Opinion
Criminal Action No. 89-523, Section "K".
October 12, 2004
Before the Court is United States of America's Motion and Order for Writ of Continuing Garnishment (Doc. 154) and Claim for Exemption Forms filed by Audrey Gaudet and Stanley Gaudet (Doc. 160 and 161).
I. Background
On July 14, 1991 the U.S. District Court Eastern District of Louisiana sentenced Stanley Gaudet for violations of 18 U.S.C. § 664, Theft and Embezzlement from Employee Benefit Plan and Union Funds. As part of his sentence, Stanley Gaudet was ordered to pay restitution totaling $2,750,538.87 to the Sheet Metal Worker's International Association and a $500.00 special assessment. He was also ordered to return to the Sheet Metal Worker's International Association any monthly pension checks for which he became eligible. Stanley Gaudet argued on direct appeal and in a petition for post-conviction relief under 28 U.S.C. § 2255 that the order requiring him to turnover his pension benefits violates ERISA. United States v. Gaudet, 966 F.2d 959 (5th Cir. 1992); United States v. Gaudet, 81 F.3d 585 (5th Cir. 1996). The Fifth Circuit rejected Gaudet's arguments because of failure to raise the objection in the district court below, 966 F.2d at 963, and because this particular claim was outside the scope of § 2255, 81 F.3d at 592.
Because Stanley Gaudet has not paid the debt as ordered, on February 14, 2004, the U.S. Attorney's Office filed an Application for Writ of Continuing Garnishment against garnishee, Sheet Metal Workers' Local Unions and Councils. On February 13, 2004, the court issued a Writ of Garnishment in which Sheet Metal Workers' Local Unions and Councils ("LUCPF") was made garnishee.
The United States of America filed a Motion to Dismiss the Application for Writ of Garnishment filed against Sheet Metal Workers' National Pension Fund because it did not have any property owned by the defendant. The Motion was granted on July 21, 2004 (Doc. 162).
On April 14, 2004, Audrey and Stanley Gaudet filed a Claim for Exemption Form under Federal Law, 18 U.S.C. § 3613, (Doc. 160 and 161), in which they claimed an exemption under each of the ten categories listed on the form. Subsequently, upon motion by the United States, Stanley Gaudet and Audrey Gaudet were ordered to file a statement under oath regarding their claims of exemption, describing "each item of property for which exemption is claimed, the value and basis of such valuation, and the nature of [their] ownership" and describing why the property subject to garnishment is exempt. 28 U.S.C. § 3014(b)(1)(2) (Doc. 163). The Gaudets answered the order without the aid of an attorney and provided no explanation why the property subject to garnishment is exempt.
In addition to the above described proceedings, the Gaudets filed suit in the U.S. District Court Eastern District of Louisiana against the Sheet Metal Workers' National Pension Fund ("NPF"), the New Orleans Sheet Metal Workers' Local 11, and the LUCPF seeking distribution of pension benefits and to enforce an alleged qualified domestic relations order. Gaudet v. Sheet Metal Workers' National Pension Fund, 216 F. Supp.2d 582 (E.D.La. 2002). The NFP filed a counterclaim to recoup the pension funds that Gaudet had received as a result of embezzlement from the Local 11 Pension Fund and to collect a civil judgment obtained by the Local 11 Pension Fund against Gaudet. The United States was not a party to the lawsuit. The Gaudets and the defendants filed motions for summary judgment. This court denied the Gaudets' motion and entered judgment in favor of the LUCP based on the Gaudets' failure to exhaust administrative remedies relating to the qualified domestic relations order. This Court granted summary judgment in favor of the NPF on the grounds that the plan administrator did not abuse his discretion when it determined that the NPF did not owe any benefits to the Gaudets. Gaudet, 216 F. Supp. at 592, aff'd, 71 Fed. Appx. 441, 2003 WL 21417518 (5th Cir. (La.)).
Subsequently, on March 14, 2003, the Gaudets filed a second lawsuit in this court against LUCPF in which they sought to enforce the domestic relations order. Civil Action No. 03-0750. The Court administratively closed this matter pending the garnishment proceedings (Doc. 16 Civil Docket 03-750).
The United States requests the Court to deny the Gaudets' claim for exemptions and enter an order directing LUCPF to remit the funds held in the Gaudets' pension fund to the Clerk of Court, U.S. District, Eastern District of Louisiana.
