Lowenschuss v. Selnick

170 F.3d 923, 22 Employee Benefits Cas. (BNA) 2649, 1999 U.S. App. LEXIS 4244
CourtCourt of Appeals for the Ninth Circuit
DecidedMarch 17, 1999
DocketNos. 96-17213, 97-16506
StatusPublished
Cited by7 cases

This text of 170 F.3d 923 (Lowenschuss v. Selnick) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lowenschuss v. Selnick, 170 F.3d 923, 22 Employee Benefits Cas. (BNA) 2649, 1999 U.S. App. LEXIS 4244 (9th Cir. 1999).

Opinion

CYNTHIA HOLCOMB HALL, Circuit Judge:

Fred Lowenschuss (“Debtor”) appeals the district court’s orders: (1) affirming the bankruptcy court’s order granting Beverly Selnick’s (“Selniek”) motion for leave to seek a QDRO in the Pennsylvania courts; (2) vacating the bankruptcy court’s ruling that the Pennsylvania divorce court awarded Selniek a money judgment in Debtor’s beneficial interest in the Fred Lowenschuss & Associates at Law Pension Plan (the “Pension Plan”); and (3) vacating the bankruptcy court’s order confirming Debtor’s proposed plan of reorganization. Sun International, Inc.1 (“Sun”) has intervened in that part of the appeal addressing the district court’s order vacating the bankruptcy court’s money judgment ruling. We have jurisdiction under 28 U.S.C. § 158(d), and we affirm each of the district court’s orders.

BACKGROUND

On September 28, 1981, Selniek filed for divorce in the Pennsylvania courts. Almost ten years later, in July 1991, a Pennsylvania divorce court entered an order (the “Divorce Decree”) for the equitable distribution of the marital property of Debtor and Selniek. The Divorce Decree awarded Selniek, inter alia, 38.7% of Debtor’s interest in the Pension Plan. The divorce court ordered Debtor to transfer to Selniek the full value of her 38.7% share directly from the Pension Plan. One month later, instead of transferring to Sel-nick her share of the Pension Plan assets, Debtor transferred over $8 million in Pension Plan assets out of Pennsylvania to avoid the jurisdiction of the Pennsylvania courts. Debtor followed his assets out of Pennsylvania, relocating in Nevada where, on August 24, 1992, he filed a Chapter 11 bankruptcy petition.2 On his bankruptcy petition, Debt- or listed as excluded from the bankruptcy estate his beneficial interest in the Pension Plan as an ERISA qualified plan under 11 U.S.C. § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). In the alternative, Debtor claimed that his beneficial interest in the Pension Plan was exempt from the bankruptcy estate under 11 U.S.C. § 522(b).

In deciding the composition of Debtor’s bankruptcy estate, the bankruptcy court determined that the Pension Plan was “ERISA qualified,” and therefore excluded from the bankruptcy estate Debtor’s beneficial interest in the Pension Plan (the “Exclusion Order”). Selniek appealed the Exclusion Order. Debtor then submitted to the bankruptcy court a proposed plan of reorganization. During the plan confirmation hearing, the bankruptcy court ruled that the Divorce Decree had awarded Selniek a money judgment against Debtor, and not a property interest in the Pension Plan. While Selnick’s appeal of the Exclusion Order was still pending, the bankruptcy court confirmed Debtor’s plan of reorganization (the “Confirmation Order”). Selniek appealed both the money judgment ruling and the Confirmation Order.

On appeal, the district court vacated the Exclusion Order, and remanded the case to the bankruptcy court to hear additional testimony on the exclusion issue. In addition, the district court ordered the bankruptcy court to grant Selniek leave to seek a Qualified Domestic Relations Order (“QDRO”) in the Pennsylvania courts. Pending resolution of the exclusion issue, the district court stayed Selnick’s appeal of the money judgment ruling and the Confirmation Order, and issued a related minute order declaring that the plan of reorganization could not be confirmed until the exclusion issue had been resolved. Debtor immediately appealed, but the Ninth [928]*928Circuit dismissed the appeal for lack of jurisdiction.

On remand, the bankruptcy court granted Selnick’s motion for leave to petition the Pennsylvania courts for a QDRO. Debtor appealed the QDRO order, and the district court affirmed. Debtor now appeals the district court’s order affirming the bankruptcy court’s QDRO order.

In addition, the bankruptcy court determined that the Pension Plan was not ERISA qualified, and that therefore Debtor’s beneficial interest in the Pension Plan could not be excluded from Debtor’s bankruptcy estate. Having resolved the exclusion issue, the bankruptcy court determined that Debtor’s beneficial interest in the Pension Plan was not exempt from the bankruptcy estate under Nevada law.3

Following resolution of the exclusion and exemption issues, the district court lifted the stay on Selnick’s appeal of the Confirmation Order. The district eourt then vacated both the money judgment ruling and the Confirmation Order, and remanded the case to the bankruptcy court. Debtor appealed the district court’s order, and Sun intervened in the appeal of that part of the district court’s order vacating the money judgment ruling.

DISCUSSION

I. QDRO ORDER

Debtor contends that the bankruptcy court erred by granting Selnick’s motion to lift the automatic stay to allow Selnick to petition the Pennsylvania courts for a QDRO. We disagree.

We will reverse the QDRO order only if the bankruptcy court abused its discretion. In re Conejo Enters., Inc., 96 F.3d 346, 351 (9th Cir.1996). The bankruptcy court did not abuse its discretion because Selnick showed more than adequate cause for relief from the automatic stay in her motion to petition the Pennsylvania courts for a QDRO.4 See 11 U.S.C. § 362(d)(1); Conejo, 96 F.3d at 352 (requiring bankruptcy court to grant relief from automatic stay for cause).

Debtor listed on his bankruptcy petition as excluded under 11 U.S.C. § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), his beneficial interest in the Pension Plan. The Supreme Court decided in Patterson that a debtor’s interest in a pension plan could be excluded from the debtor’s bankruptcy estate if the pension plan contained a transfer restriction that was enforceable under ERISA See 504 U.S. at 758-60, 112 S.Ct. 2242. Because Patterson was decided in June 1992, almost one year after the Divorce Decree was entered and just two months before Debtor filed his petition, the QDRO issue did not become important until Debtor’s bankruptcy. Therefore, the bankruptcy court did not abuse its discretion when it granted Sel-nick’s motion to lift the automatic stay to allow her to return to the Pennsylvania courts to seek a QDRO. Neither Debtor, Selnick, nor the Pennsylvania divorce court could have known during the divorce proceeding that the QDRO issue would be important in the future.5 Nor could the divorce court have anticipated that Debtor would transfer all of his assets out of Pennsylvania and flee the jurisdiction of the Pennsylvania courts.

Debtor contends that the bankruptcy court granted Selniek’s motion for a QDRO only [929]

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170 F.3d 923, 22 Employee Benefits Cas. (BNA) 2649, 1999 U.S. App. LEXIS 4244, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lowenschuss-v-selnick-ca9-1999.