Ames v. Ames
776 S.W.2d 154 · Texas Supreme Court · 1989
Facts
Threaded Steel Products Company, a family-owned corporation, had an ERISA profit-sharing plan with Mike Ames, one of the brothers, serving as the sole trustee. After the company experienced financial difficulties, the plan was terminated in November 1982. Mike, as trustee, received $424,888.35 in plan funds from the administrator. He deposited a portion of these funds ($254,646.72) into a checking account styled for R.E., R.G., R.L., and R.M. Ames, with himself as trustee and signor. Without R.E. and R.G.'s knowledge or consent, Mike drew a $254,000 check from this account, payable to Interfirst Bank of Beaumont. Subsequently, $157,895.02 was transferred back from Interfirst to Heights State Bank and, combined with additional borrowed money, used to purchase a $254,000 CD. This CD was then pledged as collateral for commercial loans from Heights State Bank to Threaded Steel, and when the company defaulted, the bank offset the CD against the overdue loans, resulting in R.E. and R.G.'s benefits not being distributed to them.
Procedural history
R.E. and R.G. Ames sued Mike Ames and Heights State Bank in state district court for conversion and breach of fiduciary duty. The trial court rendered judgment against Mike for actual and punitive damages but issued a take-nothing judgment against Heights State Bank. The court of appeals affirmed the judgment against Mike, adding a five percent penalty, and reversed and remanded the take-nothing judgment against Heights State Bank. Mike and Heights State Bank then filed applications for writ of error to this court.
Issue
Did the state court have subject matter jurisdiction over a conversion claim for profit-sharing funds, or was it preempted by ERISA, when the plan had been terminated and the funds converted by the trustee post-termination? Did the court of appeals apply the correct standard when reversing the jury's finding regarding the bank's liability as being against the great weight and preponderance of the evidence?
Holding
The state court properly exercised jurisdiction over the conversion claim because ERISA did not apply to the trustee's misconduct after the plan's termination was completed. The court of appeals correctly applied the standard for reviewing the factual sufficiency of the evidence. The court modified the court of appeals' judgment to eliminate a five percent penalty but affirmed in all other respects.
Rule
State courts have concurrent jurisdiction over actions by a plan participant or beneficiary to recover benefits due under a plan. ERISA provisions do not govern a trustee's actions for misconduct occurring after a plan's termination is completed and benefits are due for distribution. A lawsuit to recover converted benefits from a terminated plan does not "relate to" an employee benefit plan for ERISA preemption purposes if it does not involve regulating the plan's content or operation. A court of appeals may reverse a jury's "failure to find" if it is against the great weight and preponderance of the evidence, but must detail the relevant evidence and clearly state why the finding is factually insufficient or manifestly unjust.
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