United States v. Novak

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 22, 2006
• Docket: 04-55838
• Status: Published

Opinion

FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,  No. 04-55838 Plaintiff-Appellant, v.  D.C. No. CV-03-06706-CBM RAYMOND P. NOVAK, OPINION Defendant-Appellee.  Appeal from the United States District Court for the Central District of California Consuelo B. Marshall, Chief Judge, Presiding

Argued and Submitted February 16, 2006—Pasadena, California

Filed March 23, 2006

Before: Alfred T. Goodwin, Betty B. Fletcher, and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Callahan; Dissent by Judge B. Fletcher

3173 UNITED STATES v. NOVAK 3175

COUNSEL

Debra Yang, United States Attorney, Leon W. Weidman, and Brent A. Whittlesey, Assistant United States Attorneys of Los Angeles, California, for the appellant.

Martin S. Bakst of Encino, California, for the appellee.

OPINION

CALLAHAN, Circuit Judge:

The United States appeals from the district court’s order quashing its writ of garnishment of Raymond Novak’s bene- fits under a pension plan subject to the Employment and Retirement Income Security Act of 1974 (“ERISA”). The dis- 3176 UNITED STATES v. NOVAK trict court held that such a garnishment was prohibited by ERISA’s anti-alienation provision, 29 U.S.C. § 1056(d)(1). We reverse and remand because we determine that the Man- datory Victims Restitution Act of 1996 (“MVRA”), 18 U.S.C. § 3663A, in conjunction with 18 U.S.C. § 3613, constitutes a statutory exception to ERISA’s anti-alienation provision.

I

The criminal information filed against Novak alleged that between 1995 and 1999 he transported certain valuable tele- phone boards in interstate commerce knowing that the boards were stolen. His then-wife was employed by Nestle U.S.A., Inc. (“Nestle”). Novak’s wife would order the telephone boards for Nestle, then steal the boards and deliver them to Novak, who would sell them. Novak was also charged with failing to report the income he received from selling the stolen telephone boards on his 1997 federal income tax returns.

Novak pleaded guilty to charges of conspiracy to transport stolen goods in violation of 18 U.S.C. § 371 and filing false income tax returns in violation of 26 U.S.C. § 7206. The dis- trict court sentenced him to 24 months’ imprisonment and ordered him to pay restitution in the amount of $3,360,051.67.

From February 1990 to March 2000, Novak worked as the director of telecommunications at Robinsons-May Depart- ment Stores (“May Company”). During that time, he earned pension benefits that were fully vested at the time of his plea. It appears that under the pension plan, Novak, after reaching the age of sixty-five, would be entitled to an annual payment of almost $11,000, or he could immediately withdraw the entire amount, which had a market value of $142,245.11 as of September 30, 2003.

On September 18, 2003, at the government’s request, the Clerk of the district court issued a post-judgment writ of gar- nishment to the May Company for amounts owed to Novak. UNITED STATES v. NOVAK 3177 The writ was issued pursuant to the garnishment provisions of the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3205. Novak objected to the garnishment, the gov- ernment responded, and the district court held a hearing.

On March 5, 2004, the district court issued an order quash- ing the writ of garnishment. The government filed a timely notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II

When it quashed the writ of garnishment, the district court recognized that a pension fund was the type of property that may be reached by the United States pursuant to the FDCPA. The district court, however, relying primarily on the Supreme Court’s opinion in Guidry v. Sheet Metal Workers Nat’l Pen- sion Fund, 493 U.S. 365, 376 (1990), and our decision in United States v. Jackson, 229 F.3d 1223 (9th Cir. 2000), held that garnishment was prohibited by ERISA’s anti-alienation provision. The district court rejected the government’s argu- ment that the MVRA created an exception to ERISA’s anti- alienation provision.

Both the interpretation of ERISA and the applicability of other statutes to ERISA are questions of law that we review de novo. Shaver v. Operating Eng’rs Local 428 Pension Trust Fund, 332 F.3d 1198, 1201 (9th Cir. 2003); Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1455 (9th Cir. 1995).

