GUIDRY v. SHEET METAL WORKERS NATIONAL PENSION FUND
Legal provision: Employee Retirement Income Security
Argument of Eldon E. Silverman
Chief Justice Rehnquist: We'll hear argument next in Number 88-1105, Curtis Guidry v. Sheet Metal Workers National Pension Fund.
Mr. Silverman, you may proceed whenever you're ready.
Mr. Silverman: Mr. Chief Justice and may it please the Court:
In the district court Curtis Guidry stipulated that his former employer, the union, was entitled to a judgment in the amount of $275,000 because of theft by Mr. Guidry from his union employer.
He, however, opposed any taking of this three separate pension funds based on the anti-alienation clause in the Employee Retirement Security Income Act of 1974, which is also known as ERISA.
The distric' court imposed the constructive trust, indicating that it was creating only a narrow exception for Mr. Guidry and in favor of the union to redress the theft of union employer funds.
The Tenth Circuit Court of Appeals affirmed, choosing between conflicting circuits, and chose to follow that line of cases that say that federal courts have inherent equitable common law powers to create exceptions to a congressional enactment.
The Tenth Circuit also recognized on the alternative argument of Mr. Guidry that a constructive trust was a garnishment within the Consumer Credit Protection Act, which meant that he would be entitled to 75 percent as an exemption.
However, the Tenth Circuit held Mr. Guidry failed to preserve that right.
Today I will make three major arguments.
The first is that Congress created the anti-alienation clause in ERISA with its own three narrow exceptions, none of which are applicable here.
Under separation of powers, it is Congress, not the courts, that should make any changes to ERISA.
Second, the creation of a special exemption for the union based on federal labor law would effectively gut the anti-alienation clause because any other judgment creditor of a federal cause of action would also say that its judgment was claimed to be impaired by the anti-alienation clause.
Lastly, in the event that you find that the constructive trust was properly imposed, Mr. Guidry is entitled to at least 75 percent of his pension under the Consumer Credit Protection Act because a constructive trust clearly fits within the definition of garnishment.
Unknown Speaker: Why do you say at least?
Mr. Silverman: Why do I say at least?
Unknown Speaker: Yes.
Mr. Silverman: I should say 75 percent.
There is no quantification.
It's exactly that figure.
Unknown Speaker: I thought I'd missed something.
Mr. Silverman: No.
As to the--
Unknown Speaker: You didn't mean entitled to at least.
You meant at least entitled to.
Mr. Silverman: --I imagine.
What I'm actually arguing is that he's entitled under the ERISA to 100 percent, so I'm arguing in the alternative that if you don't accept the first argument of 100, then he deserves 75 percent.
As to the first argument, after almost a decade of study, Congress passed ERISA.
This Court has repeatedly called ERISA a comprehensive and reticulated statute.
In fact, it has six subtitles.
It has over 150 subsections, not... not counting other intricate sections.
Among one of the interrelated provisions is the anti-alienation clause in Section 1056(d), which is clear-cut and straightforward.
The concept of anti-alienation is not new to federal law in ERISA.
Strong anti-alienation causes have predated ERISA, such as in the Civil Service Retirement Act, the Social Security Act, the Railroad Retirement Act and others.
Congress has shown that it can create its own exceptions to ERISA by initially in the first act legislating two narrow exceptions and then in 1984 legislating a third, none of which are claimed to be applicable here.
In enacting an anti-alienation clause, Congress chose between competing social principles.
In enacting the clause, Congress decided that no matter how deserving a judgment creditor, how egregious an action of the judgment debtor was, that pension funds could not be touched.
This is not unusual either, because both state and federal legislatures historically have provided exemption laws.
Take the Homestead exemption which has been historical.
Take the Tools of the Trade exemption.
A pension is a tool of the trade of a retired person.
Unknown Speaker: Mr. Silverman, can federal taxes be taken out of his share of the pension fund?
Mr. Silverman: Under a special federal statute in the IRS, yes.
Unknown Speaker: The Tenth Circuit assumed that the embezzlement of funds was from the pension fund itself.
Mr. Silverman: Correct.
Unknown Speaker: The Solicitor General says that isn't so, that the embezzlement was only of the union's funds.
Mr. Silverman: That has been a misinterpreted fact, and we say the same thing.
In fact, the action... there were competing claims in the district court, and, in fact, Mr. Guidry was only fiduciary of one of the three plans, the Local 9 plan.
He wasn't a fiduciary of the two national pension plans.
As to that one plan, there was a state court action.
He settled it before this instant case, and there was a release given to him, and the pension resumed.
So he basically upheld his anti-alienation rights in that state court action.
The union then started a separate action, brought in the pension funds.
They came in in different ways below.
Unknown Speaker: Did... did the Respondent raise this argument based on the LMRDA provision in the lower courts?
Mr. Silverman: Not exactly.
It was raised by the district judge.
He... when he went and said in pari materia to create a narrow exception, he did cite the LMRDA and said I think it's in pari materia.
And as we've argued, in pari materia means statutes of the same subject matter.
If you have to get to judicial construction, we would argue that the same subject matter of anti-alienation is anti-alienation, and those are found in the Civil Service and in other federal acts which have mandated exemptions.
So we think LMRDA talks about a substantive right perhaps, whereas there's another substantive right in ERISA; namely, an exemption.
But you can still get your judgment; you just can't collect it against the pensions.
Unknown Speaker: Are the narrow exceptions to the anti-alienation provision to which you refer, are they contained in the... in ERISA?
Mr. Silverman: Correct.
Unknown Speaker: So we don't have to look outside of ERISA to decide what... what is a provision that prohibits assignment or alienation?
