STATE TREASURER V THOMAS K ABBOTT
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STATE OF MICHIGAN
COURT OF APPEALS
STATE TREASURER,
FOR PUBLICATION
December 28, 2001
9:15 a.m.
Plaintiff-Appellee,
v
No. 223567
Clinton Circuit Court
LC No. 97-008368-CZ
THOMAS K. ABBOTT,
Defendant-Appellant,
Updated Copy
March 15, 2002
and
AUTO BODY CREDIT UNION and JOANN A.
ABBOTT,
Defendants.
Before: Fitzgerald, P.J., and Hoekstra and Markey, JJ.
FITZGERALD, P.J.
Defendant Thomas K. Abbott is a General Motors Corporation retiree and receives a
monthly pension benefit. He is currently a prisoner at a Michigan correctional facility. Plaintiff,
the treasurer of the state of Michigan, filed an action pursuant to the State Correctional Facility
Reimbursement Act (SCFRA), MCL 800.401 et seq., seeking partial distribution of defendant's
pension benefits to the state of Michigan for reimbursement of the cost of caring for defendant. 1
On remand from the Supreme to this Court for consideration as on leave granted,2 defendant
appeals from a final circuit court order directing defendant to change his pension address to his
prison address, appointing the warden receiver of defendant's pension checks, and directing
partial distribution of the funds to the state of Michigan as reimbursement for expenses incurred
for defendant's incarceration. Defendant contends that the order violates the Employee
Retirement Income Security Act (ERISA), 29 USC 1001 et seq., which prohibits assignment or
alienation of a participant's pension benefits. We reverse.
1
JoAnn Abbott, defendant's wife, is currently receiving approximately sixty-seven percent of
Thomas' pension at issue in this case.
2
State Treasurer v Abbott, 461 Mich 911; 603 NW2d 786 (1999).
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I. The SCFRA
Under Michigan law, plaintiff may seek reimbursement for incarceration costs where the
prisoner is able to pay for the prisoner's maintenance. The purpose of the SCFRA is:
to provide procedures for securing reimbursement to the state of the expenses
incurred by the state for the cost of care of certain prisoners in state correctional
facilities; to provide procedures for securing the reimbursement of expenses to be
incurred by the state in regard to the future cost of care of such prisoners; and to
prescribe certain powers and duties of certain state and local public officers and
officials. [1984 PA 282.]
The SCFRA specifically includes "pension benefits" within the definition of "assets" that may be
sought as reimbursement under the act. MCL 800.401a(a), 800.404.
II. The ERISA
A. Antialienation Provision
It is undisputed that the pension plan at issue is governed by the ERISA. Under the
ERISA, benefits provided under the plan may not be assigned or alienated. "Each plan shall
provide that benefits provided under the plan may not be assigned or alienated." 29 USC
1056(d)(1). The purpose of the ERISA's proscription on alienation and assignment is to protect
an employee from his own financial improvidence in dealing with third parties. The provision is
not intended to alter traditional support obligations, but rather to assure that the employee and his
beneficiaries reap the ultimate benefits due upon retirement. See Stinner v Stinner, 520 Pa 374;
554 A2d 45 (1989). The antialienation rule extends to voluntary and involuntary assignments
such as garnishments. Commercial Mortgage Ins, Inc v Citizens Nat'l Bank of Dallas, 526 F
Supp 510 (ND Tex, 1981). Similarly, courts have also held that restitution orders violate the
ERISA's antialienation clause. Guidry v Sheet Metal Workers Nat'l Pension Fund, 493 US 365;
110 S Ct 680; 107 L Ed 2d 782 (1990); United States v Smith, 47 F3d 681 (CA 4, 1995).
B. Preemption Provision
The ERISA subjects all employee benefit plans to federal regulation. It is "a
comprehensive statute designed to promote the interests of employees and their beneficiaries in
employee benefit plans." Shaw v Delta Air Lines, Inc, 463 US 85, 90; 103 S Ct 2890; 77 L Ed
2d 490 (1983); Nachman Corp v Pension Benefit Guaranty Corp, 446 US 359, 361-362; 100 S
Ct 1723; 64 L Ed 2d 354 (1980). The ERISA is designed to protect "the interests of participants
in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to
participants and beneficiaries of financial and other information" and by establishing "standards
of conduct, responsibility, and obligation for fiduciaries of employee benefit plans." 29 USC
1001(b).
