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United States v. Cullenward

United States District Court, E.D. California

April 9, 2014



KENDALL J. NEWMAN, Magistrate Judge.

Presently pending before the court is third party Michele Cullenwards motions to quash writs of garnishments issued against her retirement accounts with Scottrade, Inc. ("Scottrade") and T. Rowe Price Associates, Inc. ("T. Rowe Price"), which are related to a judgment for restitution entered against her spouse, Martin Stewart Cullenward, in a criminal case, United States v. Cullenward, 2:13-cr-60-JAM. (See United States v. Cullenward, 2:14-mc-22-JAM-KJN, ECF No. 7), and United States v. Cullenward, 2:14-mc-23-JAM-KJN ECF No. 8.).[1] The United States filed a response to the motions to quash, and Ms. Cullenward subsequently filed a reply to the United States' response. (See id., 2:14-mc-22-JAM-KJN, ECF Nos. 9, 11.)[2]

After considering the parties' briefing, the courts record, and the applicable law, the court grants the motions to quash the writs of garnishment.


The background facts are largely undisputed. In an underlying criminal case, defendant Martin Stewart Cullenward was ordered to pay restitution pursuant to the Mandatory Victims Restitution Act, 18 U.S.C. § 3663a ("MVRA") in the amount of $1, 483, 620.14, to be paid jointly and severally, to varying degrees, with certain co-defendants. (See United States v. Cullenward, 2:13-cr-60-JAM, ECF Nos. 24, 29, 31.) On February 6, 2014, the United States filed applications for writs of garnishment with respect to two of Ms. Cullenwards retirement accounts - a rollover IRA through Scottrade and a 401(k) account through Ms. Cullenwards current employer, Bogle Vineyards, for which T. Rowe Price provides certain recordkeeping services. ( Id., 2:14-mc-22-JAM-KJN, ECF No. 3 and 2:14-mc-23-JAM-KJN, ECF No. 3.) The Clerk of Court issued writs of garnishment on February 10, 2014. ( Id., 2:14-mc-22-JAM-KJN, ECF No. 4 and 2:14-mc-23-JAM-KJN, ECF No. 4.)

Scottrade filed an amended answer to the writ of garnishment indicating that Ms. Cullenward has a self-directed IRA at Scottrade with an approximate market value of $25, 127.66 in securities and $1, 003.87 in cash. According to Scottrade, the IRA is "controlled solely by Michelle Cullenward. Martin S. Cullenward does not have control or trading authority over this account." (United States v. Cullenward, 2:14-mc-22-JAM-KJN, ECF No. 14.)

T. Rowe Price filed an answer to the writ of garnishment indicating that Ms. Cullenward has a 401(k) account through her employer, Bogle Vineyards, for which T. Rowe Price provides record-keeping services, with an account balance of $7, 909.04 as of February 12, 2014. (United States v. Cullenward, 2:14-mc-23-JAM-KJN, ECF No. 7.) T. Rowe Price also stated that it was an improper party to respond to the writ of garnishment, because it is not the plan administrator of the Bogle Vineyards 401(k) and only provides certain directed record-keeping services for the plan. (Id.) The answer specified the name and contact information of the actual plan administrator for the 401(k) plan. (Id.)

Ms. Cullenward ultimately filed objections and the instant motions to quash both writs of garnishment.


In this case, the United States seeks to immediately liquidate Ms. Cullenwards retirement accounts. Ms. Cullenward contends that garnishment of the retirement accounts at issue is inappropriate under binding Ninth Circuit case law, because Mr. Cullenward is not the owner of the accounts and has no present unilateral right to receive a lump sum distribution or other payments from Ms. Cullenwards retirement accounts. Ms. Cullenward asserts, consistent with the answers filed by Scottrade and T. Rowe Price, that she is the owner of these retirement accounts, and that they are not subject to Mr. Cullenwards management and control.

The United States does not dispute that the retirement accounts are registered to Ms. Cullenward, and that she exercises management and control over the accounts. The United States essentially argues that Ms. Cullenwards retirement accounts are nonetheless community property under California law, because their contents derive from Ms. Cullenwards earnings during marriage; that the community estate is liable for a debt (or a judgment for a debt) incurred by either spouse before or during marriage pursuant to California law; and that the United States therefore may garnish Ms. Cullenwards community property retirement accounts to satisfy the restitution judgment against her spouse.

The Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. ("ERISA") contains an anti-alienation provision, which generally requires that "benefits under the plan may not be assigned or alienated" and thus "broadly protects covered retirement benefits from dissipation through payment to third parties...." 29 U.S.C. § 1056(d)(1); United States v. Novak , 476 F.3d 1041, 1045 (9th Cir. 2007). The anti-alienation provision accords with ERISAs strong underlying policy that "[r]etirement funds shall remain inviolate until retirement." Boggs v. Boggs , 520 U.S. 833, 851 (1997). Nevertheless, under the MVRAs statutory scheme, the United States may enforce an order of restitution pursuant to the MVRA "in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law. Notwithstanding any other Federal law (including section 207 of the Social Security Act), a judgment imposing a fine [or an order of restitution] may be enforced against all property or rights to property of the person fined, " subject to certain specified exceptions not relevant here. 18 U.S.C. § 3613(a), (f).

In Novak, the Ninth Circuit Court of Appeals considered "whether-and if so, under what circumstances-a criminal defendants retirement benefits are available as a source of funds to compensate crime victims." Novak , 476 F.3d at 1043. After performing extensive statutory construction and interpretation, the Ninth Circuit ultimately held that the "MVRA authorizes the enforcement of restitution orders against retirement plan benefits, the anti-alienation provision of ERISA notwithstanding." Id. at 1053. However, the Ninth Circuit noted that that conclusion still leaves a key question: "When is a participants interest in a retirement plan property or [a] right [] to property' under 18 U.S.C. § 3613(a)? Only if the defendants interest is properly so categorized can that interest be reached by the government when enforcing a restitution order under [the] MVRA." Id. at 1060. "The matter is far from straightforward, as retirement plans differ widely in their terms. Plans often include promises of future benefits not convertible to cash in whole or part until some contingency-such as ...

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