A Newark federal judge has awarded legal fees to John Hancock Insurance Co. and to Lincoln National Life Insurance Co. in connection with a battle over a $3.4 million payout from life insurance policies taken out on the late conservative activist and attorney Phyllis Schlafly. But the underlying dispute between her children and followers appears far from resolution.
Schlafly, known for her opposition to the Equal Rights Amendment, died at age 92 in 2016. Since then, a battle has been waged for control of the organization she founded, Eagle Forum, which is listed as beneficiary on the policies.
Her son Andrew, a Far Hills resident, sued the two insurance companies in Morris County Superior Court in March 2017, seeking an injunction against the distribution of policy proceeds to “anyone other than proper representatives acting in the interests of and under the direct instructions of the members of Eagle Forum.”
Other suits concerning the control of the assets of Eagle Forum are pending in federal courts in Illinois and Missouri, and in a state court in Missouri.
In the New Jersey case, Andrew Schlafly, who is pro se, claims that since his mother’s death, Eagle Forum lacks a properly functioning board of directors. He claims that the people purporting to control Eagle Forum have dissipated its assets and “are attempting to take Eagle Forum in a direction other than its mission,” U.S. Magistrate Judge Steven Mannion wrote in his May 21 report and recommendations.
U.S. District Judge Esther Salas on Wednesday issued an order adopting Mannion’s recommendations and awarding the fees.
The insurance companies brought Eagle Forum into the case as a third-party defendant, and the organization opposed the award of fees to the insurance companies, claiming that determining the beneficiary of a policy is part of an insurer’s routine course of business.
But, Mannion said, the cases that Eagle Forum provided to support its position were from other jurisdictions, and not binding in the District of New Jersey. Courts in the District of New Jersey have rejected the notion that insurance companies are never permitted to recoup attorney fees, and routinely make such awards, Mannion said.
Eagle Forum argued that the insurers’ failure to pay out the policy proceeds is a “vexatious refusal to pay,” according to Mannion, but that argument ignores the case’s “tortured procedural history,” he said. The insurers had a legitimate fear of paying the wrong person, officer or entity at Eagle Forum, Mannion said.
Mannion awarded Lincoln’s request of $41,229, finding it not excessive or redundant—and, at roughly 2% of the policy proceeds of $2 million, it would not seriously deplete those funds, he said. He made the same finding in connection with the $109,176 fee application for John Hancock, which came to roughly 8% of the $1.42 million award.
Schlafly said the insurance company fee application was a routine matter, and that resolution of the underlying dispute in the New Jersey case was “proceeding in a timely way.” He said that the Illinois and Missouri cases were still pending, but declined to comment on them otherwise.
Media reports about the dispute indicate that the rift among Phyllis Schlafly’s supporters concerned her endorsement of Donald Trump for the 2016 Republican presidential nomination before her death, with some in Eagle Forum instead favoring the candidacy of U.S. Sen. Ted Cruz. Schlafly confirmed that such is the nature of the dispute.
Edward Butkovitz of Kleinbard in Philadelphia. who represents the Eagle Forum, did not return a call about the case.
Valerie Pennacchio of Saul Ewing in Newark, who represented Lincoln National, and Darren Goldstein of Flaster/Greenberg in Cherry Hill, who represent John Hancock, also did not return calls about the case.
— Read Ave Maria Funds Deliver Heavenly Returns, on ThinkAdvisor.