Mr. Silverman: Correct.
The first two were that you could voluntarily and revocably assign 10 percent of your benefits.
The second and the initial legislation was if you borrowed from the plan you could secure it with your benefits, and then in '84 Congress allowed the QDRO, Qualified Domestic Relations Order, to further the purpose of the Act so that divorced people, divorced spouses and children, were also included within the rights of ERISA.
So they have... Congress has clearly thought about it, and this Court has cautioned in other cases of ERISA against assuming that Congress unintentionally omitted something.
That was in Massachusetts Mutual v. Russell.
There was a caution of this Court to assume that there is an additional remedy within this very complex interrelated statute.
I today represent... as I had mentioned earlier we view the pension as an exemption similar to the tool of the trade because, in essence, this is how the pensioner supports his family, and his family is often innocent of any wrongdoing in any event.
And, of course, the whole point of a pension fund is not only to provide for the pensioner but for the dependents.
Now I do represent Mr. Guidry who did seek to enforce his rights.
In asserting his rights, I do not seek nor do I need to rehabilitate Mr. Guidry.
He was convicted.
He served a maximumly imposed not only fine but criminal sentence, and today at 67 he is simply seeking a legal right that anyone else who is a judgment debtor has under the laws, whether under the Homestead exemption, the Tools of the Trade or the Medical.
Unknown Speaker: May I just ask at that point, do you agree that he violated the LMRDA statute?
I'm interested in the argument that Respondent makes that the Tenth Circuit didn't really rely on the relief under that statute.
Mr. Silverman: Well, not under 501(b) because they never brought a 501(b) argument.
So it's for the first time that they say wouldn't we fit within 501(b).
501(b) says the court should give other appropriate relief.
It is a broad general statement, and it cannot in a view of construction overcome a specific enactment.
They got their relief.
They got their judgment.
They're frustrated like every other judgment creditor that they can't--
Unknown Speaker: I understand your statutory.
Supposing before ERISA was enacted you had a trust of this kind administered by in this way, and a fiduciary of the trust violated the LMRDA statute and there were spendthrift provisions in the trust which would normally be enforceable as a matter of state law.
Would you not agree that in enforcing the federal statute that the federal judge could order relief that overcome the state law obstacle?
Mr. Silverman: --Respectfully, I do not.
That's the very issue in United Mine Workers v. Tony Boyle where there... it was pre-ERISA, and the argument was made that Mr. Boyle's conduct was reprehensible, and the court said it's reprehensible.
The next argument was made, well, there's this federal labor policy in the LMRDA.
There, the court ruled that LMRDA cannot overcome a lawyer-drawn spendthrift clause.
My argument is if it can't overcome a lawyer-drawn spendthrift clause, how can it overcome a congressionally drawn spendthrift clause.
I'm calling it a spendthrift clause--
Unknown Speaker: Right.
No, that's right.
It would seem to follow that if it could not overcome... I'm... I just wasn't aware of that case.
Is that a... a circuit court case?
Mr. Silverman: --Yes, it's a circuit court case.
Unknown Speaker: That's it.
I mean, if that case is right, your argument would follow.
Mr. Silverman: Well, it's a D.C. Circuit Court case.
I can't appeal to--
Unknown Speaker: What circuit is it from?
Mr. Silverman: --Well, it's... we think it is a proper ruling, and even if it isn't, the end result of... let's say you gave--
Unknown Speaker: You said it's D.C. Circuit, isn't it?
Mr. Silverman: --Yes.
Unknown Speaker: There.
There you are.
Mr. Silverman: Let's assume--
Unknown Speaker: It may be right anyway.
Mr. Silverman: --and again, it's our argument you can't come to this Court for the first time and say I wish I would have brought a 501(b) case, but let's give them that and say they bring it.
If they got a judgment, it would still be for... it's a derivative suit that comes through a union member, and again we claim they can't bring it because the union always... already brought a suit.
But let's say they bring it.
They get a judgment.
It's the same judgment they have here for defalcation against an employer, not against a union, and so you have the same bar.
It all comes out the same.
It's a judgment though derivative in that instance.
And I... I do want to emphasize that the facts of this case seem to... to... to do get a bit twisted; that here we have a man who did steal from his employer union but not the pension funds.
His criminal conviction was for theft from the union.
This civil judgment is for theft from the union.
Unknown Speaker: [inaudible]
Mr. Silverman: They did say otherwise.
I raised it in my Petition for Rehearing, but it was... it was not granted.
But it wouldn't change the case at all if they decided differently because they followed St. Paul Fire & Marine v. Cox, which is an employer embezzlement case which says federal courts have broad equitable powers and we want to use it here.
In fact, the majority of these cases that are in dispute are all employer embezzlement cases.
So that seems to be the context in which it arises.
So it is an error, and we feel we have to point it out, but it wouldn't change the result from the rationale of the Tenth Circuit.
The district court in imposing the constructive trust and creating what it called a narrow exception had to rule in an inconsistent manner.
We have two clauses that came into play in the district court: the nonforfeiture clause and the anti-alienation clause.
The district court followed those restrictive cases, saying let Congress decide on the nonforfeiture issue.
The pensions were seeking to deprive him of a pension.
Mr. Guidry was seeking to get his pension, and the unions were saying give him his pension but give it to me.
So we had three competing interests in the district court, and the district court said I'm going to follow those restrictive cases; I'm not going to create an exception on the non-anti-alienation clause.
But then the court inconsistently to perhaps fill a social purpose that it saw or to do what it saw as good, it created the so-called narrow exception; and as we all know, good lawyers will use this narrow exception to create a greater crack in the door than we have now.
