United States v. Elashi

• Decision Date: 12 June 2015
• Docket Number: Nos. 14–10751,14–10800.,s. 14–10751
• Citation: 789 F.3d 547
• Parties: UNITED STATES of America, Plaintiff–Appellee v. Ghassan ELASHI, Defendant v. Majida Salem, Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

789 F.3d 547

UNITED STATES of America, Plaintiff–Appellee

v.Ghassan ELASHI, Defendant

v.Majida Salem, Appellant.

Nos. 14–10751

14–10800.

United States Court of Appeals, Fifth Circuit.

June 12, 2015.

Megan J. Fahey, Assistant U.S. Attorney, U.S. Attorney's Office, Fort Worth, TX, for Plaintiff–Appellee.

Mario Pfister Cadeddu, Esq., Dallas, TX, John D. Cline, San Francisco, CA, for Appellant.

Appeals from the United States District Court for the Northern District of Texas.

Before BARKSDALE, SOUTHWICK, and HIGGINSON, Circuit Judges.

Opinion

STEPHEN A. HIGGINSON, Circuit Judge:

Appellant Majida Salem appeals the district court's final order of garnishment that orders her to pay the balance of the $3,500 special assessment that was part of her husband's criminal conviction and sentence. Because the Mandatory Victims Restitution Act authorizes the Government to garnish Salem's salary, we must AFFIRM.

FACTS AND PROCEEDINGS

In 2009, Appellant Majida Salem's husband, Ghassan Elashi, was convicted of 35 counts of violating various federal laws. The district court sentenced Elashi to 65 years in prison and ordered him to pay a $3,500 special assessment. As of October 28, 2013, Elashi had paid only $587.12 of the assessment, resulting in a $2,912.88 balance.

Because Elashi's remaining debt was set to expire on May 27, 2014, see 18 U.S.C. § 3013(c), the Government filed an Application for Writ of Garnishment on November 5, 2013. The district court issued a writ of garnishment to Brighter Horizons Academy, Salem's employer, instructing the school to withhold 25% of Salem's take-home pay.See 15 U.S.C. § 1673. Brighter Horizons was served, and it filed an answer stating that Salem's monthly take-home pay is $3,362.12.

On December 3, 2013, Salem moved to quash the writ of garnishment, arguing that Texas state law exempted her wages from garnishment. The district court, however, denied Salem's motion, holding that state-law exemptions do not apply to the enforcement of federal criminal debt. The district court entered a final order of garnishment on July 2, 2014. Salem timely appealed.¹

STANDARD OF REVIEW

This court reviews a garnishment order for abuse of discretion. United States v. Clayton, 613 F.3d 592, 595 (5th Cir.2010). A district court necessarily abuses its discretion if its conclusion is based on an erroneous determination of the law. Id. The controlling issue here is one of statutory interpretation, which is a question of law that the court reviews de novo. Id.

DISCUSSION

The United States is enforcing the federal mandatory special assessment that was imposed at Elashi's sentencing. Special assessments are collected in the same manner as criminal fines and are therefore treated in the same manner as federal tax liens. See 18 U.S.C. §§ 3013(b), 3613(c). The Department of Justice filed a Notice of Lien in the public records in Dallas County to perfect the lien on Elashi's property.

Although federal law creates the lien on Elashi's property, state law defines the property interests to which the lien attaches. See United States v. Rodgers, 461 U.S. 677, 683, 103 S.Ct. 2132, 76 L.Ed.2d 236 (1983) ( “[I]t has long been an axiom of our tax collection scheme that, although the definition of underlying property interests is left to state law, the consequences that attach to those interests is a matter left to federal law.”). Texas is a community property state. The Texas Family Code defines community property as “property, other than separate property, acquired by either spouse during marriage.” Tex. Fam.Code Ann. § 3.002. All property that the spouses possess during their marriage is presumed to be community property, id. § 3.003, and each spouse has an undivided, one-half interest in all community assets, Medaris v. United States, 884 F.2d 832, 833 (5th Cir.1989).

Community property is further classified as either solely managed community property or jointly managed community property. Solely managed community property is “the community property that the spouse would have owned if single, including ... personal earnings” and three other categories that are not relevant to this appeal. Tex. Fam.Code Ann. § 3.102(a)(1). All other property is generally jointly managed community property. Id. § 3.102(c). Ordinarily, Texas law does not allow the creditor of one spouse to garnish the non-debtor spouse's solely managed community property. See id. § 3.202(b). With two exceptions that are not relevant here, the Texas Constitution also states that “[n]o current wages for personal service shall ever be subject to garnishment.” Tex. Const. art. XVI, § 28. The question on appeal is whether these state-law exemptions apply to the federal government when it is collecting special assessments. The district court held that they do not. We agree with the district court.

