Southwestern Bell Telephone Company, Southwestern Bell Corporation Employee Stock Ownership Plan and Southwestern Bell Corporation Savings Plan for Salaried Employees v. Salathiel DeRusse--Appeal from 299th District Court of Travis County
SOUTHWESTERN BELL TELEPHONE COMPANY, ET AL.,
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 299TH JUDICIAL DISTRICT
NO. 471,364, HONORABLE PETE LOWRY, JUDGE PRESIDING
Southwestern Bell Telephone Company, Southwestern Bell Corporation Savings Plan for Salaried Employees, and Southwestern Bell Corporation Employee Stock Ownership Plan appeal from a judgment awarding Salathiel DeRusse $90,000 in attorney's fees under the Employee Retirement Insurance Security Act of 1974 (ERISA), 29 U.S.C. 1001-1461 (1988). (1) We will reverse the trial-court judgment and remand the cause for proceedings consistent with this opinion.
In 1986, Michael Wallace, a Southwestern Bell employee, executed a form designating Salathiel DeRusse, his roommate since 1984, beneficiary of the proceeds from Wallace's employee benefits payable at death. In 1989, Wallace became seriously ill and, on June 30, 1989, while hospitalized, executed a form giving Wallace's mother a general power of attorney. A few hours before Wallace's death on July 27, 1989, his mother, acting under the power of attorney, executed and submitted to Southwestern Bell a new beneficiary designation naming Wallace's two sisters primary beneficiaries, in equal parts, of Wallace's benefits.
At the time of Wallace's death, these benefits included: (1) $46,000 in group life insurance under the Southwestern Bell Group Life Insurance Program, administered by American General Life Insurance Company; (2) $92,000 in supplementary life insurance under the Southwestern Bell Supplementary Life Insurance Program, also administered by American General; (3) $19,723.43 in an employee savings plan; and (4) $4,227.55 as the value of accumulated stock in an employee stock-option plan. It is undisputed that these benefits were subject to ERISA. In addition to the foregoing, Wallace had accumulated additional benefits totaling $5,019.56. The parties dispute whether these were subject to ERISA, an issue we will discuss below.
The day after Wallace's death, Southwestern Bell's benefits office notified DeRusse that he was the sole beneficiary of Wallace's benefits, notwithstanding the change in beneficiary submitted by Wallace's mother. On July 31, 1989, four days after Wallace's death, Wallace's sisters submitted to Southwestern Bell's benefits office a claim to all of Wallace's benefits. On August 8, 1989, DeRusse received from the manager of Southwestern Bell's benefits office a letter enclosing the forms necessary to file a claim for benefits under the life insurance policies. DeRusse did not receive forms necessary to claim the remaining benefits. The benefits office sent to Wallace's sisters the appropriate forms for claiming these benefits. On August 9, 1989, DeRusse submitted a claim for Wallace's group and supplementary life insurance, which Southwestern Bell forwarded to American General.
On August 22, 1989, Southwestern Bell's benefits office notified DeRusse by letter of the change of beneficiary under the power of attorney. The letter stated that Southwestern Bell's legal department had determined Mrs. Wallace's power of attorney to be valid under Texas law; that the new beneficiaries had demanded payment of the benefits; and that proceeds from the Stock Plan, the Savings Plan, and Wallace's unpaid wages would be paid to the new beneficiaries. The letter also informed DeRusse that his claims for the group and supplementary life insurance had been submitted to the insurance carrier for determination of the proper beneficiary.
In response, on August 28, 1989, DeRusse's attorney contacted Southwestern Bell and American General regarding DeRusse's claims and requested the benefits be interpleaded in a lawsuit DeRusse intended to file. On that same date, Southwestern Bell issued checks to the Wallace sisters totalling $5,019.56.
DeRusse filed suit in district court on September 1, 1989, against Wallace's mother and sisters (the Wallace defendants), Southwestern Bell Corporation, Southwestern Bell, the Stock Plan, the Savings Plan, and American General. DeRusse prayed for a declaratory judgment that he was entitled to Wallace's benefits, invalidation of the beneficiary designation submitted by Wallace's mother, and relief under various causes of actions, including a breach-of-fiduciary-duty action under ERISA against all of the Bell entities and American General. Proceeds from the group and supplementary life insurance and Savings Plan were interpleaded into the registry of the trial court. The petition in interpleader stated the stock could not be liquidated and the Savings Plan would hold it in trust until the proper beneficiary could be determined. The $5,019.56 paid to the Wallace sisters was not interpleaded.
On October 24, 1990, on cross-motions for summary judgment, the trial court granted DeRusse's motion and denied the Wallace defendants' motion. (2) Pursuant to the summary judgment, DeRusse recovered the proceeds from the group and supplementary life insurance plans, the Savings Plan, the Stock Plan, and $5,019.56 in unpaid wages and unused vacation pay. The lawsuit went to trial on all remaining issues in February 1992. At the time of trial, DeRusse settled his claims with the Wallace defendants except those for attorney's fees. The Bell entities agreed to indemnify the Wallace defendants against any judgment awarded against them for attorney's fees. See Tex. R. Civ. P. 11.
After a bench trial on the issue of attorney's fees, the trial court rendered judgment that DeRusse recover from the Bell defendants, based on his claim under ERISA, $90,000 in attorney's fees plus two-thirds of the court costs. (3) The trial court denied all other relief.
