Strobel v. Dillon

STANLEY STROBEL, Plaintiff, v. ANDY DILLON, State Treasurer in his official capacity as Treasurer of the State of Michigan,BILL SCHUETTE, in his official capacityas Attorney General for the State of Michigan, Defendants.

Case No. 11-11684

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

March 31, 2015

HON. AVERN COHN

MEMORANDUM AND ORDER STAYING PROCEEDINGS ON PLAINTIFF'S MOTION FOR RELIEF FROM JUDGMENT (Doc. 21)

I. Introduction

A. Preliminary

This is a case under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq. Plaintiff Stanley Strobel, presently on parole, was formerly a state prisoner. Plaintiff is also a former employee of General Motors Corporation (GM). Plaintiff retired from GM with a monthly pension benefit in the amount of $3,160.00¹ which he receives from Fidelity. As will be explained, the State Treasurer, a defendant in this case, brought an action against plaintiff in state court under the State Correctional Facility Reimbursement Act, (SCFRA), M.C.L. § 800.401, to recover thecosts of his incarceration which involved freezing his assets, including his pension benefits. While the state court case was pending, but a day before a final judgment was entered, plaintiff filed suit in federal court, essentially claiming that the state's attempt to recoup the costs of incarceration via his pension violates ERISA. Plaintiff named as defendants Andy Dillon, in his official capacity as State Treasurer, and Bill Schuette, Attorney General for the State of Michigan, also in his official capacity. The two count complaint claimed an ERISA violation under Count I and sought injunctive relief based on ERISA under Count II. The Court dismissed the complaint on the grounds that plaintiff's claims were barred by Rooker-Feldman and res judicata. (Doc. 19).

Before the Court is plaintiff's motion for relief from judgment. As will be explained, plaintiff is entitled to the relief he seeks. This is so because the Court did not take into account the fact that an injunction was entered in 2008 against the State of Michigan barring it obtaining pension benefits from any GM pension plan under the SCFRA, Gale v. General Motors, 556 F. Supp. 2d 689 (E.D. Mich. 2008). Neither plaintiff's former counsel nor, more importantly, defendants made the Court aware of the Gale decision.

B. Ruling

As will also be explained, a ruling on the motion is STAYED pending resolution of an appeal in a similar case, Robbennolt v. Washington, 2013 WL 4670013 (E.D. Mich. Aug. 30, 2013).

II. Background

In order to fully understand plaintiff's motion, it is necessary to set forth the background of the Gale decision, plaintiff's case, and the Robbennolt case.

A. Gale

In 2003, the Michigan State Treasurer filed an action in the Circuit Court for Cheboygan County against Gale, an inmate in a state correctional facility, seeking obtain his pension benefits under the GM Pension Plan. A Final Order was entered in the Circuit Court, on October 20, 2003, ordering Gale to notify GM that all pension benefits should be mailed to his correctional facility and further ordering the warden to make monthly distributions to the State of Michigan equal to 90% of Gale's pension benefits. The Order also provided that if Gale failed or refused to notify GM, then the warden was ordered to notify GM.

In October, 2006, Gale filed a Motion for Relief of Judgment in the Circuit Court contending that the Sixth Circuit decision in DaimlerChrysler v. Cox, 447 F.3d 967 (6th Cir. 2006), invalidated the Circuit Court's 2003 Order. In Cox, the Sixth Circuit held that notices and order issued under SCFRA that required monthly pension checks be sent to the prison over a prisoner's objection violated ERISA's anti-alienation provision, 29 U.S.C. § 1056(d)(1) (generally providing that plan benefits may not be assigned or alienated).

On November 9, 2006, the Circuit Court denied Gale's Motion. Prior to January 1, 2007, benefits payable to Gale from the GM Pension Plan had been forwarded to the warden at his correctional facility.

On December 26, 2006, based on Cox, Gale sued GM and the Michigan State Treasurer in this district seeking relief from having his pension benefits involuntarilytaken by the State of Michigan. Gale v. General Motors, No. 06-15710 (E.D. Mich. 2006). Due to the conflict between the Sixth Circuit and the Michigan Supreme Court's decision in State Treasurer v. Abbott, 468 Mich. 143 (2003), GM sought a declaration that the SCFRA violated provisions of ERISA to the extent it allowed the State of Michigan to involuntarily attach or assign monthly pension benefits. In addition, starting January 1, 2007, GM suspended all payments of retirees' pension benefits being sent to prison facilities.

