Guidry v. Sheet Metal Workers National Pension FundGuidry v. Sheet Metal Workers National Pension Fund
Upon rehearing this case en banc, we return to the issue of whether the anti-alienation provision of the Employee Retirement Income Security Act of 1974 (ERISA)
Circuit Judge BRORBY delivered the unanimous opinion of the court with respect to Part I below.
Chief Judge SEYMOUR delivered the opinion of the court with respect to Part II, in which Circuit Judges LOGAN, MOORE, BALDOCK, EBEL, KELLY, and HENRY joined.
Circuit Judge BRORBY dissented with respect to Parts II-A and II-B, joined by Circuit Judges STEPHEN H. ANDERSON and TACHA.
BRORBY, Circuit Judge, for a unanimous court.
BACKGROUND
Essentially, Mr. Guidry is a judgment debtor of the union intervenor, Local No. 9, in the amount of $275,000 plus interest.1 The district court ordered union pension plans to pay Mr. Guidry‘s back and future pension benefits after Local No. 9‘s unsuccessful attempt to impose a constructive trust on pension benefits held by the funds. Local No. 9 then sought to collect its judgment through garnishment of a bank account established in Denver, Colorado, and through attempted seizure of funds tendered to Mr. Guidry at his home in Texas. Mr. Guidry challenged these efforts in United States District Courts in Colorado and in the Southern District of Texas.
Subsequently, the parties entered into a series of stipulations directing the deposit of past pension payments and future payments into a single bank account in Denver, Colorado. The parties also agreed to remove amounts from the Registry of the United States District Court for the Southern District of Texas and place the funds into the Denver account. All disputed funds, therefore, would be subject to a single writ of a garnishment so as to specifically present the issue before us. The United States District Court for the District of Colorado concluded the anti-alienation provision of ERISA continues to protect pension benefits from garnishment “so long as the proceeds are clearly identified as such and have not been co-mingled with other funds or used for the acquisition of assets.” Findings, Conclusions and Order On Post Judgment Issues, No. 84-M-879 (D.Colo. Jan. 8, 1992), slip op. at 3 p 1. The district court held this conclusion was mandated by the law of the case established by the United States Supreme Court in Guidry v. Sheet Metal Workers Nat‘l Pension Fund, 493 U.S. 365, 375-76, 110 S.Ct. 680, 686-87, 107 L.Ed.2d 782 (1990).
On appeal, our three-judge panel reversed the district court, with one judge dissenting. Guidry II, 10 F.3d 700, 717 (10th Cir.1993) (Brown, J., dissenting). The panel first held the mandate of the Supreme Court did not require a bar on garnishment of received pension payments. The Supreme Court was not factually presented with the issue of post-payment garnishment and therefore did not explicitly bar such garnishment as part of the law of the case. Nor would our decision to allow garnishment of distributed benefits unsettle any implicit resolution within the Court‘s mandate.2
The panel reached, then, the fundamental issue of whether the anti-alienation provision, ERISA
I.
Having reheard the arguments of the parties and reexamined the panel‘s opinion, we affirm the primary holding of Guidry II. Although the plain language of the anti-alienation provision of ERISA and its legislative history are inconclusive, the applicable administrative regulations show the provision was not intended to apply to benefits following distribution to and receipt by the beneficiary. This interpretation is also consistent with comparison of other statutory provisions that expressly provide greater protection to retirement income.
ERISA is a comprehensive statute intended in significant part to ensure pension benefits will actually be received upon retirement by plan participants and beneficiaries. See Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361, 374-75, 100 S.Ct. 1723, 1726, 1732-33, 64 L.Ed.2d 354 (1980). To that end, ERISA imposes “minimum standards” on private plan managers and employers. ERISA
Legislative history of section 206(d)(1) has been described as sparse and inconclusive. See Coar v. Kazimir, 990 F.2d 1413, 1420 (3d Cir.) (citing Ellis Nat‘l Bank v. Irving Trust Co., 786 F.2d 466, 470 (2d Cir.1986); GMC v. Buha, 623 F.2d 455, 460 (6th Cir.1980)), cert. denied, --- U.S. ----, 114 S.Ct. 179, 126 L.Ed.2d 138 (1993). A House Report explains the anti-alienation provision was designed “[t]o further ensure that the employee‘s accured [sic] benefits are actually available for retirement purposes.” H.R.Rep. No. 807, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N. pp. 4639, 4670, 4734.5 This history indicates a plan is obligated to protect benefits from alienation at least up to point of payment so that benefits will be available for retirement purposes. Again, however, legislative history does not resolve whether ERISA protection extends past the mere availability of funds within the plan to include funds held by the beneficiary after distribution.
