United States v. Kevin Harris
2017 U.S. App. LEXIS 6873
| 9th Cir. | 2017Background
- Michael Harris was convicted in 1997 of federal offenses and ordered to pay $646,000 in restitution; most remains unpaid.
- Harris is a beneficiary of two irrevocable discretionary trusts established by his parents for his support; trustees have absolute-discretion language and spendthrift clauses.
- The government sought a writ of continuing garnishment under 28 U.S.C. § 3205(a) to attach any current or future distributions to Harris from the trusts to satisfy the restitution judgment.
- Trustees argued Harris had disclaimed his interest (except certain accounts) and that the trusts’ discretionary terms and spendthrift clauses precluded garnishment.
- The district court granted the writ; the Ninth Circuit reviewed de novo whether a beneficiary’s interest in discretionary support trusts is "property" subject to federal garnishment and whether disclaimer or spendthrift clauses block attachment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a beneficiary’s interest in a discretionary support trust is "property" under federal garnishment statutes | Harris’s beneficiary interest is a present property right because California law allows beneficiaries to compel distributions consistent with the trust’s purpose; thus it falls within the broad federal definition of property | Harris argued he only has a mere expectation of future payments, not a property interest subject to a federal lien | Court held the interest is "property" under 28 U.S.C. § 3002(12) and related statutes because California law gives a beneficiary enforceable rights to distributions, even from discretionary trusts |
| Whether Harris’s disclaimer prevents attachment of the writ | The government argued federal liens are not defeated by state-law renunciations once a sufficient state-law interest exists | Trustees contended the disclaimer eliminated Harris’s interest, so nothing could be garnished | Court held the disclaimer is ineffective to bar attachment; federal lien law supersedes state attempts to negate an interest once state law creates that interest (Drye framework) |
| Whether spendthrift clauses protect trust assets from federal garnishment | The government argued spendthrift clauses do not shield trust assets from enforcement of a federal lien | Trustees argued spendthrift provisions and discretionary language insulate the trusts from creditors and garnishment | Court held spendthrift clauses do not prevent enforcement of federal liens; they do not block garnishment of distributions |
| Appropriate relief / scope of garnishment | Government sought continuing writ to reach current and future distributions, not to compel trustee to make distributions | Trustees objected to writ attaching to distributions and sought to prevent continuing garnishment | Court affirmed continuing writ: any current or future distributions to Harris are subject to garnishment until restitution is satisfied; government is not forcing distributions |
Key Cases Cited
- Drye v. United States, 528 U.S. 49 (1999) (federal lien law preempts state law that would defeat attachment once state law creates the interest)
- United States v. Nat'l Bank of Commerce, 472 U.S. 713 (1985) (Congress used broad language to reach every interest in property for federal liens)
- United States v. Bess, 357 U.S. 51 (1958) (federal liens attach despite state-law attempts to avoid them)
- Leuschner v. First W. Bank & Trust Co., 261 F.2d 705 (9th Cir. 1958) (spendthrift clauses do not protect trust assets from enforcement of federal liens)
- United States v. Taylor, 254 F. Supp. 752 (N.D. Cal. 1966) (government lien may attach to beneficiary’s right to discretionary trust payments)