The Bell defendants bring eleven points of error attacking the trial court's award of attorney's fees to DeRusse and the court's failure to make additional findings of fact requested by the Bell defendants. DeRusse, in six cross-points, argues the trial court erred by failing to award him $200,000 in attorney's fees, the amount he contends he was required to expend because of the lawsuit.
ERISA is a federal statute regulating employee pension plans and welfare benefit plans that provide benefits for contingencies such as disability, illness, accident, death, or unemployment. Its purpose is "to promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Airlines, Inc., 463 U.S. 85, 90 (1983). The statute provides that a civil action, such as that brought by DeRusse, may be brought by a beneficiary to recover benefits due him. 1132(a)(1)(B). In such an action, the statute permits a court "in its discretion [to] allow a reasonable attorney's fee and costs of action to either party." 1132(g)(1).
The trial court, in the summary-judgment proceeding, determined that DeRusse was entitled to certain benefits, the disposition of which was controlled by Southwestern Bell's beneficiary-designation form. (4) In the attorney's fees suit, DeRusse claimed a breach under ERISA of fiduciary duties by the Bell defendants, see 1104, and the trial court awarded him fees under 1132(g). However, the trial court could only award fees attributable to ERISA claims. See Harsch v. Eisenberg, 956 F.2d 651, 663 (7th Cir.), cert. denied, 113 S. Ct. 61 (1992). Therefore, the nature of the benefits and the Bell defendants' acts in administering the benefits controlled the decision regarding DeRusse's claim for ERISA attorney's fees.
The group and supplementary life insurance plan proceeds, which totalled $138,000, were administered by American General, the underwriter of the insurance benefits. The contract between Southwestern Bell Corporation and American General designates Southwestern Bell Corporation the fiduciary of the program "with the rights and obligations as set forth in the group insurance contract." The contract further allows Southwestern Bell Corporation to delegate duties to American General and allows American General to be "arbiter of claims." The life insurance plan establishes claim-and-review procedures consistent with ERISA.
Wallace's Savings Plan proceeds totalled $19,723.43 at the time of his death. The Savings Plan establishes Southwestern Bell Corporation as administrator and sponsor of that Plan. The Corporation is charged with appointing a Benefit Plan Committee having all powers necessary to administer the Savings Plan, save those vested in Southwestern Bell Corporation and the trustees of the Plan. The Corporation and Committee may delegate authority to officers or employees of employing companies. (5) The Committee appoints a person or persons, known as Savings Plan Administrators, who have authority to grant or deny claims under the Plan. The Plan provides for the Committee's review of claims denied by Administrators. Both Southwestern Bell Corporation and the Committee are named in the Plan as ERISA fiduciaries with respect to the particular duties allocated to each of them. The Plan allows the fiduciaries to delegate any of their responsibilities to employing companies and Savings Plan Administrators.
At the time of his death, Wallace had acquired 84.511 shares of Southwestern Bell Corporation stock, valued at $4,227.55, in the Employee Stock Ownership Plan. The Stock Plan is organized in a way similar to the Savings Plan, Southwestern Bell Corporation being charged to appoint a Benefit Plan Committee. The Corporation and Committee may delegate authority to employees of the employing companies. All questions related to eligibility are within the purview of the Committee, whose decision is final. The Plan names both Southwestern Bell Corporation and the Committee as fiduciaries "with respect to the particular duties and responsibilities provided in the Plan to be allocated to [each]." The Plan establishes a claims-review procedure and provides "[t]he Committee shall determine conclusively for all parties all questions arising in the administration of the Plan."
Unlike the benefits discussed above, which all parties agree are regulated by ERISA, the proper characterization of Wallace's remaining benefits, which total $5,019.56, is disputed in this appeal. At the time Southwestern Bell elected to honor the change in beneficiary submitted by Wallace's mother, it disbursed to Wallace's two sisters, by Southwestern Bell check, $5,019.56 representing unpaid wages and unexpended paid vacation time. In the summary judgment, the trial court awarded these benefits to DeRusse as "wages, unused vacation pay and excused paid work days." Not until after summary judgment had been rendered for DeRusse did Southwestern Bell first contend that only $3,552.28 of the $5,019.56 constituted unpaid wages, which are not an ERISA benefit; the remainder, according to Southwestern Bell, was actually an ERISA-controlled benefit administered by the Disability Plan, a plan never named as a defendant in this suit and not covered by the beneficiary-designation form. (6) DeRusse contends the entire $5,019.56 is an ERISA benefit administered and controlled by Southwestern Bell.
Southwestern Bell's Fiduciary Status
In their second point of error, the Bell defendants contend the court erred in awarding attorney's fees against Southwestern Bell because it is not an ERISA fiduciary that controlled and administered funds subject to ERISA.
A party is a fiduciary under ERISA to the extent it exercises discretion over the management of plan assets, renders investment advice for a fee, or exercises discretionary control over the administration of the plan. 1002(21)(A). Federal courts have given the term a liberal construction in keeping with the remedial purpose of ERISA. See Donovan v. Mercer, 747 F.2d 304, 309 (5th Cir. 1984). Whether a party is a fiduciary is determined by the authority a party exercises over an employee benefit plan. Id.