In the absence of clear Congressional intent, we give deference to reasonable agency regulations.6 See Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). Treasury regulations define “assignment” and “alienation” as “[a]ny direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary.”
This limited reading of ERISA section 206(d)(1) makes sense when compared with the more specific language found in other income protection statutes. For example, the Social Security Act,
We therefore affirm the primary holding of the Guidry II panel and conclude ERISA section 206(d)(1) protects ERISA-qualified pension benefits from garnishment only until paid to and received by plan participants or beneficiaries. Accord Trucking Employees of N. Jersey Welfare Fund, Inc. v. Colville, 16 F.3d 52 (3d Cir.1994) (agreeing with the holding of Guidry II panel opinion); NCNB Fin. Servs., Inc. v. Shumate, 829 F.Supp. 178 (W.D.Va.1993) (once the line of actual receipt is crossed, ERISA no longer protects funds originating in private pension plan, although funds originating from social security would be protected under the Social Security Act).
SEYMOUR, Circuit Judge, joined by LOGAN, MOORE, BALDOCK, EBEL, PAUL KELLY, Jr., and HENRY, Circuit Judges.
II.
In the alternative, Mr. Guidry claims exemptions from garnishment under Colorado and Texas law.7 See
A.
The ERISA preemption provision applies to state laws that “relate to any employee benefit plan” covered by the Act.
ERISA preemption principles are easier to state than they are to apply. See, e.g., Monarch Cement Co. v. Lone Star Indus., Inc., 982 F.2d 1448, 1452 (10th Cir.1992) (pointing out difficulty in determining when state law preempted); National Elevator Indus., Inc. v. Calhoon, 957 F.2d 1555, 1558-59 (10th Cir.) (same), cert. denied, --- U.S. ----, 113 S.Ct. 406, 121 L.Ed.2d 331 (1992); Arkansas Blue Cross & Blue Shield v. St. Mary‘s Hosp., 947 F.2d 1341, 1344 (8th Cir.) (same), cert. denied, --- U.S. ----, 112 S.Ct. 2305, 119 L.Ed.2d 227 (1992); Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 145 (2d Cir.) (same), cert. denied, 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989). “[T]he ‘ultimate touchstone’ in determining preemption is the Congressional purpose in enacting ERISA.” Hospice of Metro Denver v. Group Health Ins., 944 F.2d 752, 755 (10th Cir.1991) (quoting Fort Halifax Packing, 482 U.S. at 8, 107 S.Ct. at 2216).
The purpose of ERISA preemption is twofold. First, preemption “protect[s] the interests of employees and their beneficiaries in employee benefit plans.” Second, preemption “ensure[s] that plans and plan sponsors are subject to a uniform body of benefit law ... [by] minimiz[ing] the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government.”
Monarch Cement, 982 F.2d at 1453 (citations omitted).
We turn first to Mr. Guidry‘s claims under Colorado law. Local No. 9 filed several writs of garnishment in Colorado federal district court beginning in late April 1991. Mr. Guidry initially claimed that seventy-five percent of the funds were exempt under Colorado law, relying on
When the Colorado garnishment exemption at issue here is evaluated in light of the principles governing ERISA preemption, the Colorado statute clearly does not have a connection with or contain a reference to the covered plan under any of the analyses applied by various courts. Several circuits have recognized common categories of laws that have a connection to ERISA plans, all of which either create or regulate plan benefits, terms, reporting or other requirements, or provide remedies for misconduct arising from plan administration. See National Elevator, 957 F.2d at 1558-59 (quoting Martori Bros. Distrib. v. James-Messengale, 781 F.2d 1349 (9th Cir.), cert. denied, 479 U.S. 1018, 107 S.Ct. 670, 93 L.Ed.2d 722 (1986)); see also Arkansas Blue Cross, 947 F.2d at 1344-45; Aetna Life Ins. Co., 869 F.2d at 146-47. These state laws are preempted because they run afoul of Congressional intent that ERISA plans not be subject to conflicting state directives. Laws which regulate or affect the relationships among the primary ERISA entities are preempted for the same reason. See, e.g., Credit Managers Ass‘n v. Kennesaw Life & Accident Ins., 25 F.3d 743, 751 (9th Cir.1994); Arkansas Blue Cross, 947 F.2d at 1344; Memorial Hosp. Syst. v. Northbrook Life Ins. Co., 904 F.2d 236, 248-49 (5th Cir.1990). The Colorado garnishment exemption does not affect the calculation or payment of plan benefits, nor does it otherwise impact the administration of the plan or the relationship among the plan entities. Indeed, the Colorado law has no impact on the plan whatsoever, either direct or indirect.
