United States Court of Appeals

For the Eighth Circuit

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No. 12-2449

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United States of America

lllllllllllllllllllll Plaintiff - Appellee

v.

Joyce Ashcraft

lllllllllllllllllllll Defendant - Appellant

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 Appeal from United States District Court 

for the Northern District of Iowa - Cedar Rapids

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 Submitted: June 5, 2013

 Filed: October 9, 2013

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Before LOKEN, MELLOY, and BENTON, Circuit Judges.

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MELLOY, Circuit Judge.

Joyce Ashcraft appeals the district court's order denying her objection to the

garnishment of her disability payments. The district court ruled Ashcraft's disability

payments were not "earnings" within the meaning of the Consumer Credit Protection

Act (the "Act"), 15 U.S.C. § 1673(a), which limits garnishment of "earnings." We

reverse and hold Ashcraft's disability payments are "earnings" within the meaning of
the Act. We grant the government's motion to strike and deny all other pending

motions.

I.

In 2004, Ashcraft pleaded guilty to several criminal charges. She was

sentenced to a term of imprisonment and to restitution. She was released from

custody in November 2012. At some time prior to her incarceration, she worked for

Amana Refrigeration. Amana provided long-term disability insurance to its

employees through Principal Life Insurance Company ("PLIC"). Ashcraft's

employment with Amana aggravated a medical condition, rendering her unable to

work; as a result, Ashcraft receives disability payments from PLIC. Those payments

will continue until she reaches the age of sixty-five in November 2016. The 1

government does not dispute that the disability insurance providing Ashcraft's current

disability payments was provided by Amana in the course of Ashcraft's employment.

In February 2012, the government sought to garnish Ashcraft's disability

payments pursuant to her restitution sentence. Ashcraft objected. Ashcraft argued

her disability payments are "earnings" within the meaning of the Act and are thus

subject to the Act's limitations on garnishment.

The district court ruled Ashcraft's disabilitypayments are not "earnings" within

the meaning of the Act and overruled her objection to garnishment. Ashcraft

appealed. On appeal, Ashcraft argues that the language of the Act is inclusive,

allowing for nonenumerated "periodic payments" to fall within the definition of

"earnings," and that the disability payments are the kind of periodic payments

Ashcraft stated and the district court found that Ashcraft's disability payments 1

would be reduced once she was released from custody because she would begin

receiving social security benefits. However, the amount of the disability payments

is not at issue on this appeal. 

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intended to be protected by the Act. Ashcraft argues that her disability insurance was

part of her compensation fromAmana and that her disability payments are considered

wages by the IRS. The government argues that Ashcraft's disability payments are not

"compensation paid or payable for personalservices" as the Act requires and that the

Act does not expressly include disability payments within the definition of

"earnings."2

II.

We review the district court's interpretation of a statute de novo. Planned

Parenthood Minn., N.D., S.D. v. Rounds, 686 F.3d 889, 893 (8th Cir. 2012). To

interpret a statute, we examine both the clause at issue and the statute as a whole, as

well as "the objects and policy of the law, as indicated by its various provisions, and

give to it such a construction as will carry into execution the will of the Legislature." 

Kokoszka v. Belford, 417 U.S. 642, 650 (1974). Where the statute's language is

unambiguous, we interpret the statute according to its plain language. United States

v. Allmon, 702 F.3d 1034, 1036 (8th Cir. 2012).

The government argues we must decide whether Ashcraft's disability

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payments are "earnings" under the Act or "property" under the Federal Debt

Collection Practices Act, while Ashcraft argues that the categories of "earnings" and

"property" are not mutually exclusive. For purposes of this appeal, we need only

determine whether Ashcraft's disability payments are "earnings";we do not determine

whether they are or may also be "property."

Additionally, to the extent the government argues it is entitled to collect

restitution from Ashcraft free from the Act's restrictions based on the terms of

Ashcraft's plea agreement, that argument is meritless. The government itself admits

in its brief that its general garnishment powers are restricted by the Act. Further, to

the extent Ashcraft argues the government should not be permitted to garnish her

disability payments merely because she has made other restitution payments, that

argument is also meritless.