Unknown Speaker: [inaudible]
Mr. Silverman: There is.
There's a Treasury regulation that we believe is legislative in nature, that versus interpretive--
Unknown Speaker: Is it... is it right on this?
Mr. Silverman: --Right on.
Unknown Speaker: So... and did you call that to the attention of--
Mr. Silverman: Yes, we did.
And the reg is Section 1.401(a)-13(b)(1), and it clearly says that a trust is not--
Unknown Speaker: --Where are you reading from in your brief?
Mr. Silverman: --On page 3 of my brief, I put it as statutes and regulations involved.
Of course, that comes up under the Treasury context because one of the points in the anti-alienation clause is it appears not only in the Treasury law and amendment to the IRS, but it also appears under the labor portion.
Unknown Speaker: Regulations really just say what the statute does in about twice as many words, don't they?
Mr. Silverman: You might say it, but at least for our purposes it... it goes ahead and says there that in the parens
"either at law or in equity cannot be alienated or subject to attachment, garnishment, levy and execution. "
And I know we could all make distinctions between those remedies, but it's like some cases say we're doing a constructive garnishment.
Others say we're doing a constructive trust.
Others say we're doing equity.
It comes out that he doesn't have his pension, and... and he deserves his pension.
Unknown Speaker: Yes, but that... that provision merely is something that has to be included in order to meet the tax... requirements, and it merely requires that that clause be in the instrument.
It doesn't really say anything about the enforceability of the clause in a situation like this, does it?
Mr. Silverman: Well, it's... it appears that the Treasury regulation was given power by the... Congress to interpret it not only for the Labor Department but for the Treasury Department.
There's a separate provision in ERISA.
What you're reading, as you'll see in page 3, there is almost an identical provision in the IRS Code and in the ERISA, and what we have here is that it was just decided that labor would not give duplicitous regulations.
Unknown Speaker: Yes, but I still think it's... maybe I misread it.
But all it says is that... that the trust instrument must contain such a provision.
Mr. Silverman: --Well, and everyone wants their trust to be protected under federal law from taxes or from initial--
Unknown Speaker: Right, but I'm not sure that adds anything to the fact that... I mean, it doesn't really answer the question.
When a trust instrument has that kind of a provision, is it... is it subject to having... to an exception such as was imposed in this case?
Mr. Silverman: --Absolutely not.
Congress... the Treasury reg says we won't qualify a plan taxwise--
Unknown Speaker: Right.
Mr. Silverman: --unless you have the provision.
So if they didn't have it, they'd lose their tax, and you can say so what.
Unknown Speaker: Right.
Mr. Silverman: But ERISA itself says something in addition.
It says plan benefits shall not be alienated, which is about the same thing, I agree, but it--
Unknown Speaker: Well, I agree with you.
I understand your statutory argument.
But all I'm saying is I'm not sure the regulation really adds any force to your statutory argument.
That's really all I'm saying.
Mr. Silverman: --All right.
I wanted to point out as an argument under--
Unknown Speaker: You might say that it does indicate at least the Treasury's interpretation of what alienation would consist of.
Mr. Silverman: --Garnishment.
Unknown Speaker: That it would consist of garnishment and either at law... and assignment either at law or in equity and so forth.
Mr. Silverman: Well, the reason I didn't argue it strongly is because my principal argument is plain meaning, and I didn't need to go and say, but look at the Treasury regulation.
That supports my argument.
Perhaps I should have, but since I felt it was plain and we didn't really get that argument back at us... the argument we got back at us is we should have brought another lawsuit against you under the LMRDA.
We're not going to support the Tenth Circuit and you should lose.
I would point out the argument that under the saving clause, if you take it that the saving clause somehow impairs an LMRDA judgment under Section 501(b) that they never got, if you argue that, then you'd argue that a judgment under the Securities Exchange Act of '34, the Fair Labor Standards Act would also be impaired by the anti-alienation clause.
You'd end up with any federal cause of action judgment creditor going right through the anti-alienation clause, which could not have been the intention.
As to the last argument, in the event the Court does uphold the constructive trust we have made the alternative argument that under the Consumer Credit Protection Act he is entitled to a 75 percent exemption.
The union employer in its brief concedes as it does on the constructive trust theory that it's not seeking to uphold the rationale of the Tenth Circuit.
That rationale was that Mr. Guidry failed to claim the exemption by filing an objection form.
As the case was set up, they garnished before they got the constructive trust.
The pensions denied they owed any sums because, as I had told you earlier, they wanted it forfeited, so they wrote zero.
Under Colorado law, you have to calculate 75 percent, the garnishee.
Well, the garnishee, because it's mathematically impossible, did not calculate 75 percent of zero; therefore, Mr. Guidry did not have... it wasn't right for him to object.
The union's basic argument is, well, we need to go back to when... when it all happened in the beginning, and whatever they argue they can't get around the fact that their cause of action in the district court invoked the equity arm of the court.
It said it was an equitable remedy.
In their brief, they admit a constructive trust is an equitable remedy.
A decision against Mr. Guidry, though satisfying for the particular moment and this particular union, would not be a step forward for the vast number of American workers who participate in pension funds whether they're union members or not.
ERISA's anti-alienation clause protects not only workers but its often innocent spouses and dependents.
Anti-alienation is a clear federal policy expressed not only in ERISA but in other acts.
Congress created the anti-alienation clause.
If it is to be changed, Congress, not the Court, should weigh, deliberate and decide.
I would like to reserve my balance.
Unknown Speaker: Thank you, Mr. Silverman.
