Hoult v. Hoult

United States Court of Appeals
For the First Circuit

No. 02-2128

JENNIFER HOULT,

Plaintiff, Appellee,

v.

DAVID PARKS HOULT,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before

Torruella, Lynch, and Lipez,
Circuit Judges.

Jordan L. Shapiro, with whom Edward J. Collins, Eric L.
Shwartz, and Shapiro & Hender were on brief, for appellant.

Laura D'Amato, with whom Adrienne M. Markham, Kevin P.
O'Flaherty, Pamela L. Signorello, Ellen C. Meyer, and Goulston &
Storrs, P.C. were on brief, for appellee.

June 22, 2004
 LYNCH, Circuit Judge. On July 1, 1993, a federal jury in

the district of Massachusetts awarded Jennifer Hoult a $500,000

verdict against her father, David Hoult, for sexually abusing her

throughout her childhood. The verdict was affirmed on appeal in

Hoult v. Hoult, 57 F.3d 1, 2 (1st Cir. 1995). This case arises

from Jennifer's attempt to collect on that judgment, which, almost

eleven years later, has still not been paid in full.

On May 13, 2002, the district court found that David had

fraudulently conveyed over $130,000 in assets to avoid paying the

judgment. Two weeks later, on May 30, it entered an order

requiring him to deposit all his income in a designated

Massachusetts bank account and to limit his withdrawals from that

account to $2,900 per month, a sum meant to cover his reasonable

living expenses. David did not appeal from that order. He later

moved in the district court to strike from the order social

security benefits and Employee Retirement Income Security Act

(ERISA) pension benefits that he receives, arguing principally that

federal statutes prohibit the alienation of each of those benefits.

See 42 U.S.C. § 407(a) (social security); 29 U.S.C. § 1056(d)(1)

(ERISA). The court denied his motion. David, who has since been

found in civil and criminal contempt for refusing to comply with

the order, now appeals from that denial.

We find that the district court properly denied the

motion to strike as to ERISA benefits. ERISA's anti-alienation

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provision does not apply where, as here, the funds have already

been disbursed to the plan beneficiary. In so holding, we join

four other circuits and disagree with one.

More difficult questions are raised by the court's

refusal to strike social security benefits from the order, but we

need not resolve those questions here. The parties stated to the

district court that neither had any objection to an arrangement

that would exempt David's social security benefits from the order

but would reduce his $2,900 monthly withdrawal limit by the amount

of his monthly social security check (about $1,400 per month). We

confirmed this at oral argument. We affirm the denial of the

motion to strike the ERISA pension benefits and remand with

instructions to modify the order as to social security benefits.

I.

On July 29, 1993, four weeks after the verdict, Jennifer

moved for a preliminary injunction barring David and his current

wife (not Jennifer's mother) from transferring David's assets

except as necessary for ordinary living expenses. Jennifer alleged

that she had discovered that after she had filed suit in July 1988,

David had started transferring his assets to protect them from a

potential judgment. The district court granted the injunction on

August 4. David did not appeal that order.

On September 7, 1994, Jennifer filed a supplemental

complaint against David and his wife for fraudulent conveyance and

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civil contempt. A five-day bench trial was held on the fraudulent

conveyance claims in January 1996.1

In November 1996, before judgment had entered in the

fraudulent conveyance trial, Jennifer learned that David had

retired from his position as a senior research associate at the

Massachusetts Institute of Technology (MIT) and had begun receiving

approximately $4,800 in ERISA pension benefits from MIT each

month.2 On January 27, 1997, she moved to modify the August 4,

1993 preliminary injunction to require, inter alia, that David

deposit his monthly ERISA pension check in a designated bank

account and limit his withdrawals from that account to $1,700 per

month (which, according to his testimony in the fraudulent

conveyance trial, was the amount that he contributed each month to

his and his wife's living expenses). Her motion did not mention

social security benefits. The district court said that it would

allow the motion and requested Jennifer's counsel to file a

proposed form of order.

