The Missouri Court of Appeals found that provider Huntleigh Securities had a limited fiduciary duty to an alternate payee to inform her of its intent to transfer the funds pursuant to the plan administrator’s (her ex-husband’s) request, since it had been put on notice of her ownership interest in the property.
In 1997, Rodab Shervin was awarded 100% of her former husband’s pension benefits held in a retirement plan with Huntleigh Securities Corp., some $488,000, according to Washington-based legal publisher BNA. Following that award, Shervin sent a copy of the QDRO to Huntleigh’s chief financial officer, who froze the account to prevent the husband from taking money from the account.
On July 23, 1997, Shervin was notified that ex-husband, in his capacity as administrator for the retirement plan, attempted to liquidate the plan, even though it had been wholly awarded to her by the court. Subsequently, on July 25 and October 1, 1997, Shervin obtained restraining orders preventing her ex-spouse from removing, transferring, withdrawing from or liquidating the plan. Each time Shervin obtained restraining orders, which she sent to Huntleigh, blocking her ex-husband’s attempts.
However, on December 30, 1999, the husband submitted a written request to transfer the funds. Huntleigh consulted with its legal counsel, and was told there was no legal basis for blocking the transfer. Subsequently, a Huntleigh representative notified Shervin of the request on January 11 of the following year. At that point Shervin reminded Huntleigh of the court orders and asked that she be notified if Huntleigh intended to transfer the funds, according to the court.
Three days later, Huntleigh transferred the funds to a bank – which wired the funds to a bank in the United Kingdom – where Shervin could not reach them. Her ex-husband ultimately withdrew the funds for his own personal use.
A trial court found that Huntleigh breached its fiduciary duty to Shervin by transferring the funds and awarded her the amount in the retirement plan.
Writing for the Missouri Court of Appeals, Judge Sherri B. Sullivan found that provider Huntleigh did have a limited fiduciary duty to inform the alternate payee of its intent to transfer the funds pursuant to the plan administrator’s (her ex-husband’s) request, since it had been put on notice of her ownership interest in the property.
However, the court rejected Shervin’s argument that Huntleigh had a fiduciary duty to refuse the husband’s request to transfer the funds, noting, “a confidential relationship exists when one person relies upon and trusts the other with the management of his property and attendance to his business affairs”.
The customary duty of care owned by a plan administrator to an alternate payee did not apply to Huntleigh, according to the court, which noted that her ex-husband was, in fact, the plan administrator.
The court did uphold the damage award, noting that, regardless of its fiduciary relationship with the parties, Shervin’s nonetheless suffered injury as a result of Huntleigh’s failure to notify her of the intent to transfer the funds. The court said if Shervin had been notified of Huntleigh’s intent to transfer the funds, she could have taken action to prevent the transfer.
The case is Shervin v. Huntleigh Securities Corp., Mo. Ct. App., No. ED80271, 9/17/02.