Mr. Goldhammer, we'll hear from you.
Argument of Joseph M. Goldhammer
Mr. Goldhammer: Mr. Chief Justice, and may it please the Court:
What we have before us here is a case that the LMRDA was exactly designed to cover.
And the LMRDA has been in this case from the very beginning.
The LMRDA was the basis of the district court's opinion in this case.
Opposing counsel quarrels with the district court's use of the term in pari materia, but what we have here is a case where you have to--
Unknown Speaker: And... and you sought recovery under LMRDA?
Mr. Goldhammer: --That's correct, Your Honor.
We brought complaint in the District Court for the District of Colorado in which we alleged jurisdiction under Section 501(b) of the LMRDA.
The first claim for relief... by the way, that's on page 29 of the Joint Appendix.
Paragraph number 1 of the complaint alleges jurisdiction under Section 501(b).
So I don't know where opposing counsel gets the idea that this is not a 501(b) case or that we never alleged 501(b).
Then, the first claim for relief in the complaint alleges breach of fiduciary duties under Section 501 of ERISA... of the LMRDA, the Labor Management Reporting and Disclosure Act, which is 29 United States Code, Section 501.
The LMRDA has been in this case from day one.
It was the basis of the district court's opinion.
It's been here all along.
It is the essence of this case, and the fact that the Tenth Circuit did not... I take chief responsibility for not being persuasiveness... persuasive enough in my arguments to... to the Tenth Circuit for them to rely upon it.
Unknown Speaker: xxx your judgment, you defend their opinion?
Mr. Goldhammer: Well, I defend the... the result of their opinion.
There are two major aspects of it that I have problems with.
One of the problems--
Unknown Speaker: Well, I don't... you're not here defending that rationale?
Mr. Goldhammer: --I'm not really defending that rationale--
Unknown Speaker: You're... you're presenting another ground for affirmance?
Mr. Goldhammer: --I am... I am presenting another, more persuasive ground for affirmance in... in some respects at least, in many respects at least.
This... this is the type of case that was exactly designed to be covered under the LMRDA.
Unknown Speaker: May I just ask you a question--
Mr. Goldhammer: Yes.
Unknown Speaker: --about the LMRDA?
There were three trusts involved, and is it correct that he was a fiduciary of only one of the three?
Mr. Goldhammer: There were actually... yes, that's true.
Three pension trusts and a welfare trust that he stole some money from.
He was pensioned... he was a trustee out of... of two out of the four.
Unknown Speaker: And as to the two of which he was not a trustee, did you assert an LMRDA claim as to those?
Mr. Goldhammer: Well, the LMRDA claim doesn't assert stealing in particular from pension funds.
Unknown Speaker: It asserts a violation of his--
Mr. Goldhammer: --stealing from unions.
Unknown Speaker: --a violation of his duties as a union officer, not as a fiduciary of the trust?
Mr. Goldhammer: Exactly.
Section 501 specifically creates fiduciary duties for union officers.
Unknown Speaker: I see.
Mr. Goldhammer: And they--
Unknown Speaker: But you are not claiming, you are not in this argument at least, you are not relying on a claim that a breach of his fiduciary obligations as a trustee of two of the four funds is what justifies this relief?
Mr. Goldhammer: --Well, we're in a sense relying on both; but primarily, primarily, we are relying on the fact that he breached his fiduciary duties to the union.
Unknown Speaker: And is it correct that insofar as you sought relief from the fund of which he was a trustee, whether it's one or two, that that claim has been satisfied?
Mr. Goldhammer: No, that claim has... oh... ah, what happened here was that--
Unknown Speaker: It would be a lot easier for me if I got a yes or no.
Mr. Goldhammer: --Yeah, and--
Unknown Speaker: They seem... I got the impression from your--
Mr. Goldhammer: --Insofar as... let me make sure--
Unknown Speaker: --I got the impression from your opponent that it had been satisfied, and I want to be sure I'm not misled.
Mr. Goldhammer: --Okay.
Insofar as that trust fund claims against him, he has been released by that trust fund for any liability to that trust fund.
Unknown Speaker: All right, thank you.
Mr. Goldhammer: And the facts of this case are very complicated, and the reason why they're complicated is because Mr. Guidry made them complicated.
The way in which he stole money was very complicated.
Unknown Speaker: No, I understand, but the two things that are... do characterize the claims that, at least the main portion of what remain, is, one, he was an officer of the union, and the union was his employer.
I mean, it's both that he breached duties that he owed under the statute, and, secondly, his status as an employee of the union makes it fit within some of these other cases.
Mr. Goldhammer: The fact that he was an employee of the union makes no difference in this case.
Unknown Speaker: You don't rely on that?
Mr. Goldhammer: --imposes--
Unknown Speaker: Well, I understand it doesn't for the LMRDA, but I'm talking about some of the other circuit court decisions have relied... have said in effect that embezzlement from an employer, when that happens, when you embezzle from an employer, you can get relief against the ERISA program--
Mr. Goldhammer: --Right, and we don't rely on those cases either.
Unknown Speaker: --You don't rely on those.
Mr. Goldhammer: We don't rely on the Cox case.
Unknown Speaker: Okay.
Mr. Goldhammer: Okay.
But we rely--
Unknown Speaker: Which I think is a conflict [inaudible] to resolve.
Mr. Goldhammer: --on the fact that he was a union officer.
Mr. Guidry... and in fact in many unions the rank and filers are the officers of the union.
They aren't employed by the union in any sense, and that has nothing to do with this case.
The fact that Mr. Guidry was employed by the union really has no major part in this case.
The fact that he was a union officer is the key... key thing.