In response to GM's Counterclaim and Crossclaim, the State Treasurer pointed out that the plaintiff in Gale had complied with the state court order and directed GM to change his address. The district court referred the case to a magistrate judge for pre-trial matters. On March 24, 2007, the magistrate judge issued a Report and Recommendation (MJRR) addressing GM's Motion for Declaratory Judgment. The MJRR summarized the relief sought by GM:

Here, in the administration of its pension and retirement programs, GM claims it needs guidance from this Court regarding the payment of benefits to Plaintiff and to similarly situated retirees (Dkt. # 28, p. 2). GM therefore seeks a declaration that prior to pension benefits being suspended, it had no liability for forwarding pension benefits to Plaintiff's prison address in accordance with the state court order entered by the Circuit Court for Cheboygan County and in reliance on the Michigan Supreme Court's decision in State Treasurer v. Abbott, 468 Mich. 143, 660 N.W.2d 714 (2003), cert. denied, 540 U.S. 1112, 124 S.Ct. 1038, 157 L.Ed.2d 901 (2004). Further, GM seeks a declaration that under the holding in DaimlerChrysler future pensions benefits should be forwarded pursuant to Plaintiff's instructions.

556 F. Supp. 2d at 702.

The magistrate judge also noted that in Cox, the Sixth Circuit held that the state court orders requiring that pension benefits be sent to the warden resulted in a prohibited alienation of benefits under ERISA and were void:

The Sixth Circuit rejected petitioner's argument that the orders and notices did not result in a prohibited alienation of benefits because the state court order only directed the warden to send notices, but did not directly require DaimlerChrysler to do anything. Id. The court observed that DaimlerChrysler sought a declaration as to whether it must comply with the wardens' notices and reasoned that to hold that DaimlerChrysler had to comply with the notices would create a legal obligation enforceable against the plan before distribution. Accordingly, the court concluded that the notices were void to the extent that they directed DaimlerChysler to send benefits to an account controlled by the warden, because such a directive would constitute an alienation of plan assets.

556 F.Supp.2d at 704.

The magistrate judge further noted that Gale, unlike the prisoners in Cox, complied with the State Court Order and notified GM of the change of address, further held that this involuntary change of address also violated the anti-alienation provisions of ERISA:

The Sixth Circuit's conclusion that the orders and notices would effect a prohibited alienation, insofar as they require the plan to send pension payments to the inmates' prison accounts, is reinforced by the overall operation of the statutory scheme in this case. SCFRA provides for the state court, after considering the inmate's moral and legal obligations to support his dependents, to order the inmate to reimburse the state for the costs of his incarceration in an amount up to 90% of the inmate's assets. Moreover, the specific orders in this case were actions initiated by the Attorney General under SCFRA for the specific purpose of obtaining an allocation to the State of up to 90% of the inmates' pension benefits. The state court then ordered the inmate to instruct his Pension Plan to pay benefits into his prison accounts, under the control of the State, to satisfy the state court's award. And if he failed to do so, the warden is instructed to send the order and notices to the Pension Plan directing it to do so. From start to finish, then, the proceedings under SCFRA were directed in substance toward a court-ordered redirection of the inmate's pension benefits by the pension plan to the state. That result is prohibited by ERISA's anti-alienation provision.

556 F. Supp. 2d at 707 (footnote omitted). Additionally the magistrate judge recognized that GM had suspended the payment of pension benefits and was seeking further direction from the Court:

GM also seeks a declaration that pension benefits held in suspension commencing January 1, 2007, and pension benefits payable in the future should be forwarded to the address designated by Plaintiff, or should continue to be held in suspension at his direction. This is precisely the relief the Sixth Circuit and lower court granted DaimlerChrysler in deciding its motion for declaratory judgment.

556 F.Supp.2d at 707.

In fashioning relief, the magistrate judge set forth a form of declaratory relief which would bar the State of Michigan from seeking future pension benefits or reimbursement under SCFRA:

The district court adopted the MJRR in its entirety. The order adopting the MJRR set forth the following directives:

IT IS FURTHER ORDERED that the Orders, Notices and Michigan State Treasurer's requests to General Motors and/or the GM Hourly Rate Employees Pension Plan (or its administrator) under SCFRA are hereby declared PREEMPTED by ERISA and void, to the extent the Orders, Notices and/or SCFRA directs GM and/or the Pension Plan to send or make payments of Plaintiff's Pension Plan benefits to any address or account other than as designated by the Plaintiff who is

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