Summary
The United States Court of Appeals for the Second Circuit affirmed a judgment concerning ERISA survivor benefits under annuity contracts issued by TIAA-CREF. The court held that TIAA-CREF unreasonably delayed commencing an interpleader action and therefore was not entitled to discharge from liability or attorney's fees, while affirming an award of attorney's fees, costs, and disbursements to Carmen Mendez. The court also upheld the denial of prejudgment interest because investment earnings had already been included in the deposited proceeds and no court order provided for interest after deposit.
Topics
Practice areas
Questions Presented
- Whether TIAA-CREF was entitled to discharge from further liability under 28 U.S.C. § 2361 despite delaying commencement of the interpleader action.
- Whether the district court properly awarded Mendez attorney's fees, costs, and disbursements under ERISA.
- Whether TIAA-CREF was entitled to attorney's fees from the interpleader fund or under ERISA.
- Whether the amount of Mendez's attorney's-fee award was excessive.
- Whether Mendez was entitled to prejudgment interest on the annuity proceeds.
Holdings
- A stakeholder that satisfies the statutory requirements for interpleader may nevertheless be denied discharge under 28 U.S.C. § 2361 when it unreasonably delays commencing the action in circumstances implying bad faith. TIAA-CREF's delay justified denial of discharge.
- Without a court order of abandonment, the estate's unsupported abandonment allegation did not create a colorable adverse claim to Mendez's ERISA spousal benefits; Mendez was plainly entitled to the proceeds.
- The district court did not abuse its discretion in awarding Mendez attorney's fees, costs, and disbursements under 29 U.S.C. § 1132(g)(1), or in denying TIAA-CREF attorney's fees.
- The district court properly awarded Mendez $20,190 in attorney's fees, costs, and disbursements.
- Prejudgment interest is discretionary in an ERISA action and was properly denied because the annuity proceeds had earned investment income before deposit and Mendez failed to obtain an order providing interest on funds held in the court registry.
Key quotations
“Without a court order of abandonment, Mendez plainly was entitled to the proceeds under ERISA and the Treasury Regulation.” (982 F.2d at 786)
“In view of Mendez' plain entitlement to the proceeds, TIAA-CREF's delay in commencing an interpleader action clearly was unreasonable and impliedly was commenced in bad faith.” (982 F.2d at 786)
“Rather, prejudgment interest is a discretionary matter for the court and should be awarded only in cases where such an award is "fair, equitable and necessary to compensate the wronged party fully."” (982 F.2d at 789)
Factual background
TIAA-CREF issued retirement annuity contracts to Leocadio V. Diaz, who died on December 25, 1989. Mendez claimed entitlement as Diaz's surviving spouse to fifty percent of the approximately $410,544 annuity balance under ERISA. Diaz's executrix opposed payment, alleging abandonment, but never produced or claimed the existence of a court order of abandonment, which the applicable Treasury Regulation required for a nonconsensual waiver of spousal benefits. TIAA-CREF nevertheless delayed interpleading and depositing the funds until after Mendez filed suit.
Procedural history
Mendez filed an action in New York County Supreme Court to recover annuity proceeds after TIAA-CREF withheld them based on the estate's unsupported abandonment claim. TIAA-CREF removed the action to the Southern District of New York, counterclaimed in interpleader, and deposited the disputed funds in court. The district court granted Mendez summary judgment, denied TIAA-CREF discharge and attorney's fees, awarded Mendez attorney's fees, costs, and disbursements, and denied prejudgment interest in the final judgment. The Second Circuit affirmed.