Unknown Speaker: Well, the funds we're talking about now were funds taken from the union, not the pension funds?
Mr. Goldhammer: Well--
Unknown Speaker: For purposes of our discussion.
Mr. Goldhammer: --For purposes of our discussion, yes.
And I'm giving you a yes answer to that question just so you don't misunderstand me.
But it's also important for you to understand that Mr. Guidry's schemes of embezzlement involved these pension funds very directly and it... to a very great degree, and this is the way he did it.
Money passed between the pension funds and the union.
The reason for that is that the union performed clerical services for the pension funds.
And Mr. Guidry would steal them while they were in transit, and then nobody could figure out who he stole the money from.
And I'm terribly sorry that I have to give you evasive or ambiguous answers about where the money was stolen from.
Unknown Speaker: You said yes?
Mr. Goldhammer: Yeah.
But... but... but what's going on here is that Mr. Guidry has created these complexities, and now he relies on these complexities in order to thwart the union's attempt to get his money back.
Unknown Speaker: Has the union gotten any of its money back?
Mr. Goldhammer: No, not one penny.
Even though Mr. Guidry has indicated that he's very sorry.
Unknown Speaker: How much is... is missing?
Mr. Goldhammer: Well, we... our judgment is for $275,000.
The... the audit that was done in 1981 by Arthur Young and Company showed that practically a million dollars, $998,000 and change, was missing from the union at that time.
And what was happening is that during the period at least we know from early 1970 up through September of 1981, Mr. Guidry was stealing from the union on a month-by-month-by-month basis, every single month.
In the criminal case it was documented in the prosecutor's statement that between April of '77 and the end of September of '81, Mr. Guidry stole on 75 separate occasions.
This is the kind of--
So, what we have here is a... an LMRDA case, and it's also a state law case.
You'll notice in the complaint that we also went ahead and claimed four claims for relief under state law.
So you might ask the question, what was the Congress doing in enacting the LMRDA if the types of... of conduct which they were trying to proscribe in the LMRDA was also covered under state law.
In Colorado we have laws against embezzlement and theft and conversion, and all of those are pled in the complaint.
So what was going on here is that union officers, union officers in the 1950s and before that, the Jimmy Hoffas, the Dave Becks, the people who are the most ignominious names in labor history, were stealing from unions and not paying the money back.
And they found a way under state law to avoid paying money back.
And what the LMRDA is all about is you got to pay it back.
It's a restitutionary statute.
What it adds to state law is you got to pay it back.
It's a federal law, first of all.
It gives the federal powers and the federal authorities--
Unknown Speaker: It adds federal enforcement to state law.
That's a... that's a... that's a big thing right there.
Mr. Goldhammer: --Yes.
It adds federal--
Unknown Speaker: Even without anything else, it would be worth it.
Mr. Goldhammer: --That's right, but it went further.
It incorporated state fiduciary laws in Section 501(a), which means fiduciary means equitable remedies.
What you're talking about here is broadening the scope of remedies.
Unknown Speaker: Excuse me.
So does... so does employer-employee relationship involve fiduciary, but you don't want to rely on those cases, and I think why you don't is because it's clear that there's no less reason for applying those cases and that relationship than there is to apply the union... the union officer relationship.
Mr. Goldhammer: --Well, there... there are some employer-employee relations are fiduciary relations, and some may not be.
But... but I--
Unknown Speaker: What I'm worried about, I mean my point is I'm worried about making a big hole--
Mr. Goldhammer: --Absolutely.
Unknown Speaker: --in the provision that these... these trust funds are or these retirement funds are not obtainable by judgment creditors.
Mr. Goldhammer: Absolutely.
And we're worried about the same thing--
Unknown Speaker: No, you're not.
Mr. Goldhammer: --and that's why we're not relying on those cases.
Unknown Speaker: You're worried that I'm worried.
That's what you're worried about.
Mr. Goldhammer: Exactly.
I somehow had a feeling you'd be worried.
And... and so what we did here was we say, you know, this is an LMRDA case, first of all; and second of all, you then... you've got Section 514(d) of ERISA which says that although ERISA preempts... actually in 514(a) it says ERISA preempts state law.
It says that ERISA shall not impair, supersede, modify, amend, do anything to... it doesn't say that.
But the overall picture here is not to affect other federal laws, and that's the important point about federalizing the fiduciary relationship in the LMRDA.
So what does the other side do with 514(d)?
They don't mention it.
And... but there is also the argument that if you apply 514(d) in this case, then you open up the, you know, the floodgates again because then every other federal judgment will be taken in by this, and anybody who has a federal judgment can overcome the anti-alienation provision.
Not every federal judgment is based upon a statute like the LMRDA.
The LMRDA is remedies, remedies, remedies.
That's what it's all about.
Unknown Speaker: Well, but certainly you can say the same thing about the Securities Act, about some other acts.
They have elaborate provisions for remedy.
Mr. Goldhammer: Well, to the extent that they were exclusively created for the purpose, I must confess, Your Honor, that my malpractice insurance doesn't cover securities law and, therefore, I know... what I know about it you can put in a thimble.
But to the extent that those--
Unknown Speaker: Well, but... just a minute.
Wait until I finish my question.
Mr. Goldhammer: --Absolutely.
Unknown Speaker: You're defending against an argument that if we accept your position here, judgments under other federal laws would be equally subject over a garnishment.
So surely you're obligated to make some sort of a response.
Mr. Goldhammer: And my response is that... that the Court should approach those subjects on a case-by-case basis.
I accept your characterization of the securities laws because I know nothing about it, but I accept your characterization.
