Tennessee Law Firm Still on Hook Over 401(k) Distribution

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Nov. 8 — Two former employees of a personal-injury law firm can move on their claim that the firm wouldn’t distribute their 401(k) plan assets to their retirement accounts in violation of ERISA ( Alexander v. Terry Law Firm, P.C. , 2016 BL 370818, E.D. Tenn., No. 2:16-cv-00091, 11/7/16 ).

Judge Thomas W. Phillips of the U.S. District Court for the Eastern District of Tennessee Nov. 7 denied in part Terry Law Firm P.C.'s motion to dismiss the charges. The firm recently deposited the disputed funds into a state court’s registry, so Phillips agreed to toss the participants’ claim to recover benefits under the Employee Retirement Income Security Act to the extent it sought specific performance and an accounting. However, he allowed the participants to proceed with their claim to recover other types of remedies related to the delay in their procurement of benefits and attorneys’ fees.

The plan in dispute had 17 participants and over $3.3 million in assets in the past year, according to its annual report.

The Tennessee-based law firm must also defend claims that it breached its ERISA fiduciary duties, the court said. As such, the participants can move on their claim seeking a court order prohibiting the law firm from taking any action that would result in the alienation of their vested retirement benefits.

The court declined to apply the exhaustion-of-remedies doctrine over the participants’ claims to recover benefits. The participants’ dispute wasn’t about a denial of benefits, rather, the issue was contractual in nature—whether the law firm breached its contractual duty under the plan to release the funds in a timely manner, the court said.

The participants’ claim for restitution was dismissed because their request was “more akin to a request for monetary compensation, which is ‘the classic form of legal relief,’ ” and didn’t fall under the equitable remedies available under ERISA, the court said.

Fowler & Fowler, PLLC represents the participants. Berry & Tudor, P.C. and Taylor Law Firm represents the law firm.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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