JEFFERY A. DELLER, Chief Judge.
The matter before the Court is a Motion for Authority of Chapter 7 Trustee to Execute a Qualified Domestic Relations Order to Effectuate Property Settlement Agreement (the "Motion to Execute QDRO"). The Motion to Execute QDRO is a core proceeding over which this Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157(b)(2)(A), 157(b)(2)(E), 157(b)(2)(O) and 1334(b).
For the reasons set forth below, the Court shall enter an order which essentially defers ruling on the relief set forth in the motion until such time as the Chapter 7 Trustee demonstrates to the Court that the bankruptcy trustee has appropriate standing to recover the pension interests at issue.
As an initial matter, neither the debtor, the debtor's ex-spouse nor any creditor has lodged an objection to the trustee's Motion to Execute QDRO. However, FedEx Corporation ("FedEx"), who is the employer of the debtor's exspouse, has lodged an objection.
Specifically, FedEx (as plan administrator of the FedEx Corporation Employee's Pension Plan) has interposed two objections to the relief requested. First, FedEx contends that the relief is not warranted because the trustee is not an "alternate payee," and therefore not a "beneficiary" under the FedEx pension plan pursuant to Sections 1056(d)(3)(j) and (k) of the Employee Retirement Income Security Act of 1974 ("ERISA"). See 29 U.S.C. §§ 1056(d)(3)(j) and (k). According to FedEx, since the bankruptcy trustee is neither an "alternate payee" nor a "beneficiary" as such terms are used in ERISA, it is alleged that the
Preliminarily, the Court does have some concern over the standing of FedEx to interject itself into this bankruptcy proceeding. The Court has this concern because the record reflects that FedEx is not a creditor of the debtor; nor does FedEx own the pension funds at issue. Rather, FedEx is merely a plan administrator, with no pecuniary interest in the outcome of these proceedings. As such, it is questionable as to whether FedEx may have standing to object to the trustee's Motion to Execute QDRO. See In re Global Indus. Tech., Inc., 645 F.3d 201, 210 (3d Cir.2011))("party-in-interest" is person or entity that alleges a "specific, `identifiable trifle' of injury" or a person or entity that has a "personal stake in the outcome of [the] litigation") (citations omitted).
Regardless of whether FedEx has standing, this Court has elected to examine the trustee's motion even though neither the debtor nor any creditor has objected to the relief requested. See In re Jasinski, 406 B.R. 653, 656 (Bankr. W.D.Pa.2009)(court examined merits of underlying relief even though movant requested a default judgment for failure of parties-in-interest to object).
During the course of examining the merits of the motion, the Court observed that the United States District Court for the Western District of Pennsylvania recently rendered its decision in the case of Urmann v. Walsh (In re Urmann), ___ B.R. ___, C.A. No. 14-718, 2014 WL 5440736 (W.D.Pa. Oct. 24, 2014).
In In re Urmann, the United States District Court affirmed the Bankruptcy Court's approval of a settlement that provided for the liquidation and remittance of the debtor's marital interest in a 401(k) plan. In reaching the decision that the Bankruptcy Court did not abuse its discretion in approving the settlement at issue, the District Court in Urmann addressed the trustee's request for authority to seek a QDRO. In this regard, the District Court wrote:
In re Urmann, ___ B.R. at ___, 2014 WL 5440736 at *8 (footnote omitted).
The reasoning in Urmann is persuasive, and this Court finds no reason to deviate from the holding of the United States District Court. That is, a trustee in bankruptcy may "stand in the shoes" of the debtor pursuant to 11 U.S.C. § 541, and assert the debtor's rights to pursue a QDRO (to the extent that the retirement funds at issue constitute property of the bankruptcy estate).
This Court's conclusion is particularly acute since ERISA itself provides that the provisions of ERISA shall not be "construed to alter, amend, modify, invalidate, impair, or supercede any law of the United States...." See 29 U.S.C. § 1144(d). A plain reading of the phrase "any law of the United States" as used in Section 1144(d) of ERISA includes Sections 323, 541 and 704 of the Bankruptcy Code. See 11 U.S.C. §§ 323,
As can be seen by these provisions of the Bankruptcy Code, the fact that a bankruptcy trustee is not specifically identified as an "alternate payee" or "beneficiary" in ERISA is of no moment. This is because the Bankruptcy Code fills in the gap complained of by FedEx, and Section 1144(d) of ERISA preserves the ability of the Bankruptcy Code to operate in this fashion. Accordingly, the trustee seeking the issuance of a QDRO is consistent with the statutes referenced above.