And to the extent that the securities laws were created as a remedial supplement to already existing state laws to cover ground that was already covered by state law, then I would argue that there would be an exception for the securities laws as well.
Have I answered your question?
Unknown Speaker: It seems to me you've agreed there should be an exception for any federal statute that authorizes the judge to grant X, Y and Z relief and any other appropriate relief.
Mr. Goldhammer: Well, I--
Unknown Speaker: Maybe RICO, the Sherman Act, all sorts of statutes.
Mr. Goldhammer: --I'm not going that far.
I'm saying that what we have here is a case where there would be no reason for the statute's existence at all.
There... what... what the other side seems to be saying is that this case is not--
Unknown Speaker: Well, no, that isn't true here because the statute, LMRDA would at the very least authorize a judgment against your adversary.
Maybe you couldn't collect it from this particular pool of assets, but you're not totally frustrating the purposes of Landrum-Griffin.
Mr. Goldhammer: --Well, in this case there's no reason for the existence of Title 5 except for the fact that it broadens the remedial scope of the statute.
You know, we could have gotten the same judgment under four counts in the complaint stating state law.
Unknown Speaker: Well, to say that it doesn't apply to your case is not to say it has no purpose.
I mean that's a rather high standard to impose upon any law.
To say that it's a law that does nothing unless it helps your case--
Mr. Goldhammer: Yeah.
Unknown Speaker: --It helps a lot of other cases.
Mr. Goldhammer: No.
My case is the typical Landrum-Griffin case.
If... if Landrum-Griffin was designed to cover anything, it was designed to cover stealing from labor unions, Title 5.
Unknown Speaker: But the typical case is the one in which the only assets remaining are the assets that are... that are under... under this kind of an... of an ERISA... entitlement.
Mr. Goldhammer: The typical case is where--
Unknown Speaker: That's the typical case?
Mr. Goldhammer: --where the defalcating union officer finds convenient ways to make his assets.
Unknown Speaker: Well, but this is... this is only one convenient way.
Mr. Goldhammer: Yes, and it's the one we're dealing with here.
Unknown Speaker: That's right.
Mr. Goldhammer: It's probably the most convenient way.
Unknown Speaker: Well, I don't know.
What about a embezzlement statute that says anytime you embezzle money from the federal government you're in deep trouble and you can... and there's provision for recovering the money?
Do you think the United States could attach these funds?
Mr. Goldhammer: Judging by the United States' position with regard to taxes and the FDIC--
Unknown Speaker: I know, but their position with respect to this getting to the pension fund is a little different.
Mr. Goldhammer: --So you're saying that if the federal government--
Unknown Speaker: I'm asking you.
Mr. Goldhammer: --I know, but I want to make sure I understand your question.
Unknown Speaker: All right.
Mr. Goldhammer: And you're saying that if the federal government had an embezzlement statute, federal embezzlement--
Unknown Speaker: Which it does.
Suppose it... suppose it brings... it wants to recover the money, and so it brings a suit to recover the money.
Mr. Goldhammer: --Uh-hum.
Unknown Speaker: Can it... can they attach his benefits from a pension fund?
Mr. Goldhammer: I... I--
Unknown Speaker: After all, the only reason for the embezzlement statute is to... is to prevent embezzling from the government.
Mr. Goldhammer: --Yeah, and... and--
Unknown Speaker: I don't know why... if they can't recover, I don't know why the union should be able to.
Mr. Goldhammer: --Right, and... and what... what I would say to that is if you apply Section 514(b) strictly, then you... the answer to that question would be yes, they could recover out of a... out of a spendthrift clause.
These spendthrift clauses have a... a... a... not a totally clear history.
The Boyle case, which is the D.C. Circuit case that we were talking about earlier, was a case in which... it was a pre-ERISA case but it was about a 1977 case covering events in the early '70s, and it was a case basically in which there was a voluntary spendthrift trust provision in one of these pension plans that was voluntarily agreed to by the union that was now trying to get around it, and the court basically said... the district court in that case basically said we're not going to let you get around it because you could have had... you could have changed it.
At any time you could have changed it.
At that time, the major debate was whether spendthrift clauses covered any torts whatsoever.
And so when Congress enacted ERISA, they brought the spendthrift trust provision into the federal arena, and at that time they also enacted Section 514(d), and they said that we're not going to impair any other federal law with this whole statute; and, therefore, if the example that you give is... is consistent with the... the literal language ERISA and with the statements made and with the entire purpose of ERISA.
I... I would like to cover a couple of other points.
One is that... well, I... I probably ought to go on and talk about the CCPA argument.
Here again, we are faced with harmonizing the CCPA and the LMRDA.
The remedy that the Court chose in this case was the constructive trust, which is an equitable remedy.
There's no doubt it's an equitable remedy.
And what we were arguing under the CCPA is that the equitable remedy they chose authorizes the Court to go back and look at what... what the source of the earnings was and to determine whether those earnings were obtained by fraud.
In this case, Mr. Guidry's earnings were obtained by fraud.
He engaged in a long series of fraudulent activities against the union which were not disclosed.
The contributions were made into the pension plans by him when they shouldn't have been made by him into the pension plans because he was committing fraud at the same time.
He was in effect getting double compensation for... for his work at the union, and they were fraudulently obtained.
What the opponent's position is on the CCPA is that the rather typical language in that... in that statute which prohibits any legal or equitable procedure to get at the earnings of a person precludes the Court from engaging in that kind of analysis.
In other words, I guess what they're saying is that if you commit an outright theft of money and put it into a pension plan that there's no way to get at that money anymore.
And that is a radical position for the Court to take.
