UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK
September 5, 1978
Raymond E. CARTLEDGE, Martin F. Tynan, John E. Haigney and Donald E. Scaggs, as members of the Pension Plan Committee of the Pension Agreement between Clevepak Corporation, Piermont Board Mill and the United Paperworkers International Union AFL-CIO, Plaintiffs,
The Honorable Howard MILLER, Judge of the Family Court of the State of New York, County of Rockland, Rockland County Support Collection Unit and Vivian Cozart, Defendants
The opinion of the court was delivered by: WEINFELD
This case involves the construction of the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") which prohibit the assignment or alienation of employees' pension benefits and thereby exempt such benefits from attachment or garnishment by creditors.
The issue presented is whether there exists an implied exception to these "anti-assignment or alienation" provisions with respect to orders for the support of a wife and dependent children issued by a state court pursuant to statutory authority. Defendants Rockland County (New York) and the Rockland County Support Collection Unit have obtained a state court order garnishing the pension of George Allen Cozart in order to fulfill support obligations and arrears owed to his wife, defendant Vivian Cozart. Also named as a defendant is the Family Court Judge who issued the order. Plaintiffs, members of the Pension Plan Committee created under the Pension Agreement between Clevepak Corporation and the United Paperworkers International Union (the "Pension Committee"), bring this action to enjoin the enforcement of the state court order on the ground that such enforcement would violate ERISA. Finding that ERISA's anti-assignment or alienation provisions do not preclude the execution of validly issued court orders enforcing family support rights, this Court denies the injunction and dismisses the action upon the merits.
The facts which gave rise to this case are as follows. Commencing in 1958 and over the next twenty years George Allen Cozart failed in his legal duty to support and maintain his wife and children; during that period he frequently disregarded orders of the Rockland County Family Court intended to secure compliance with that obligation, and he was constantly in arrears.
In 1965 his chronic failure to comply with the orders led to his being held in contempt of court and his commitment to jail for three days.
For the last eleven years, the support of his dependents has been borne in large measure by the community through public assistance payments made by the Rockland County Department of Social Services.
Pursuant to the Social Security Act, as amended,
the wife assigned to the Department "all the support rights (accrued, Pending and continuing)" which she had against her husband in return for "the public assistance and care received and to be received."
In January 1967, after Cozart had failed to comply with a number of orders to provide for the necessities of his family, the Family Court entered a "payroll deduction order" pursuant to New York's Family Court Act.
The order was addressed to Cozart's employer, Clevepak Corporation, directing it to withhold $ 35.00 per week from his wages and to pay those withholdings to the Family Court for the benefit of his dependents.
However, he continued to be in arrears, and by 1977 they were substantial. He retired that year and was entitled to receive a pension under the Pension Plan Agreement between Clevepak Corporation and the United Paperworkers International Union (the "Clevepak Plan"). The Social Services Department petitioned the Family Court for an order directing Cozart to pay the accumulated arrears (then estimated to be $ 5,275.80) at a rate of $ 35.00 per week. After a hearing, the Court issued a "corrected payroll deduction order" in an effort to liquidate the arrears. The order directed the Pension Committee "to withhold and deduct from the pension of (George Cozart) the sum of $ 35.00 per (week) commencing . . . forthwith and to forward the total amount so withheld . . . to Rockland County Support Collection Unit."
The Pension Committee then brought this suit to enjoin the enforcement of the state court order as an invalid assignment or alienation of pension benefits.
The essential claim, however worded, is that the pension payments to which Cozart is entitled are beyond the reach of the state court order by reason of ERISA. The Committee contends that the order is an attachment of an employee's pension benefits, in violation of ERISA's mandate that "benefits provided under the plan may not be assigned or alienated"
and contravenes the Clevepak Plan's requirement that no "assignment, pledge, or encumbrance of any kind, of pensions or deferred benefits" should be recognized.
Compliance with the order, it asserts, would constitute a breach of its fiduciary duty
and would jeopardize the Clevepak Plan's tax-exempt status under the Internal Revenue Code.