DeRusse contends Southwestern Bell is a fiduciary under ERISA because it controlled the decision to make payment of the benefits to Wallace's sisters. We will first discuss this argument as it pertains to those of Wallace's benefits that Southwestern Bell actually disbursed. The record reflects that Southwestern Bell made the decision to disburse $5,019.56 to Wallace's sisters. Therefore, Southwestern Bell's fiduciary status turns on whether the $5,019.56 was accrued under an ERISA employee benefit plan.
We agree with the Bell defendants that the $3,552.28 in unpaid wages was not an ERISA benefit. See Massachusetts v. Morash, 490 U.S. 107, 114 (1989) (employer's policy of paying discharged employees from general assets for unused vacation time does not constitute benefit plan). (7) Accordingly, Southwestern Bell's unilateral action in disbursing this amount to the Wallace sisters was not subject to ERISA regulation.
Distribution of the remaining $1,467.28, even if we consider it an ERISA benefit under the Disability Plan, was not controlled by a beneficiary-designation form. (8) The Plan allows the Plan Committee, at its discretion, to pay the benefits to the decedent's spouse or other "suitable person" for use in payment of death and burial expenses or for the benefit of anyone dependent upon the decedent. Therefore, DeRusse was not entitled to this benefit on the basis of the form designating him beneficiary of Wallace's other benefits. (9)
Southwestern Bell's fiduciary status relative to the remaining benefits turns on the types of tasks performed by Southwestern Bell personnel. The record reflects that on July 27 Mrs. Wallace and her attorney went to the Southwestern Bell office. There they met with Wallace's supervisor, Randall Johnson. At the time, Johnson was shown Mrs. Wallace's power of attorney and asked to assist in making the change of beneficiary. Johnson provided Mrs. Wallace with Southwestern Bell's instructions and form for beneficiary designation and, because of his unfamiliarity with such matters, made a long-distance conference call to B. F. Cottingham, district manager of employee benefits in Southwestern Bell's benefits office in San Antonio. (10) Cottingham testified that at the time of this discussion, he was aware of Southwestern Bell's rule requiring that changes of beneficiary, effected under a power of attorney, be accompanied by a court order. (11) In any case, Mrs. Wallace was not informed of the rule, and Southwestern Bell accepted the new beneficiary-designation form, which was forwarded by Southwestern Bell's benefits office to American General and the Plan Administrators.
A party is a fiduciary only with respect to those aspects of the plan over which it exercises authority or control. Sommers Drug Stores v. Corrigan Enters., Inc., 793 F.2d 1456, 1459-60 (5th Cir. 1986), cert. denied, 479 U.S. 1034 (1987). Although the Savings Plan and the Stock Plan allow delegation of authority to an employing company, the record does not contain any evidence indicating what duties and responsibilities, if any, were delegated to Southwestern Bell. We therefore must look at the functions Southwestern Bell performed.
All contact with DeRusse was through the Southwestern Bell benefits office in San Antonio. Personnel in the office, who were Southwestern Bell employees, accepted Mrs. Wallace's change-of-beneficiary form, processed the claims, contacted DeRusse regarding his claims, and forwarded to the Plans the beneficiary-designation forms and Mrs. Wallace's power of attorney. In other words, the Southwestern Bell office served as liaison between the beneficiaries and the Plans. There is, however, no evidence that Southwestern Bell made the decisions to deny DeRusse benefits from the Savings Plan and Stock Plan. Nor is there evidence that Southwestern Bell had power to make decisions regarding plan policy, interpretations, or procedures. Further, the record is clear that the decision-making power on the life-insurance benefits lay exclusively within American General's control.
ERISA regulations reject ministerial functions as being within the scope of the fiduciary responsibilities outlined in section 1002(21)(A). Among the functions expressly rejected as fiduciary in nature are:
( 1) Application of rules determining eligibility for participation in benefits;
. . . .
( 3) Preparation of employee communications materials;
. . . .
( 6) Calculation of benefits;
. . . .
( 9) Preparation of reports concerning participants;
(10) Processing of claims; and
(11) Making of recommendations to others for decision of plan administration.
29 C.F.R. 2509.75-8; see also Kerns v. Benefit Trust Life Ins. Co., 790 F.Supp. 1456, 1460-61 (E.D. Mo. 1992). Given these express guidelines for use in determining fiduciary status, one cannot reasonably conclude that Southwestern Bell was a fiduciary. (12) The record indicates Southwestern Bell's role was limited to accepting and transmitting to another the beneficiary-designation form executed under the power of attorney, albeit absent the court order required by the rules. However, the ultimate decision-making authority with regard to these benefits lay elsewhere. Accordingly, we sustain the Bell defendants' second point of error.
