ERISA-Fifth Circuit Rules That The Trustee May Use Plan Assets To Pay Attorney’s Fees Incurred In A Contest For Benefits With The Plans’ Sole Beneficiary

In Futral v. Chastant, No. 13-30856 (5th Cir. 2014), the plaintiff, Laurie Futral (“Futral”), the widow of Dr. (Dentist) Robert Chastant sued to recover attorney’s fees that were allegedly illegally deducted from the dentist’s ERISA plans to contest her status as beneficiary. The district court entered summary judgment against Futral on this issue.

In this case, Dr. Robert Chastant was murdered on December 13, 2010. Prior to his death, he established an ERISA qualified defined benefit plan and profit sharing plan through his dental practice, which was the plans’ sponsor. He also purchased several life insurance policies. The sole remaining beneficiary under the plans and insurance policies was Futral. Defendant Chastant was named executor of Dr. Chastant’s will and also the trustee of the ERISA plans. Shortly after her husband’s death, Futral filed a suit against the insurance companies and Chastant to recover the insurance proceeds and plan benefits. However, by the time the suit was filed, Chastant and the insurance companies had become aware of allegations that Futral had a hand in her husband’s death, which would have disqualified her from receiving benefits under the Louisiana Slayer Statute.

Subsequently, the insurance companies interpled the insurance proceeds, and Chastant answered Futral’s complaint and asserted the Slayer Statute as an affirmative defense. On May 21, 2012, a jury found that Futral had not participated in the murder. The verdict was not appealed, and both the insurance proceeds and the ERISA plan benefits were released to Futral. During the course of the litigation, and allegedly in accord with the provisions of the ERISA plans, Chastant paid the majority of his attorney’s fees from their corpus. Futral brought this suit to recover the plans’ funds that Chastant applied to pay the attorney’s fees. She alleged that using plan funds in this way was a breach of the fiduciary duty under ERISA that Chastant owed her as the plans’ trustee. The district court granted summary judgment to Chastant, holding that Chastant did not breach his fiduciary duty.

In analyzing the case, the Fifth Circuit Court of Appeals (the “Court”) said that Futral provides no authority for the proposition that Chastant’s actions breached his fiduciary duties under ERISA, for example, by actually being conflicted as the plans’ trustee and the estate’s executor. Having both duties does not create a conflict of interest. It is undisputed that Chastant owed a duty of loyalty to the beneficiary of the plans, but only several weeks after his brother’s murder, the allegations against Futral made it unclear whether Chastant could pay her claims without violating state law. Consequently, the Court continued, Chastant used plan funds to defend against a suit seeking to compel disbursement to a potentially ineligible beneficiary. When the issue was resolved, he released the balance of the funds after paying most of his attorney’s fees from the plan’s assets. The Court concluded that the foregoing is not a breach of ERISA fiduciary duty. As such, the Court affirmed the district court’s summary judgment on the fiduciary breach claim.

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