[1] Our evaluation of this case starts with the Supreme Court’s explanation of ERISA’s anti-alienation provision in Guidry. There, the Court held that the anti-alienation provi- sion prohibited the imposition of a constructive trust on, or garnishment of, a pension covered by ERISA “unless some exception to the general statutory ban is applicable.” Guidry, 493 U.S. at 372. 3178 UNITED STATES v. NOVAK In Guidry, the Court was concerned with the remedial pro- visions of the Labor-Management Reporting and Disclosure Act of 1959 (“LMRDA”), 29 U.S.C. § 501(a) (1982). This statute provided, under certain circumstances, for a private right of action “to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organi- zation.” Guidry, 493 U.S. at 374. The Court assumed, without deciding, that the LMRDA’s statutory provision might autho- rize the imposition of a constructive trust, and stated that the question presented was “whether that authorization may over- ride ERISA’s prohibition on the alienation of pension bene- fits.” Id. at 374-75. The Court held that it did not, reasoning that the LMRDA would not be:

modified, impaired, or superseded by our refusal to allow ERISA pension plans to be used to effectuate the remedial goals of the LMRDA. Were we to accept respondents’ position, ERISA’s anti- alienation provision would be inapplicable whenever a judgment creditor relied on the remedial provisions of a federal statute.

Id. at 375.

The Court also declined to find any “generalized equitable exception” to ERISA’s anti-alienation provision. Id. at 376. It observed that the anti-alienation provision reflected a “consid- ered congressional policy choice, a decision to safeguard a stream of income for pensioners (and their dependents, who may be, and perhaps usually are, blameless), even if that deci- sion prevents others from securing relief for the wrongs done them.” Id. It stressed that “[i]f exceptions to this policy are to be made, it is for Congress to undertake that task.” Id.

[2] The Court further explained that the creation of excep- tions was particularly problematic in the context of an anti garnishment provision because such a provision, by defini- tion, hinders the collection of a lawful debt. Id. Thus, a UNITED STATES v. NOVAK 3179 restriction on garnishment “can be defended only on the view that the effectuation of certain broad social policies some- times takes precedence over the desire to do equity between particular parties.” Id. (emphasis in original). The Court cau- tioned that courts “attempting to carve out an exception that would not swallow the rule would be forced to determine whether application of the rule in particular circumstances would be ‘especially’ inequitable.” Id. at 377. For this reason, the Court concluded that “the identification of any exception should be left to Congress.” Id.

We determine that with the passage of the MVRA, Con- gress did what the Supreme Court in Guidry indicated it could do: enact a statutory exception to ERISA’s anti-alienation provision. We find that Congress enacted a statutory excep- tion because (a) the MVRA is a specific collection statute designed to provide victims with restitution, and (b) Congress provided for restitution orders to be enforced like tax liens, which are enforceable against ERISA pension benefits.

[3] While the purposes behind the remedial provision of the LMRDA at issue in Guidry were not clear, Congress enacted the MVRA specifically “to ensure that the loss to crime vic- tims is recognized,” and to establish that in addition to other penalties authorized by law, “the offender makes restitution to the victim.” S. REP. NO. 104-179, at 12 (1995), as reprinted in 1996 U.S.C.C.A.N. 924, 925-27.1 To that end, the MVRA 1 Senate Report 104-179 includes the following statements: The purpose of H.R. 665 is to improve the administration of jus- tice in Federal criminal cases by requiring Federal criminal defendants to pay full restitution to the identifiable victims of their crimes. ... The committee amendment is intended first, to require that full restitution be ordered to the victims of all covered offenses in which there is an identifiable victim, second, to establish one set 3180 UNITED STATES v. NOVAK requires district courts to order restitution for victims in cases involving property loss.2 This is the type of broad social pol- icy determination that the Supreme Court in Guidry noted was appropriate for Congress, but not the courts.