The state statute is therefore preempted only if it is read as making reference to an ERISA plan. “[S]tate laws which make ‘reference to’ ERISA plans are laws that ‘relate to’ those plans within the meaning of [the ERISA preemption provision].” Mackey v. Lanier Collection Agency & Serv., 486 U.S. 825, 829, 108 S.Ct. 2182, 2185, 100 L.Ed.2d 836 (1988). The relevant Colorado statute exempts from garnishment a percentage of an individual‘s earnings, which the statute defines as “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, avails of any pension or retirement benefits, or deferred compensation plan, avails of health, accident, or disability insurance, or otherwise.”
As the Supreme Court has pointed out, “ERISA‘s pre-emption provision does not refer to state laws relating to ‘employee benefits,’ but to state laws relating to ‘employee benefit plans.’ ” Fort Halifax Packing, 482 U.S. at 7, 107 S.Ct. at 2215; see also Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483. Because the Colorado law here refers to benefits rather than plans, “the language of the ERISA presents a formidable obstacle to [preemption].” Fort Halifax Packing, 482 U.S. at 8, 107 S.Ct. at 2216; see Standard Ins. Co. v. Saklad, 119 Or.App. 91, 849 P.2d 1150, 1152 (1993), cert. denied, --- U.S. ----, 114 S.Ct. 1236, 127 L.Ed.2d 580 (1994).
The Supreme Court‘s analysis of the Georgia garnishment statutes at issue in Mackey compels the conclusion that the Colorado garnishment exemption is not preempted. One state statute in Mackey expressly referred to and applied solely to ERISA benefit plans. See Mackey, 486 U.S. at 829, 108 S.Ct. at 2185. The Court held that this statute was preempted because it “single[d] out ERISA employee welfare benefit plans for different treatment under state garnishment procedures.” Id. at 830, 108 S.Ct. at 2186. “It is this ‘singling out’ that pre-empts the Georgia antigarnishment exception.” Id. at 838, 108 S.Ct. at 2190 n. 12. In contrast, the general Georgia garnishment statute in Mackey did “not single out or specifically mention ERISA plans of any kind.” Id. at 831, 108 S.Ct. at 2186. The Court examined whether the general statute was nonetheless preempted because it related to ERISA, and concluded that it was not. Critical to this result was the Court‘s conclusion that, as a matter of Congressional intent, “state-law methods for collecting money judgments must, as a general matter, remain undisturbed by ERISA.” Id. at 834, 108 S.Ct. at 2187-88.
Unlike the statute held preempted in Mackey, the Colorado statute before us does not specifically mention ERISA plans or single them out for special treatment. Although the Colorado law does make a generic reference to pension benefits, the law is nonetheless one of general application and therefore of the type that has consistently been described as outside the reach of ERISA‘s preemption provision. See, e.g., Greater Washington Bd. of Trade, --- U.S. at ---- n. 1, 113 S.Ct. at 583 n. 1; Monarch Cement, 982 F.2d at 1452; Aetna Life Ins., 869 F.2d at 146. Such statutes may nonetheless be preempted if they have a connection to ERISA plans. See, e.g., Arkansas Blue Cross, 947 F.2d at 1344-51. For the reasons discussed above, however, the Colorado garnishment exemption has absolutely no impact on ERISA plans when examined in light of the factors relevant to such a determination. Accord Standard Ins., 849 P.2d at 1152.
Finally, a finding that ERISA does not preempt state law here is mandated by logic and common sense. If, as we hold, the anti-alienation provision of ERISA does not apply to the funds at issue because they are no longer associated with an ERISA plan, it follows that a state law affecting those funds likewise does not relate to an ERISA plan. The Colorado law providing an exemption to garnishment is therefore not preempted by ERISA. Accord id.
