OPINION DENYING TRUSTEE’S MOTION FOR STAY PENDING APPEAL
This mаtter is before the Court on the Trustee’s Motion for Stay Pending Appeal of this Court’s September 8, 2011 Order Denying “Trustee’s Objection to Debtors’ Claim of Exemption” with respect to Debt- or Leo Holstine’s exemption of a workers’ compensation redemption payment in the аmount of $138,000 under § 522(d)(ll)(E). The Trustee requests that the Court’s September 8, 2011 Order Denying “Trustee’s Objection to Debtors’ Claim of Exemption” be stayed pending appeal. The Trustee also requests that TCF National Bank be prohibited from allowing the cash in account number XXXXXX539 to be diminished in any amount lеss than $70,000, and that the Debtors be prohibited from disposing of the first $70,000 in that account. The Trustee brings this motion for stay pending appeal pursuant to Fed. R. BankrJP. 8005, L.B.R. (E.D. Mi.) 9014-1, and the applicable Federal Rules of Civil Procedure.
The Debtors oppose this Motion for Stay Pending Appeal.
FACTUAL BACKGROUND
On March 17, 2011, Leo Holstine settled his pending workers’ compensatiоn claim against his employer. The settlement was effectuated by a Redemption Order. The Redemption Order provided for the lump-sum payment to Leo Holstine the amounts of $138,601.46 (balance of settlement), and $20,000.00 (medical set aside). Leo Hol-stine received the redemption payments (in the form of three or four separate checks) in early April, 2011. These checks/payments were deposited into the Holstine’s joint account(s) with TCF Bank. Of the approximate total of $158,000.00 received, approximately $154,000.00 remains intact in the subjeсt joint TCF Bank accounts, with the Holstines having used some proceeds, pre-petition, for payment of on-going medical expenses and personal expenses.
On April 25, 2011, Leo J. Holstine and Paula T. Holstine (the “Debtors”) filed a joint voluntary petition under Chapter 7 of the U.S. Bаnkruptcy Code. The Debtors scheduled a $138,601.46 joint TCF Nation
On September 7, 2011, this Court held an evidentiary hearing at which it overruled the Trustee’s objection to the Debtors’ amended claims of exemption. On September 8, 2011, the Court entered its “Order Denying Trustee’s Objection to Debtors’ Claim of Exemption”.
On September 14, 2011, the Trustee filed his Notice of Appeal from the September 8, 2011 “Order Denying Trustee’s Objection to Debtors’ Claim of Exemption”. The Trustee’s appeal alleges that the Bankruptcy Court erred when it decided that workers’ compensation redemption funds were exempt under 11 U.S.C. § 522(d)(ll)(E).
ANALYSIS
In determining whether a stay pending appeal should be granted under Fed. R.App. P. 8(a), a court considers the same four fаctors that are traditionally considered in evaluating the granting of a preliminary injunction.
Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, et. al.,
1. whether the movant has shown a strong or substantial likelihood of success on the merits;
2. whether the movant has demonstrated irreparable injury;
3. whether the issuance of an injunction would cause substantial harm to others; and
4. whether the public interest is served by the issuance of an injunction.
American Imaging Services, Inc. v. Eagle-Picher Industries, Inc. (In re Eagle-Picher Industriеs, Inc.,
To prevail on this Motion, the Trustee must first establish a likelihood of success on appeаl, i.e. that the Debtors’ exemption of his workers’ compensation redemption is not exemptible under § 522(d)(ll)(E). Section 522(d)(ll)(E) states:
(d) The following property may be exempted under subsection (b)(1) of this section:
(11) The debtor’s right to receive, or property that is traceable tо—
(E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.
As explained in the Court’s Seрtember 7, 2011 Opinion, issued from the bench, the Court found the Debtor’s workers’ compensation redemption award is property that is traceable to a payment in compensation of loss of his future earnings. Therefore, the award may be exempted to the extent rеasonably necessary for the
The Trustee does not contest any of the relevant facts. Those facts are thаt the money the Debtor seeks to exempt is traceable to a workers’ compensation award, awarded for the specific purpose of compensating the Debtor for the loss of future earnings. Nor does the Trustee dispute that the entire amount of this аward is reasonably necessary for the support of the Debtor and the Debtor’s depen-dants. The Trustee’s argument that it will prevail on appeal is based on a purely legal issue. The Trustee argues that, as a matter of law, the Debtor cannot exempt a workеrs’ compensation recovery under 11 U.S.C. § 522(d)(ll)(E) because that section is limited to the exemption of tort recoveries.
