Court Opinion

ID: 8995216
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:32:52.014272+00
Date Added: 2024-06-11T17:11:01.653457
License: Public Domain

SNEED, Circuit Judge,
dissenting:
Although I join in this court’s reaffirmation of the reasoning in Daniel v. Security Pac. Nat’l Bank (In re Daniel), 771 F.2d 1352 (9th Cir.1985), cert. denied, 475 U.S. 1016, 106 S.Ct. 1199, 89 L.Ed.2d 313 (1986),1 *430I respectfully dissent from that portion of the majority’s opinion, supra Part III.B.2, finding that ERISA’s preemption provision voids Arizona’s exemption scheme.
The majority holds that ERISA of its own force preempts the Arizona exemption statute. Relying on the Supreme Court’s decision in Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988), the majority finds that Arizona’s exemption statute, by explicitly seeking to protect ERISA-qualified plans from creditors, not only “relates to” ERISA within the meaning of 29 U.S.C. § 1144(a) as interpreted in Mackey, but outwardly conflicts with ERISA as well.2 In my opinion, this is an improper analysis in the bankruptcy context.
The Bankruptcy Code sets forth an exemption scheme by which a state either can allow its debtors to choose between the standard “laundry list” of federal exemptions or available state exemptions, or can force its debtors to take the state exemptions exclusively. In short, whether and to what extent a debtor will be able to exempt property from collection in the bankruptcy setting is a decision left, by federal congressional will, entirely to the states. A straightforward preemption analysis focusing solely on the force and effect of the ERISA preemption provision as it relates to a state exemption scheme ignores the Bankruptcy Code. Just as Congress is empowered to reserve for itself an area for exclusive regulation and control, as it has certainly done for pension and welfare benefit plans, it may also authorize states to exercise final authority without regard to other federal legislation. I believe this has been done in the Bankruptcy Code. The Supremacy Clause, I contend, can both permit or preclude the operation of state law either implicitly or explicitly.
In this case the permission is explicit. The legislative history supports this conclusion. It indicates that the federal exemptions were created to provide a readily available modem alternative to state exemption laws that were outdated at the time of the Bankruptcy Code’s revision. See In re Komet, 104 B.R. 799, 812 (W.D.Tex.1989) (opinion on rehearing). Indeed, the federal exemptions explicitly create an exemption for ERISA-qualified pension plans from the bankruptcy estate.3 In light of the purpose behind the federal “laundry list” alternative, it makes little sense to argue that a state is not empowered under the Bankruptcy Code to at least emulate portions of the model list in a reasonable fashion.
There are thirty-five so-called “opt out” states that have affirmatively chosen to limit their debtors to the state exemption scheme. There is as much reason to believe that Congress intended to permit states to exempt ERISA-qualified plans as there is to believe that Congress intended to give states the ability to enact unlimited homestead exemptions, exemptions for specified numbers of farm animals, or the like.
*431The syllogism the majority employs to demonstrate its conflict-therefore-preemption analysis between ERISA and A.R.S. § 33-1126(B) precisely reveals the point I wish to make, it reads: “Under Daniel, ERISA’s anti-alienation provisions do not protect a debtor in bankruptcy_ [binder the state law exemption of [the Bankruptcy Code], A.R.S. § 33-1126(B) does protect a debtor in bankruptcy. Thus by operation of the bankruptcy code, the Arizona statute would accomplish a disposition of ERISA plan funds different from that accomplished by ERISA.” Supra at 14615 (emphasis added). In my view, it is the “operation” of the Bankruptcy Code that should control.
I acknowledge that Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), presents a difficult problem. Shaw dealt with the relationship between the New York Human Rights Law, Title VII, and ERISA’s preemption and savings clauses, 29 U.S.C. §§ 1144(a), (d). Sundry providers of welfare plans claimed that ERISA’s preemption clause, § 1144(a), superseded the New York law, which was “a comprehensive antidiscrim-ination statute, prohibiting, among other practices, employment discrimination on the basis of sex.” Shaw, 463 U.S. at 88, 103 S.Ct. at 2895. Under New York interpretation, pregnancy discrimination was sex discrimination. See Brooklyn Union Gas Co. v. New York State Human Rights Appeal Bd., 41 N.Y.2d 84, 390 N.Y.S.2d 884, 359 N.E.2d 393 (1976). This went beyond Title VII as then interpreted by the Court, which, in General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976), had found Title VII’s prohibition against sex discrimination not to cover pregnancy.4 Thus the plan providers argued that the New York Human Rights Law affected the administration of their welfare plans by requiring protections that ERISA did not. Because the New York law “related” to ERISA within the meaning of § 1144(a) it should be preempted, they argued.
Supporters of the New York Human Rights Law countered that ERISA’s savings clause, § 1144(d), should be interpreted to stave off preemption. They reasoned that because Title VII — in sharp contrast to ERISA’s strict preemptive posture — “expressly preserves nonconflicting state laws,” preemption of the New York law “would impair and modify Title VII because it would change the means by which it is enforced.” Shaw, 463 U.S. at 101, 103 S.Ct. at 2902. Thus, the clash was between one federal law (Title VII) that was meant not to preempt related state laws and another (ERISA) that was. The latter, however, contained a savings provision pledging not to “impair” or “modify” other federal legislation.
The Court pointed out that Title VII would not be “impaired” or “modified” should ERISA preempt the New York law regarding pregnancy protection because Title VII was itself indifferent to state civil rights protections that it did not address. As the Court put it: “Title VII would prohibit precisely the same employment practices, and be enforced in precisely the same manner, even if no State made additional employment practices unlawful.” Id. at 103, 103 S.Ct. at 2903. The Court found no legislative intent in Title VII to either encourage states to broaden civil rights protections or to shelter state civil rights laws that did so. See id. at 103 n. 24, 103 S.Ct. at 2903 n. 24.
It did, however, find an intent on the part of Congress not to preempt those portions of the New York Human Rights Law which “provide[d] a means of enforcing Title VII’s commands.” See id. at 102, 103 S.Ct. at 2902. The reason was plain enough. Title VII contemplated and encouraged a joint state and federal enforcement scheme, whereby all employee grievances under Title VII would first be referred to the state grievance mechanism, if one existed. In New York State, it was under the authority of the New York Human Rights Law that employee grievances had traditionally been handled. Thus, for ERISA to preempt a state law that Title VII not only encouraged states to enact, but upon which *432it also relied in its enforcement mechanism, would be to impair and modify federal legislation contrary to ERISA’s savings provision. See id. at 101-02, 103 S.Ct. at 2902.
The majority here considers state exemption laws akin to the pregnancy protection provision at issue in Shaw. The Bankruptcy Code is simply indifferent to the substance of state exemption schemes, as Title VII was to New York’s pregnancy protection rule, and as such must yield to ERISA’s peculiarly jealous nature. I disagree. The Bankruptcy Code not only authorizes states to fashion exemptions in bankruptcy as they see fit, but provides therein a model example of an exemption that the majority would prohibit. To my mind, A.R.S. § 33-1126(B) is the equivalent of those portions of the New York Human Rights Law that the Court saved in Shaw, not those it preempted.5 Indeed, it could be argued that Arizona’s exemption of the ERISA-qualified plan should survive preemption even if ERISA did not contain a savings provision. Here, § 1144(d) spares any doubt. Disallowing a valid state exemption in bankruptcy would impair the Bankruptcy Code no less than invalidating state civil rights grievance mechanisms impairs Title VII.
ERISA is a complicated statute, as are the Bankruptcy Code and state exemption statutes; but while ERISA preemption is easy to invoke and may marginally simplify the law, it does not always result in the best resolution of state and federal interests that present day federalism requires. I do not think the majority has resolved these competing interests appropriately in this case. Therefore, I respectfully dissent.

