In re Komet, Bankruptcy No. 88-50379-C.

• Decision Date: 05 July 1989
• Docket Number: Bankruptcy No. 88-50379-C.
• Parties: In re Harvey KOMET & Eleanor B. Komet, Debtors.
• Court: U.S. Bankruptcy Court — Western District of Texas

104 B.R. 799 (1989)

In re Harvey KOMET & Eleanor B. Komet, Debtors.

Bankruptcy No. 88-50379-C.

United States Bankruptcy Court, W.D. Texas, San Antonio Division.

July 5, 1989.

Claiborne B. Gregory, Jr., Gresham, Davis, Worthy & Moore, San Antonio, Tex., for debtors.

Ruth Lown, Wolff & Wolff, San Antonio, Tex., for First City Nat. Bank of San Antonio.

Gloria Scott, Martin & Drought, Inc., San Antonio, Tex., for San Antonio Sav. Ass'n.

James H. Barrow, Kaufman, Becker, Clare & Padgett, Inc., San Antonio, Tex., for Texas Commerce Bank — San Antonio.

Richard H. Weinstein, Oppenheimer, Rosenberg, Kelleher & Wheatley, Inc., San Antonio, Tex., Employee Benefits Committee, Section of Taxation State Bar of Texas.

DECISION AND ORDER

LEIF M. CLARK, Bankruptcy Judge.

This court previously heard the objections of First City Bank-Central Park, N.A., First City Bank-Forum, N.A., San Antonio Savings Association and Texas Commerce Bank-San Antonio ("creditors") to the exemptions claimed by Harvey Komet and Eleanor B. Komet ("debtor") in a pension plan and a profit sharing plan, pursuant to Bankruptcy Code Section 522(b)(2)(A) and the recently enacted Texas exemption statute for retirement plans, Section 42.0021 of the Texas Property Code. Tex.Prop.Code, § 42.0021 (West pamphl. ed. 1988). In light of the U.S. Supreme Court's decision in Mackey v. Lanier Collections Agency & Service, Inc., 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988) (hereinafter Mackey), this court held that the Texas exemption statute was unavailable as it was preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"). In re Komet, 93 B.R. 498 (Bankr.W.D.Tex. 1988); see 29 U.S.C. § 1144(a).

The debtors moved to reconsider, to further argue the preemption issue. This court granted the debtors' motion, heard extensive oral argument, and considered the briefs submitted not only by the parties to this case but also from the amicus curae, the Employee Benefit Committee, Section of Taxation for the State Bar of Texas.

After careful reconsideration of this court's previous ruling, and with the benefit of decisions since rendered by other bankruptcy courts in Texas on the same or similar issue, I reaffirm my decision that the Texas exemption statute for retirement plans is indeed at least partially preempted by ERISA, and certainly preempted in this case. See In re Dyke, 99 B.R. 343, 19 BCD 105 (Bankr.S.D.Tex.1989); In re Volpe, 100 B.R. 840 (Bankr.W.D.Tex.1989); In re Laxson, 102 B.R. 85 (Bankr.N.D.Tex.1989). However, this court vacates its order sustaining creditors' objections to the claimed exemptions. The court will allow the debtors to retain their plans pursuant to Code Section 522(b)(2)(A), finding these plans are exempt by virtue of the anti-alienation provisions of ERISA. ERISA § 206(d)(1), codified at 29 U.S.C. § 1056(d); see also 26 U.S.C. § 401(a)(13).

LEGAL ANALYSIS

I. Texas' Exemption for ERISA tax-qualified retirement plans is pre-empted by operation of Section 514(a) of ERISA.

Following Mackey, this court previously found that Texas' exemption statute for ERISA tax-qualified employee pension benefit plans "relates to" ERISA and is thereby preempted. In re Komet, 93 B.R. 498 (Bankr.W.D.Tex.1988), reh'ng. granted; see Tex.Prop.Code, § 42.0021 (West pamphl. ed. 1988). I reaffirm that decision here, for the following reasons. First, the precise language of Mackey itself compels that conclusion. Second, the expansive scope of ERISA supports Mackey's equally expansive application of Section 514(a) of ERISA. Finally, even under a more limited reading of the scope of pre-emption, such as that suggested in Fort Halifax (cited and discussed infra), Texas' statute impermissibly encroaches upon the due administration of ERISA plans, compelling a finding of pre-emption.

A. The binding precedent of Mackey compels a finding that Texas' exemption statute for ERISA-qualified plans is pre-empted under ERISA Section 514(a).

The Supreme Court in Mackey observed that the Georgia anti-garnishment provision there under review

expressly refers to — indeed, solely applies to — ERISA employee benefit plans . . . "A law `relates to\' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." . . . we have reaffirmed this rule, concluding that state laws which make "reference to" ERISA plans are laws that "relate to" those plans within the meaning of Section 514(a).....