Innocent Stakeholder Argument
In points of error one and eight, the Bell defendants contend the trial court erred in awarding ERISA attorney's fees against them because they were innocent stakeholders and there was no evidence or insufficient evidence to support the trial-court finding that they were not innocent stakeholders of Wallace's benefits. (13)
A party may maintain an interpleader action when the party may be exposed to multiple liability because of conflicting claims. Tex. R. Civ. P. 43. The availability of the remedy of interpleader is contingent upon the existence of a bona fide controversy between the claimants, and the stakeholder must have a reasonable doubt, either of fact or law, as to which claimant is entitled to the funds at issue. Great Am. Reserve Ins. Co. v. Sanders, 525 S.W.2d 956, 958 (Tex. 1975). The interpleading party must act with diligence and impartiality to secure for itself the benefits conferred upon a mere stakeholder under a proper bill of interpleader. National Life & Accident Ins. Co. v. Thompson, 153 S.W.2d 322, 323-24 (Tex. Civ. App.--Waco 1941, writ ref'd). When interpleader is sought in good faith, the stakeholder is entitled to costs and attorney's fees. When an interpleading party is responsible for the conflict regarding the funds, however, that party is not entitled to attorneys' fees incurred in interpleading the claimants. Brown v. Getty Reserve Oil, Inc., 626 S.W.2d 810, 815 (Tex. App.--Amarillo 1981, writ dism'd).
The record, as discussed above, indicates that Southwestern Bell accepted Mrs. Wallace's change of beneficiary and forwarded it to American General, the Savings Plan administrator, and the Stock Plan administrator. American General's manager of group benefits testified that he would not have distributed the benefits to the rival beneficiary claimants in light of Southwestern Bell Corporation's rule governing changes of beneficiaries. Had American General not been put on notice by DeRusse's attorney, the manager said, American General would have made a determination of the stronger claim, approached the parties with its determination, and "hope[d] that they would work something out together." Only if this process failed would American General have looked to interpleader.
However, there is no testimony in the record from representatives of the Plan defendants. (14) The inferences that may be drawn from the documentary evidence and testimony of Southwestern Bell personnel is that, in ignorance or disregard of Southwestern Bell Corporation's rule governing beneficiary changes, the Plan administrators made the decision sometime between August 17 and August 18 to distribute proceeds from the Plans to Wallace's sisters. The appropriate forms for distribution were sent to Wallace's sisters before DeRusse was afforded an opportunity to request a review of the claim. The evidence indicates, had it not been for the intervention of DeRusse's attorney, the Plan defendants would not have voluntarily paid DeRusse. Accordingly, we believe it lay within the trial court's discretion to determine that the Plan defendants were not impartial stakeholders. We overrule points of error one and eight as to the Plan defendants.
In point of error nine, the Bell defendants attack the sufficiency of the evidence to support several of the trial court's findings and conclusions of law pertinent to the court's determination that the Bell defendants were not innocent stakeholders. (15) In this same point of error, the Bell defendants attack the trial court's conclusions of law that the Bell defendants' actions in regard to each of these factors were arbitrary and capricious. (16) The Bell defendants argue that "findings" of arbitrary and capricious actions have no place in a suit for ERISA attorney's fees. (17)
The trial court found that the Bell defendants did not timely or voluntarily pay the benefits to DeRusse; did not enforce the applicable rules on change-of-beneficiary designations; notified DeRusse and Wallace's sisters that the sisters, not DeRusse, were the beneficiaries; did not inform DeRusse of the ERISA regulations or remedies available for denial of claims; and did not provide a claim or review procedure by which DeRusse could challenge the payment of the funds to Wallace's sisters. As to each of these findings, the trial court concluded the Bell defendants' actions were arbitrary and capricious.
We believe the trial court's "findings" and "conclusions" constitute the factors the trial court considered in making its assessment of the attorney's fees award. Moreover, we believe the trial court's choice of the words "arbitrary and capricious" does not indicate the court applied an inappropriate standard of review to the attorney's fees suit; rather, it reflects the court's evaluation of the relevant factors in reaching a conclusion that the Bell defendants' actions were not reasonable under the circumstances.
All of these factors are supported by the record. The only one we do not believe relevant to the court's determination of attorney's fees in this case is the lack of claim-and-review procedures available to DeRusse for the funds disbursed to Wallace's sisters. As discussed above, these funds were not subject to ERISA or were not covered by the beneficiary-designation form.
Therefore, because it was improper for the trial court to consider Southwestern Bell's failure to afford a review procedure as to the funds disbursed to Wallace's sisters, we sustain this point of error as to that "finding" and "conclusion." We overrule it in all other respects as it pertains to the Plan defendants.
Exhaustion of Remedies
ERISA requires every employee benefit plan to establish a claims procedure, which must provide for adequate written notice of claim denials as well as an opportunity for "full and fair review" of benefit denials. 1133. The Savings Plan and Stock Plan did provide for such procedures, requiring a claimant to file a request with the plan administrator or coordinator, guaranteeing written notice of denial, and outlining procedures for further review of denied claims.
The Bell defendants argue that DeRusse failed to exhaust his administrative remedies under the plans before filing his ERISA claims in court. Although the statute does not mention the exhaustion-of-remedies doctrine, federal courts have held consistently that, as a matter of sound policy, the doctrine should be applied. See, e.g., Mason v. Continental Group, Inc., 763 F.2d 1219, 1227 (11th Cir. 1984), cert. denied, 474 U.S. 1087 (1986). Despite the applicability of the doctrine, however, courts have made exceptions when meaningful access to administrative remedies was denied or resort to such remedies would be futile. See Amato v. Bernard, 618 F.2d 559, 568 (9th Cir. 1980); cf. 4 Kenneth C. Davis, Administrative Law Treatise 26:1 (2d ed. 1983). Further, whether to apply the exhaustion requirement is a decision committed to the trial court's discretion; it can be overturned on appeal only if the trial court clearly abused its discretion. Curry v. Contract Fabricators Inc. Profit Sharing Plan, 891 F.2d 842, 846 (11th Cir. 1990).