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The Act states, in relevant part:

(a) The term "earnings" means compensation paid or payable for

personal services, whether denominated as wages, salary, commission,

bonus, or otherwise, and includes periodic payments pursuant to a

pension or retirement program.

(b) The term"disposable earnings" means that part ofthe earnings

of any individual remaining after the deduction from those earnings of

any amounts required by law to be withheld . . . 

15 U.S.C. § 1672.

(a) [T]he maximum part of the aggregate disposable earnings of an

individual for any workweek which issubjected to garnishment may not

exceed

(1) 25 per centum of his disposable earnings for that week, or

(2) the amount by which his disposable earnings for that week

exceed thirty times the Federal minimum hourly wage . . . in

effect at the time the earnings are payable,

whichever is less.

15 U.S.C. § 1673. 

Whether disability payments are "earnings" within the meaning of the Act is

an issue of first impression for our court, and neither party points to a case from any

of our sister circuits offering a ruling on the present issue. While several courts have

previously interpreted the meaning of "earnings" under the Act, most of those courts

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considered whether pension payments and retirement savings constitute "earnings" ;

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they did not address the Act's applicability to disability payments. However, two

prior cases are particularly relevant, and we introduce those cases before moving to

our analysis.

First, courts interpreting the Act's definition of "earnings" rely heavily on

Kokoszka v. Belford, 417 U.S. 642 (1974). In Kokoszka, the Supreme Court

analyzed both the Act and the Bankruptcy Act and determined that income tax

refunds did not constitute "earnings." Quoting with approval the Second Circuit's

holding that "earnings" did not include "every asset that is traceable in some way to

such compensation," the Kokoszka Court stated:

[T]he Consumer Credit Protection Act sought to prevent consumers

from entering bankruptcy in the first place. . . . There is every indication

that Congress, in an effort to avoid the necessity of bankruptcy, sought

to regulate garnishment in its usual sense as a levy on periodic payments

Although the Act expressly includes payments pursuant to a pension or 3

retirement program, "district courts around the country have divided over whether

monthly pension-benefit payments constitute 'earnings' under the [Act]." United

States v. DeCay, 620 F.3d 534, 543–44 (5th Cir. 2010) (describing the split) (citing

United States v. Belan, No. 2:07-x-50979, 2008 WL 2444496, at *3 (E.D. Mich. June

13, 2008) ("[O]nce passed to a retirement account or annuity in the hands of the

employee, the funds in the account or annuity are not 'earnings' under the [Act]."),

and United States v. McClanahan, No. 3:03-00053, 2006 WL 1455698, at *3 (S.D.

W. Va. May 24, 2006) ("[U]nder clear statutory language . . . the Government may

garnish only 25% of the Defendant's pension.")). In United States v. Cunningham,

a district court within our circuit recently held that the Act's garnishment limitations

apply to pension payments. 866 F. Supp.2d 1050, 1060 (S.D. Iowa 2012) (concluding

that the Act's plain language "unambiguously includes payments made froma pension

or retirement account to an individual."). However, because the Act expressly

includes "payments pursuant to a pension or retirement program," 15 U.S.C.

§ 1672(a), those cases deal with a different question than the one Ashcraft's case

presents. 

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of compensation needed to support the wage earner and his family on a

week-to-week, month-to-month basis.

Id. at 651.

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Second, although the parties do not point to any federal district court or court

of appeals opinion addressing the present question, In re Conway, No. 03-11200-

MAM-7, 2003 Bankr. LEXIS 1988 (Bankr. S.D. Ala. Sept. 9, 2003) offers relevant

analysis. In Conway, a bankruptcy court concluded a debtor's disability insurance

payments were "earnings":

The Supreme Court noted that the legislative history of the Act "fully

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support[s]" the view that "earnings" are "limited to periodic payments of

compensation and [do] not pertain to every asset that istraceable in some way to such

compensation." Kokoszka, 417 U.S. at 651 (second alteration in original). Some

courts interpret this to mean that only periodic payments, as opposed to lump sums,

can constitute "earnings." See, e.g., Pallante v. Int'l Venture Invs., Ltd., 622 F. Supp.