In addition, the phrase "any law of the United States" as used in Section 1144(d) of ERISA also includes 11 U.S.C. § 105(a). Section 105(a) of the Bankruptcy Code empowers bankruptcy courts to issue any "order, process, or judgment that is necessary or appropriate to carry out the provisions of this title [which is title 11 of the United States Code]." 11 U.S.C. § 105(a).
It is evident that court authorization for the trustee to seek a QDRO is an "order, process, or judgment" under Section 105(a) of the Bankruptcy Code. Moreover, ERISA, by virtue of Section 1144(d), does not write Section 105(a) of the Bankruptcy Code out of existence. In fact, ERISA does the opposite — namely it plainly states that ERISA does not "alter, amend, modify, invalidate, impair, or supercede any law of the United States." See 29 U.S.C. § 1144(d). ERISA therefore does not preclude the ability of a bankruptcy trustee to seek the entry of a QDRO if the bankruptcy trustee has succeeded to the debtor's pension plan interests by operation of law. At least on this basis, the trustee has standing to pursue the Motion to Execute QDRO.
Finding as a legal matter that a bankruptcy trustee could succeed to a debtor's interest as an "alternate payee" or "beneficiary" under ERISA does not necessarily translate to the entry of an order granting the Motion to Execute QDRO. The Court reaches this conclusion because the Court has some concerns regarding the chapter 7 trustee's standing to liquidate the pension interests awarded to Ms. Dively.
The record reflects that the debtor's equitable distribution claim between the debtor and her ex-husband, Sean Dively, was settled in 2011 — which was prior to the bankruptcy petition date of February 22, 2012. The marital settlement agreement between Bobbi Jo S. Dively and Sean
The preceding undisputed facts therefore reflect that Ms. Dively had a vested pre-petition interest in the FedEx pension, see Crawford v. Hertzberg (In re Hertzberg), Adv. No. 14-214, 2014 WL 6382951 at *4 (Bankr.W.D.Pa. Nov. 13, 2014), and the trustee has accepted the present value of her interest as being $77,646.39 as of the petition date.
That Ms. Dively owned a vested interest in the pension prior to the bankruptcy filing is important relative to any competing claims of the bankruptcy trustee. This conclusion is evident because the law provides that Ms. Dively's interest in the pension may, under the right set of circumstances, defeat any claim of ownership that is made by the trustee. For example, in Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), the U.S. Supreme Court held that retirement plans containing a legally enforceable "anti-alienation clause" are not "property of the estate" pursuant to 11 U.S.C. § 541(c)(2). In addition, as set forth in 11 U.S.C. §§ 522(b)(3)(C)
The net effect of the operation of Sections 541(c)(2), 522(b)(3)(c), 522(d)(10)(E) and 522(d)(12) of the Bankruptcy Code, and the U.S. Supreme Court's decision in Patterson v. Shumate, supra., is that retirement funds in some instances may be outside the ambit of "property of the estate." See e.g. Rousey v. Jacoway, 544 U.S. 320, 125 S.Ct. 1561, 161 L.Ed.2d 563 (2005).
Simply stated, if Ms. Dively's pension interests fall under the umbrella of 11 U.S.C. §§ 541(c)(2), 522(b)(3)(C), 522(d)(10)(E) or 522(d)(12), the assets would be excluded from "property of the estate" and the trustee in this case may not make any claim to the assets for the benefit of creditors. See Nelson v. Ramette (In re Nelson), 322 F.3d 541 (8th Cir.2003). Rather, Ms. Dively may retain such funds to augment her fresh start after her bankruptcy case is administered and closed.
The matter sub judice stands on different footing than Burgeson and Urmann because this case involves a pre-bankruptcy vested interest by Ms. Dively in the pension plan. That interest was vested by operation of the marital settlement agreement, which was, in turn, incorporated into the prepetition divorce decree.
