Opinion ID: 656195
Heading Depth: 3
Heading Rank: 2

Heading: The Bankruptcy and District Court Rulings

Text: 16 After a hearing on those objections, the bankruptcy court sustained the Trustee's objections to the Schleins' claims for exemption. The Schleins were ordered to turn over the funds in their retirement accounts to the Trustee. According to the Schleins, the total amount taken by the Trustee was $175,278.83, which included the principal amount of the IRA and SEP deposits plus accrued interest. The bankruptcy court's ruling was based on the following syllogism: The Schleins' SEP/IRA account is an employee benefit plan as defined by ERISA; ERISA, 29 U.S.C. § 1144(a), preempts any and all state laws insofar as they may now or hereafter relate to any employment benefit plan; Florida Statute s 222.21(2)(a) directly relates to an employee benefit plan covered by ERISA; therefore, ERISA preempts Fla.Stat. § 222.21(2)(a). In re Schlein, 114 B.R. at 782-83. 17 The district court agreed with the bankruptcy court's conclusion that Fla.Stat. § 222.21(2)(a) relates to ERISA plans, and is therefore preempted by ERISA. The court reasoned that [t]he Supreme Court has repeatedly held that ERISA shall preempt any state law that 'relates to' an employee benefit plan, even if the law is consistent with ERISA's substantive requirements. The court also noted that the Supreme Court has declared that this broad preemption is not restricted to state laws that affect plan terms, conditions, or administration. Finding that the existence of a pension plan is a critical factor in establishing a debtor's right to exemption under section 222.21(a), the court held that section to be preempted by ERISA. 18 The court also rejected the Schleins' argument that the saving clause contained in 29 U.S.C. § 1144(d) applies to Fla.Stat. § 222.21(2)(a). The court concluded that although debtors can opt for state exemption schemes, the Bankruptcy Code does not transform state laws into federal laws that section [1144(d) of ERISA] saves. Relying primarily on the Ninth Circuit's opinion in Pitrat v. Garlikov, 947 F.2d 419 (9th Cir.1991), withdrawn, 992 F.2d 224 (9th Cir.1993), 2 the court found that because state law exemptions are not necessary to the enforcement of the Bankruptcy Code, and because the Bankruptcy Code, as a whole, can operate effectively without any state law ... section [1144(d) ] does not save section 222.21(2)(a) from preemption. 19