476 F.3d 1041 (9th Cir. 2007), 04-55838, United States v. Novak

Docket Nº:04-55838.
Citation:476 F.3d 1041
Party Name:UNITED STATES of America, Plaintiff-Appellant, v. Raymond P. NOVAK, Defendant-Appellee.
Case Date:February 22, 2007
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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476 F.3d 1041 (9th Cir. 2007)

UNITED STATES of America, Plaintiff-Appellant,


Raymond P. NOVAK, Defendant-Appellee.

No. 04-55838.

United States Court of Appeals, Ninth Circuit

February 22, 2007

Argued and Submitted October 3, 2006

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[Copyrighted Material Omitted]

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Brent A. Whittlesey, Assistant United States Attorney, Los Angeles, California, for the plaintiff-appellant.

Martin S. Bakst, Encino, California, for the defendant-appellee.

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

Before: Mary M. Schroeder, Chief Circuit Judge, Harry Pregerson, Stephen Reinhardt, Andrew J. Kleinfeld, Michael Daly Hawkins, Sidney R. Thomas, Barry G. Silverman, M. Margaret McKeown, Kim McLane Wardlaw, William A. Fletcher, Richard A. Paez, Marsha S. Berzon, Johnnie B. Rawlinson, Richard R. Clifton, and Jay S. Bybee, Circuit Judges.


BERZON, Circuit Judge:

We are asked to determine whether — and if so, under what circumstances — a criminal defendant's retirement benefits are available as a source of funds to compensate crime victims. Answering these questions requires reconciling two federal statutory schemes — one, the Mandatory Victims Restitution Act of 1996 ("MVRA"), Pub. L. No. 104-132, 110 Stat. 1227, governing the payment of restitution to crime victims, and the other, the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, 1 regulating private pension plans. Underlying each statute is a weighty policy determination: MVRA rests on the recognition that "[i]t is essential that the criminal justice system recognize the impact that crime has on the victim, and, to the extent possible, ensure that [the] offender be held accountable to repay these costs." S. Rep. No. 104-179, at 18 (1995). ERISA is meant to assure that "[r]etirement funds shall remain inviolate until retirement." Boggs v. Boggs, 520 U.S. 833, 851, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997) (quoting John H. Langbein & Bruce A. Wolk, Pension and Employee Benefit Law 547 (2d ed. 1995)) (internal quotation mark omitted). Taking a close look at the statutory implementation of these two important policies, we conclude that criminal restitution orders can be enforced by garnishing retirement funds, but with the funds only payable when the defendant has a current, unilateral right to receive payments under the terms of the retirement plan.


From 1995 to 1999, Raymond Novak and his former wife, Norma Ortega Nance, engaged in a scheme to steal telephone equipment from the Nestlé Food Company, resell the equipment, and pocket the proceeds. Nance, a Nestlé employee, had access to the equipment, which she then passed along to Novak to sell. The scheme cost Nestlé over $3.3 million. Unsurprisingly, Novak did not report the earnings from this illicit trade on his federal tax returns.

In December 2002, Novak pleaded guilty, pursuant to a plea agreement, to Conspiracy to Transport Stolen Goods, 18 U.S.C. § 371, and Filing a False Tax Return, 26 U.S.C. § 7206(1). He received a twenty-four month prison term and three years of supervised release. The district court also "ordered that the defendant shall pay restitution in the total amount of $3,360,051.67 pursuant to [MVRA]." Novak was required to make an initial $25,000

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restitution payment within three months of the plea hearing, with the balance "due during the period of imprisonment." He did not appeal that judgment.

Novak was employed by The May Department Stores Company from 1990 to 2003, during which time he was covered by the company's retirement plans. In July 2003, the U.S. Attorney's Office began asking May for records of Novak's interests in the company's retirement plans. May responded that Novak had earned benefits under two plans: The May Department Stores Company Retirement Plan ("May Retirement Plan") and The May Department Stores Company Profit Sharing Plan ("May Profit Sharing Plan"). Under the former plan, "Novak's annual accrued benefit payable as a single life annuity at age 65 was $10,836.00."2Under the latter plan, Novak's various index fund and company stock holdings had a total value of $142,245.11 as of September 30, 2003. May also noted that "[i]n accordance with the terms of the Plans, as a result of his termination, [Novak] is entitled to receive distributions of his benefits in The May Department Stores Company Retirement Plan and his accounts under The May Department Stores Company Profit Sharing Plan. In order to receive payment of his benefits and accounts, [Novak] must complete and submit an Application for Payment of Benefits (Form EB-50). . . to the Plan Administrator."3 Both plans come within the scope of ERISA.

