Court Opinion

ID: 9520001
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:29:01.731538+00
Date Added: 2024-06-11T12:45:25.586273
License: Public Domain

LATTA, Bankruptcy Judge,
dissenting.
I agree with the majority that the Debtors have failed to prove that their pension plans constitute trusts. In fact, I would put the matter more strongly the Debtors’ pension plans manifestly are not trusts. Because I do not believe, however, that the presence of an express trust is required to exclude an ERISA-qualified retirement plan from the assets of a bankruptcy estate, I respectfully dissent from the opinion of the majority.
With respect to statutory construction, the Sixth Circuit Court of Appeals has instructed:
‘We read statutes and regulations with an eye to their straightforward and commonsense meanings.” [Citation omitted.] We ascertain the plain meaning of a statute by reviewing “the particular statutory language at issue, as well as *547the language and design of the statute as a whole.” [Citation omitted.] “When we can discern an unambiguous and plain meaning from the language of a statute, our task is at an end.” [Citation omitted.]
We may not, however, rely on the literal language of the statute where such reb-anee would lead to absurd results or an interpretation which is inconsistent with the intent of Congress. [Citations omitted.] Every word in the statute is presumed to have meaning, and we must give effect to all the words to avoid an interpretation which would render words superfluous or redundant.
Walker v. Bain, 257 F.3d 660, 666-67 (6th Cir.2001). The majority’s reading is inconsistent with the clear intent of Congress that ERISA-qualified pension plans not be subject to creditor claims.
Outside the bankruptcy law, I find no functional distinction between the protections afforded to beneficiaries of ERISA-qualified pension plans in which assets are held in trust and those in which assets are used to purchase annuity contracts. Outside of bankruptcy, no creditor of the Adams would be able to reach the debtors’ beneficial interests in their pension plans to satisfy claims, and this is true not because these interests are exempt from execution pursuant to state law, but because they are exempt from execution pursuant to federal law. See Guidry v. Sheet Metal Workers Nat. Pension Fund, 493 U.S. 365, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990)(per-mitting no equitable exception to ERISA’s anti-alienation provision). The filing of a bankruptcy case should not change this result.
In Patterson v. Shumate, the Supreme Court held that “the antialienation provision required for ERISA qualification ... constitutes an enforceable transfer restriction for purposes of § 541(c)(2)’s exclusion of property from the bankruptcy estate.” 504 U.S. at 759, 112 S.Ct. 2242. Earlier in that opinion, the Court pointed out that “[t]he natural reading of the provision [§ 541(c)(2)] entitles a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction enforceable under any relevant nonbankruptcy law.” Id. at 758, 112 S.Ct. 2242. (emphasis added). While it is true that the specific issue before this Panel was not before the Court in Shumate, and thus that the reference to “the plan” may be merely dicta, I think that the reference actually illumines the Court’s understanding of the intent of Congress expressed both in ERISA and the Bankruptcy Code. The Court, recalling its previous refusal in Guidry to recognize any exceptions to ERISA’s anti-abenation provisions outside the bankruptcy context, asserted that its holding gave “full and appropriate effect to ERISA’s goal of protecting pension benefits,” and that it furthered the important policy underlying ERISA of uniform treatment of pension benefits. Id. at 764-65, 112 S.Ct. 2242. Each of these considerations applies with respect to plans that are not required to hold certain assets in trust.
The majority has advanced no policy considerations that support their more restrictive reading of section 541(c)(2). Instead their conclusion rests solely upon the literal requirement that a debtor’s beneficial interest be held “in a trust.” This emphasis on the asserted plain meaning of one section of the Bankruptcy Code fails to give proper deference to the unqualified prohibition on alienation found in ERISA. “Where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one.” Morton v. Mancari, 417 U.S. 535, 550-51, 94 S.Ct. 2474, 2482-83, 41 L.Ed.2d 290 (1974) quoted in Guidry, 493 U.S. at 375, *548110 S.Ct. 680. It is not section 541(c)(2) that excludes a debtor’s beneficial interest in an ERISA-qualified plan from the bankruptcy estate, but rather the anti-alienation provision itself which excludes it.