Before the order was issued and before judgment entered

in the fraudulent conveyance trial, David filed a voluntary

petition under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101

1
The court deferred its consideration of the contempt count
to a later date and eventually dismissed it.
2
Starting in April 1994, the court had garnished a portion
of David's wages each month to pay the judgment, but those payments
stopped when David retired in the fall of 1996.

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et seq., which automatically stayed the fraudulent conveyance

proceedings. See 11 U.S.C. § 362. The bankruptcy court ruled on

July 2, 1999 that David's MIT pension was not the property of his

bankruptcy estate. It also held on October 29, 1999 that David's

judgment debt to Jennifer and interest on that debt were

nondischargeable. David appealed both rulings. His appeals were

dismissed for lack of prosecution.

On November 22, 1999, Jennifer alerted the district court

to the bankruptcy court's rulings and renewed her request to modify

the August 4, 1993 order. She again did not mention social

security benefits in her motion. David opposed the motion. First,

he argued that Florida, not Massachusetts, law applied because he

was a Florida resident and maintained a Florida residence in

addition to his home in Massachusetts. He contended that Fla.

Stat. chs. 222.21(2)(a) and 222.14 exempted his ERISA pension

benefits from the claims of all creditors. Second, he argued that

the order would effectively be an execution of judgment and that

under Fed. R. Civ. P. 4.1, a district court sitting in

Massachusetts did not have the authority to execute on the assets

of a Florida resident. Finally, he argued that the proposed order

would violate ERISA's anti-alienation provision, which states that

"[e]ach pension plan shall provide that benefits provided under the

plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1).

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 On May 13, 2002, the court entered its findings of fact

and conclusions of law as to the fraudulent conveyance claims,

finding that David had fraudulently conveyed over $130,000 in

assets.3 Two weeks later, on May 30, 2002, the court inserted the

following language into the August 4, 1993 preliminary injunction:

1. David Hoult shall place all monies, income and funds
he receives from any source in a single Massachuestts's
[sic] bank account in his name only (the "Account") on or
before June 14, 2002;

2. David Hoult shall not make any withdrawals from the
Account except for $2,900 per month; and

3. David Hoult shall provide Plaintiff's attorney . . .
with (i) the name of the bank and the account number of
the Account; (ii) a copy of each check or receipt which
documents monies or income he receives; and (iii) a copy
of the monthly statement of activity (the "Monthly
Statement") relative to the Account.

The order made no exception for either David's social security or

his ERISA pension benefits. Indeed, social security benefits may

have been included without the court being aware that "all income"

included social security payments.

David did not appeal the May 30 order. Initially, he

simply refused to comply with the order and was held in contempt.

After he began to comply on July 3, 2002, the court purged him of

that contempt. Then, on July 20, 2002, twenty days after the time

for filing an interlocutory appeal from the May 30 order had

expired, see Fed. R. App. P. 4(a)(1)(A), David filed a motion with

3
The court entered final judgment to this effect on March
24, 2003.

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the district court to strike social security and ERISA pension

benefits from the order. In that motion, he stated, "The instant

motion is directed only to social security and pension benefits.

Defendant recognizes that the [May 30 order] remains effective with

respect to all other 'monies, income or funds' he receives from any

other source." As to his ERISA benefits, David reiterated his

earlier arguments under Florida law and under ERISA's anti-

alienation provision.4 He also argued that, as written, the order

violated the anti-alienation provision of the Social Security Act,

which provides that "none of the moneys paid or payable or rights

existing under this title shall be subject to execution, levy,

attachment, garnishment, or other legal process, or to the

operation of any bankruptcy or insolvency law." 42 U.S.C. §

407(a). This was the first time the issue of social security

benefits was argued to the court.

