Daimlerchrysler Corp. v. Cox
| Decision Date | 23 May 2006 |
| Docket Number | No. 05-1716.,05-1716. |
| Parties | DAIMLERCHRYSLER CORPORATION and DaimlerChrysler-UAW Pension Agreement, Plaintiffs-Appellees, v. Mike COX, Attorney General of the State of Michigan, and Jay B. Rising, Treasurer of the State of Michigan, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: Victoria A. Reardon, State of Michigan, Department of the Attorney General, Detroit, Michigan, for Appellants. Edward C. Hammond, Clark Hill, Birmingham, Michigan, for Appellees. ON BRIEF: Victoria A. Reardon, Daniel M. Levy, State of Michigan, Department of the Attorney General, Detroit, Michigan, for Appellants. Edward C. Hammond, Florence M. Vincent, Clark Hill, Birmingham, Michigan, Stephanie J. Clifford, Clark Hill, Detroit, Michigan, for Appellees.
Before: SUHRHEINRICH, GILMAN, and ROGERS, Circuit Judges.
This is a case of first impression in this circuit, involving the question of whether Michigan's State Correctional Facility Reimbursement Act (SCFRA), in conjunction with other Michigan laws and with directives from the Michigan Department of Corrections (MDOC), runs afoul of the federal Employee Retirement Income Security Act (ERISA) in cases where prisoners refuse to inform their pension plans of a change of address. The combined effect of the Michigan laws requires wardens to notify pension plans that they should send the prisoner's benefit payments to the institutional address of that prisoner. When a pension payment is received at the prison, it is deposited into the prisoner's institutional account. SCFRA then allows the warden to garnish up to 90% of each deposit to reimburse the state of Michigan for the costs of caring for the prisoner.
In this case, the DaimlerChrysler Corporation, as the fiduciary of its pension plan, brought a declaratory action to void state-court orders and notices, issued pursuant to SCFRA, that informed DaimlerChrysler that it should send benefit payments to the prisoners' institutional addresses. The district court invalidated the orders and notices as violations of ERISA's anti-alienation provision, but only to the extent that DaimlerChrysler is required to "send or make payments of Pension Plan benefits to any address or account other than as designated by the Participants of the Pension Plan, under Pension Plan terms." For the reasons set forth below, we AFFIRM the judgment of the district court.
In Michigan, inmates are permitted to receive mail only at the correctional facility where they are incarcerated. A directive issued by the MDOC also prohibits prisoners from possessing accounts at financial institutions, so prisoners must keep all of their assets in their institutional accounts. Dept. of Corrections Policy Directive No. 04.02.105. Funds credited to a prisoner's account may be used only in accordance with this directive. Id.
Michigan enacted SCFRA to reimburse the state for the costs of detaining and providing for its prisoners. Under SCFRA, the attorney general may seek reimbursement for expenses incurred during a prisoner's incarceration by filing a complaint against the prisoner in the state trial court. Mich. Comp. Laws § 800.404(1). The court, after considering any legal or moral obligations of the prisoner to support any dependents, may order the prisoner to reimburse the state for the costs of incarceration in an amount up to 90% of the prisoner's assets. Mich. Comp. Laws § 800.403(3). A prisoner's assets include his pension benefits. Mich. Comp. Laws § 800.401a(a).
SCFRA also provides mechanisms for ensuring that a prisoner's assets are used to reimburse the state. Pursuant to § 800.404(3) of the Michigan Compiled Laws, the state court may order any person, corporation, or entity having custody of a prisoner's assets to "appropriate and apply the assets or a portion thereof toward reimbursing the state." But this specific provision of SCFRA is not applicable where, as in the present case, a prisoner's assets are held by a private pension plan. Application of § 800.404(3) in those cases would violate ERISA's anti-alienation provision, which states that each plan must "provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1). Instead, in order to recover a prisoner's benefits held by a private pension plan, the state utilizes SCFRA in conjunction with other Michigan laws and with MDOC's prison directives. This combination of laws and directives is at issue in the present case.