The prior decision of the Sixth Circuit in Wilcox does not alter this conclusion. In that case, the court asserted that
An inquiry under § 541(c)(2) normally has three parts: First, does the debtor have a beneficial interest in a trust? Second, is there a restriction on the transfer of that interest? Third, is the restriction enforceable under nonbank-ruptcy law?
Taunt v. General Retirement System of the City of Detroit (In re Wilcox), 233 F.3d 899, 904 (6th Cir.2000). In that case, however, it was undisputed that the debtor’s interest in his retirement plan was a beneficial interest in a trust. Thus there was no specific discussion of the trust requirement, and certainly no statement that it included only “express trusts.” More importantly, the retirement plan under consideration in Wilcox was not an ERISA-qualified plan, and thus the court was not called upon to consider the important policy considerations presented in this case where a federal statute restricts transfer of the Debtor’s interest.
The majority relies heavily upon the decision of the bankruptcy court in Barnes to support its conclusion that only an interest in a trust can be the subject of an enforceable transfer restriction within the meaning of 11 U.S.C § 541(c)(2). See In re Barnes, 264 B.R. 415 (Bankr.E.D.Mich.2001). Significantly, while that decision requires the presence of a “trust” before a beneficial interest is excluded from a bankruptcy estate, the contract found to be a trust is virtually indistinguishable from the contracts in the present case. Rather than following the three-step analysis announced in Wilcox, the court focused solely upon the “sine qua non ” of a trust: the division of legal title from equitable interest. See Barnes, 264 B.R. at 432. The court concluded that a variable annuity contract may be a trust for purposes of § 541(c)(2). I find this result disingenuous, and much prefer a straightforward holding that § 541(c)(2) does not require the existence of an express trust to exclude an ERISA-qualified plan from a bankruptcy estate.
It is important to emphasize that Shu-mate did not exclude a debtor’s interest in an ERISA-qualified pension plan from the bankruptcy estate under § 541(e)(2) because that interest looks something like an interest in a spendthrift trust. ERISA-qualified pension plans do not look anything like spendthrift trusts. They may be self-settled and they permit the voluntary invasion of corpus under certain specified conditions. The rationale advanced for excluding spendthrift trusts from the estate, that the filing of a bankruptcy case should not be cause for frustrating the expectations of the settlor of the trust, is not present with respect to ERISA-qualified pension plans. See H.Rep. No. 95-595, 95th Cong., 1st Sess. 176 (1977), U.S.Code & Admin.News 1978 pp. 5963, 6136. Rather, completely different policy considerations are at work in the case of ERISA-qualified pension plans. The goal of ERISA is to protect and preserve pension benefits for pensioners and their dependents.
In announcing its decision in Guidry, the Court emphasized this policy:
Section 206(d) [29 U.S.C. § 1056] reflects a considered congressional policy choice, a decision to safeguard a stream of income for pensioners (and their dependents, who may be, and perhaps usually are blameless), even if that decision prevents others from securing relief for the wrongs done them.
*549Guidry, 493 U.S. at 365, 110 S.Ct. 680. Likewise in Shumate, the Court characterized its holding as giving “full and appropriate effect to ERISA’s goal of protecting pension benefits.” Shumate, 504 U.S. at 764, 112 S.Ct. 2242. Further, the court indicated that its decision would ensure that “the treatment of pension benefits will not vary based upon the beneficiary’s bankruptcy status.” Id.
The narrow reading of § 541(c)(2) advanced by the majority of the Panel nullifies the anti-alienation provision of ERISA for non-trust, qualified pension plans. The majority advances no policy argument in favor of this reading. Were we called upon simply to construe § 541(c)(2), without the benefit of the Supreme Court’s opinions in Guidry and Shumate, then a narrow, “plain-meaning” reading would be appropriate, but I believe that we must go beyond § 541(c)(2) and include within our discussion the plain meaning of ERISA’s anti-alienation requirement. When this is done, it is clear that ERISA-qualified pension plans, whether held in trust or not held in trust, are excluded from the bankruptcy estate.