II. Analysis
As stated above, the Fifth Circuit twice examined the judgement requiring Gaudet to make restitution of the total embezzled amount. On direct appeal, Gaudet argued that the district court's order divesting him of his pension plan to satisfy the restitution award was erroneous. Gaudet, 966 F.2d at 961. The Court rejected the claim because Gaudet had an opportunity to object below and failed to do so; however, the Court made the following statement. Id. at 964. "The judge's order permitting the government to satisfy the restitution order from Gaudet's pension and thereby repay the pension funds he embezzled is certainly not counter intuitive. No judge or other legal scholar can be expected to have an intimate knowledge of every obscure rule or law. Thus, even if Gaudet is correct that ERISA's anti-alienation provisions preclude the use of his pension to satisfy his restitution obligation, the district court's error is not an obvious one." Id. On post-conviction relief under 28 U.S.C. § 2255, Gaudet argued that his counsel was constitutionally ineffective because he failed to object to the order requiring Gaudet to surrender his pension benefits. 466 U.S. at 592. The court determined that this claim was outside the scope of § 2255 and, therefore, did not reach the merits of the claim. Id. The law of this case, as determined by the Fifth Circuit, is that restitution is lawful.
In considering Gaudet's argument, the Fifth Circuit recognized that "Gaudet has a substantial legal argument," under Guidry v. Sheet Metal Workers' National Pension Fund, 493 U.S. 365, 371-73, 110 S.Ct. 680, 685, 107 L.Ed. 2d 782 (1990) (holding that it was inappropriate to approve any generalized exception to ERISA's anti-alienation provision), and Herberger v. Shaunbaum, 897 F.2d 801 (5th Cir. 1990), cert. denied, 498 U.S. 817, 111 S.Ct. 60, 112 L.Ed.2d 35 (1990) (refusing to allow the plan to offset the outstanding judgment against petitioner's monthly pension benefits). However, the court held that the "district court did not commit reversible error in requiring Gaudet to relinquish his pension payments to satisfy his restitution obligation to his pension plans." 966 F.2d at 964.
Under 28 U.S.C. § 3014(b)(1)(2), Stanley Gaudet and Audrey Gaudet were ordered to file a statement under oath regarding their claims of exemption, describing "each item of property for which exemption is claimed, the value and basis of such valuation, and the nature of [their] ownership" and describing why the property subject to garnishment is exempt. The Gaudets did not respond with any explanation or any law explaining their claim for exemption. Furthermore, the Gaudets bear the burden of persuasion on the applicability of an exemption. 28 U.S.C. § 3014(b)(2). Therefore, since the Fifth Circuit upheld the restitution order and Stanley Gaudet and Audrey Gaudet did not provide any explanation in their claims of exemption, the Writ of Continuing Garnishment asking this Court to direct LUCPF to remit the funds held in Gaudet's pension funds is granted.
Audrey Gaudet has previously claimed an interest in Gaudet's pension by virtue of a qualified domestic relations order ("QDRO") in Gaudet v. Sheet Metal Workers' National Pension Fund, 2001 WL 1518305 (E.D.La). However, as a result of the garnishment proceedings against LUCPF, Audrey Gaudet has no interest in the LUCPF. As stated in Gaudet v. Sheet Metal Workers' National Pension Fund, 2001 WL 1518305 (E.D.La), "this Court emphasizes that the language of the QDRO makes Audrey's alleged entitlement to benefits purely derivative of any amount of pension owed to Stanley. Under a logical interpretation of that order, if Stanley is not entitled to any benefits under the pension plan . . . Audrey can not claim any independent right to more benefits under the plan." Id. at 5. Thus, because Stanley Gaudet is not entitled to the benefits in the LUCP due to the garnishment of those funds, then Audrey Gaudet should not be allowed to claim any independent rights to the benefits in the same plan.
Furthermore, the United States filed the notice of lien in the records of St. Charles Parish, State of Louisiana, on April 14, 1999 (Government Exhibit 2 in Doc 167). Mrs. Gaudet contends that the state court approved the separate agreement property, which established the QDRO, on May 16, 2001. The priority of a federal tax lien in relation to a competing lien is governed by federal common law. United States v. National Bank of Commerce, 472 U.S. 713, 722 (1985). Absent a provision to the contrary, the federal priority rule is that "the first in time is the first in right." United States v. McDermott, 507 U.S. 477, 449 (1993). Thus, this Court has determined for the reasons stated above that Mrs. Gaudet's interest in LUCPF, if there are any, no longer exists due to the garnishment proceedings against the LUCP.
Accordingly, IT IS ORDERED that the Claim for Exemption Forms filed by Stanley and Audrey Gaudet are DENIED. IT IS FURTHER ORDERED that the United States of America's Writ of Continuing Garnishment is GRANTED and that Sheet Metal Workers' Local Unions and Councils (LUCP) remit the funds held in Stanley Gaudet's pension fund to the Clerk of Court, U.S. District, Eastern District of Louisiana, for application in accordance with the provisions of the judgment in this case.