The plans involved in the present case provided a procedure for claiming benefits and for review of denials. However, the Plan defendants, who controlled the plan administrative- review procedures, exercised control in a manner to deny DeRusse meaningful access to those procedures. DeRusse was not provided with notice or claim forms as to these benefits, even though he was the named beneficiary under Wallace's original, properly executed form. Additionally, DeRusse was never apprised of administrative remedies available to him under the Plans and ERISA. Under these facts, we believe the trial court did not abuse its discretion in declining to apply the "exhaustion" doctrine. See Vaca v. Sipes, 386 U.S. 171, 184-85 (1967). We overrule the Bell defendants' sixth point of error.
Joint and Several Liability
In their fifth point of error, the Bell defendants argue that the trial court erred by awarding attorney's fees jointly and severally against the Bell defendants rather than by apportioning liability among them. The Bell defendants cite no authority to support this position; similarly, DeRusse offers no authority to support the contrary position.
ERISA allows an employee benefit plan to be sued as an entity, as DeRusse sued the Savings Plan and the Stock Plan in this cause. See 1132(d)(1). The statute further provides: "Any money judgment . . . against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this subchapter." 1132(d)(2). The express words of the statute limit the circumstances in which joint liability exists. Because ERISA charges a fiduciary with performing duties specific to its plan, see 1104, we see no justification for applying joint and several liability when there is no evidence that a fiduciary of one plan exercised discretionary control over another plan.
We believe the trial court, in assessing joint and several liability, was considering the liability of Southwestern Bell. However, as we stated before, Southwestern Bell was not a fiduciary; therefore, it was improper to assess joint and several liability against it. We read ERISA to preclude joint and several liability under the facts of this case; the trial court erred in failing to apportion liability among the defendants. The fifth point of error is sustained. (18)
Request for Additional Findings
Appellants timely requested nine additional findings of fact from the trial court. See Tex. R. Civ. P. 298. The failure of a trial court to file additional requested findings is not reversible error if the record demonstrates the appealing party has suffered no injury. Wentz v. Hancock, 236 S.W.2d 175, 176 (Tex. Civ. App.--Austin 1951, writ ref'd). In this cause, four of the requested additional findings concerned matters not disputed in the evidence; the court, therefore, committed no error in refusing to make these four findings. See Landscape Design & Constr., Inc. v. Harold Thomas Excavating, Inc., 604 S.W.2d 374, 378 (Tex. Civ. App.--Dallas 1980, writ ref'd n.r.e.). The remaining requested additional findings were disposed of directly or indirectly by the original findings, were not supported by the evidence, or were contrary to findings previously made by the trial court. Accordingly, the trial court's failure to make these additional findings was not error or did not cause harm to the Bell defendants. See Strickland v. Coleman, 824 S.W.2d 188, 193 (Tex. App.--Houston [1st Dist.] 1991, no writ). We overrule point of error eleven.
Attorney's Fee Award
The Bell defendants and DeRusse both challenge the attorney's fees awarded to DeRusse. Because the decision to grant attorney's fees is committed to the discretion of the trial court, its decision will not be disturbed on appeal absent a clear showing of abuse of discretion. An abuse of the trial court's discretion occurs if the trial court fails to consider a factor legally relevant to the determination of a reasonable attorney's fee; rests its determination upon a factor that it is forbidden by law to consider in arriving at a reasonable attorney's fee; or exaggerates a legally relevant factor to an unreasonable degree. See Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 939-40 (Tex. App.--Austin 1987, no writ).
Under ERISA, the court "in its discretion may allow a reasonable attorney's fee and costs of action to either party." 1132(g)(1). Applying the factors set forth in Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980), the trial court held DeRusse was entitled to $90,000 in attorney's fees and two-thirds of the court costs. The record reflects the trial court also considered the amount in controversy in reaching its determination of reasonable attorney's fees.
In points of error three and four, the Bell defendants contend there was no evidence or insufficient evidence to support the award of attorney's fees and the trial court abused its discretion in awarding the fees. In point of error seven, the Bell defendants attack the legal and factual sufficiency of the evidence to support specific trial-court findings relevant to the award of the fees.
Applying the Bowen factors in this cause, the trial court found (1) the Bell defendants were culpable and acted in bad faith in not taking steps to pay the benefits to DeRusse after they learned of the rule that required a power of attorney to be accompanied by a court order to change a beneficiary designation; (2) the fee award should deter similar behavior in others in similar circumstances; (3) the results obtained by DeRusse in this case would be of substantial benefit to similarly situated beneficiaries of these plans; (4) the unquestionable merits of DeRusse's position justified a fee award; and (5) the lack of merit in the Bell defendants' position justified a fee award to DeRusse. See Bowen, 624 F.2d at 1266; see also Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983), cert. denied, 467 U.S. 1251 (1984). These factors should be used as "guidelines to assist [courts] in exercising their discretion." Bowen, 624 F.2d at 1266. The district court analyzed each of these factors; its findings, with the exception of the third one listed above, are supported by the record. The remaining factors weigh heavily in DeRusse's favor, and we cannot say the trial court's decision to award attorney's fees was an abuse of discretion or that the court would have reached a different result but for its finding on the third factor. We overrule the Bell defendants points of error three, four, and seven.
