United States v. Charles Herbert Smith , 47 F.3d 681 ( 1995 )

WILLIAMS, Circuit Judge,

dissenting:

I am unable to accept the majority’s conclusion that the anti-alienation provision of ERISA precludes the district court from entering a restitution order that takes into consideration Smith’s retirement income as a source from which, when received, he can make payments to compensate the numerous victims of his criminal acts.¹ In my opinion, the majority errs in relying on two Supreme Court decisions which do not answer the question before us and in creating a circuit split with two Courts of Appeal that have confronted the question. Accordingly, having discerned no error on the part of the district court in the formulation of its restitution order, I respectfully dissent from the majority opinion and would affirm the decision of the district court.

The majority primarily bases its decision on Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365, 376, 110 S.Ct. 680, 687, 107 L.Ed.2d 782 (1990). In Guidry, the Supreme Court addressed whether the imposition of a constructive trust by the district court violated the statutory prohibition on assignment or alienation of pension benefits under § 206(d)(1) of ERISA, 29 U.S.C. § 1056(d)(1). Id. Specifically, in that case, Guidry had not received any pension benefits at the time the district court imposed the constructive trust. The Court held that § 206(d)(1) applied to garnishment proceedings and that the imposition of a constructive trust remedy in such a setting violated ERISA. Id. at 376-77, 110 S.Ct. at 687-88. Important for this case, the Supreme Court reasoned that it would be inappropriate “to approve any generalized equitable exception- — either for employee malfeasance or for criminal misconduct — to ERISA’s prohibition on the assignment or alienation of pension benefits.” Id. at 376, 110 S.Ct. at 687. This proposition forms the basis, in large part, upon which the majority decides this case. Op. at 682-84.

While I certainly agree with the majority that under Guidry the federal courts are not to fashion equitable exceptions to the assignment and alienation provision of ERISA, I conclude that Guidry does not resolve the specific issue before us which can be decided under the statute: whether § 206(d)(1) of ERISA and the Department of Treasury’s interpretation of “assignment” or “alienation” in the Treasury Regulations, Treas. Reg. 1.401(a)-13(c), prohibit a restitution order that may affect pension benefits that Smith will have received at the time a payment is to be made. The best demonstration of this difference comes from the Tenth Circuit Court of Appeals on remand of Guidry. Unable to impose a constructive trust over Gui-dry’s pension plan, the district court on remand was confronted with whether it could issue an order that imposed garnishment of benefits after they were paid to Guidry. Guidry v. Sheet Metal Workers Int’l Ass’n, 10 F.3d 700, 704-05 (1993) (Guidry II), modified on reh’g and remanded on other grounds, 39 F.3d 1078 (10th Cir.1994) (en banc). The district court held that it could. On appeal, one of Guidry’s main contentions was that the kind of order the district court could issue had been resolved by the Supreme Court. Id. at 705. The Tenth Circuit disagreed, reasoning:

The Supreme Court, in considering a constructive trust, (1) held that ERISA § 206(d)(1) applied to garnishment proceedings, Guidry, 493 U.S. at 371-72, 110 S.Ct. at 684-85; and (2) reversed the imposition of a constructive trust over the pension benefits of Mr. Guidry in the plan, id. at 376-77, 110 S.Ct. at 687. This case, in contrast, involves a writ of garnishment issued by a Colorado court upon the garnishee, First Interstate Bank, subjecting the pension funds of Mr. Guidry in the account to the process of garnishment. This case, therefore, is factually distinct from Guidry in the critical respect that the garnishment process is over funds that Mr. Guidry has received, whereas the constructive trust invalidated by Guidry was over benefits in the plan.

Guidry II, 10 F.3d at 706 (emphasis added). The panel’s reasoning was unanimously upheld when the question was considered by the Tenth Circuit en banc. Guidry v. Sheet Metal Workers Nat’l Pension Fund, 39 F.3d 1078, 1081 (10th Cir.1994) (en banc) (Guidry III ).² For the same reasons offered by the Tenth Circuit on remand, I believe that the Guidry decision does not resolve the issue presented here and that we must take a fresh look at the relevant statutory and regulatory provisions.

Since the issuance of Guidry two of our sister circuits have addressed the issue we face and held that pension funds, once distributed, are no longer protected under § 206(d)(1). Guidry II, 10 F.3d at 705-08, Guidry III, 39 F.3d at 1081-83; Trucking Employees of North Jersey Welfare Fund v. Colville, 16 F.3d 52, 55 (3rd Cir.1994). I agree with the reasoning offered in these decisions and, for the purposes of this dissent, will simply summarize the major points in their decisions. To begin, the relevant statutory text in § 206(d)(1), “[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated,” 29 U.S.C. § 1056(d)(1), is ambiguous when one attempts to discern the meaning of “benefits provided under the plan.” Guidry II, 10 F.3d at 708. Given the ambiguity in the text of the statute, the Guidry II and Trucking Employees courts turned to the Department of Treasury regulation which define “assignment” and “alienation” as:

Any 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.

Treas. Reg. § 1.401(a) — 13(e)(l)(ii) (emphasis added). As did the courts in Guidry II and Trucking Employees, I would hold that while there is admittedly some tension between the general principle under ERISA of protecting the beneficiary’s retirement benefits and the Department of the Treasury’s interpretation of the anti-alienation provision, the agency’s interpretation is clear, reasonable, and entitled to deference under Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984); Trucking Employees, 16 F.3d at 55-56 (applying interpretation to restitution order); Guidry II, 10 F.3d at 710 (applying interpretation to garnishment proceeding). Under the above-stated regulatory provision, the restitution order against Smith’s “received retirement income is not an action against the plant;] it is not prohibited by ERISA § 206(d)(1) as implemented by the ERISA Regulations.” Guidry II, 10 F.3d at 710. Following our two sister circuits, I would hold that pension funds, once distributed, are no longer protected under § 206(d)(1).