Jennifer defended the order as to the ERISA benefits,

arguing, inter alia, that ERISA's anti-alienation provision does

not prevent alienation of benefits after they have been distributed

to beneficiaries and that David's citation to Florida law was

inapposite because Massachusetts law, rather than Florida law,

4
David also raised a new argument that Jennifer had taken
the position before the bankruptcy court that his ERISA benefits
should be excluded from his estate based on ERISA's anti-alienation
provision and, hence, that she should be judicially estopped from
seeking the order at issue in this case. David's counsel stated in
oral argument before us that he has abandoned this argument on
appeal.

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applied. As to the social security benefits, Jennifer argued that

the order did not violate the Social Security Act's anti-alienation

provision because it did not "attach" David's social security

income but merely required him to deposit it in a designated bank

account for monitoring. She said that she "would not object,

however, if concrete proof of the amount of his social security

payment is provided, to excluding that amount from the required

income deposit and, concomitantly, reducing the monthly amount

David may withdraw by that same amount." David's social security

payment is about $1,400 per month; the May 30 order allowed him to

withdraw $2,900 per month.

At a hearing on David's motion on August 2, 2002, the

district court asked David's counsel whether David had any

objection to Jennifer's proposal. He said that David did not. In

the end, though, the court decided that it was not necessary to

adopt Jennifer's proposal and, instead, simply denied David's

motion. The court ruled that the order did not need to be altered

as to social security benefits, reasoning that David's disposal of

his social security benefits was not restrained in any way because

his $2,900 monthly withdrawal limit far exceeded the $1,400 he

received in social security benefits. Nor did the order, the court

ruled, have to be amended as to the ERISA benefits. The court held

that ERISA's anti-alienation provision presented no bar once the

funds had been distributed to David. The court further determined

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that even if Florida law applied, it did not help David because its

relevant provisions applied only to honest debtors and David, based

on his history of fraudulent conveyances, was not such a debtor.

David filed this appeal from the denial of his motion to strike on

September 3, 2002.

While this appeal was pending, David stopped complying

with the May 30 order. On May 14, 2003, Jennifer filed a motion to

hold David in civil contempt, alleging that David had not produced

any of the monthly statements required under the May 30 order since

January 2003. A grand jury indicted David on August 27, 2003 for

three counts of felony criminal contempt. The indictment alleged

that in January 2003 David stopped depositing his income in the

designated Massachusetts account and started putting it in a

Florida account instead; that David exceeded his $2,900 withdrawal

limit virtually every month since November 2002; and that, by March

2003, there was only about $23 left in the Massachusetts account.

On January 16, 2004, the district court granted Jennifer's motion

for civil contempt and awarded $46,676 in damages. On February 24,

2004, David pleaded guilty to all three counts of felony criminal

contempt.

II.

David does not appeal from the issuance of the May 30,

2002 order but instead from the denial of his motion to strike

ERISA and social security benefits from that order. We review the

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denial of a motion to modify a preliminary injunction for abuse of

discretion. See Pub. Serv. Co. of N.H. v. Patch, 202 F.3d 29, 32

(1st Cir. 2000); 16 Wright, Miller & Cooper, Federal Practice &

Procedure § 3924.2 (West 1996). Under that standard, pure issues

of law are reviewed de novo, findings of fact for clear error, and

judgment calls with considerable deference. See Nieves-Marquez v.

Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2004).

David raises three sets of arguments on appeal. First,

he argues that the May 30, 2002 order constitutes an improper

execution of judgment under Fed. R. Civ. P. 69(a). Second, he

argues that the application of the May 30 order to his ERISA

pension benefits violates (1) Florida statutes that he reads as

exempting such benefits from creditors' claims, see Fla. Stat. chs.

222.21(2)(a), 222.14; and (2) the anti-alienation provision of

ERISA, 29 U.S.C. § 1056(d)(1). Third, he argues that the order's

application to his social security benefits violates the anti-

alienation provision of the Social Security Act, 42 U.S.C. §

407(a). We consider each argument in turn.

A. Authority to enter the May 30 order

David argues that the May 30 order is effectively an

attempt to execute on the judgment and that, on his reading of Fed.