[4] The MVRA also provides that restitution orders are to be enforced by the government using all of the remedies that are available for the collection of criminal fines. 18 U.S.C. § 3664(m)(1)(A)(i); see also United States v. Phillips, 303 F.3d 548, 550-51 (5th Cir. 2002) (holding that the “MVRA provides the Government authority to enforce victim restitu- tion orders in the same manner that it recovers fines and by all other available means”). In addition, 18 U.S.C. § 3613, which is entitled “Civil remedies for satisfaction of an unpaid fine,” states that “an order of restitution made pursuant to [the MVRA] is a lien in favor of the United States on all property and rights to property of the person fined as if the liability of the person fined were a liability for a tax assessed under the Internal Revenue Code of 1986.” 18 U.S.C. § 3613(c). Thus, Congress has made the policy choice to elevate the collection of criminal restitution orders in the debt-collection food chain to equal the position enjoyed by the Internal Revenue Service in the collection of its unpaid tax demands.

of procedures for the issuance of restitution orders in Federal criminal cases, and third, to consolidate the procedures for the collection of unpaid restitution with existing procedures for the collection of unpaid fines, while at the same time strengthening these procedures. S. REP. NO. 104-179, at 12-14 (1995), as reprinted in 1996 U.S.C.C.A.N. 924, 925-27. 2 18 U.S.C. § 3663A(a)(1) states: Notwithstanding any other provision of law, when sentencing a defendant convicted of an offense described in subsection (c), the court shall order, in addition to, or in the case of a misdemeanor, in addition to or in lieu of, any other penalty authorized by law, that the defendant make restitution to the victim of the offense or, if the victim is deceased, to the victim’s estate. UNITED STATES v. NOVAK 3181 [5] In § 3613, Congress also defined what limited types of property are beyond the government’s reach. Subsection (a) of 18 U.S.C. § 3613 states:

Enforcement. The United States may enforce a judg- ment imposing a fine in accordance with the prac- tices and procedures for the enforcement of a civil judgment under Federal law or State law. Notwith- standing any other Federal law (including section 207 of the Social Security Act), a judgment impos- ing a fine may be enforced against all property or rights to property of the person fined, except that—

(1) property exempt from levy for taxes pursuant to section 6334(a)(1), (2), (3), (4), (5), (6), (7), (8), (10), and (12) of the Inter- nal Revenue Code of 1986 shall be exempt from enforcement of the judgment under Federal law; . . . .

Two features of this statute inform our position that ERISA pension plans are not exempted. First, the statute specifically states “[n]otwithstanding any other Federal law[,]” all proper- ties may be reached except those specifically exempted by the statute. Second, none of the exemptions in 18 U.S.C. § 3613(a)(1) apply to ERISA pension plans.3 We further note that as some of the exemptions are quite detailed and concern properties similar to ERISA pension plans, we cannot assume that the exclusion of ERISA pension plans was an oversight.4 3 Additional exemptions are set forth in § 3613(a)(2) and (3), but they have no bearing on this case. 4 For example, 26 U.S.C. § 6334(a)(6) and (7), which exempt certain annuity and pension payments and workmen’s compensation payments, respectively state: (6) Certain annuity and pension payments. Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension pay- 3182 UNITED STATES v. NOVAK Indeed, we have already so held, having determined that the government may levy a tax lien against a delinquent tax- payer’s ERISA protected assets. In re McIntyre, 222 F.3d 655, 660 (9th Cir. 2000). In McIntyre we reversed the lower court’s determination that ERISA’s anti-alienation provision prevented the IRS from levying on the benefits from any ERISA-governed pension plan. We explained:

the Internal Revenue Code expressly indicates that no other federal law shall exempt property from the IRS’s authority to levy a delinquent taxpayer’s prop- erty under § 6331. See 26 U.S.C. § 6334(c). More- over, ERISA’s anti-alienation clause cannot prevent the IRS from undertaking what would otherwise be a valid exercise of its levy authority under 26 U.S.C. § 6331, because ERISA itself has a saving clause that states: “Nothing in this subchapter [which includes the anti-alienation provision] shall be con- strued to alter, amend, modify, invalidate, impair, or supersede any law of the United States.” 29 U.S.C. § 1144(a).