In the Bell defendants' tenth point of error, they contend the award of attorney's fees was excessive because the recovery did not "bear some reasonable relationship to the amount in controversy." See Argonaut Ins. Co. v. ABC Steel Prods. Co., Inc., 582 S.W.2d 883, 889 (Tex. Civ. App.--Texarkana 1979, writ ref'd n.r.e.). They base this argument on their contention that the amount in controversy, as it relates to the Bell defendants, is less than $30,000. The trial court considered the amount in controversy to be the value of all Wallace's employee benefits, an amount in excess of $160,000. The Bell defendants argue that the bulk of DeRusse's recovery, $138,000, resulted from the Group and Life Insurance Plans administered by American General, against whom the trial court denied all relief. Further, the $5,019.56 paid to the Wallace sisters was never interpleaded and was not a proper basis for recovery of attorney's fees under ERISA. Therefore, the trial court was limited to consideration of the value of the Stock Plan and Savings Plan, a value equal to $23,950.98, in awarding attorney's fees. We agree.
As we stated above, the $3,552.28 in unpaid wages, which was part of the $5,019.56 disbursed to Wallace's sisters, is not an ERISA benefit. Therefore, it was not properly a part of the amount in controversy. See Harsch, 956 F.2d at 663 (a trial court may award plaintiffs "only those fees reasonably attributable to claims that may be brought under ERISA"). And despite the Bell defendants' concession that $1,467.28 of the amount distributed as unpaid wages was an ERISA benefit, this benefit was not controlled by the beneficiary-designation form naming DeRusse as beneficiary. Therefore, to the extent that the trial court considered the $5,019.56 in awarding attorney's fees, it abused its discretion.
The trial court also included in the amount in controversy the value of Wallace's life-insurance proceeds. We believe, by including these sums in the amount in controversy, the trial court was considering Southwestern Bell's benefit office's role in advising, accepting, processing, and forwarding to American General a beneficiary-designation form that was invalid under Southwestern Bell's own rules. However, because the trial court's award is based solely on ERISA and Southwestern Bell is not a fiduciary under ERISA, its action with regard to these funds is irrelevant. (19) Further, there is no evidence that the two Bell Plan defendants, the Savings Plan and the Stock Plan, had anything to do with the administration or payment of the life-insurance proceeds. Therefore, to the extent the trial court considered the life-insurance proceeds in its determination of attorney's fees, it abused its discretion.
We iterate, however, that the amount in controversy was not the sole factor the trial court considered in making its attorney's fees award. We therefore sustain the Bell defendants' tenth point of error only to the extent the trial court's award reflects consideration of amounts not properly includable in the amount in controversy. However, because we cannot know from the record the weight the trial court accorded this factor in light of other relevant factors, we make no determination as to whether the fee awarded was excessive.
In his cross-appeal, DeRusse brings six points of error, primarily attacking as improper the trial court's consideration of the amount in controversy in determining reasonable attorney's fees under ERISA. DeRusse sought attorney's fees in the amount of $200,000, a calculation he contends was based on the number of reasonable and necessary hours expended by his attorneys. The trial court awarded only $90,000.
In his first five cross-points, DeRusse complains the trial court erred by awarding fees based solely on the amount in controversy. He bases this argument on the trial court's finding that "[c]onsidering solely the amount in controversy, the total fees charged by Plaintiff's lawyers are not reasonable." DeRusse concedes, in argument under these points, that under state case law the amount in controversy is a legally relevant factor to consider when determining reasonable and necessary attorney's fees. See United States Steel Corp. v. Whitley, 636 S.W.2d 465, 470 (Tex. App.--Corpus Christi 1982, writ ref'd n.r.e.). He argues, however, the trial court abused its discretion by exaggerating to an unreasonable degree the amount-in-controversy factor. See Landon, 724 S.W.2d at 940.
The court's finding indicates that, if it were to base its determination on only one factor, it would find DeRusse's fee request unreasonable. However, the record reflects the trial court properly considered a number of factors in reaching its determination, only one of which was the amount in controversy. We therefore cannot say that the trial court abused its discretion in the particular claimed by DeRusse.
Also in his fifth cross-point, DeRusse attacks the trial court's findings that the amount in controversy was only the amount of Wallace's benefits and did not include the attorney's fees incurred by DeRusse to obtain the benefits. DeRusse argues that the amount in controversy included the benefits plus reasonable attorney's fees. As authority for this proposition, DeRusse quotes testimony of his own expert witness, which he contends is supported by Texas case law. However, the only decision DeRusse cites in his brief refers to what may be considered in the amount in controversy when determining a court's jurisdictional limits. See Johnson v. Universal Life & Accident Ins. Co., 94 S.W.2d 1145 (Tex. 1936). We decline to interpret Johnson as holding that, for purposes of determining the reasonableness of attorney's fees, the amount in controversy includes the amount sought to be recovered plus the claimed attorney's fees. We overrule DeRusse's cross-points of error one through five.