R. Civ. P. 69(a), a writ of execution is required.5 Fed. R. Civ.

5
Rule 69(a) provides that "[p]rocess to enforce a judgment
for the payment of money shall be a writ of execution, unless the
court directs otherwise." David argues that the exception for

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P. 4.1 requires such writs to be served within the territorial

limits of the state in which the district court sits (here,

Massachusetts). David claims that he is a Florida resident and

that the district court in Massachusetts therefore does not have

authority to execute the judgment against him.

This argument comes too late. On appeal from the denial

of a motion to modify an injunction, "review does not extend to the

propriety of the original order." 16 Federal Practice & Procedure

§ 3924.2; see also Lichtenberg v. Besicorp Group, Inc., 204 F.3d

397, 401 (2d Cir. 2000). This argument is an attack on the

district court's authority to issue the May 30 order (and, indeed,

on its power to issue the original August 4, 1993 order), not the

court's refusal to strike ERISA and social security benefits from

that order. Accordingly, it is beyond the scope of our review. If

David wished to make such a challenge, he should have appealed

directly from the May 30 order within the thirty-day appeals

period. See 28 U.S.C. § 1292(a)(1) (interlocutory appeals may be

taken from preliminary injunctions); Fed. R. App. P. 4(a)(1)(A)

(allowing thirty days from the entry of the order to file an

appeal).

B. ERISA benefits

situations in which "the court directs otherwise" applies only when
execution is an inadequate remedy and says that no such showing has
been made here.

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 We turn to the court's refusal to strike ERISA benefits

from the order. We first clear away the issue of whether state law

presents any barrier to the May 30 order. The parties dispute

whether the order was issued under Fed. R. Civ. P. 69 (post-

judgment executions) or Fed. R. Civ. P. 64 (pre-judgment orders).

Under either rule, the order must comport with the law of the state

in which the district court is held (here, Massachusetts), except

that any federal statute governs to the extent applicable.6

David raises a belated argument that the order violates

Massachusetts law, which requires that "amounts held by a trustee

for a defendant in a pension shall be reserved in the hands of the

trustee and shall be exempt from attachment." Mass. Gen. L. ch.

246, § 28 (defining "pension" as including all ERISA pensions).

This argument has been waived, as it was made for the first time in

David's reply brief. Andresen v. Diorio, 349 F.3d 8, 13 (1st Cir.

2003). Moreover, even were it not waived, the argument fails on

the merits. Section 28 is not applicable because the order does

not affect amounts held in trust for David by a third-party; the

order directs David himself to deposit pension funds in the

designated bank account after those funds reach his hands.

6
David argues that Florida law exempts pension money from
all claims of creditors and from all legal process, citing Fla.
Stat. chs. 222.21(2)(a), 222.14. But under both Rule 64 and Rule
69, the relevant law is that of Massachusetts, not that of Florida.

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 David's primary argument is that the order violates

federal law: namely, ERISA's anti-alienation provision, 29 U.S.C.

§ 1056(d)(1). Jennifer responds that § 1056(d)(1) does not

restrict alienation of pension benefits that have already been

distributed to plan beneficiaries. If Jennifer is correct, the May

30 order does not violate § 1056(d)(1) because the order applies

only after the pension benefits are disbursed to David each month.

Four of the five courts of appeals to consider the

question have construed § 1056(d)(1) as applying to benefits only

while held by the plan administrator and not after they reach the

hands of the beneficiary. Wright v. Riveland, 219 F.3d 905, 919-21

(9th Cir. 2000); Robbins v. DeBuono, 218 F.3d 197, 203 (2d Cir.

2000); Guidry v. Sheet Metal Workers Nat'l Pension Fund, 39 F.3d

1078, 1081-83 (10th Cir. 1994) (en banc); Trucking Employees of

North Jersey Welfare Fund, Inc. v. Colville, 16 F.3d 52, 54-56 (3d

Cir. 1994). One court has held that § 1056(d)(1) bars alienation

of benefits after distribution to the beneficiary if those benefits

are post-retirement annuity payments (but not if they are pre-

retirement lump sum payments). United States v. Smith, 47 F.3d

681, 682-84 (4th Cir. 1995). We join the majority view.

