Gerald W. Kerr v. Charles F. Vatterott and Co., et al.

Employee Retirement Income Security Act - Pensions - 401(k) Plan - Gerald Kerr Homes Corp. (Kerr Homes), of which Kerr is the presiding and sole shareholder, formed a partnership called Legacy Homes with Vatterott and Co. to acquire, develop, and market real estate. Kerr Homes managed the daily operations of the Legacy Homes partnership and Vatterott and Co. provided the financial backing for the enterprise. Vatterott and Co. maintained the bank account for the partnership. Unbeknownst to Vatterott and Co., Kerr opened a separate bank account I the Legacy Homes partnership name, eventually depositing over $260,000 of partnership funds into the account and disbursing $153,000 to Kerr Homes. Legacy Home employees, including Kerr, worked on Vatterott and Co. projects as well as Legacy Homes projects and thus were eligible to participate in Vatterott and Co.'s 401(k) pension plan. Vatterott and Co. made matching employer contributions to the plan on behalf of Legacy Homes employees. On July 12, 1991, Vatterott and Co. notified all Legacy employees, including Kerr that they would be terminated effective July 14, 1991, because Vatterott and Co. could no longer fund Legacy Homes' payroll and benefit accounts. The 401(k) plan entitles a plan participant who is terminated prior to retirement to receive the net credit balance in his individual plan account. Under the plan, the trustee must distribute a terminated employee's account as soon as practicable after his termination, but the trustee may not distribute any funds until so instructed by the plan administrator. Kerr was fully vested in the 401(k) plan at the time of his termination from Legacy. He submitted a withdrawal request to Vatterott and Co. on October 28, 1991, but received no response. The value in Kerr's 401(k) account as of September 30, 1991 (the valuation date based on Kerr's October request) was $16,968. After several letters to both Vatterott and Co. and Commerce Bank (the trustee of Vatterott and Co.'s 401(k) plan), which received no response, he requested a copy of the latest plan description. Finally on July 15, 1993, Gregory Vatterott informed Kerr that they would not distribute Kerr's 401(k) funds until Kerr paid Vatterott and co. $5,902 to reimburse Vatterott and co. for Kerr's half of employer matching contributions that Vatterott and Co. had made on behalf of Legacy Homes partnership employees. Kerr refused to pay the matching funds and Vatterott and Co. refused to distribute Kerr's personal 401(k) account. In January 1995, Kerr's attorney demanded that Vatterott and Co. and Commerce Bank provide a full and complete accounting of Kerr's plan account, provide a copy of the plan, and effect a trustee-to-trustee transfer of Kerr's funds. Vatterott and Co. responded with information about Kerr's account. Vatterott and Co. also stated that Commerce Bank would send a copy of the plan to Kerr, which they did within approximately one week of the request. On March 22, 1995, Gregory Vatterott advised Kerr's counsel that Vatterott and Co. sought the matching employer contributions from Kerr Homes (the corporation) a Vatterott and Co.'s partner in the Legacy Homes partnership rather than from Kerr personally, and provided Kerr with a withdrawal request form. Kerr submitted the distribution request on April 11, 1995, and Vatterott and Co. authorized distribution of Kerr's plan account on April 17, 1995. On May 4, 1995, Commerce Bank made a trustee-to -trustee transfer of $22,490, the value of Kerr's account as of March 31, 1995, the last date of the quarter immediately preceding the April request and authorization. Kerr filed suit on April 10, 1995, the day before his final request for disbursement, seeking actual damages and interest, statutory penalties, and attorney's fees and costs. He also sought punitive damages based in supplemental state law claims. Kerr amended his complaint by interlineation immediately prior to trial, adding a claim for equitable relief. Following a bench trial, the district court dismissed the state law claims as pre-empted by ERISA; found Kerr's claim for actual damages for the amount in his 401(k) plan moot because Kerr received the full amount of his account prior to trial; denied the claim for interest as an inappropriate remedy, and declined to award a statutory penalty because Kerr did not prove that Vatterott and Co. had received his request for ERISA documents. The district court also declined Kerr's request for attorney's fees and costs because Kerr was unsuccessful on his ERISA claims.

Following a bench trial, teh district judge dismissed the state law claims, the claim for actual damages for the amount in the 401(k) plan; denied teh claim for interest as an innapropriate remedy, and declined to award a statuatory penalty. They also declined Kerr's request for attorney's fees and costs.

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The judgment was affirmend in part, reversed in part, and remanded by the United States Court of Appeals, Eighth Circuit. See: 184 F.3d 938 (8th Cir. 1999). The date above is the date of the appellate decision and not the the trial date. Reported by EMDH.