Pension Fund Violated Automatic Stay When It Withheld Benefits Of Debtor To Apply Them To Unpaid Default Judgment Against Debtor
IN RE: RADCLIFFE (April 23, 2009)
Barry Radcliffe owned Glass Service, Inc. The company made pension contributions as part of a labor agreement. When the company became delinquent, Radcliffe provided his personal guarantee. When he failed to perform on his guarantee, the pension fund sued and obtained a default judgment. Radcliffe requested his own pension benefits from the fund and, shortly thereafter, declared bankruptcy. The fund refused to turn over his benefits. Instead, they said they would apply the money to the default judgment. Radcliffe filed an adversary action in the bankruptcy court. The court ordered the fund to pay damages, interest, punitive damages and attorney's fees. The district court affirmed. The pension fund appeals.
In their opinion, Judges Kanne, Rovner and Evans affirmed. The first issue the Court addressed was whether the fund violated the automatic stay. The automatic stay takes effect immediately upon the filing of the bankruptcy petition and prevents creditors from taking any action to collect on a debt. The Court agreed with the district court that the fund’s refusal to pay the benefits violated the automatic stay. The Court also agreed that the fund’s conduct was intentional, taken with full knowledge of the existence of the bankruptcy proceeding, a requirement for punitive damages. The next issue was whether the court should have lifted the stay. One of ERISA's goals is to safeguard pension benefits. One way in which it does that is to prevent benefits from being assigned or alienated. As such, Radcliffe's pension benefits never became part of the bankruptcy estate. The Court found no abuse of discretion in the lower court’s refusal to lift the stay.