The plain language of § 1056(d)(1) is that "[e]ach

pension plan shall provide that benefits provided under the plan

may not be assigned or alienated." That language governs only the

plan itself. Standing alone, it "does not read comfortably as a

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prohibition against creditors reaching pension benefits once they

have left the hands of the administrator." Robbins, 218 F.3d at

203. If Congress had intended § 1056(d)(1) to reach that far, it

could easily have employed the type of language found, for example,

in the Veterans Benefits Act, 38 U.S.C. § 5301(a), which prohibits

attachment of benefits "either before or after receipt by the

beneficiary." That Congress chose not to do so is significant.

The regulations promulgated by the Secretary of Treasury,

who has the authority to implement § 1056(d) of ERISA,7 further

reinforce our interpretation. Those regulations, which are

entitled to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def.

Council, Inc., 467 U.S. 837, 844 (1984), define the terms

"assignment" and "alienation" to cover:

(i) Any arrangement providing for the payment to the
employer of plan benefits which otherwise would
be due the participant under the plan, and

(ii) Any direct or indirect arrangement (whether
revocable or irrevocable) whereby a party
acquires from a participant or beneficiary a
right or interest enforceable against the plan
in, or to, all or any part of a plan benefit

7
Congress originally delegated this power to the Secretary
of Labor. 29 U.S.C. § 1135 (1974). In 1978, President Carter,
pursuant to the Reorganization Act of 1977, 5 U.S.C. §§ 901-12,
transferred that authority to the Treasury Secretary,
Reorganization Plan No. 4 of 1978, reprinted in 1978 U.S.C.C.A.N.
9814, 9815, and Congress ratified that transfer in 1984, Pub. L.
No. 98-532, 98 Stat. 2705 (1984). The Supreme Court has recognized
the Treasury regulations as the "applicable administrative
regulations" for § 1056(d). Guidry v. Sheet Metal Workers Nat'l
Pension Fund, 493 U.S. 365, 371-72 (1990).

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 payment which is, or may become, payable to the
participant or beneficiary.

26 C.F.R. § 1.401(a)-13(c)(1) (emphasis added). Once benefits are

distributed to the beneficiary, a creditor's rights are enforceable

against the beneficiary, not against the plan itself; accordingly,

under the regulations, § 1056(d)(1) does not apply. The Treasury

Secretary's interpretation is a reasonable one, and given that

Chevron deference applies, we decline to disturb it.

The only court to have disagreed with this interpretation

is the Fourth Circuit in Smith. There, the majority held, over a

dissent, that § 1056(d)(1) prohibits alienation of pension funds

after the funds are distributed when those funds are received as

annuity payments during retirement, but not when those funds are

received as a lump sum payment before retirement. 47 F.3d at 683.

The Smith majority relied primarily on Hisquierdo v. Hisquierdo,

439 U.S. 572 (1979), which held that the anti-alienation provision

of the Railroad Retirement Act (RRA), 45 U.S.C. § 231m(a), covers

benefits after they are disbursed to beneficiaries. 439 U.S. at

583; see also Smith, 47 F.3d at 683-84.

We read the statute differently. Nothing in ERISA or in

the regulations supports a distinction in the anti-alienation

provision between pre-retirement lump sum payments and post-

retirement annuity payments. And Hisquierdo is not a useful

analogy because of differences in language between the anti-

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alienation provision of the RRA and that of ERISA. The RRA

provides, in relevant part, that:

Notwithstanding any other law of the United States, or of
any State, territory, or the District of Columbia, no
annuity or supplemental annuity shall be assignable or be
subject to any tax or to garnishment, attachment, or
other legal process under any circumstances whatsoever,
nor shall the payment thereof be anticipated.