Id. at 660. We concluded that “it is plain that the IRS’s authority to proceed against a delinquent taxpayer’s interest in benefits from an ERISA-governed plan is not constrained by ERISA’s anti-alienation provision.”5 Id. The issue, thus, is

ments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Honor roll (38 U.S.C. 1562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code. (7) Workmen’s compensation. Any amount payable to an indi- vidual as workmen’s compensation (including any portion thereof payable with respect to dependents) under a workmen’s compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico. 5 We also noted that other courts had reached the same conclusion, citing Shanbaum v. United States, 32 F.3d 180, 182-83 (5th Cir. 1994) UNITED STATES v. NOVAK 3183 reduced to whether the government’s writ of garnishment to enforce a criminal restitution order has the same reach as a writ of garnishment to enforce a tax lien. We hold that it does.

Although a tax liability to the federal government is con- ceptually different from an order of restitution to a defrauded party, Congress, in enacting the MVRA, made the social pol- icy decision to treat the latter in the same manner as the former.6 As noted, the Supreme Court in Guidry recognized that exemptions to ERISA’s anti-alienation provision concerned broad social policies, which were properly within the prov- ince of Congress. Guidry, 493 U.S at 376-77. In enacting the MVRA and providing for the enforcement of restitution orders through 18 U.S.C. § 3613, Congress — as the Supreme Court in Guidry indicated that it could — has created a statu- tory exception to ERISA’s anti-alienation provision.

We note that our conclusion is in accord with lower court decisions from around the country. E.g., United States v. Lazorwitz, No. 5:04 CV 161 F, 2005 WL 3732741, at * 2 (E.D.N.C. Nov. 17, 2005) (holding that because the defen- dant’s “interest in an ERISA qualified plan does not fit within

(“[r]eading the unambiguous language of Internal Revenue Code section 6334(c) with the mandate contained in section 1144(d) of ERISA, Shan- baum’s argument that the IRS levy authority yields to the later enacted non-alienation provision is without merit”); United States v. Sawaf, 74 F.3d 119, 123-24 (6th Cir. 1996) (upholding the treasury regulation that authorizes the IRS to levy on the benefits of an ERISA-governed plan and applying that regulation to uphold the IRS’s collection against such bene- fits); and Anderson v. United States, 149 B.R. 591, 595 (9th Cir. BAP 1992) (upholding a tax lien against benefits from an ERISA-governed plan). 6 The broad social policies may be seen in the language in Senate Report 104-179 which notes that the legislation was needed “to ensure that the loss to crime victims is recognized, and that they receive the restitution that they are due,” and so that “the offender realizes the damage caused by the offense and pays the debt owed to the victim as well as to society.” S. REP. NO. 104-179, at 12 (1995), as reprinted in 1996 U.S.C.C.A.N. 924, 925. 3184 UNITED STATES v. NOVAK any exceptions listed in § 3613(a), ERISA is not a bar to gar- nishment”); United States v. James, 312 F. Supp. 2d 802, 805 (E.D. Va. 2004) (“Because defendant’s interest in an ERISA qualified plan does not fit within any of the exceptions listed in § 3613(a), it follows that ERISA is no bar to garnishment of a qualified pension plan to collect a criminal restitution order.”); United States v. Tyson, 242 F. Supp. 2d 469, 474 (E.D. Mich. 2003) (“[T]his Court holds that 18 U.S.C. § 3613 is an express statutory exception to the anti-alienation provi- sion of ERISA[.]”); United States v. Sowada, No. 03-240, 2003, WL 22902613, at *2 (E.D. La. Dec. 9, 2003) (holding that “the United States can garnish ERISA funds for satisfac- tion of criminal fines and penalties,” and observing that to “hold otherwise would give convicted criminal defendants greater rights than those of citizens who owe a tax debt to the government.”); United States v. Rice, 196 F. Supp. 2d 1196, 1202 (N.D. Okla. 2002) (“With the passage of 18 U.S.C. § 3613, Congress created an exception to ERISA’s anti- alienation provision by subjecting all of a criminal defen- dant’s property to execution for the collection of a criminal fine.”).

