alabama, Inc., 790 F.2d 1247, 1249 (5th Cir.1986); 29 U.S.C. § 1144(c)(1) (1985). See also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). This provision, as interpreted by the United States Supreme Court, demonstrates Congress’ intent “to establish pension plan regulation as exclusively a federal concern.” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981).
In the instant case, Mike claims that pursuant to ERISA the cause of action asserted against him is not within the state court system’s jurisdiction and should therefore be dismissed. Alternatively, Mike contends that even if the action against him is for recovery of benefits, which would give state courts concurrent jurisdiction under 29 U.S.C. § 1132(a)(1)(B), the action is nonetheless preempted by ERISA and should therefore be dismissed since it was tried on state common law and statutory grounds.
In order for state courts to have subject matter jurisdiction to consider the action against Mike, it must be determined to be an action by plan participants seeking to recover or clarify rights to benefits “under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B) (1985). While Mike contends the action against him is for breach of fiduciary duty, R.E. and R.G. claim their suit is for recovery of benefits under the pension and profit-sharing plan which had been terminated. Hence, R.E. and R.G. claim that not only do Texas courts have jurisdiction over their suit, but that it is not preempted by ERISA as the action is only incidently or tangentially related to a benefit plan which is no longer in existence.
The case was pleaded and submitted to the jury on the theory of conversion. The instructions and special issues dealt only with conversion under state common law and the power a trustee has in transferring trust funds under state statutory law. Hence, the issue in this case at the trial court level was not whether R.E. and R.G. were contractually entitled to benefits under the terms of the plan. It is undisputed that the Ames brothers are due benefits under the terms of the plan. The claims asserted involve conversion of plan benefits and thus it is my view that R.E. and R.G. place at issue the propriety of certain conduct by Mike as trustee and call for construction and application of the standards of conduct established by ERISA.
Section 1104 of ERISA provides for certain duties owed by fiduciaries to plan beneficiaries. By allegedly having taken the benefits due the Ames brothers and having pledged them to secure loans for Threaded Steel, Mike allegedly violated express provisions of section 1104(a)(1) which provide that “a fiduciary shall discharge his duties *161with respect to a plan solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries.” Undoubtedly, conversion of plan benefits by a trustee constitutes a breach of fiduciary obligations under ERISA. Therefore, the action against Mike, however labeled, is in actuality a claim for breach of fiduciary duty and should not be considered as a claim for plan benefits conferring Texas state courts with subject matter jurisdiction.
In reaching this conclusion, I would restrictively interpret the phrase “under the terms of the plan” in 29 U.S.C. § 1132(a)(1)(B) to mean state court jurisdiction is limited to suits solely involving application or construction of the terms of the plan in determining whether a participant or beneficiary is entitled to benefits as a matter of contract law. This interpretation is in keeping with holdings of a majority of courts which have addressed this issue. See, e.g., Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1500 n. 2 (9th Cir.1984); Central States, Southeast & Southwest Areas Health & Welfare Fund v. Old Sec. Life Ins. Co., 600 F.2d 671, 676 (7th Cir.1979); Morrissey v. Curran, 567 F.2d 546, 549 (2d Cir.1977); Lembo v. Texaco, Inc., 194 Cal.App.3d 531, 538, 239 Cal. Rptr. 596, 600 (1987); Young v. Sheet Metal Workers’ Int’l Ass’n, 112 Misc.2d 692, 698-699, 447 N.Y.S.2d 798, 803 (Sup.Ct.1981); Goldberg v. Caplan, 277 Pa.Super. 47, 54, 419 A.2d 653, 657 (1980); Duffy v. Brannen, 148 Vt. 75, 529 A.2d 643, 651 (1987). But see Hoffman v. Chandler, 431 So.2d 499 (Ala.1983).
PREEMPTION
Even if the claims asserted against Mike are within the state courts’ jurisdiction, I believe that they would be preempted by the express provision of ERISA which provides that the Act preempts all state laws as far as they relate to employee benefit plans. 29 U.S.C. § 1144(a). See generally Bishop & Denney, Hello ERISA, Good-bye Bad Faith: Federal Pre-emption of DTPA, Insurance Code, and Common Law Bad Faith Claims, 41 Baylor L.Rev. 267 (1989). “A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” Shaw, 463 U.S. at 96-97, 103 S.Ct. at 2899-2900. Therefore, even if the suit against Mike were considered to be a contract action to recover plan benefits, it would fall directly under ERISA’s preemptive provision. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). Further, it has consistently been held that because of the broad goals of Congress in enacting ERISA, the Act preempts state common law causes of action that do not expressly concern pension plans. See Ales-si, 451 U.S. at 523-24,101 S.Ct. at 1906-07. Hence, ERISA’s preemptive effect over state law claims “depends on the conduct to which such law is applied, not on the form or label of the law.” E-Systems, Inc. v. Taylor, 744 S.W.2d 956, 959 (Tex.App.—Dallas 1988, writ denied) (citing Scott v. Gulf Oil Corp., 754 F.2d 1499, 1504 (9th Cir.1985)). See also Gorman v. Life Ins. Co. of North America, 752 S.W.2d 710, 714 (Tex.App.—Houston [1st Dist.] 1988, writ requested); Sams v. N.L. Indus., Inc., 735 S.W.2d 486, 489 (Tex.App.—Houston [1st Dist.] 1987, no writ); Giles v. TI Employees Pension Plan, 715 S.W.2d 58, 59 (Tex.App.—Dallas 1986, writ ref’d n.r.e.).
At trial, the jury affirmatively answered a special issue which asked if Mike converted the funds due R.E. and R.G. under the Threaded Steel profit-sharing plan. Thus, I believe that it is clear that although the common law cause of action of conversion does not regulate pension plans, the conduct relied on by the Ames brothers to establish their claim pertains to proper handling of plan funds.
CONCLUSION
In my view, the court has erroneously placed emphasis on the fact that the plan was terminated. R.E. and R.G. claimed in their pleadings and through testimony that Mike did not perform his duties as trustee and fiduciary of the plan. This claim specifically places Mike’s conduct with respect to the plan itself at issue. Therefore, appli*162cability of ERISA is unavoidable. Moreover, as a practical matter, it is unwise to hold that Mike is no longer subject to ERISA’s standards simply because the plan was terminated. If this were Congress’ intent, it would behoove a plan fiduciary to avoid the application and consequences of ERISA violations by terminating the plan before committing fraud or other breaches of fiduciary duty. I believe the better view dictates that ERISA governs both pre- and post-termination conduct by plan fiduciaries as it relates to profit-sharing funds. See Mead Corp. v. Tilley, — U.S. —, 109 S.Ct. 2156, 104 L.Ed.2d 796 (1989) (termination of the plan did not remove the action from the confines of ERISA).
For the above reasons, I dissent.
COOK, J., joins in this opinion.

. State laws which regulate banking, insurance, or securities are exempt from this preemption provision. 29 U.S.C. § 1144(b)(2)(A) (1985).