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Stills v. Janney Montgomery Scott LLC

United States District Court, D. South Carolina, Columbia Division

August 11, 2016

Robert C. Stills, Plaintiff,
v.
Janney Montgomery Scott LLC, Prudential Retirement Insurance and Annuity Company, and Ansaldo STS USA, Inc., Defendants. Janney Montgomery Scott LLC, Third Party Plaintiff,
v.
Amy Stills, Third Party Defendant.

          ORDER

          Joseph F. Anderson, Jr., United States District Judge.

         This case arises from a dispute between Plaintiff Robert C. Stills (“Plaintiff”) and Defendants Janney Montgomery Scott LLC (“JMS”), Prudential Retirement Insurance and Annuity Company (“Prudential”), and Ansaldo STS USA, Inc. (“Ansaldo”) regarding a 401k distribution. In essence, Plaintiff is complaining about his own mother, Amy Stills (“Stills” or “Mother”), spending his money that she was entrusted with while he was a minor. Plaintiff did not include Stills as a Defendant, but she has since been brought into the case by Defendant JMS.

         Plaintiff alleges that Stills should never have been entrusted with his money because she was not appointed by a court as his guardian. Plaintiff claims that Defendants are responsible for the losses he sustained, which occurred due to his own mother’s conduct. For the purposes of this motion, Plaintiff claims that Defendant Ansaldo is responsible for his losses because it breached fiduciary duties imposed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. Defendant Ansaldo has filed a Rule 12(b)(6) motion to dismiss, or in the alternative, a motion for summary judgment per Rule 56 of the Federal Rules of Civil Procedure. Ansaldo alleges that Plaintiff cannot make a valid claim, and that it is therefore entitled to judgment as a matter of law.

         I. FACTUAL AND PROCEDURAL HISTORY

         Plaintiff was the great nephew of the late Mary Eva Spence (“Spence” or “Decedent”). Spence was a long-time employee of Defendant Ansaldo and its predecessor, and was also a participant in the Ansaldo STS USA Retirement/Savings Plan (“Plan”). Ansaldo is the Plan Sponsor and Plan Administrator or the Plan.

         In 2013, Spence became ill and never returned to work at Ansaldo. During her last illness, Stills, the mother of the Plaintiff, took care of her. Like Spence, Stills was also a long-time employee of Ansaldo. On approximately May 3, 2013, Spence named Plaintiff as a 50% beneficiary with respect to her interest in the Plan. Plaintiff’s minor sister, who is not a party in this case, is the beneficiary of the remaining 50% of Spence’s interest in the Plan. Spence passed away on May 28, 2013.

         Because the Plaintiff was a 16-year-old minor at the time of Spence’s death, a question arose as to who should receive his funds from the Plan. Paragraph 7.5(F) of the Plan states:

If, in the opinion of the Plan Administrator, a Participant or Beneficiary entitled to a Plan distribution is not able to care for his/her affairs because of a mental condition, a physical condition, or by reason of age, at the direction of the Plan Administrator, the Trustee will make the distribution to the Participant’s or Beneficiary’s guardian, conservator, trustee, custodian (including under a Uniform Transfers or Gifts to Minors Act) or to his/her attorney-in-fact or to other legal representative, upon furnishing evidence of such status satisfactory to the Plan Administrator and to the Trustee. The Plan Administrator and the Trustee do not have any liability with respect to payments so made and neither the Plan administrator nor the Trustee has any duty to make inquiry as to the competence of any person entitled to receive payments under the Plan.

         On June 12, 2013, Prudential, pursuant to its role as the Plan’s record keeper and an Administrative Services Agreement, sent a letter addressed to “Guardian for Robert C. Stills, Jr.” enclosing a Death Claim form. On June 25, 2013, Prudential received a Death Claim form listing the Plaintiff as the beneficiary. The form requested that Prudential transfer the funds via a Non-Spouse Beneficiary Direct Rollover to an Inherited Individual Retirement Account at JMS. Stills’ signature on the document appeared on the line for Beneficiary’s/Guardian’s Signature.

         On July 12, 2013, after receiving the Death Claim form, Prudential sent Stills a letter stating:

We have received your request to settle the account of Mary K. Spence from the above referenced plan. Unfortunately, we cannot honor your request for the following reason(s):
• Please provide Guardianship documentation to prove you are the minor beneficiary’s legal guardian.
• Please return this letter and the necessary information as indicated above in the envelope provided or fax it to 1-866-439-8602 . . .

         After receiving this letter, Stills contacted Haley Smith at Ansaldo, who then faxed in copies of birth certificates and Form SSA-1099 - Social Security Benefit Statement with respect to Plaintiff and his minor sister. Plaintiff’s birth certificate showed that Stills is the Plaintiff’s mother, while the Social Security Benefit Statement showed that Stills receives benefits for the Plaintiff.

         On July 23, 2013, Ansaldo received an email from Murray Carter (“Carter”) with JMS, which outlined the issues raised by Prudential with respect to the Plaintiff’s guardianship. It is apparent from Carter’s email that he cut and pasted out of an email from Mike Ruane with Prudential and then inserted his own comments in bold or a different typeface with respect to Prudential’s questions. Carter’s email was addressed to Sandy Turley (“Turley”) and Haley Smith (“Smith”), both of whom worked for Ansaldo. The email provided:

Sandy and Haley,
I’m reaching out to you regarding the Mary Eva Spence Estate. Ms. Spence had listed to Megan Stills and Robert Stills as the beneficiaries to her 401(k) account as you may know these are Amy Stills minor children. We are trying to distribute the funds to each child so it can be deposited to their Beneficiary’s IRA’s.
When the paperwork was returned to Prudential we were informed that Guardianship papers were required. As such, Amy produced birth certificates and Social Security statements to show the relationship. However, see response of Prudential from Mike Ruane:
Unfortunately, a birth certificate and Social security statement are not Guardianship papers. This is not sufficient proof of guardianship.
Again, the only way to receive Guardianship paperwork is by going to the local Court/Family Court.
Without having Amy Stills go through the effort and expense to do this Prudential ...

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