A comparison of the relevant federal provisions—the Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. § 3613, and the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. §§ 3001 –3308 —helps to resolve this issue. The MVRA authorizes the United States to collect federal criminal debts “in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.” 18 U.S.C. § 3613(a). The MVRA also broadly permits the United States, “[n]otwithstanding any other Federal law,” to enforce a special-assessment order “against all property or rights to property of the person fined.” Id. (emphasis added). Section 3613 further states that the only property exempt from garnishment is property that the United States cannot seize to satisfy the payment of federal income taxes. See id. Finally, the MVRA likewise explains that federal criminal debts are to be treated in the same manner as federal tax liens. See id. § 3613(c). Thus, under the MVRA, the Government could garnish Salem's wages.

In this case, the Government proceeded under the FDCPA, which authorizes the Government to garnish property “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). Under the FDCPA, however, “[c]o-owned property,” like Salem's salary, is “subject to garnishment to the same extent as co-owned property is subject to garnishment under the law of the State in which such property is located.” Id.; see also 28 U.S.C. § 3010(a) (“The remedies available to the United States under this chapter may be enforced against property which is co-owned by a debtor and any other person only to the extent allowed by the law of the State where the property is located.”). In other words, if this case were proceeding solely under the FDCPA, the Government could not garnish Salem's salary because Texas law does not allow it.

Compared in this manner, the MVRA and the FDCPA have conflicting provisions on which property is exempt from collection. The MVRA contains a limited number of exemptions, none of which is relevant here. In contrast, the FDCPA bases its exemptions on the relevant state law. Thus, if the FDCPA controls, Salem's salary is exempt from garnishment; if, on the other hand, the MVRA controls, then the Government may garnish Salem's salary. As might be expected, the Government argues that the MVRA controls, while Salem argues that the FDCPA controls. As discussed below, both Fifth Circuit precedent and the statutes themselves demonstrate that the MVRA controls.

Dealing with the same issue in the context of enforcing a federal tax lien, this court has held that state law does not exempt community property from federal tax collection efforts. See Medaris, 884 F.2d at 833–34. In particular, the court held that the IRS was entitled to attach the debtor's one-half interest in his wife's income—her solely managed community property—because her income was a community asset. Id. Texas's exemption for solely managed community property was inapplicable to the federal government because the Internal Revenue Code states that state laws cannot exempt property from federal tax collection efforts. Id. (citing 26 U.S.C. § 6334(c) ); see also United States v. Mitchell, 403 U.S. 190, 204–05, 91 S.Ct. 1763, 29 L.Ed.2d 406 (1971) (holding that state-law exemptions are not effective against the United States when it attempts to enforce a federal tax lien under the Internal Revenue Code). Instead, a court could consult state law only to determine what property interests the debtor had. See Medaris, 884 F.2d at 833. Federal law then defined which property was subject to attachment for the unpaid taxes.See id. (noting that a tax lien “attaches against ‘all property and rights to property ... belonging to’ the person liable for taxes” (quoting 26 U.S.C. § 6321 )); see also United States v. Craft, 535 U.S. 274, 278, 122 S.Ct. 1414, 152 L.Ed.2d 437 (2002) (“The federal tax lien statute itself creates no property rights but merely attaches consequences, federally defined, to rights created under state law.” (internal quotation marks and citation omitted)); Drye v. United States, 528 U.S. 49, 58, 120 S.Ct. 474, 145 L.Ed.2d 466 (1999) (“We look initially to state law to determine what rights the taxpayer has in the property the Government seeks to reach, then to federal law to determine whether the taxpayer's state-delineated rights qualify as ‘property’ or ‘rights to property’ within the compass of the federal tax lien legislation.”).

Salem attempts to distinguish Medaris by noting that it was a tax case that did not involve the FDCPA. The MVRA, however, explicitly states that fines, including special assessments, are to be treated in the same manner as tax liens. See 18 U.S.C. §§ 3013(b), 3613(c). Like the enforcement of a tax lien under the Internal Revenue Code, the United States may enforce a judgment imposing a fine against all of the property in which the debtor has an interest. Compare 26 U.S.C. § 6321 (“If any person liable to pay any tax...