In cross-point of error six, DeRusse complains the trial court erred in considering the amount in controversy because it was not a proper factor for consideration in an ERISA attorney's fees case where evidence indicated that the fees were incurred as a result of the other party's actions. DeRusse concedes that the amount in controversy has been a factor used by federal courts in determining reasonableness. See Ursic v. Bethlehem Mines, 719 F.2d 670, 677 (3d Cir. 1983) ("When monetary damages are awarded, the trial court must consider the relationship between the fee award and the amount of recovery."). (20) DeRusse argues, however, that this Court should adopt the reasoning of the plurality in City of Riverside v. Rivera, 477 U.S. 561 (1986). (21)
The Fifth Circuit has rejected the analogy between the purpose of ERISA's fee-shifting provision and the federal civil-rights statutes. See Bowen, 624 F.2d at 1265 (contrasting purpose of 42 U.S.C. 1988 with that of ERISA fee-shifting provision); see also Mark H. Berlind, Note, Attorney's Fees Under ERISA: When Is An Award Appropriate?, 71 Cornell L. Rev. 1037, 1049-55 (1986) (absent legislative mandate, courts should not equate economic interests with constitutional rights for fee-shifting purposes). Further, even those federal courts that adopt the analogy to federal civil-rights statutes have not held it an abuse of discretion to determine attorney's fees on a contingent-fee basis rather than based on the number of hours expended by attorneys. See Harsch, 956 F.2d at 663 (although lodestar method preferable, trial court's application of contingent-fee standard not abuse of discretion).
Once the trial court in this cause applied the Bowen factors and determined an award of attorney's fees was appropriate, it was faced with determining a reasonable fee. In determining reasonableness, most appellate courts generally consider the same set of factors regardless of the statute. See, e.g., Ursic, 719 F.2d at 673-78; see also Samuel R. Berger, Court Awarded Attorneys' Fees: What is "Reasonable"?, 126 U. Pa. L. Rev. 281, 285 (1977). Among those factors is the amount involved and the results obtained. (22) We therefore conclude the trial court did not abuse its discretion in considering the amount in controversy. We overrule DeRusse's sixth cross-point of error.
We reverse the trial court's judgment and remand the cause to the trial court to assess the amount of attorney's fees in light of our holdings and to apportion liability among the Plan defendants.
John Powers, Justice
[Before Justices Powers, Kidd and B. A. Smith]
Reversed and Remanded
Filed: September 22, 1993
[Do Not Publish]
1. Southwestern Bell Corporation and American General Life Insurance Company were defendants in the suit. The trial court, however, denied relief against them.
Because of the number of defendants in this cause with "Southwestern Bell" in their names, we have adopted in this opinion the following method of distinguishing the individual defendants: Southwestern Bell Telephone Company (Southwestern Bell); Southwestern Bell Corporation Savings Plan for Salaried Employees (Savings Plan); Southwestern Bell Corporation Employee Stock Ownership Plan (Stock Plan). To distinguish Southwestern Bell, the company, from Southwestern Bell Corporation, we will refer to the corporation by its full name. We will refer to American General Life Insurance Company as American General.
2. The summary judgment was severed and appealed to this Court by Wallace's mother and sisters. This Court affirmed the judgment on August 14, 1991. See Wallace v. DeRusse, No. 3-91-078-CV (Tex. App.--Austin Aug. 14, 1991) (not designated for publication).
3. The trial court rendered judgment against Southwestern Bell Company, the Savings Plan, and the Stock Plan, jointly and severally (collectively, the "Bell defendants"). As we stated above, the trial court denied relief against Southwestern Bell Corporation and American General.
4. The Southwestern Bell beneficiary-designation form that named DeRusse as Wallace's beneficiary controlled distribution of all life insurance proceeds, savings plan proceeds, stock plan proceeds, and unpaid wages/reimbursable expenses. The form also controlled disposition of proceeds from a savings plan for non-salaried employees and a voluntary contribution plan, plans in which Wallace did not participate and which are not involved with this lawsuit.
5. "Employing Company" is defined as Southwestern Bell Corporation or any subsidiary of the Corporation.
6. The Disability Plan benefits, unlike the other benefits, are not listed on the beneficiary-designation form. The Disability Plan states that these benefits may, at the discretion of the Committee, be paid to a spouse or suitable person selected by the Committee for use in payment of expenses incident to death of the participant or for the benefit of anyone dependent upon the deceased at the time of death.
In other respects, the Disability Plan resembles the other ERISA benefit plans. Southwestern Bell Corporation is the Plan administrator and sponsor that appoints a Committee charged with granting or denying claims for benefits under the Plan. The Plan provides a procedure for review of denials of benefits. Southwestern Bell Corporation, the Committee, and others are named as fiduciaries with respect to the duties and responsibilities allocated to each by the Plan.
7. The Supreme Court explained that the purpose behind ERISA was to protect employees from mismanagement of funds accumulated in employee benefit plans. The Court reasoned that ordinary vacation payments are generally fixed, due at known times, and not dependent on contingencies outside the employee's control. Therefore, they present none of the risks ERISA is intended to address. Id. at 114.
The Court distinguished those circumstances when vacation benefits are paid from an organized plan or fund, in which case the regulatory provisions of ERISA would apply. Id. The evidence in this case, however, indicates unpaid wages were paid from the general Southwestern Bell Company account, not a special plan account.
8. The record indicates Southwestern Bell did exercise discretionary control over these funds. The Southwestern Bell check disbursing the $1,467.28 as part of the $5,019.56 in unpaid wages and vacation pay was issued August 28. Documentary evidence in the record indicates the Employee Benefit Committee for the Disability Plan did not approve the disbursement as to the $1,467.28 until August 30.
