Summary
The Eleventh Circuit affirmed an order permitting St. Paul Fire and Marine Insurance Co. to garnish H. Ray Cox's vested interest in an ERISA pension and profit-sharing plan. The court held that ERISA's anti-alienation and anti-forfeiture provisions did not prevent garnishment to satisfy liabilities arising from Cox's criminal misapplication of his employer's funds. The court concluded that allowing garnishment in these circumstances was consistent with ERISA's objectives and the equitable principle that a wrongdoer should not profit from his misconduct.
Topics
Practice areas
Questions Presented
- Whether ERISA's non-alienation and non-forfeiture provisions bar garnishment of a participant's pension-plan funds to satisfy a judgment arising from the participant's criminal misconduct toward his employer.
- Whether ERISA's preemption provision prevents application of the equitable principle that a wrongdoer should not benefit from his misdeeds in determining the availability of garnishment.
Holdings
- ERISA does not bar garnishment of pension-plan funds to satisfy liabilities arising from an employee's criminal misconduct against the employer; such garnishment constitutes an implied exception to ERISA's non-alienation provisions.
- ERISA does not preempt application of equitable principles concerning the availability of garnishment orders when those principles do not relate directly to employee benefit plans.
Key quotations
“Because we agree with the district court that Congress did not intend the non-alienation provision of ERISA to create a windfall for employees who engage in criminal acts at the expense of their employers, we affirm.” (¶ 1)
“The insulation of an employee from liability for the consequences of his criminal misconduct does not protect the financial interests of other employees or promote security in the workplace.” (¶ 6)
“There is no reason to conclude that ERISA requires the abrogation of the equitable principle that a wrongdoer should not benefit from his misdeeds.” (¶ 6)
Factual background
H. Ray Cox, president of Alabama City Bank of Gadsden, was convicted of knowingly and willfully misapplying bank funds with intent to injure and defraud the bank, in violation of 18 U.S.C. § 656. St. Paul, the bank's surety, paid the bank $152,000 and received an assignment of the bank's rights against persons responsible for the loss; it then obtained a judgment against Cox. St. Paul sought to garnish Cox's vested interest in the bank's pension and profit-sharing plan, while another claimant asserted an interest in the same funds, leading the bank to commence an interpleader action.
Procedural history
After St. Paul paid the bank's insured loss and obtained an assigned claim against Cox, it obtained a judgment against him and initiated garnishment proceedings against his pension-plan interest. The district court held that ERISA's non-alienation and non-forfeiture provisions did not bar garnishment based on liabilities arising from Cox's criminal misconduct toward his employer. The Eleventh Circuit affirmed.