B.
Turning to the application of the Colorado provisions, the discussion and decision in Rutter v. Shumway, 16 Colo. 95, 26 P. 321 (1891), drives our conclusion that these funds are exempt from garnishment. In Rutter, the Colorado Supreme Court held that the then-applicable garnishment exemption9 continued to apply to wages after they had been deposited in the wage earner‘s bank account.10 The court emphasized that the Colorado Constitution mandates the enactment of liberal exemption laws. See
The rationale expressed by the court in Rutter in extending the garnishment exemption to wages deposited in a bank account is directly relevant here:
It is argued with much ingenuity that the earnings of the laborer, when received by him, are no longer wages, but capital; that the exemption statute has performed its office when it has enabled the laborer to secure his wages from his employer without let or hindrance; and that thereafter the statute cannot be invoked in his favor. The statute cannot be thus reasoned away. Such a construction is narrow and illiberal. It would compel the laborer to leave his earnings in the hands of his employer, or else forego the protection of the statute altogether. It would not only deprive him of the privilege of depositing his earnings with any bank or other depository for safe-keeping, but would subject his wages to supplemental proceedings even in his own pocket; for, if earnings once received immediately lose their character as wages, then it is evident that the laborer could never retain his earnings for a single hour without exposing them to the very perils which the statute was designed to avert. Such a construction would practically frustrate the beneficent objects of the statute.
26 P. at 322 (emphasis added). While Rutter is admittedly old, it has never been overruled by the Colorado Supreme Court and was recently followed in In re Kobernusz, 160 B.R. 844, 847-48 (D.Colo.1993). See also Miller v. Monrean, 507 P.2d 771, 774-75 (Alaska 1973) (quoting Rutter with approval). We likewise are required to follow it.
Moreover, we note that the “compensation paid” language in the Colorado statute is virtually identical to the language in the Social Security Act,
The protection afforded by Sec. 407 is to “moneys paid” and we think the analogy to veterans’ benefits exemptions which we reviewed in Porter v. Aetna Casualty and Surety Co., 370 U.S. 159 [82 S.Ct. 1231, 8 L.Ed.2d 407 (1962)], is relevant here. We held in that case that veterans’ benefits deposited in a savings and loan association on behalf of a veteran retained the “quality of moneys” and had not become a permanent investment. Id., at 161-162 [82 S.Ct. at 1232-33].
Id. 409 U.S. at 416, 93 S.Ct. at 592 (citations omitted). We hold that pension benefits which constitute “compensation paid” under the Colorado statute retain their exempt status just like “moneys paid” under the Social Security Act do. Mr. Guidry is therefore entitled to an exemption from garnishment of the uncommingled pension benefits held by him in his bank account.
C.
In his petition for rehearing, Mr. Guidry also challenges the panel‘s resolution of his claims concerning the applicability of the Texas blanket pension exemption under the Texas anti-garnishment law. To the extent Mr. Guidry is claiming that the Texas statute applies to the attempted seizure of the funds in Texas, the claim is moot. Having stipulated that all issues concerning the attempted seizure of funds in Texas were rendered moot when the funds were transferred to Colorado, Mr. Guidry effectively stipulated the mootness of his claim that the Texas statute applies to this seizure.
To the extent that Mr. Guidry is arguing that the Texas statute nevertheless applies to funds after their transfer to Colorado, his claim is without any legal support. Mr. Guidry has cited no law to indicate that a Texas exemption would apply to a Colorado garnishment proceeding. In fact, the law is to the contrary. See Garrett v. Garrett, 490 P.2d 313, 315 (Colo.App.1971) (“Colorado follows the general rule that exemption laws have no extraterritorial effect.“).
In summary, we REMAND this action for further proceedings in light of this opinion with respect to the Colorado statute governing exemption from garnishment.11
BRORBY, Circuit Judge, joined by STEPHEN H. ANDERSON and TACHA, Circuit Judges, dissenting.
The rain it raineth on the just
And also on the unjust fella:
But chiefly on the just, because
The unjust steals the just‘s umbrella.
Charles Bowen, Thad Stem Jr., and Alan Butler, Sam Ervin‘s Best Short Stories (1973).