This conclusion is further bolstered by our decision in Tenneco Inc. v. First Virginia Bank, 698 F.2d 688, 690-91 (4th Cir.1983). In Tenneco, we confronted a question substantially similar to the one at issue here. The question there was whether an employee’s interest in an ERISA plan was “subject to garnishment by a judgment creditor of the employee.” Id. at 689. The discussion in that case turned in large part on the fact that when the employee was terminated, all accrued benefits “became payable to him within a reasonable time after his request.” Id. Interpreting the substantially similar language contained in Treas. Reg. § 1.401(a)-13(b)(1), we held that the balances remaining in the employee’s pension accounts were not garnishable, but that those funds that had been withdrawn by the employee (and not rolled-over into another qualified plan within the allowed sixty-day period) were garnisha-ble. Id. at 690-691. In so holding, we rejected the employee’s argument that any funds, whether paid out to him or not, that had accumulated in the pension accounts were “forever immune” from attachment by a creditor. Specifically, we held that we could find “[n]o provision of ERISA” that would support protection for the funds once they were no longer in a qualified ERISA approved plan. Id. at 691. In short, as I read Tenneco, we drew a distinction between the protection afforded benefits still in the hands of the trustee and the protection afforded distributed funds in the hands of the beneficiary — exactly the proposition espoused by the courts in Guidry II and Trucking Employees.

The majority attempts to avoid this interpretation by narrowly construing the holding in Tenneco to draw “a distinction between funds disbursed from an ERISA plan before an employee has retired [Tenneco ] and such funds paid as an annuity for retirement purposes [this case].” Slip Op. at 5. Finding nothing in the ERISA statutory text or regulations to support a distinction between disbursed funds before and after retirement, the majority relies on the Supreme Court’s decision in Guidry for support of the proposition that “the purpose of ERISA is to safeguard a stream of income for pensioners.” Id. Once again, while I agree with this general principle, I cannot agree with its application where ERISA’s statutory language and regulations make clear that the benefits, once distributed, may be attached. Left without support from Guidry, the majority puts forth the following without any direct support from ERISA or ease law: “Where an employee elects to draw on her ERISA plan prior to her retirement, she forfeits the protection provided by the Act. Where, however, the funds are paid pursuant to the terms of the plan as income during retirement years, ERISA prohibits their alienation.” Op. at 683. I cannot agree with such a distinction.

Finally, I do not find support for the majority’s pre-retirement/post-retirement distinction in Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979). In Hisquierdo, the Supreme Court determined that a spouse’s expectation of receiving railroad retirement benefits (not an ERISA-covered plan) was not subject to allocation and division between spouses by a state domestic court. Id. at 590-91, 99 S.Ct. at 812-13. In reaching this conclusion, however, the Court, noting the prohibition on alienation of benefits to a divorced spouse under 45 U.S.C. § 231d(c)(3), id. at 585-86, 99 S.Ct. at 810-11, merely implemented the express intent of Congress specified in the Railroad Retirement Act (the RRA). 45 U.S.C. § 231m(a). The text of § 231m(a) states, in relevant part:

Notwithstanding any other law of the United States, or of any State, territory, or the District of Columbia, no annuity or supplemental annuity shall be assignable or be subject to any tax or to garnishment, attachment, or other legal process under any circumstances whatsoever, nor shall the payment thereof be anticipated....

Id. (emphasis added). The majority reads this provision as being “substantially similar” to the anti-alienation provision at stake in this case. Op. at 683. I cannot agree, as there is nothing in either ERISA’s text or regulatory provisions suggesting an equivalent breadth of protection to benefits as preventing alienation “under any circumstances whatsoever.” Accordingly, while Hisquierdo may — like the Supreme Court decision in Guidry — support the general proposition that courts should not generally favor allowing the beneficiary to lose his benefits, the case simply does not answer the more precise inquiry of statutory interpretation that I believe must be addressed in order to resolve this ease. The decision of the majority fails to account for the clear language of the Treasury regulation to which we owe deference as a reasonable agency interpretation. Furthermore, it is at odds not only with the law of this circuit but also with that articulated by the Third and Tenth Circuits. Since neither of the Supreme Court opinions cited by the majority appears to control the question, I wonder that the majority has chosen to ignore a reasonable agency interpretation of § 206(d)(1) and create a split among the circuits to reach such a seemingly inequitable result which denies restitution to victims of illegal conduct. I, therefore, respectfully dissent.

1 . Of course, should Mr. Smith's financial condition change, he would be able to apply to the court for a modification of the restitution payments. 18 U.S.C.A. § 3663(g) (West 1985 & Supp.1994).

2 . It is worth noting that, procedurally, the en banc court in Guidry III did not vacate the panel opinion in Guidry II. In fact, the en banc court relied in large part upon the analysis offered by the panel in its discussion of what issues were and were not resolved when the Supreme Court had previously heard the case. Guidry III, 39 F.3d at 1081 n. 2 ("We find no reason to further clarify or disturb the panel's analysis of the law of [the] case. See Guidry II, 10 F.3d at 705-08, for the full discussion.”).