III

Finally, our decision is not inconsistent with our opinion in Jackson. There, the district court, without reference to any statute, had ordered Jackson to use benefits from his ERISA pension plan to pay a criminal restitution order. 229 F.3d at 1224. On appeal, Jackson for the first time raised ERISA’s anti-alienation provision as a defense. Id. at 1225. We found that there was no equitable exception to the anti-alienation provision, and accordingly held that it was plain error to order Jackson to draw out his ERISA plan benefits. Id.

Our determination in Jackson that there was no applicable equitable exception to ERISA’s anti-alienation provision was an accurate reading of Guidry, insofar as equitable principles apply generally to common law or statutory spendthrift trusts UNITED STATES v. NOVAK 3185 and their equivalents. There, however, neither party called the district court’s, or this court’s, attention to the specific provi- sions of the MVRA which apply to this case. Congress, in enacting the MVRA post-Guidry, and in providing for the enforcement of restitution orders pursuant to 18 U.S.C. § 3613, created a statutory exception to ERISA’s anti- alienation provision. Accordingly, although Jackson is part of the background against which we review the intersection of the MVRA and ERISA, that case does not require us to ignore the clearly expressed Congressional choice to give the MVRA the same standing the IRS has when it gathers up assets to sat- isfy internal revenue demands.

IV

[6] The Supreme Court in Guidry noted that an anti- alienation provision was based on “the view that the effectua- tion of certain broad social polices sometimes takes prece- dence over the desire to do equity between particular parties.” Guidry, 493 U.S. at 376. It also recognized that it was appro- priate for Congress to create exceptions to an anti-alienation provision. Id. We determine that Congress, by requiring the entry of restitution orders in certain criminal cases (18 U.S.C. § 3663A(a)(1)), by making those restitution orders liens in favor of the United States (18 U.S.C. § 3613(c)), and by authorizing the enforcement of those orders against all proper- ties not exempt from the reach of the United States for the payment of taxes (see 19 U.S.C. § 3613(a)), has created a stat- utory exemption to ERISA’s anti-alienation provision. Accordingly, the district court’s order quashing the writ of garnishment is VACATED and this matter is REMANDED.

B. FLETCHER, Circuit Judge, dissenting:

I respectfully dissent. 3186 UNITED STATES v. NOVAK The majority holds that the Mandatory Victim Restitution Act (MVRA), 18 U.S.C. § 3663A, in conjunction with 18 U.S.C. § 3613, constitutes a statutory exception to ERISA’s anti-alienation provision. However, Guidry v. Sheet Metal Workers National Pension Fund, 493 U.S. 365 (1990), as well as our decision in United States v. Jackson, 229 F.3d 1223 (9th Cir. 2000), require Congress to issue a clear statement of its intent to abrogate ERISA. Neither the MVRA nor 18 U.S.C. § 3613 contains such directive.

Section 206(d) of ERISA provides that benefits under its pension plans “may not be assigned or alienated.” See 29 U.S.C. § 1056(d)(1). Guidry takes an uncompromising approach, finding no exceptions to ERISA’s anti-alienation provision without a clear directive from Congress. “If excep- tions to this policy are to be made, it is for Congress to under- take that task.” Guidry, 493 U.S. at 346. Congress — not courts — determine the exceptions to the statutory bar.1

In Jackson, we reversed a district court decision that ordered a defendant to pay immediate restitution out of the proceeds of his undistributed ERISA pension plan. We fol- lowed Guidry’s unequivocal rejection of any generalized equitable exception to ERISA’s anti-alienation provision, holding that no exception to ERISA’s anti-alienation provi- sion shall lie unless Congress says so.

The few exceptions to this rule are clearly indicated within the statutory text. For instance, § 104(a) of the Retirement Equity Act of 1984, see 29 U.S.C. § 1056(d)(3), clearly man- dates that the anti-alienation provision does not apply to a 1 The Guidry decision honors Congress’ “considered . . . policy choice . . . to safeguard a stream of income for pensioners . . . even if that deci- sion prevents others from securing relief for the wrongs done them.” Id. at 376. And it notes that those social-policy objectives “sometimes take[ ] precedence over the desire to do equity between particular parties.” Id. at 376. UNITED STATES v. NOVAK 3187 qualified domestic relations order. See Guidry, 493 U.S. at 376 & n.18. ERISA contains an explicit, narrow exception to the anti alienation provision in cases of crimes against the pension plan itself. See 29 U.S.C. § 1056(d)(4)(A)(1) (noting that the anti-alienation provision in § 1056(d)(1) “shall not apply . . . if . . . the order or requirement to pay arises . . . under a judgment of conviction for a crime involving such plan . . . .”); see also Jackson, 229 F.3d at 1225.