Mackey, 486 U.S. at ___, 108 S.Ct. at 2185, 100 L.Ed.2d at 843.¹ Under the expansive reading given to Section 514(a) by Mackey, it is nearly impossible for a state statute such as Section 42.0021 of the Texas Property Code to survive pre-emption. In re Dyke, 99 B.R. 343, 348, 19 BCD 105, 109 (Bankr.S.D.Tex.1989) (Mahoney, B.J.); In re Laxson, 102 B.R. 85 (Bankr.N.D.Tex. 1989) (McGuire, B.J.); contra In re Volpe, 100 B.R. 840 (Bankr.W.D.Tex.1989) (Kelly, B.J.). In Dyke, Bankruptcy Judge Margaret Mahoney pointed out that

given the Supreme Court\'s interpretation of the phrase "relate to," in Shaw v. Delta Air Lines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1985) the court in Mackey expended little analysis in determining that Georgia\'s anti-garnishment statute was pre-empted by ERISA. The statute\'s express reference to ERISA plans as well as the "different treatment" accorded to non-ERISA plans under the statute established the factual predicate for the court\'s conclusion. Logically absent from the Court\'s analysis was any discussion of whether the Georgia statute was "in conflict with" ERISA\'s substantive provisions. The Court in Shaw had already rejected the narrow interpretation of the phrase "relate to" as only embracing those state laws that directly clash with ERISA\'s substantive provisions.

In re Dyke, supra, 99 B.R. at 348, 19 BCD at 109 (citations omitted).

I concur in Judge Mahoney's evaluation of Mackey and its impact on Texas' exemption law for private retirement plans governed by ERISA.² It is simply not possible to evade the clear mandate that a law which "makes reference to" an ERISA plan faces pre-emption under Section 514(a). See 120 Cong.Rec. H29197 (1974) (remarks of Rep. Dent) (pre-emption principle is intended to be applied in its broadest sense to foreclose any non-Federal regulation of employee benefit plans); see also Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th Cir. 1989) (state laws beyond the scope of ERISA pre-emption are few). The Texas statute, by incorporating ERISA,³ seeks to insulate ERISA pension benefits from the reach of creditors, an area already regulated by ERISA. ERISA § 206(d), codified at 29 U.S.C. § 1056(d); 26 U.S.C. § 401(a)(13)(B); 26 CFR § 1.401(a)-13(b)(1); see Commercial Mortgage Ins. Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D.Tex.1981). "Any state law which singles out ERISA plans, by express reference, for special treatment is pre-empted." Mackey, 486 U.S. at ___, n. 12, 108 S.Ct. at 2189 n. 12, 100 L.Ed.2d at 849 n. 12; See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549, 1552-1553, 95 L.Ed.2d 39, 107 S.Ct. 1549 (1987); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1985). Even though this reference is entirely salutary and consistent with the purposes of ERISA, it is nonetheless a reference sufficient to bring Texas' statute within the ambit of Mackey's holding. "The pre-emption provision . . . displaces all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirement." Mackey, 486 U.S. at ___, 108 S.Ct. at 2185, 100 L.Ed.2d at 844, citing Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at 739, 105 S.Ct. at 2388.

I also reject the contention that Texas' statute is "too tenuous, remote, or peripheral" to trigger pre-emption under Section 514(a) of ERISA. In re Volpe, 100 B.R. 840 (Bankr.W.D.Tex.1989); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 2901 n. 21, 77 L.Ed.2d 490, 501 n. 21 (1985). The Fifth Circuit pointed out that one appropriate predicate for the application of this exception to the broad reach of Section 514(a) is that the state law in question be one of "general application." Sommers Drug Stores v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1467 (5th Cir. 1986). Judge Mahoney, examining the Texas exemption statute, correctly observed that

Section 42.0021 is clearly not a state law of general application. Instead, Section 42.0021 is a state law of specific application designed to regulate in part ERISA plan benefits. It specifically exempts qualified benefit plans from creditor attachment. This is not a state law which exempts many types of property and only indirectly affects qualified benefit plans.

In re Dyke, 99 B.R. at 350, 19 BCD at 110. A state statute which by its terms explicitly enters into a field expressly regulated by a provision of ERISA (here, Section 206(d) of ERISA) is simply not a statute which "may affect employee benefit plans in too tenuous, remote or peripheral a manner . . ." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 2901 n. 21, 77 L.Ed.2d 490, 503 n. 21 (1985).⁴

B. The holding in Mackey is consistent with congressional intent with regard to ERISA.

When Congress enacted ERISA in 1974, it intended to thoroughly occupy the field of private employee benefit plans, to the exclusion of all state laws and regulations. See H.R.Conf.Rep. No. 1280, 93rd Cong., 2d Sess. 383 (1974); D. Gregory, "The Scope of ERISA Preemption of State Law: A Study in Effective Federalism," 48 Pitt LR 427, 449-457 (1987); ERISA § 514(a), codified at 29 U.S.C. § 1144(a). ERISA, by definition, governs

Any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee

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