45 U.S.C. § 231m(a) (emphasis added). In concluding that Congress

intended § 231m to reach benefits after distribution, the Supreme

Court emphasized the fact that the statute was written broadly to

prohibit creditors from subjecting the annuity to any "legal

process under any circumstances whatsoever." Hisquierdo, 439 U.S.

at 586. No similarly sweeping language exists in ERISA's anti-

alienation provision.8

C. Social security benefits

David also argues that the district court's refusal to

strike social security benefits from the order violates the anti-

alienation provision of the Social Security Act, 42 U.S.C. §

407(a), which provides that

The right of any person to any future payment under this
subchapter shall not be transferable or assignable, at
law or in equity, and none of the moneys paid or payable
or rights existing under this subchapter shall be subject
to execution, levy, attachment, garnishment, or other

8
Indeed, since Hisquierdo, the Supreme Court has expressly
reserved judgment on whether ERISA benefits may be alienated after
distribution, see Boggs v. Boggs, 520 U.S. 833, 845 (1997),
suggesting that the Court itself does not view Hisquierdo as
controlling on that issue.

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 legal process, or to the operation of any bankruptcy or
insolvency law.

There is no question that § 407(a), unlike § 1056(d)(1), applies to

benefits after they have been distributed to beneficiaries.

See Philpott v. Essex County Welfare Bd., 409 U.S. 413, 414-16

(1973).

Jennifer argues, nonetheless, that the May 30 order does

not violate § 407(a) because it does not constitute an "execution,

levy, attachment, garnishment, or other legal process" within the

meaning of § 407(a). She contends that the order imposes no

restraint on David's ability to dispose of his monthly social

security check because it allows him to withdraw the full amount of

the social security check after depositing it in the designated

bank account. His social security check is approximately $1,400

per month; he is allowed to withdraw $2,900 per month. The only

effect of the order, Jennifer contends, is to track David's income

each month.

David, citing Robbins, 218 F.3d at 201, responds that the

term "other legal process" is construed expansively to cover all

express or implied threats to resort to legal processes such as

contempt. He points out that the order requires him, under threat

of contempt, to deposit his benefits in a bank account effectively

controlled by the court and to report those deposits to Jennifer.

That, he argues, is restraint enough to trigger § 407.

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 The Supreme Court has recently provided some guidance on

the interpretation of "other legal process" in § 407. The Court

stated that

"other legal process" should be understood to be process
much like the processes of execution, levy, attachment,
and garnishment, and at a minimum, would seem to require
utilization of some judicial or quasi-judicial mechanism,
though not necessarily an elaborate one, by which control
over property passes from one person to another in order
to discharge or secure discharge of an allegedly existing
or anticipated liability.

Wash. State Dep't of Soc. & Health Servs. v. Keffeler, 537 U.S.

371, 385 (2003). The question whether the May 30 order "passes

control" over David's social security check to the court is a

difficult one.

That question, however, is not one that we need to

resolve. Both Jennifer and David stated to the district court that

they would have no objection to an arrangement that exempted

David's social security benefits from the May 30 order, required

David to report the amount of his monthly social security benefits,

and reduced his $2,900 monthly withdrawal limit by that amount.

Jennifer's counsel reiterated this position to us during oral

argument. In light of the parties' mutual amenability, we think

the best solution is to remand with instructions to adopt that

arrangement.

We anticipate that David may claim that he should not be

required under § 407 even to report the amount of his social

security benefits. Any such argument would fail. David has waived

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the argument and, even had it been preserved, such a reporting

requirement would not violate § 407. The arrangement to which

David has agreed depends on his accurate reporting of the amount of

his benefits.

III.

We vacate the denial of the motion to strike as to social

security benefits and remand with instructions to modify the order

to exempt social security benefits, to require David Hoult to

report the amount of his social security benefits each month, and

to reduce the monthly withdrawal limit by that amount. We affirm

the denial of the motion to strike in all other respects.

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