Shah sued Baloch for breach of contract and fraud. Shah obtained a $411,505 judgment against Baloch. After the entry of the judgment, Shah alleged that Baloch fraudulently transferred funds into his 401(k) account. Shah then served a writ of garnishment on the bank that acted as the trustee of Baloch’s 401(k) account. The bank objected to the garnishment. The superior court quashed the writ, finding that the funds in Baloch’s 401(k) account were exempt from garnishment under ERISA.
The Court of Appeals affirmed. ERISA’s anti-alienation bar, 29 U.S.C. § 1059(d), generally prohibits a creditor from garnishing a qualified plan to collect on a judgment against a plan participant, unless one of two statutory exceptions apply. Finding the two statutory exceptions inapt, Shah asked the Court to recognize an equitable exception to the anti-alienation bar in cases where a plan participant fraudulently conveys funds to a qualified plan. Courts have authorized the recovery of funds from a qualified plan only when there is a fraudulent conveyance between a perpetrator and a plan’s trustee; a plan participant or beneficiary was not involved in the wrongdoing. The Court declined to adopt an equitable exception to the anti-alienation bar, even though it may lead to “distasteful” results in some cases by preventing a judgment creditor from satisfying a judgment from fraudulently conveyed funds. The Court concluded, however, that it is Congress’s role to carve out additional exceptions to ERISA’s anti-alienation bar.
Presiding Judge Johnsen authored the opinion, in which Judge Downie and Judge Gemmill concurred.
Posted by: Phillip W. Londen