667, 669 (N.D. Ohio 1985) (relying on Kokoszka for the proposition that "[t]he

determinative factor in deciding whether severance pay is subject to the statutory

limitations is whether the monies are received in periodic payments. . . . It is when

payments are periodic that severance pay is intended to provide income similar to

current earnings." (citation and internal quotation marks omitted)). The Court's

discussion of "periodic" occurs during an analysis of the legislative history. The

statute Congress passed does not restrict itself to periodic payments. It includes

payments "denominated as wages, salary, commission, bonus, or otherwise,"

contemplating a wide variety of payment structures. Indeed, bonuses (and payments

in the "otherwise" category) are frequently not periodic. Congress defines the only

test as whether the payment is "compensation paid or payable for personal services." 

15 U.S.C. § 1672(a).

In any event, to the extent the periodic nature of the payments helps to establish

them as "compensation paid . . . for personalservices," Ashcraft's disability payments

were "periodic payments of compensation needed to support the wage earner and

[her] family on a week-to-week, month-to-month basis." Kokoszka, 417 U.S. at 651.

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"Earnings" under the federal statute include "periodic payments pursuant

to a pension or retirement plan." 15 U.S.C. § 1672(a). Disability

payments serve the same purpose and, like retirement or pension

payments, are replacement income. The payments are taxed like wages. 

The payments are an employee benefit like a pension . . . . [Debtor's

employer] paid all costs of the plan . . . [and] [t]he plan states that "the

long termdisability plan providesfinancial protection for you by paying

a portion of your income while you are disabled . . . ." The plan, as this

language and the employer funding make clear, is an income

replacement vehicle for [ ] employees. As a benefit of employment, this

Court concludes it is "other compensation" to employees paid to them

as a part of their earnings for personal services performed in the past.

Id. at *20–22. See also Rousey v. Jacoway, 544 U.S. 320, 331 (2005) (identifying

various types of benefit plans, including "disability, illness, or unemployment

benefit[s]" and noting that "[t]he common feature of all of these plans is that they

provide income thatsubstitutes for wages earned assalary or hourly compensation.").

We turn now to our analysis. Based on the Act's plain language, Ashcraft's

disability payments constitute "earnings." By defining "earnings" as "compensation

paid or payable for personal services, whether denominated as wages, salary,

commission, bonus, or otherwise," the Act prioritizes the character of the payment

over its label. Thus, although Ashcraft's evidence that the IRS lists her disability

payments as wages may support her claim, whether or not the disability payments are

labeled as wages is not the central issue; the central issue is whether the disability

payments are "compensation paid or payable for personal services." We hold they

are.

Ashcraft receives the disability payments through her former employer. They

are payments designed to function as wage substitutes; they are not merely "traceable

in some way" to Ashcraft's compensation, Kokoszka, 417 U.S. at 651, but are

themselves a direct component of the compensation Amana provided to Ashcraft in

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return for the personalservices Ashcraft rendered to Amana. They are "compensation

paid or payable for personal services" that are "denominated . . . otherwise" by her

former employer as disability payments rather than as wages or salary. 

The government's argument that Ashcraft receives the payments precisely

because she cannot render "personalservices" due to her disability incorrectlyfocuses

on the time the payments are received rather than the character of the payments. 

Simply because the disability payments are delayed—simplybecauseAmana received

Ashcraft's personal services before Ashcraft began receiving her disability

payments—does not take the payments out of the category of compensation. The

disability payments constitute "'other compensation' to employees paid to [her] as a

part of [her] earnings for personal services performed in the past." Conway, 2003

Bankr. LEXIS 1988, at *22. 

III.

For the reasons stated above, we conclude Ashcraft's disability payments are

"earnings" within the plain meaning of the Act and are therefore subject to the Act's

limitations on garnishment. 

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