It is not--
Unknown Speaker: xxx maybe Congress was radical.
Mr. Goldhammer: --Congress wasn't radical.
The language of this statute is similar to the language of... of most anti-alienation provisions in various statutes, and the common law is that with respect to homesteads, with respect to anti-alienations provisions in life insurance policies, that we're just not going to allow these little refuges for fraud that... that the... that the common law... that these equitable remedies were designed for the very purpose of voiding exemptions where that's necessary to avoid unjust enrichment.
Unknown Speaker: What is the rule if... if... if a... there's a beneficiary of a... of a spendthrift trust works for a bank but he likes to steal so he steals from the bank, too, and the bank wants to get the money back.
Can they get at... break the spendthrift provision?
Mr. Goldhammer: Well, the... the rule in the Cox case is that they can.
That's... that's the case in which there is a split--
Unknown Speaker: They can or they cannot?
Mr. Goldhammer: --There's a split in the circuits on that.
Unknown Speaker: Well, so you mean some people say the bank could break the spendthrift trust?
Mr. Goldhammer: That's correct.
Unknown Speaker: And others say not?
What's the majority rule?
Mr. Goldhammer: The Tenth in this case and the Eleventh say yes, you can.
I believe the Second and the Sixth say no, you can't.
Unknown Speaker: Apart from... just going back to Justice White's question, at common law, before we had all these statutes, what would the answer have been in his hypothetical?
Mr. Goldhammer: At common law I think the majority view was that tort creditors were not covered by spendthrift trust provision and therefore you could get at the money.
That was the argument in the Boyle case.
That was the argument that was being made in the Boyle case, and the Court said, well, we're not going to get to that question as to whether tort causes of action are covered under spendthrift trust provisions because you were the ones who made the spendthrift trust provision yourself, and you didn't provide any exception yourself.
So that the law clearly was that if the spendthrift provision was defined by the agreement of the parties to... to the pension agreement--
Unknown Speaker: Of course, the Boyle case is not a typical common law case.
That's also got... had the Landrum-Griffin involved and so forth.
I was really asking, let's say, in the Nineteenth Century the old cases on just breaking spendthrift trusts.
You say the general rule was that if it would... that a tort judgment creditor could invade the trust notwithstanding the spendthrift?
Mr. Goldhammer: --Right.
And Scott, On Trusts, describes the reason for that.
He says that a person who makes a contract with another person has the opportunity to investigate that person's credit rating and determine whether he's going to have to get at pensions in order to satisfy his judgment, whereas a person who's standing in front of a vehicle who happens to get knocked down by a careless driver doesn't have that choice and that, therefore, he makes the strong argument that tort creditors at common law should never have been precluded from getting at pension--
Unknown Speaker: Well, in making the... Professor Scott making the argument that they should never have been subjected, is that the same as saying that was the law at common law?
Mr. Goldhammer: --It's my understanding--
Unknown Speaker: That's what I see.
Mr. Goldhammer: --that that is the common law.
Unknown Speaker: Okay, thank you.
Mr. Goldhammer: There is... there is no question that if Mr. Guidry is able to do what he has set out to do in this case that it would case great impairment to Landrum-Griffin, and it would cause great impairment also to ERISA itself.
There is a case which the government was a party in called Crawford v. La Boucherie Bernard which establishes yet another exception to the anti-alienation provision, one where the money is actually stolen from the trust fund itself.
There are several other exceptions that have been recognized by the Court for the anti-alienation provision.
We cite them in the brief.
One is... is bankruptcy and the question of whether the pension fund becomes a part of the bankrupt's estate.
There is a case called FDIC v. Calhoun and another one in the Tenth Circuit called FDIC v. Farha in which the FDIC has contended that when they come in and take over a bank that they can invade the pension funds of a... let's say the president of the bank who may owe money to the bank in order to satisfy that debt.
And there have been a number of exceptions at common law.
So the only place to look for these exceptions is not ERISA itself.
In fact, before ERISA was amended to expressly authorize exceptions for domestic relations orders, the courts had already implied an exception.
And what... what Mr. Guidry did here in large measure was to steal money from a union, to steal some money from the pension fund and from a welfare fund... and by the way, the fact that he stole money from those two entities is in the record by virtue of the fact that Mr. Guidry himself entered into the record a settlement agreement that he made, and in that settlement agreement he confessed to a judgment of $205,000 against the two local funds, the... the welfare fund and the pension fund, but he was left off the hook for only $50,000.
But we are concerned about the fact that this kind of activity is documented in labor history, the very kind of activity that Mr. Guidry engaged in.
In the legislative history of Landrum-Griffin, Dave Beck is reputed to have stolen $400,000, and now they are unable to get the money back because he is engaged in some kind of subterfuge to hide the money away or do whatever.
And it will also damage ERISA itself, because ERISA is really designed to protect pensioners, and if Mr. Guidry can get away from stealing money in transit or from stealing money directly from these trust funds and making it so complicated that we can't tell who he stole it from, then that will occur again, and we are concerned about that in particular.
We are also concerned about the... the individuals who are the victims of these thefts--
Unknown Speaker: xxx your opposition's position is that it wouldn't make any difference whether he stole it from the pension fund or anyplace else.
Mr. Goldhammer: --Well, I'm not... I'm not completely clear about that.
The Crawford case... at least the amicus in this case, the Solicitor General, has taken the position, has admitted in taking the position that he supports the rule in the Crawford case, and... and so I'm not completely clear that what my opponent's position would be on it.