The ERISA includes a preemption provision that provides that the ERISA will
"supersede any and all state laws" to the extent that those laws "relate to" any employee benefit
plan that is subject to the ERISA, thereby eliminating the confusion of conflicting state
regulations. 29 USC 1144(a). The preemption provision was enacted to "establish pension plan
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regulations as exclusively a federal concern." Alessi v Raybestos-Manhattan, Inc, 451 US 504,
523; 101 S Ct 1895; 68 L Ed 2d 402 (1981).
C
Defendant argues that reimbursement under the SCFRA violates the ERISA because such
reimbursement amounts to an assignment of defendant's pension benefits to plaintiff that is
specifically prohibited by the ERISA. 29 USC 1056(d)(1). Plaintiff contends that the order
directing defendant to change his pension address to the prison and deposit of the funds into
defendant's prison account does not operate as an assignment. Rather, plaintiff contends that the
ERISA does not apply to funds once they are deposited into the prison account.
In State Treasurer v Baugh, 986 F Supp 1074 (ED Mich, 1997), the state treasurer
brought an action against a prisoner and the prisoner's former employer under the SCFRA
seeking an order directing the former employer's pension plan to deposit the prisoner's pension
benefits into his personal prison account that could be used to partially reimburse costs of the
prisoner's incarceration. The court held that the treasurer's request violated the antialienation
provisions of the ERISA and was preempted by the ERISA:3
The Court agrees that once pension benefits are placed in a personal
account, ERISA no longer operates to protect those funds. However, in the
instant case, defendant Chrysler Corp. would not be voluntarily depositing the
pension funds into [the defendant's] personal prisoner account but would be doing
so only by court order. Such an involuntary transfer clearly constitutes an
assignment. [Id. at 1077 (citations omitted).]
Although Baugh is not binding precedent in this Court, Yellow Freight System, Inc v
Michigan, 464 Mich 21, 29, n 10; 627 NW2d 236 (2001), Baugh is entitled to respectful
consideration by this Court. Id. Additionally, the holding in Baugh is consistent with analogous
federal decisions in which a state was seeking to use a miscreant's pension for restitution. See,
e.g., Guidry, supra at 367-369; United Metal Products Corp v Nat'l Bank of Detroit, 811 F2d 297
(CA 6, 1987). In those cases, the courts refused to create a judicial exception to the ERISA
antialienation provision for employee misfeasance or criminal misconduct:
A court attempting to carve out an exception that would not swallow the
rule would be forced to determine whether application of the rule in particular
circumstances would be "especially" inequitable. The impracticality of defining
such a standard reinforces our conclusion that the identification of any exception
should be left to Congress. [Guidry, supra at 377.]
There is no dispute that directly garnishing defendant's pension benefits to reimburse the
state would violate the ERISA's antialienation provision. Baugh, supra. Plaintiff attempts to
3
The court noted that application of the antialienation rule in Baugh begat "an unsettling result,"
but found that to hold otherwise would constitute an exception to the ERISA contrary to
congressional direction. Id. at 1077, citing Guidry, supra at 376.
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distinguish Baugh by asserting that plaintiff did not make a claim against the pension plan in this
case and did not seek an order compelling the plan to do anything. Plaintiff argues that ordering
defendant to direct his pension to be sent to his prison address is consistent with Baugh and does
not violate the ERISA. This argument fails for two reasons. First, defendant did not voluntarily
change his pension address to his prison address and did not voluntarily have the pension funds
deposited into his personal prisoner account, but rather was ordered by the court to do so. The
court's order effectively required the pension fund to make the pension payment to defendant's
prison account against defendant's will.4 Such an involuntary transfer clearly constitutes an
assignment and conflicts with the ERISA's antialienation provision.5 Second, if defendant
refuses to direct the pension fund to pay the benefits to his prison account, the only method of
ensuring that the benefits reach the prison account is by reliance on the order directing the fund
to send the money to the prison, just as in Baugh.
Accordingly, we conclude that the order requiring General Motors to make defendant's
pension payment to defendant's prison account against defendant's will conflicts with, and is
therefore preempted by, the ERISA's antialienation provision. Baugh, supra at 1077; Guidry,
supra at 376-377.
Reversed.
/s/ E. Thomas Fitzgerald
/s/ Joel P. Hoekstra
/s/ Jane E. Markey
4
An order forcing defendant to take his pension benefits at the prison has the same practical
effect as the orders deemed prohibited in Baugh, supra, and Guidry, supra.
5
Black's Law Dictionary (5th ed), p 109, defines an assignment as "[a] transfer or making over
to another of the whole of any property, real or personal, in possession or in action, or of any
estate or right therein. It includes transfers of all kinds of property including negotiable
instruments." (Citations omitted.)
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