United States v. Cunningham

• Decision Date: 11 June 2012
• Docket Number: No. 4:07–cr–08.,4:07–cr–08.
• Citation: 866 F.Supp.2d 1050
• Parties: UNITED STATES of America, Plaintiff, v. Ramona CUNNINGHAM, Defendant.
• Court: U.S. District Court — Southern District of Iowa

866 F.Supp.2d 1050

UNITED STATES of America, Plaintiff,

v.Ramona CUNNINGHAM, Defendant.

No. 4:07–cr–08.

United States District Court, S.D. Iowa.

June 11, 2012.

John S. Courter, William C. Purdy, United States Attorney, Des Moines, IA, for Plaintiff.

Chip J. Lowe, Howe Cunningham Lowe & Kelso PLC, Urbandale, IA, for Defendant.

ORDER

ROBERT W. PRATT, District Judge.

Before the Court is a Motion to Quash Writ of Garnishment, filed by Ramona Cunningham (“Defendant”) on March 3, 2012. Clerk's No. 320. This motion was filed in conjunction with Defendant's Objections to Garnishment of IPERS Benefits.¹ Clerk's No. 319–1. The Government filed a Resistance to the motion on March 15, 2012. Clerk's No. 324. On March 27, 2012, the Court held a hearing on the motion. Clerk's No. 326. The matter is fully submitted.

I. FACTUAL AND PROCEDURAL HISTORY

Iowa Public Employees' Retirement System (“IPERS”) is a public pension system that provides retirement benefits to various categories of covered Iowa state employees. See Hr'g Tr.² at 3–4. Both employers and employees fund the program by making regular contributions in accordance with a statutorily devised payment schedule. Id. at 6. As a state of Iowa employee, Defendant participated in IPERS between 1984 and 2006. See id. at 10. In July 2008, the Social Security Administration determined that Defendant was disabled and awarded her social security disability benefits. See id. at 20–21. This determination triggered Defendant's eligibility for IPERS disability retirement benefits. See id. at 16. Accordingly, since March 2009, Defendant has been receiving monthly IPERS payments of $2,701.92.³See id. at 17. She will continue to receive monthly payments for the remainder of her life but will not receive any residual payment upon her death. See id.

On June 30, 2008, Defendant pled guilty to six counts of fraud relating to the misapplication of funds provided under the Federal Workforce Investment Act. See Clerk's No. 211. On December 15, 2008, Defendant was sentenced to 84 months incarceration and was later ordered to pay $1,799,066.00 in restitution. See Clerk's Nos. 239, 290. This amount is to be paid jointly and severally with her co-defendants. To date, $1,651,09.00 of the restitution is unpaid. Resistance at 1. Individually, Defendant has contributed $1,111.00 towards the restitution. Id.

On February 6, 2012, the Clerk of Court, pursuant to 28 U.S.C. § 3205(a), issued a Writ of Continuing Garnishment (hereinafter the “Writ”) requiring IPERS to provide a description of any of Defendant's property in its possession, the amount of any payments it anticipated owing Defendant in the future, and directing IPERS to immediately withhold and retain, pending further order of Court, any property in which Defendant has a nonexempt interest for which IPERS is or could become indebted to her. See Clerk's No. 310. IPERS indicated that it anticipated paying Defendant $2,701.92 per month for the remainder of her life. See Clerk's No. 313. Defendant now seeks to quash this Writ. Clerk's No. 319, 320.

II. APPLICABLE LAW AND ANALYSIS

This case requires the Court “to find a correct path through the labyrinth of federal execution statutes.” Paul Revere Ins. Group v. United States, 500 F.3d 957, 961 (9th Cir.2007). Generally, the Government may enforce a restitution judgment using the same procedures that are available to enforce a civil judgment. See18 U.S.C. § 3613(a). One such enforcement mechanism is garnishment. “A court may issue a writ of garnishment against property (including nonexempt disposable earnings) in which the debtor has a substantial nonexempt interest and which is in the possession, custody, or control of a person other than the debtor, in order to satisfy the judgment against the debtor.” 28 U.S.C. § 3205(a). A garnishment order may only be terminated by satisfaction of the debt, exhaustion of the garnished property, or a court order quashing the writ of garnishment. See id. § 3205(c)(10).