As of September 2003, Novak's restitution payments were, under the terms of the restitution order, more than $3.3 million in arrears. The government is responsible for enforcing restitution orders and turning the funds collected over to victims. See 18 U.S.C. §§ 3664(m)(1)(A)(i), 3612(c)(2). To implement this responsibility, the government moved for enforcement against Novak's assets by applying for and receiving a writ of garnishment directed to May, pursuant to the Federal Debt Collection Procedures Act ("FDCPA"). See 28 U.S.C. § 3205. Novak moved to quash the writ, arguing that the anti-alienation provision found in section 206(d)(1) of ERISA, 29 U.S.C. § 1056(d)(1), prevented such garnishment. The district court ruled that our interpretation of the ERISA anti-alienation provision in United States v. Jackson, 229 F.3d 1223 (9th Cir. 2000), which held that ERISA's anti-alienation provision applies to criminal restitution orders, prevented such garnishment. It therefore quashed the writ.

On the government's appeal, a divided panel held that MVRA overrides ERISA's anti-alienation provision. 441 F.3d 819 (9th Cir. 2006). The panel majority determined that Jackson did not control this case, because Jackson had not considered MVRA's statutorily mandated criminal restitution provisions. We reheard this appeal en banc to determine whether the government can garnish retirement plans covered by ERISA as a means of enforcing criminal restitution orders.4457 F.3d 981 (9th Cir. 2006).


To address that question, we must resolve the apparent tension between a pair of statutory provisions that, on first glance, suggest different answers.

On the one hand, the 1996 enactment of MVRA made criminal restitution orders

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enforceable against all of a defendant's property, not excepting from its reach ERISA-covered retirement benefits. After dictating that restitution orders are enforceable in the same manner as criminal fines, 18 U.S.C. §§ 3663A(d), 3664(m)(1)(A)(i), section 206(c)(3) of MVRA states:

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 [certain enumerated] section[s] of the Internal Revenue Code of 1986 shall be exempt from enforcement of the judgment under Federal law;5

(2) [FDCPA procedures for exempting certain property] shall not apply to enforcement under Federal law; and

(3) the provisions of . . . the Consumer Credit Protection Act [limiting the garnishment of disposable earnings] shall apply to enforcement of the judgment under Federal law or State law.

18 U.S.C. § 3613(a) (emphasis added).6

At the same time, ERISA broadly protects covered retirement benefits from dissipation through payment to third parties, even if the payments are authorized by a plan participant or would otherwise be valid by force of law. Under Section 206 of ERISA, "[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); see also 26 U.S.C. § 401(a)(13)(A) (mandating that trusts are entitled to favorable retirement plan tax treatment only if they contain an anti-alienation provision). Section 206 includes two exceptions, for domestic relation orders and for offsets to recover for wrongs committed against the retirement plan. To "give[] full and appropriate effect to ERISA's goal of protecting pension benefits," the Supreme Court has "declined to recognize any [other] exceptions to ERISA's anti-alienation provision." Patterson v. Shumate, 504 U.S. 753, 764, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). In doing so, the Court has explained:

Section 206(d) reflects a considered congressional policy choice, a decision to

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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. If exceptions to this policy are to be made, it is for Congress to undertake that task.

Guidry v. Sheet Metal Workers Nat'l Pension Fund, 493 U.S. 365, 376, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990).


Our effort to reconcile the broad MVRA enforcement provision and ERISA's stringent prohibition on alienation of pension benefits begins with the language of MVRA, allowing the enforcement of criminal restitution orders against "all property or rights to property," "[n]otwithstanding any other Federal law." 18 U.S.C. § 3613(a) (emphases added).

By its use of the "all property or rights to property" language, id. (emphasis added), Congress has made quite clear that the totality of defendants' assets will be subject to restitution orders. The Supreme Court emphasized the breadth of the "all property or rights to property" phrase in the context of...

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