591 F. App'x 415
6th Cir.2014Background
- Collie Lawless, a longtime Nationwide agent, participated in a non-qualified deferred-compensation plan (Agent Security Compensation Plan) under an amended Agent’s Agreement.
- Lawless filed Chapter 7 bankruptcy on December 27, 2010 and claimed his deferred-compensation credits as exempt under Tenn. Code Ann. § 26-2-111(1)(D).
- The Trustee objected, the bankruptcy court sustained the objection, and the district court affirmed; Lawless appealed.
- The Agreement allowed Lawless to elect payment form (including lump sum) and to change that election in writing prior to cancellation; a 2009 amendment removed prior restrictions on later lump-sum elections.
- Lawless argued that IRC § 409A and plan terms effectively delay lump-sum payment for post-2004 credits more than 60 months after retirement, so the statutory acceleration exception should not apply.
- The court focused on whether, as of the petition date, Lawless had a present option to accelerate payments into a lump sum (which would disqualify the assets from the exemption).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lawless’s deferred-compensation credits are exempt under Tenn. Code § 26-2-111(1)(D) given an available acceleration option | Lawless: § 409A and plan timing mean a lump-sum or accelerated periodic payment would occur after >60 months, so the acceleration exception does not apply | Trustee: The plan gave Lawless a present option to elect a lump-sum payment, which disqualifies the assets from the exemption | Court: Plan permitted present election to receive a lump sum; that option disqualifies the assets from the exemption under § 26-2-111(1)(D) |
Key Cases Cited
- Rousey v. Jacoway, 544 U.S. 320 (2005) (held similar retirement-plan interests exempt under federal analogue)
- In re AMC Mortgage Co., Inc., 213 F.3d 917 (6th Cir. 2000) (standard of review for bankruptcy legal conclusions)
- Carr v. United States, 560 U.S. 438 (2010) (present-tense statutory interpretation principles)
- Storey v. Bradford Furniture Co., 910 S.W.2d 857 (Tenn. 1995) (statutory-interpretation approach; stop at plain meaning when clear)
- Walkup v. Covington, 114 S.W.2d 45 (Tenn. 1938) (exemptions determined as of petition date)