. In Daniel, a former version of California’s exemption statute, Cal.Civ.Proc. § 690.18(d), was found not to exempt the ERISA-qualified plan then at issue. Thus, the Daniel court was not faced with the situation now before us, in which Arizona plainly means to exempt all ERISA-qualified plans. As the majority points out, A.R.S. § 33-1126(B) makes explicit reference to "§§ 401(a), 403(a), 403(b), 408 or 409 of *430the United States internal revenue code of 1986.” Supra at 426.

. I do not think it necessary or appropriate to go into the question of the Arizona statute’s viability in a nonbankruptcy context. I would, however, note that the majority may have inadvertently extended the Supreme Court's ERISA preemption analysis evidenced in Mackey. The majority writes: "The Supreme Court has repeatedly held that state laws which make reference to ERISA plans are laws that ‘relate to’ those plans within the meaning of 29 U.S.C. § 1144(a).” Supra at 427 (emphasis added). This is inaccurate. In fact, the Court for the first time uses the verb "make” in Mackey, and does so citing prior decisions using “have.” The implication the majority draws from the altered verb is that simply “naming those sections of the I.R.C. which designate ERISA-qualified plans" triggers preemption under § 1144(a). See id. While I express no opinion on whether the make/have distinction will prove meaningful, cf. In re Volpe, 100 B.R. 840, 848 (W.D.Tex.1989), or whether the majority is correct in its interpretation of Mackey as it applies in a non-bankruptcy context, I would caution against any unwarranted extension of Mackey in the context of this case. Under the majority’s own preemption rationale, there is no reason to go so far as to find that if any challenged statute "makes” an ERISA reference however banal, it is automatically preempted.

. The Code provides for an ERISA-qualified plan exemption to the "extent reasonably necessary for the support of the debtor.” 11 U.S.C. § 522(d)(10)(E).

. Of course, Congress overcame the Gilbert ruling with the passage of the Pregnancy Discrimination Act of 1978, Pub.L. No. 95-555, 92 Stat. 2076 (codified at 42 U.S.C. § 2000e(k)).

. The majority also makes the point that part of the Court's rationale for saving certain portions of the New York Human Rights Law was to spare any increased burden on the EEOC, whereas there is no correlative reason to spare A.R.S. § 33-1126(B). See supra at 14618. This is true so far as it goes, but, again, not pertinent in bankruptcy. All bankruptcy proceedings are within the original and exclusive jurisdiction of the federal district courts, 28 U.S.C. § 1334(a), and whether an asset is exempt will make little difference to the workload of the bankruptcy judge handling the case. If anything, it will likely prove more burdensome to manage the distribution of an ERISA-qualified plan to creditors than to simply exempt the plan under state law.