The majority today has ruled that a thief is free to keep the fruits of his crime under Colorado law. If the majority is correct, Colorado shines as a welcome beacon to all embezzlers proclaiming: Embezzle from your employer and keep your pension because Colorado law prohibits recovery. I do not read Colorado law as mandating this bizarre result; therefore, I respectfully dissent from this en banc decision on the matter of Mr. Guidry‘s claimed exemption from garnishment under Colorado law.
Colorado exempts seventy-five percent of certain types of “earnings” from garnishment.
As with any question of statutory interpretation, we begin with the language of the statute. The noun “avails” is defined as a “profit, benefit, value ... or proceeds.” Webster‘s Third New Int‘l Dictionary 150 (1981). In Black‘s Law Dictionary (6th ed. 1990), “profits” are defined as “the gross proceeds of a business transaction less the costs of the transaction; i.e. net proceeds.” Id. at 1211. The definition of “proceeds” includes “[i]ssues; income; yield; receipts; produce; money or articles or other thing of value arising or obtained by the sale of property; the sum, amount, or value of property sold or converted into money or into other property.... The funds received from disposition of assets or from the issue of securities (after deduction of all costs and fees).” Id. at 1204.
The “avails” of pension benefits clearly contemplates the transition of funds from the plan to the participant or beneficiary. “Avails” includes a yield from the plan, received from its disposition of assets, following administrative costs and fees. Colorado law protects, then, not only funds within the plan but also the process of payment of the funds to the participant or beneficiary. Still, however, the plain language of
The term “avails” can be extended only so far. During distribution, the pension plan hands payment to the participant or beneficiary. Once payment is received or directed to a bank, the pension plan lets go. Absent that clasp, that transaction, the term “avails” loses meaning. The term “avails” is further restricted by the entire definition of “earnings” under Colorado law. Avails of a plan only include “compensation paid or payable.”
This interpretation is supported by a comparison with other Colorado pension protection statutes. Acts providing pensions to state police and firemen state “no part of [the] fund, either before or after any order for the distribution thereof to the members or beneficiaries of such fund ... shall be held, seized, taken, subjected to, detained, or levied on by virtue of any attachment,” except for child support purposes.
The majority has concluded a faithless servant, an embezzler, a man who steals from the hard earned labors of the workers, is entitled to keep the fruits of his crime. I do not believe the Colorado legislature or the Colorado courts would permit such an unconscionable result. It is nonsensical to assume Colorado would want a thief to keep ill-gotten gains. Like Mr. Bumble of Oliver Twist,2-1 I believe “[i]f the law supposes that, ... the law is a ass--a idiot,” and I am not willing to believe Colorado law to be either.
The majority has used impeccable logic and marvelous analysis to conclude Colorado law mandates an unjust result. I cannot read Colorado law in such a fashion.
Notes
Without attempting any comment on the scope of the garnishment exemption upon wages, Rutter does not change the interpretation of the scope of pension fund protection. The Rutter court did not specifically comment on the legislature‘s intent to protect pension benefits as it would protect wages, assuming pension benefits were exempt from garnishment in 1891. To the contrary, the recent amendments to the garnishment scheme show the Colorado legislature is content to treat pension benefits as a completely separate category from wages. See 1991 Colo.Sess.Laws 383 Secs. 1, 3. Because I would not grant Mr. Guidry‘s state law exemption, I will not address the deeper questions of federal preemption.
No monies, property or equity, of any nature whatsoever in the Fund or policies or benefits or monies payable therefrom, shall be subject in any manner by an Employee or person claiming through such Employee to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, garnishment, mortgage, lien or charge, and any attempt to cause the same subject thereto shall be null and void.
(Apt.App. to Answer and Reply, at 39.)including funds, held in or payable from any pension or retirement plan or deferred compensation plan, ... including pensions or plans which qualify under the federal “Employee Retirement Income Security Act of 1974” as an employee pension benefit plan, as defined in 29 U.S.C. sec. 1002....
1991 Colo.Sess.Laws 383, Sec. 1 (codified at“There shall be exempt from levy under execution or attachment or garnishment the wages and earnings of any debtor to an amount not exceeding one hundred dollars, earned during the thirty days next preceding such levy,”
....Rutter, 26 P. at 322 (quoting Act of March 28, 1885, Sess.Laws p. 262) (emphasis added).