Defendant raises five arguments for quashing the Writ. Specifically, Defendant claims that: (1) the Writ was issued in violation of § 3205(b)(1)(B) because the Government did not make a written demand on the debtor for payment of the debt more than thirty days prior to moving for garnishment; (2) Defendant's IPERS benefits are not subject to garnishment because both Iowa and federal law contain anti-alienation provisions applicable to pension plans; (3) failing to allow Defendant to exempt her IPERS benefits from garnishment, pursuant to 28 U.S.C. §§ 3001 and 3014, violates Defendant's Fifth Amendment right to equal protection; (4) failing to allow Defendant to exempt her IPERS benefits from garnishment as a pension payment, when other types of pension payments are exempt under 26 U.S.C. § 6334(a)(6), violates Defendant's Fifth Amendment right to equal protection; ⁴ and (5) her monthly IPERS payments qualify as earnings and, as such, pursuant to 15 U.S.C. § 1673(a), the Government may only garnish twenty-five percent of those payments.⁵ The Court will address each argument in turn.

A. Thirty Day Notice Period

Defendant first argues that the Government failed to comply with the statutory mandate that it make a written demand for payment of the debt at least thirty days prior to applying for a writ of garnishment. See28 U.S.C. § 3205(b)(1)(B) (requiring that the United States include in its application for a writ of garnishment “the facts that not less than thirty days has elapsed since demand on the debtor for payment of the debt was made and the judgment debtor has not paid the amount due”). However, the Government provided evidence that on July 29, 2010, and again on August 9, 2010, the Department of Justice sent notices to Defendant requesting payment of her restitution in full. See Ex. 1 (Clerk's No. 324–1). Both of these requests were made more than thirty days prior to January 27, 2012, the date that application for the Writ was made. Further, the Government's application for the Writ noted that a demand had been made for payment of the debt not less than thirty days from the date of the application and that the amount had not been paid. See Clerk's No. 309 at 1. Thus, the Writ was not issued in violation of § 3205(b)(1)(B).

B. Anti–Alienation Clauses

Defendant next argues that the Government is prohibited from garnishing her IPERS benefits because of anti-alienation clauses in both state and federal statutes that pertain to pension plans such as IPERS. Defendant specifically cites Iowa Code § 97B.39, a statute establishing an individual's right to future payments from IPERS, which states in relevant part:

The right of any person to any future payment under this chapter is not transferable or assignable, at law or in equity, and the moneys paid or payable or rights existing under this chapter are not subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law except for the purposes of enforcing child, spousal, or medical support obligations or marital property orders.

Defendant also claims that federal law prohibits the assignment or alienation of retirement benefits, noting that § 401(a)(13)(A) of the Internal Revenue Code (hereinafter “I.R.C.” or, when referencing this statutory section, “ERISA”) states: “[a] trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated.”

Defendant is correct that, with the exception of several narrowly defined circumstances not present here, Iowa Code § 97B.39 prohibits garnishment of IPERS benefits. However, Iowa law is not applicable in this case because it is preempted by federal law. An order of restitution is enforceable through the procedures established in 18 U.S.C. § 3613. ⁶See18 U.S.C. §§ 3664(m)(1)(A)(i), 3613(f). Section 3613(a)(2) specifically states that 28 U.S.C. § 3014,⁷ a federal statute generally permitting federal judgment debtors to apply state law property exemptions, is not applicable when the Government enforces a judgment for a criminal fine or restitution. In other words, § 3613(a)(2) prohibits the application of the anti-alienation clause contained in Iowa Code § 97B.39. To the extent that Iowa law conflicts with federal law governing garnishment of Defendant's IPERS benefits, Iowa law is preempted. See28 U.S.C. § 3003(d) (“This chapter shall preempt State law to the extent such law is inconsistent with a provision of this chapter.”); United States v. DeCay, 620 F.3d 534, 542–43 (5th Cir.2010) (“To the extent Louisiana law is inconsistent with [federal laws governing collection of restitution], Louisiana law is preempted.”).

Similarly, the anti-alienation clause contained in I.R.C. § 401(a)(13)(A) does not prevent the Government from garnishing retirement benefits to satisfy a criminal judgment debt. The Government may enforce a restitution order “against all property or rights to property of the person” ordered to pay restitution, “[n]otwithstanding any other Federal law.” 18 U.S.C. § 3613(a). The use of the phrase “notwithstanding any other Federal law” indicates that “Congress intended to override ERISA's anti-alienation provision and allow the government to reach defendants' ERISA-covered retirement plan benefits when enforcing criminal restitution orders.” United States v. Novak, 476 F.3d 1041, 1049 (9th Cir.2007); see also DeCay, 620 F.3d at 540 (“We conclude that the language in § 3613(a) authorizing the United States to enforce a garnishment order against ‘all property or rights to property’ of the debtor, ‘[n]otwithstanding any other Federal law,’ is sufficient to override the anti-alienation provision of the IRC.”); United States v. Hosking, 567 F.3d 329, 335 (7th Cir.2009) (holding that the ERISA anti-alienation clause does not prevent a district court from ordering payment from a qualified trust towards...