The majority holds that statutory amendments enacted after Guidry but prior to Jackson constitute an exception to the Guidry principle. First, the MVRA requires district courts to order restitution for victims in cases involving loss of prop- erty. 18 U.S.C. § 3663A(a)(1). Second, under 18 U.S.C. § 3613(a), the “United States may enforce a judgment impos- ing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.” The provision takes effect “[n]otwithstanding any other Federal law,” id., and “all provisions of this section are available to the United States for the enforcement of an order of restitution.” Id. at § (f).

This statutory scheme does not evidence a clear statement to abrogate ERISA’s anti-alienation provision.2 Although the statutory text does mandate restitution, it lacks any express statement (as it does for Social Security, see 18 U.S.C. § 3613(a)) that restitution owed to victims can be collected from ERISA pensions.3 And, as noted previously, there is nothing within ERISA calling for an exception for orders of 2 Neither does the legislative history of the MVRA support the majori- ty’s analysis. Although Congress recognized the importance of compen- sating victims for their losses, the history contains no mention of ERISA or a desire to undermine the anti-alienation provision or the Supreme Court’s holding in Guidry. 3 The majority notes that § 3613 contains no exception for ERISA pen- sion plans. However, the provision does not explicitly include it, either (as in the case of Social Security). It falls short of Guidry’s requirement of an explicit statement abrogating the anti-alienation provision. 3188 UNITED STATES v. NOVAK restitution. Without an express directive in the restitution stat- ute to seize ERISA pensions or a specific carve-out within ERISA’s anti-alienation provision, we should not create one through judicial fiat.

The MVRA determines a certain kind of penalty the gov- ernment can enforce, but it does not resolve “the narrow ques- tion whether that judgment may be collected through a particular means — a [restitution order] placed on the pen- sion.” Guidry, 493 U.S. at 376 (emphasis added). To create such an exception without clear intent is “especially problem- atic in the context of an antigarnishment provision. Such a provision acts, by definition, to hinder the collection of a law- ful debt.” Id.

As the Supreme Court noted in Guidry, “[i]t is an elemen- tary tenet of statutory construction that ‘[w]here there is no clear intention otherwise, a specific statute will not be con- trolled or nullified by a general one.’ ” Id. at 375 (citing Mor- ton v. Mancari, 417 U.S. 535, 550-551 (1974)). Thus, unless and until Congress amends either the ERISA statute to explic- itly provide an exception for restitution orders or the restitu- tion statute to explicitly permit the seizure of ERISA pension assets, the general restitution statute cannot trump ERISA’s more specific anti-alienation provision.

The majority cites a handful of out-of-circuit precedents supporting its conclusion that § 3613 constitutes an exception to the anti-alienation provision. But interpretations of courts in sister jurisdictions are not controlling, especially where, as here, Jackson dictates the contrary outcome. See United States v. Martinez, 967 F.2d 1343, 1347 (9th Cir. 1992) (“we are obliged to follow the law of our circuit over inconsistent law from other circuits”). Unless and until we review that decision en banc, it remains good law, see United States v. Rodriguez- Lara, 421 F.3d 932, 943 (9th Cir. 2005), and the majority is obligated to apply it. UNITED STATES v. NOVAK 3189 Our opinion in Jackson, decided after codification of the MVRA, cannot so easily be brushed aside. Jackson clearly holds that undistributed ERISA funds cannot be used to make restitution payments unless, as per ERISA, the underlying crime involved the particular ERISA plan in question.

The majority sidesteps Guidry’s requirement of a clear con- gressional statement to carve out exceptions to ERISA’s anti- alienation provision and sets up irreconcilable conflict with Jackson. I cannot support such an outcome and therefore dis- sent from the majority’s holding.