U.S. v. Novak, 04-55838.

• Citation: 441 F.3d 819
• Decision Date: 23 March 2006
• Docket Number: No. 04-55838.,04-55838.
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Raymond P. NOVAK, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

441 F.3d 819

UNITED STATES of America, Plaintiff-Appellant, v. Raymond P. NOVAK, Defendant-Appellee.

No. 04-55838.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 16, 2006.

Filed March 23, 2006.

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

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

Appeal from the United States District Court for the Central District of California; Consuelo B. Marshall, Chief Judge, Presiding. D.C. No. CV-03-06706-CBM.

Before ALFRED T. GOODWIN, BETTY B. FLETCHER, and CONSUELO M. CALLAHAN, Circuit Judges.

CALLAHAN, Circuit Judge.

The United States appeals from the district court's order quashing its writ of garnishment of Raymond Novak's benefits under a pension plan subject to the Employment and Retirement Income Security Act of 1974 ("ERISA"). The district 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 Mandatory 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 telephone 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 district 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 Department 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 garnishment to the May Company for amounts owed to Novak.

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 government responded, and the district court held a hearing.

On March 5, 2004, the district court issued an order quashing 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 Pension Fund, 493 U.S. 365, 376, 110 S.Ct. 680, 107 L.Ed.2d 782 (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 argument 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).

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 provision 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, 110 S.Ct. 680.

In Guidry, the Court was concerned with the remedial provisions 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 organization." Guidry, 493 U.S. at 374, 110 S.Ct. 680. The Court assumed, without deciding, that the LMRDA's statutory provision might authorize the imposition of a constructive trust, and stated that the question presented was "whether that authorization may override ERISA's prohibition on the alienation of pension benefits." Id. at 374-75, 110 S.Ct. 680. 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, 110 S.Ct. 680.

The Court also declined to find any "generalized equitable exception" to ERISA's anti-alienation provision. Id. at 376, 110 S.Ct. 680. It observed that the anti-alienation provision reflected a "considered 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 decision 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.

The Court further explained that the creation of exceptions was particularly problematic in the context of an anti garnishment provision because such a provision, by definition, hinders the collection of a lawful debt. Id. Thus, a restriction on garnishment "can be defended only on the view that the effectuation of certain broad social policies sometimes takes precedence over the desire to do equity between particular parties." Id. (emphasis in original). The Court cautioned 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, 110 S.Ct. 680. 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, Congress 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 exception 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.

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 victims 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 requires district courts to order restitution for victims in cases involving property loss.² This is the type of broad social policy determination that the Supreme Court in Guidry noted was appropriate for Congress, but not the courts.

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 restitution 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.

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 judgment imposing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law. Notwithstanding any other Federal law (including section 207 of the Social Security Act), a judgment imposing 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 Internal Revenue Code of 1986 shall be exempt from enforcement of...