9. The record reflects Southwestern Bell employees had difficulty in characterizing the nature of these funds. The Southwestern Bell benefits office employee responsible for handling death benefits testified the $1,467.28 was unpaid wages and the $3,552.28 was vacation pay. The district manager of Southwestern Bell's employee benefits, in his first deposition, characterized the entire amount as unpaid wages. In his second deposition, he characterized it as a plan benefit.
10. Cottingham was also secretary of the Employee Benefit Committee. This, however, is insufficient to confer fiduciary status on Southwestern Bell. See Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1325 (9th Cir. 1985).
11. Rule 3(C) of Southwestern Bell Corporation's "Rules for Employee Beneficiary Designations" states:
An outstanding beneficiary designation is revoked when a subsequently executed beneficiary designation is submitted by the employee in proper form to, and accepted by, the employing corporation of the program administrators prior to the employee's death. A conservator or attorney in fact may not revoke or change a beneficiary designation of the employee except by court order approving the revocation or change.
12. We note that courts have, in limited instances, extended liability under ERISA to nonfiduciaries who knowingly participate in fiduciary breaches. See, e.g., Lowen v. Tower Asset Management Inc., 829 F.2d 1209, 1220 (2d Cir. 1987) (in suit brought by trustees of benefit plan, related corporation and shareholders could not "use shell-game-like maneuvers to shift fiduciary obligations to one legal entity while channeling profits from self-dealing to a separate legal entity under their control."); Alman v. Danin, 801 F.2d 1 (1st Cir. 1986) (incorporators of inadequately funded corporation could not plead corporate form to avoid personal liability for failure of corporation to meet obligation to employee benefit plans); Thornton v. Evans, 692 F.2d 1064 (7th Cir. 1982) (suit under ERISA against nonfiduciary parties for conspiracy with fiduciaries in schemes violating statutory trust laws against fund as a whole may be brought as class action or derivative action). These holdings, however, are premised on the trust-law concept that those who have conspired with a trustee or fiduciary could be liable to the extent they have profited from the breach. See Fremont v. McGraw-Edison Co., 606 F.2d 752, 759 (7th Cir. 1979), cert. denied, 445 U.S. 951 (1980); see also Restatement (Second) of Trusts 256 (1957). That is not shown here.
13. The trial court made extensive findings of fact and conclusions of law. Although many of these statements are not findings of fact or conclusions of law as those terms are generally understood, they reflect the factors the trial court considered in the attorney's fees award. We shall review the trial court's actions in light of these factors for abuse of discretion.
14. Because of our disposition of point of error number two, Southwestern Bell's lack of fiduciary status precludes consideration of its actions for purposes of ERISA attorney's fees. In the balance of our opinion, we shall refer to the two remaining defendants, the Stock Plan and the Savings Plan, as the Plan defendants.
15. In their brief, the Bell defendants contend that the trial court's finding that "[n]ovel and difficult questions were involved in this case" indicates their was a reasonable doubt as to the proper beneficiaries and supports the Bell defendants' position that they were innocent stakeholders. We believe, however, this was one of the factors, among several, that the trial court considered, not in determining whether to award attorney's fees, but in assessing the reasonableness of the fee. See note 22 infra and accompanying text.
16. The Bell defendants contend the conclusions of law are more appropriately characterized as findings of fact and challenge them as such.
17. A reviewing court applies the arbitrary and capricious standard of review when considering the denial of a claim by a fiduciary with discretionary control. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).
18. We note, in the special circumstance where nonfiduciaries have been found to act in concert with fiduciaries in defrauding a fund, courts have applied joint and several liability. Commingling of assets and self-dealing, which are not involved here, are hallmarks of these cases. See, e.g., Lowen, 829 F.2d at 1221.
19. In his brief, DeRusse argues that, even if ERISA does not apply to a portion of the funds, the award can be upheld under the Uniform Declaratory Judgments Act, Tex. Civ. Prac. & Rem. Code Ann. 37.001-.011 (West 1986 & Supp. 1993). DeRusse bases this contention on his request for attorney's fees under the Act in his pleadings. However, the record reflects the trial court rendered judgment "[b]ased upon the evidence, the argument of counsel, the Rule 11 agreements and pursuant to 29 U.S.C. 1132(g)," and denied all other relief.
20. The Third Circuit later stated that whether a court in an ERISA case could reduce a fee merely because it was disproportionate to the recovery was not "self-evident" in light of City of Riverside v. Rivera, 477 U.S. 561 (1986), in which a plurality of the Court held that a fee award under 42 U.S.C. 1988 did not have to be proportionate to the damage recovery. Bell v. United Princeton Properties, Inc., 884 F.2d 713, 724 (3d Cir. 1989). The Third Circuit, however, declined to address the issue of whether the reasoning of Rivera applied to an ERISA case.
21. In Rivera, the plurality of four stated that although the amount of damages awarded is "one of many factors that a court should consider in calculating an award of attorney's fees" pursuant to 42 U.S.C. 1988, there was no requirement under 1988 that the fee be proportionate to the plaintiff's recovery. 477 U.S. at 574.
22. The factors, which the Fifth Circuit enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (5th Cir. 1974), include: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. We note the trial court considered a number of these factors, as reflected in its findings of ultimate fact.