I think it is important to point out that unions are vulnerable to these kinds of thefts because while the members of Local 9 of the Sheet Metal Workers Union are... are tremendous sheet metal workers, they are of necessity people who work with their hands and are unsophisticated about financial affairs and that they will lose if ERISA is not upheld, the purposes of ERISA is not upheld to... to promote fiduciary and honest conduct.
And also if the LMRDA is... if this loophole is created in the LMRDA to allow union officers to put money away in pension funds while they know that that money isn't really owed to them because they've been taking what--
Unknown Speaker: Mr. Goldhammer, I take it as a creditor you can get money as it's paid out up to 75 percent of it; is that right?
Mr. Goldhammer: --That we can get?
Unknown Speaker: When the benefits are actually paid out on a monthly basis and in the hands of Mr. Guidry?
Mr. Goldhammer: Mr. Guidry's position is that we can get nothing, Your Honor.
Unknown Speaker: Even when they're paid out?
Mr. Goldhammer: Ah, when they are in his hands?
Unknown Speaker: Yes, uh-huh.
Mr. Goldhammer: Ah.
If they are in a bank account, then I think the law is that we can get them.
If they are in a brown bag or if they are in Switzerland where we can't get access to them or if they are under Mr. Guidry's mattress and we don't know about it, then we can't get anything, and Mr. Guidry has shown himself quite competent--
Unknown Speaker: xxx with... with wherever the $900,000 he took is.
Mr. Goldhammer: --Well, the 900,000--
Unknown Speaker: You don't know where that is, I guess?
Mr. Goldhammer: --Well, the $900,000 it's pretty well documented was spent at gambling casinos.
Unknown Speaker: Oh, really?
Mr. Goldhammer: Establishments.
Unknown Speaker: Just frittered it away.
He didn't win.
Mr. Goldhammer: Yes.
He lost big.
Actually, the union lost big.
It was the union that was gambling, not Mr. Guidry.
It's only the problem is that the union didn't know it.
Unknown Speaker: I take it procedures to execute your judgment, I suppose you can haul him in, haul him into court and ask him... find out what his assets are and things like that?
Mr. Goldhammer: Sure.
Unknown Speaker: And can you get an order to pay over to... as soon as he gets the money, can you get an order to have him to pay it over?
Mr. Goldhammer: There's a case in this Court called Hisquerdo v. Hisquerdo which said you can't do that.
In that case there was an anti-alienation provision--
Unknown Speaker: That's just a runaround in the anti-alienation--
Mr. Goldhammer: --Yes.
That makes the anti-alienation provision meaningless.
If you want to rule that we can do that, we'd be more than happy to accept that ruling, but you'd have to overrule Hisquerdo v. Hisquerdo.
Unknown Speaker: --Thank you, Mr. Silverman.
Mr. Goldhammer: I'm Mr. Goldhammer.
Unknown Speaker: I'm sorry.
Thank you, Mr. Goldhammer.
Rebuttal of Eldon E. Silverman
Mr. Silverman: Thank you, Mr. Chief Justice.
Unknown Speaker: Do you have rebuttal?
Mr. Silverman: I do.
I would like to say, however, that I don't have any formal rebuttal but would be glad to answer any questions.
Unknown Speaker: What if the money had been stolen from the pension fund itself?
Mr. Silverman: That would have been a different case.
That's the Crawford case.
Unknown Speaker: Yes.
Mr. Silverman: And it would be... I think there I can make an argument on either side.
You're asking, and I am happy to make it, to, of course, discuss a case that isn't here because their judgment, as he admitted.
But the argument that I would make as strict construction as to the policy is that the only way the Crawford court allowed an offset... it called it an offset between the plan and the individual as opposed to a third party, the employer.
Even though the employer has related interests under Section 1103, plan benefits can't inure to the benefit of the employer.
But as to the Crawford instance, the Congress allowed the courts to create a common law remedial or equitable remedy for breach of fiduciary duty.
There, you would have to confront the question of how far you take your case of Massachusetts Mutual v. Russell, where that same language about common law creation within ERISA, you did refuse to say that Congress left out a remedy.
There, there was a claim for extra-contractual damages, for punitive damages, and the Court said don't assume Congress left out something.
What you have to--
Chief Justice Rehnquist: I think you have answered the question, Mr. Silverman.
The case is submitted.
Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.
Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 88-1105, Guidry versus Sheet Metal Workers National Pension Fund will be announced by Justice Blackmun.
Argument of Justice Blackmun
Mr. Blackmun: The petitioner, Robert Guidry, is a former official of the respondent, Union, and a former trustee of the Union’s pension plan.
He pleaded guilty to embezzling funds from the Union and has been incarcerated.
His Union employment, however, made him eligible for benefits from three pension funds.
Guidry filed suit in Federal Court against the other two plans when they concluded that he had forfeited his rights to benefits because of his criminal activity.
His own Union intervened, and it and Guidry stipulated to the entry of judgment in the Union’s favor.
The District Court, however, rejected the contention that Guidry had forfeited his right to benefits.
It imposed a constructive trust in the Union’s favor on Guidry’s pension benefits.
In doing this, the court concluded that a narrow exception to the Employment Retirement Income Security Act was appropriate where the Union and the member’s pension plans were damaged.
The Tenth Circuit affirmed.
In an opinion filed today, we reverse that judgment.
We hold that the constructive trust violated the statute’s prohibition on assignment or alienation of pension benefits.
A constructive trust remedy is prohibited unless some exception to the general statutory ban is applicable.
It is also inappropriate, we feel, to approve any generalized equitable exception to ERISA’s anti-alienation provision.
That is a task for Congress, not the courts.
This decision is unanimous except that Justice Marshall does not join part 2C of the opinion.