Accordingly, the Committee seeks a final judgment permanently enjoining the defendants from enforcing or attempting to enforce or otherwise implement the corrected payroll deduction order.
The defendants move pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint for failure to state a claim upon which relief may be granted. They contend that federal jurisdiction to enter an injunction against enforcement of the state court order is barred by the Anti-Injunction Act;
further, that even if the Court has jurisdiction it should abstain on grounds of comity and federalism; and, finally, that ERISA does not prohibit the enforcement of support rights against pension benefits.
The Pension Committee submits affidavits in opposition to defendants' motion. Accordingly, the motion may be deemed one for summary judgment under Rule 56.
The parties are in accord that no genuine issue of fact exists and that the matter is ripe for summary judgment. Since the case involves a significant construction of ERISA and other applicable federal statutes, the Court invited the Department of Justice to submit an Amicus brief setting forth its views, which it did, and its counsel also participated in oral argument.
A threshold issue is whether federal jurisdiction is barred by the Anti-Injunction Act, which provides that a federal court "may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments."
The statute is an absolute prohibition upon the federal courts against enjoining state court proceedings, unless one of the three specifically defined exceptions applies.
The Pension Committee here contends that the Anti-Injunction Act is no bar to this action since it is "expressly authorized" by ERISA. It relies on ERISA's authorization of civil actions by "a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan."
Such actions can be brought only in federal court.
The question is whether the foregoing provision of ERISA comes under the "expressly authorized" exception to the Anti-Injunction Act. To qualify under this exception, it is not necessary that the congressional enactment contain a specific reference to the Anti-Injunction Act, nor must it explicitly sanction injunctions against state proceedings.
The test is "whether an Act of Congress, clearly creating a federal right or remedy enforceable in a federal court of equity, could be given its intended scope only by the stay of a state court proceeding."
ERISA clearly meets the first prong of this test, for it establishes exclusive federal jurisdiction for fiduciaries to obtain injunctive relief to redress or prevent violations of its provisions.
The second prong of the test is also satisfied, since the "specific and uniquely federal right . . . could be frustrated if the federal court were not empowered to enjoin a state court proceeding."
That is, state court proceedings might be utilized to garnish pensions in violation of ERISA's anti-assignment or alienation provisions.
Unless a federal court could grant injunctive relief, enforcement of the state court order would frustrate the legislative goal of preventing the attachment of pension benefits by creditors.
Also persuasive is the Second Circuit's holding in Marshall v. Chase Manhattan Bank (National Association)
that the Anti-Injunction Act is inapplicable to a suit by the Secretary of Labor under ERISA's jurisdictional provision,
because Congress in enacting ERISA stated a strong preference that controversies be adjudicated in a federal tribunal, thereby " "eliminating the threat of conflicting and inconsistent State and local regulation.' "
By vesting federal courts with exclusive jurisdiction over suits brought under ERISA, Congress hoped that more uniform interpretation of ERISA would result.
Even though the Anti-Injunction Act does not preclude the Court from issuing the requested relief, defendants urge the Court not to exercise its power and to abstain from taking jurisdiction in this case. Federal courts may abstain in a suit to enjoin an ongoing state proceeding because of considerations of "comity and federalism."
Originally invoked to discourage litigation disrupting state criminal prosecutions,
comity and federalism may also justify federal court abstention where a party institutes a federal action challenging the validity of state court procedures in a pending state civil action, although he has the opportunity in the state court to raise the very issues presented to the federal court.
However, the present action is distinguishable from these cases.
First, the action does not involve the interruption of a pending state proceeding by the defending party. Any determination in this action will not affect the validity of the judgment of the Rockland County Family Court directing the husband to make payments for the support of his dependents; judgment had already been entered by the Family Court by the time the Pension Committee, which was not a party in the state case, brought the present action.
Thus the Pension Committee had no opportunity to present its federal claims in the state proceeding, nor is there any danger of duplicative litigation burdening the State.
Moreover, no state law or procedural practice is at issue in this suit, so that there is no reason to defer to the state courts to construe state law in the face of federal constitutional challenges.