Since her property interest is an interest in an ERISA qualified pension plan, Ms. Dively's interest in the FedEx pension is conceivably outside the scope of "property of the estate." If Ms. Dively's interest in the pension is superior to the interest of the chapter 7 trustee, the chapter 7 trustee has no claim at all to the assets at issue. Such a consequence implicates the ability of the trustee to prosecute the Motion to Execute QDRO because, absent an interest in the FedEx plan assets, the trustee would lack either an "injury in fact" or a sufficient "personal stake" in the outcome of this proceeding so as to warrant the invocation of this court's limited federal subject matter jurisdiction. See In re Hertzberg, supra., at *1-5. It therefore appears on its face that the determination of the Motion to Execute QDRO should be deferred until such time as the trustee demonstrates that he has standing to liquidate Ms. Dively's pension interests.
The Court recognizes that the debtor has not yet claimed an exemption in the pension, and therefore the applicability of Section 522 of the Bankruptcy Code to the pension interests of the debtor may not be ripe at the present moment. The fact that the debtor not taken an exemption under Section 522 of the Bankruptcy Code, however, does not obviate the application of 11 U.S.C. § 541(c)(2) and the holding of Patterson v. Shumate and its progeny to this case. Therefore, whether Ms. Dively's interest is not "property of the estate" remains to be determined.
In this regard, the Court would note that 11 U.S.C. § 541(a)(7) provides that property of the estate includes any "interest in property that the estate acquires after the commencement of the case." It does not appear that this provision of the Bankruptcy Code is applicable because the Motion to Execute QDRO does not cite any agreement by Ms. Dively to convey her pension interests to the trustee.
Of course, the record does reflect that the U.S. Trustee filed a complaint for revocation
A fair reading of the trustee's Motion to Execute QDRO is that the trustee is asserting a claim to the pension because it was not scheduled by the debtor. In essence, the trustee alleges in the Motion to Execute QDRO that the debtor wrongfully failed to disclose the asset and the consequence is that the trustee can now surcharge the asset because the debtor somehow forfeited her interest in the same.
The Court has not found any persuasive authority supporting the trustee's position. In fact, the Court's own research leads it to conclude that such a surcharge of exempt assets by a trustee has been rejected by the United States Supreme Court.
In Law v. Siegel, ___ U.S. ___, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014),
Making matters more difficult in this case is the fact that counsel to the debtor previously withdrew from his representation of the debtor. Ms. Dively has therefore been left unrepresented in these proceedings, even though she previously filed a letter with the Court (and reiterated in the hearing on counsel's motion to withdraw) that (a) she disclosed to counsel her pension interests for inclusion in the bankruptcy schedules and (b) she made all disclosures required by law.
Given her unrepresented status, it is not surprising that the debtor filed no papers in opposition to, or in favor of, the trustees Motion to Execute QDRO. The Court wonders whether Ms. Dively truly understands the nature of the trustee's motion, and the consequences of the relief sought by the trustee if it were granted (i.e., that the trustee is seeking to cut-off the debtor's rights to her marital share of the FedEx pension). Ms. Dively certainly
For all of the reasons set forth above, a rule to show cause shall be issued as to whether the pension interests of Ms. Dively should be excluded from property of the estate and whether the Motion to Execute QDRO should be denied for lack of standing by the chapter 7 trustee. At such rule hearing, both the debtor and the trustee shall be afforded an opportunity to be heard with respect to the issues highlighted by this Memorandum Opinion.
Applicable law does not authorize the Court to appoint counsel for the debtor. See e.g., In re Parker, No. 12-10684, 2012 WL 4021144 (Bankr.D.Vt. Sept. 11, 2012). Consequently, Ms. Dively is encouraged to seek the assistance of counsel given the complexity of these matters.
An appropriate order shall be issued.
See 11 U.S.C. § 323.
See 11 U.S.C. § 541(a)(1).
See 11 U.S.C. § 704(a)(1).
See 11 U.S.C. § 522(b)(3)(C).
See 11 U.S.C. § 522(d)(10)(E).
See 11 U.S.C. § 522(d)(12).