The case law does not support the Trustee’s argument that 11 U.S.C. § 522(d)(ll)(E) is limited to the exemption of tort recoveries. While there is case law which has reached that conclusion, those cases were decided in the context of whether to exempt a workers’ compensation award under the more generous exemption provisions of § 522(d)(10) or the more restrictive provisions of 11 U.S.C. § 522(d)(ll)(E).
1
See, Casarow v. Evans (In re Evans),
The cases citеd above are representative of the case law prior to the issuance of
In re Sanchez,
The
Sanchez
court found that the legislative history does not support the interpretation of § 522(d)(ll)(E) set forth by the Trustee, that being that § 522(d)(ll) only applies to tort-based claims and not workers’ compensation claims.
Sanchez,
At the commencement of the evidentiary hearing on September 7, 2011, this Court summarized the case law and stated that, while this Court found the Sanchez dеcision well-reasoned, this Court was undecided as to whether a debtor might also be able to avail himself of the broader protections of 11 U.S.C. § 522(d)(10)(C), even if the debtor had received the workers’ compensation award as a pre-petition lump-sum payment. However, this Court also stated that it agreed with Sanchez that § 522(d)(ll)(E) was clearly not intended by Congress to be limited to the exemption of tort recoveries.
At the conclusion of the evidentiary hearing, this Court found that the Debtor’s workers’ compensation award fell squarely within the provisions of 11 U.S.C. § 522(d)(ll)(E). This Court found that the Debtor’s workers’ compensation award was property traceable to payment in compensation of loss of future earnings and that the entire amount was necessary for the support of the Debtor and the Debtor’s dependants.
The conclusion of the Sanchez court that 11 U.S.C. § 522(d)(ll)(E) is not limited to tort recoveries was reached after a very detailed and careful analysis of both prior case law and legislative history. This Court’s reliance on that conclusion is sound. There is little likelihood that the Trustee will be successful on appeal in convincing an аppellate court that § 522(d)(ll)(E) is restricted in such a manner. 3
The Trustee has also argued that he will prevail on appeal because the Court “did not rely on any precedent when it determined that § 522(d)(ll)(E) was applicable to the bank deposits.” In fact, the Court relied on
In re Sanchez,
The third factor to be weighed in issuing a stay is the potential harm to the estate absent a stay. In this case, the Debtor redeemed a workers’ compensation award. At the evidentiary hearing, the Debtors demonstrated that the funds from the workers’ compensation awаrd were neees-sary for> their support. If these funds were taken from the Debtors, the Debtors would have no income on which to live. In reviewing the entire record in this case, the Court finds that the equities balance in favor of allowing the Debtors to utilize those funds to pay for their suрport.
With respect to the fourth factor, the Court finds that the public interest is not implicated in this case.
For the foregoing reasons, the Trustee’s Motion for Stay Pending Appeal is DENIED.
Notes
. 11 U.S.C. § 522(d)(10) does not restrict the exemption of an award of benefits "to the extent reasonably nеcessary for the support of the debtor and any dependant of the debtor.” If a benefit qualifies for exemption under 11 U.S.C. § 522(d)(10), one-hundred percent of the benefit is exempt.
. The court in Sanchez also found that if the debtor elects to receive a lump-sum payment in settlement of a workеrs’ compensation claim, then § 522(d)(10)(C) is unavailable. This Court does not necessarily adopt that position.
. As noted above, even if a district court were to agree that 11 U.S.C. § 522(d)(ll)(E) was limited to tort recoveries, the appropriate relief, based on the case law, wоuld be to remand the case for a determination of whether relief was appropriate under 11 U.S.C. § 522(d)(10)(C).
. The only case this Court could find which squarely holds that a workers' compensation award deposited pre-petition into a bank account may not be exempted under 11 U.S.C. § 522(d)(10)(C) or 11 U.S.C. § 522(d)(ll)(E) is
In re Michael,