Finally, the ERISA claim falls outside the jurisdiction and expertise of the Family Court, whose special province is domestic relations law.
Any alleged affront to the dignity of state courts would be minimal in this case and is superseded by Congress's intent to preempt state law with the creation of uniquely federal rights and to provide exclusive federal jurisdiction.
Finding and exercising jurisdiction, the Court considers the merits of plaintiff's complaint, which asserts that the attachment of George Cozart's pension to fulfill his support obligations is an invalid "assignment or alienation" under ERISA.
Plaintiff's contention is based upon a literal and strict reading of that section to exempt pension benefits from any and every levy, garnishment, or attachment. So read, plaintiff may be correct, but, "(o)n the other hand, it is a commonplace that a literal interpretation of the words of a statute is not always a safe guide to its meaning" and should be "disregarded when it defeats the manifest purpose of the statute as a whole."
Thus defendants argue that an exception to the exemption embodied in ERISA's anti-assignment or alienation provisions must be implied in order to secure enforcement of Cozart's obligations to support his dependents.
The anti-assignment or alienation sections of ERISA have been authoritatively interpreted to preclude "(a)ny direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary."
And Congress intended that ERISA's provisions would "supersede any and all State laws insofar as they may . . . relate to any employee benefit plan."
These generalized proscriptions, however, are not sufficient to infer that Congress meant to preclude the ancient family law right of maintenance and support and the issuance of process to enforce that right.
As a fundamental principle of statutory interpretation, courts have presumed that the basic police powers of the States, particularly the regulation of domestic relations, are not superseded by federal legislation unless that was the clear and manifest purpose of Congress.
An important and pervasive state law policy is to enforce the support rights of dependent spouses and children, even when they require the attachment of assets or earnings normally inalienable or unassignable under state law.
Consequently, the Supreme Court has held that "unless positively required by direct enactment the courts should not presume a design upon the part of Congress in relieving the unfortunate debtor to make the law a means of avoiding enforcement of the obligation, moral and legal, devolved upon the husband to support his wife and to maintain and educate his children."
The debates and reports on ERISA furnish little or no direction toward the precise issue: nothing contained therein suggests that the proscription against assignment or alienation was intended to include family support payments.
Indeed, an overall congressional purpose not to interfere with the States' power to enforce family support obligations may be gleaned from judicial interpretation of exemption provisions in other federal statutes. Though not exactly in Pari passu, they indicate a general congressional intent not to preclude enforcement of family support obligations. Provisions so interpreted include the exemption sections of the Social Security Act,
the Veterans Benefits Act,
and the Railway Retirement Act,
as well as the Bankruptcy Act's provision for discharge of prior obligations.
The rationale behind such judicial interpretations of the will of Congress was aptly summarized by Judge, later Justice, Rutledge in Schlaefer v. Schlaefer:
"(T)he usual purpose of exemptions is to relieve the person exempted from the pressure of claims hostile to his dependents' essential needs as well as his own personal ones, not to relieve him of familial obligations and destroy what may be the family's last and only security, short of public relief."
Moreover, the goals underlying ERISA support the reasoning of this common law presumption. Originally introduced in 1967, ERISA was meant "to prescribe legislative remedies for the various deficiencies existing in the private pension plan systems," primarily relating to prior abuses in plan vesting, funding, termination, and fiduciary conduct.
In particular, Congress was solicitous of the "continued well-being and security of millions of employees And their dependents (who) are directly affected by these plans."
Rather than intending to undermine the family law rights of dependent spouses and children, the legislature was concerned that "employees and their beneficiaries" the entire family be protected by ERISA.
Thus the conclusion is warranted that, like the previous congressional exemptions, ERISA's anti-assignment or alienation sections were included only "to protect a person and those dependent upon him from the claim of creditors,"
not to insulate a breadwinner from the valid support claims of spouse and offspring.
This conclusion is buttressed by the Amicus brief submitted on behalf of the Departments of Labor and the Treasury, which are charged with enforcement and interpretation of ERISA and whose interpretation of the Act, though not controlling, is entitled to great weight.