Under SCFRA, the attorney general first pursues a judgment against the prisoner and is awarded a percentage of the prisoner's pension payments. See Mich. Comp. Laws §§ 800.403(3), 800.404. The court then orders the prisoner to inform his or her pension plan that any benefit payments should be sent to the institutional address. If the prisoner refuses to comply, the warden of the prisoner's institution must send a copy of the order to the pension plan. The order serves to notify the pension plan of the prisoner's institutional address. Once payments are received at the prison, they are automatically deposited into the prisoner's institutional account.
In the present case, four Michigan prisoners—Gerald Cotter, Alvin Jenkins, Jessy Matthews, and Harold Swanson—are receiving benefit payments from the DaimlerChrysler Corporation-UAW Pension Agreement (Pension Plan). After Jay B. Rising, the state treasurer, filed actions against the prisoners for reimbursement pursuant to SCFRA, the prisoners were each ordered by the court to notify DaimlerChrysler that their pension benefit payments should be mailed to them at their new institutional address. Each order then stated, in slightly modified form, the following:
If the Defendant [prisoner] shall fail or refuse to notify DaimlerChrysler Corporation of his current legal prison address, or . . . any future prison address, the warden or his representative of the correctional facility where [the prisoner] is confined shall serve a copy of this Order, along with certification of the address of the correctional facility . . . upon the DaimlerChrysler Corporation, and this shall serve as notification to DaimlerChrysler Corporation of [the prisoner's] legal address where [the prisoner] is to receive his pension benefits.
The orders then require the warden to make monthly distributions to the state of Michigan in the amount of 90% of any monies deposited into the prisoner's account.
Three of the prisoners—Jenkins, Matthews, and Swanson—did not comply with the court orders requiring them to inform DaimlerChrysler to send their benefit payments to their prison addresses. The fourth prisoner, Cotter, was the only DaimlerChrysler beneficiary who gave DaimlerChrysler this requisite notification. Mike Cox, the Michigan Attorney General, therefore sent DaimlerChrysler three notices pursuant to the respective court orders for the three noncomplying prisoners, informing DaimlerChrysler where "future benefit checks should be mailed." The "Warden's Notice of Alvin Jenkins's Legal Address Pursuant to Final Court Order of May 28, 2004," for example, reads as follows:
Alvin Jenkins has refused to sign the certification of his legal address as required by the [attached] Court's order. Therefore, according to the Order, I am notifying you that Alvin Jenkins's legal address is:
Alvin Jenkins, # 440746
Parnall Correctional Facility
1780 E. Parnall
Jackson, MI 48201
Please make his monthly pension benefit checks payable to Alvin Jenkins and mail them to him at his above legal address. If Alvin Jenkins moves to another prison facility, I will notify you of his new address for purposes of receiving his pension benefit checks according to the Court Order.
The three notices were signed by the warden of each prisoner's correctional institution.
DaimlerChrysler did not comply with the three notices received from the Michigan Attorney General, but instead followed the plan's terms and specifications for sending payments to the prisoners according to the mailing address each prisoner had given DaimlerChrysler in accordance with plan documents. It did, however, change Cotter's address pursuant to his direct request.
In September of 2004, DaimlerChrysler brought a declaratory action against Attorney General Cox and State Treasurer Rising, seeking a determination that (1) state officials are precluded from enforcing the orders against the prisoners to the extent that they contravene ERISA or the Pension Plan, and (2) the orders, requests for reimbursement, and the notices issued pursuant to SCFRA are void to the extent that they compel the prisoner, or require the warden, to direct DaimlerChrysler to make payments to an account that is not voluntarily designated by the prisoner.
DaimlerChrysler argued that SCFRA is preempted by ERISA because SCFRA conflicts with several provisions in the Pension Plan. First, as mandated by ERISA, the Pension Plan provides that "[a]ny attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber [benefits payable under the Pension Plan], whether presently or thereafter payable, shall be void." Pension Plan § 14. The Pension Plan further states that benefits cannot "devolve upon anyone else." Id. DaimlerChrysler also pointed to language from the Pension Plan and the Summary Plan Description (SPD) regarding address changes. In particular, the SPD provides that if a participant's address changes, he "should notify Benefit Express at 1-800-409-3300. . . ." A confidential PIN is also required to access DaimlerChrysler's Benefit Express phone system.
The state officials then filed for summary judgment, arguing that the orders and notices issued pursuant to SCFRA violate neither ERISA's anti-alienation provision nor the corresponding anti-alienation...
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