73 F. Supp. 3d 329
S.D.N.Y.2014Background
- VFS obtained a $2.4M consent judgment (July 9, 2013) against Richard Fox and others arising from default on a secured aircraft loan governed by documents selecting New York law and forum.
- VFS sold the aircraft and recovered ~ $200,000, then sought to collect the remainder from Fox’s personal assets.
- Writ of execution served on Merrill Lynch froze two Fox accounts: an employer-established SIMPLE IRA/SRA (≈ $600,000) and a jointly held cash management account (≈ $7,000).
- Fox argued Pennsylvania law (which would shield both accounts) applies; VFS argued New York law applies and ERISA preempts state anti-garnishment protection for the SRA/IRA.
- Court held New York substantive law governs (contractual choice of law valid); resolved ERISA preemption and turnover issues for each account.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law | New York law governs under contract clauses in loan documents | Pennsylvania law governs and would shield both accounts | Held: New York substantive law controls (parties validly selected NY law) |
| ERISA coverage of SRA/IRA account | ERISA governs the SRA/IRA plan and thus affects the account; preemption may allow creditor access | SRA/IRA account falls outside ERISA’s scope (ERISA governs plan but not the individual account) | Held: ERISA governs the SRA/IRA account (plan and accounts are within ERISA) |
| ERISA preemption of N.Y. CPLR § 5205 (anti‑garnishment) | ERISA preempts state anti‑garnishment, permitting garnishment of SRA/IRA | CPLR § 5205 does not frustrate ERISA’s objectives and is not preempted | Held: ERISA does not preempt N.Y. CPLR § 5205; SRA/IRA generally sheltered from garnishment |
| Exception for recent contributions to SRA/IRA | Recent contributions within 90 days of suit are not exempt | Opposes garnishment of any funds | Held: Funds contributed after Jan 12, 2012 (90 days before suit) are reachable; parties to confer on amounts |
| Turnover of joint cash management account | New York law applies and joint account is reachable | Fox claimed tenancy by entirety or Pennsylvania protection | Held: Under NY law joint accounts are presumptively fully liable to levy; VFS entitled to turnover of full CMA (Fox did not rebut presumption) |
Key Cases Cited
- Travelers Ins. Co. v. Delta Air Lines, 514 U.S. 645 (1995) (modern ERISA preemption analysis focuses on ERISA objectives and presumption against preemption)
- Egelhoff v. Egelhoff, 532 U.S. 141 (2001) (state law preempted where it binds ERISA plan administrators to different beneficiary rules)
- Boggs v. Boggs, 520 U.S. 833 (1997) (ERISA protects participants and beneficiaries; discussion of interaction with state law)
- Mackey v. Lanier Collection Agency & Serv., 486 U.S. 825 (1988) (state law that singles out ERISA plans for special treatment can be preempted)
- Dulce v. Dulce, 233 F.3d 143 (2d Cir. 2000) (federal courts have ancillary jurisdiction to enforce judgments)
- Hattem v. Schwarzenegger, 449 F.3d 423 (2d Cir. 2006) (ERISA preemption requires examination of statute’s structure and objectives)
- Stevenson v. Bank of N.Y. Co., 609 F.3d 56 (2d Cir. 2010) (ERISA ‘relate to’ language requires focus on ERISA’s structure and objectives)