The Government takes the position, which appears reasonable and correct, that "family support decrees were not intended to be within the scope of the anti-alienation provisions of ERISA."
In response to the conclusion that an implied exception to ERISA's anti-assignment or alienation provisions is justified, the Pension Committee nonetheless advances two further arguments. First, it contends that attachment of the delinquent spouse's pension is not necessary to guarantee support payments, for "(t)here is no inhibition (to) preclude a court from jailing a pensioner who is in default of court ordered support payments."
This stands reason on its head. To jail the errant husband would impose upon the community the expense of keeping and feeding him, in addition to the burden of supporting the wife and children on welfare. Such a result is directly contrary to the legislative goal that "the continued well-being and security of millions of employees and their dependents" be guaranteed by ERISA. It is also contradicted by the facts in this case: after twenty years, and at least one period of incarceration, George Cozart's support payments remain in substantial arrears. To interpret ERISA so as to enjoin the attachment of the pension in this case is, practically, to foreclose any enforcement of the wife's support rights. "Until and unless Congress has made it plain that it intended the absurd, unfair and unconscionable result contended for by the movant . . . the Court will not leave the field, and will permit the normal and routine enforcement machinery with respect to outstanding support orders to function."
The Committee argues, secondly, that the support rights owed to the dependents cannot be enforced against the pension by the Assignee, Rockland County Department of Social Services. Plaintiffs rely on the case of Philpott v. Essex County Welfare Board,
in which the Supreme Court read the exemption section of the Social Security Act
to bar the county welfare board from garnishing disability payments assigned to it in return for receipt of public assistance. Reliance upon Philpott to govern this case is misplaced, since it is distinguishable. The holding in that case rested squarely on the Supremacy Clause: the federal exemption provision took precedence over the New Jersey statute
under which the assignment was made.
In contrast, the assignment in the present action was made pursuant to federal law the Social Security Act, as amended by the Social Services Amendments of 1974.
Moreover, the purpose of the 1974 Amendments militates against an interpretation that would deprive the State of the assets assigned by Mrs. Cozart. Congress sought to recoup for the public fisc some portion of the payments which were being made by the federal and state governments to maintain the wife and child.
To require the public authorities to continue to make the payments to the wife and to immunize the husband's pension payments would serve to defeat the congressional purpose to recover, to the extent possible, payments made to welfare recipients. The law is not bereft of common sense
and will not sanction such a result.
Additionally, Congress in the 1974 Amendments intended that the state assignee stand in the shoes of the spouse. As amended, the Social Security Act provides that "(a) debt which is a child support payment obligation assigned to a state (under the 1974 Amendments) is not released by a discharge in bankruptcy under the Bankruptcy Act."
The policy behind the provision, equally applicable to ERISA, was aptly summarized by the Ninth Circuit in 1976: "(T)he purposes of the maintenance and support exemption would be ill-served by the result sought by the bankrupt, which would jeopardize the continuing viability of the AFDC program and at the same time give tacit encouragement to parents who seek to avoid their duty to support their dependents."
Indeed, the spouse will normally profit from the enforcement, as Congress found that "the most effective and systematic method for an AFDC family to obtain child support from a deserting parent is the assignment of the family support rights to the State government for collection."
Thus the State's collection of pension funds as a surrogate for the wife is entirely consistent with ERISA's policy of ensuring the well-being of the family unit.
This case involves a complex array of legal rules and policies, but its facts are simple, and dramatic. For two decades Vivian Cozart, her children, and the State have unsuccessfully sought to enforce George Cozart's elemental support duties. Their efforts should not be thwarted by a literal-minded reading of ERISA. As the Supreme Court cautioned judges eighty years ago, "(a)ll laws should receive a sensible construction," and judicial common sense mandates that "general terms should be so limited in their application as not to lead to injustice, oppression, or an absurd consequence."
To adopt plaintiffs' strict, confined, and literal interpretation of ERISA's anti-assignment or alienation provisions would not only erode the statutory and common law policy of protecting the security of family dependents, but would lead to manifest injustice that generations of judges have refused to impute to the will of the legislature.