United States of America v. Jack M. Lee

Circuit Judge Evans died on August 10, 2011, and did not å
participate in the decision of this case, which is being resolved
by a quorum of the panel under 28 U.S.C. § 46(d).
The Honorable Charles N. Clevert, Jr., Chief Judge of the åå
United States District Court for the Eastern District of Wis-
consin, sitting by designation.
In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3117
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JACK M. LEE,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of Illinois.
No. 93-CR-10075—Michael M. Mihm, Judge.
ARGUED APRIL 12, 2011—DECIDED OCTOBER 3, 2011
Before KANNE and EVANS , Circuit Judges, and CLEVERT, å
District Judge.åå

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2 No. 10-3117
When the government could not locate the $337,000 in Lee’s 1
disclosed assets, it attempted to seize his real estate, including
Lee’s wife’s interest in the property. This court reversed the
district court’s forfeiture of the home finding that Lee’s wife was
entitled to the property during her lifetime, but affirmed the
conviction. United States v. Lee, 232 F.3d 556 (7th Cir. 2000).
CLEVERT, District Judge. Jack M. Lee pleaded guilty
in 1997 to multiple counts of fraud, money laundering,
and perjury. He was sentenced to 78 months’ imprison-
ment, five years of supervised release, and ordered to
pay $1,587,321.50 in restitution and to forfeit $337,000.1
By the time Lee completed his supervised release, most
of the restitution remained unpaid. The government
sought and received a turnover order targeting payments
Lee had received from three retirement savings plans
provided through his employer. Lee appeals that order
contending that the government is entitled to no more
than 25% of the distributions.
Because the notice of appeal was filed 28 days after the
turnover order was entered on the criminal docket, the
court will take a suggested detour to address timeliness.
Federal Rule of Appellate Procedure 4(b)(1) gives
criminal defendants fourteen days to appeal following
entry of the judgment or order being appealed. Fed. R.
App. P. 4(b)(1)(A)(I). In a civil case to which the United
States is a party, “the notice of appeal may be filed by any
party within 60 days after the judgment or order being
appealed from is entered.” Fed. R. App. P. 4(a)(1)(B).
Admittedly, “drawing the line between civil and criminal
matters for purposes of Rule 4(b) is difficult because

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No. 10-3117 3
many appealable orders technically ‘in’ criminal cases
look more civil than criminal—from the return of bond
money to motions under 28 U.S.C. § 2255 that parallel the
civil petition for a writ of habeas corpus.” United States
v. Taylor, 975 F.2d 402, 403 (7th Cir. 1992).
This court has held that district courts may entertain
civil garnishment and other collection proceedings as
postjudgment remedies within an underlying criminal
case. United States v. Kollintzas, 501 F.3d 796, 800-01 (7th
Cir. 2007) (“[N]othing precludes the government from
initiating a collection proceeding under an existing crimi-
nal docket number in order to collect a fine or restitu-
tion ordered as part of the criminal sentence.”). In addi-
tion, appeals from orders in criminal cases may be treated
as civil matters where they are collateral to criminal
punishment. United States v. Apampa, 179 F.3d 555, 556
(7th Cir. 1999). For example, an order denying a motion
for return of property has been deemed civil, Taylor,
975 F.2d at 403, as has an order refusing to issue a “certifi-
cate of innocence” to a former defendant. Betts v. United
States, 10 F.3d 1278, 1283 (7th Cir. 1993).
Here, the government sought the turnover order pursu-
ant to the Mandatory Victims Restitution Act of 1996
(“MVRA”), which permits courts to enforce restitution
orders using the same practices and procedures for the
enforcement of a “civil judgment” under federal or state
law. 18 U.S.C. § 3613(a). The order was entered after
Lee served his term of supervised release and more than
ten years following entry of judgment. To that end, the
order requiring the turnover of funds from Lee’s retire-

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4 No. 10-3117
ment savings plans appears to be ancillary to—rather
than a part of—the core criminal case. The court
construes Lee’s appeal as governed by Rule 4(a)(1), and,
therefore, timely.
The targeted funds in dispute are defined as:
(1) a defined benefit plan; (2) a 401(k) plan; and
(3) a “non-qualified” plan. Lee will receive an annual
mandatory payment estimated to be approximately
$3,000 under the defined benefit plan as long as he
works for his current employer. Under the 401(k) plan,
Lee will receive an in-service distribution of approxi-
mately $38,000 and an annual mandatory payment of
approximately $2,000. Finally, as to the non-qualified
plan, Lee is ineligible for any benefit until he is
terminated, retires, or dies. At that time his estate would
receive payments over 60 months. However, the exact
amount of the non-qualified plan funds available for
distribution is unknown and dependent upon the
success of his employer.
Lee and the government agree that “any lump sum
distribution he may receive from the plans is subject to
turnover” and that the government cannot obtain any
funds until he has a right to receive the funds from
the retirement savings plans. However, Lee maintains
that the Consumer Credit Protection Act (“CCPA”) limits
garnishment to 25% of the party’s “aggregate disposable
earnings of any individual workweek,” 15 U.S.C. § 1673(a),
and plainly subjects periodic payments to the 25% lim-
itation. The district court held that the plan benefits,
which are not paid in correspondence with an individual

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No. 10-3117 5
workweek, are not subject to the CCPA garnishment
limitations. Noting a distinction between wages and
assets that originated as wages, the court reasoned that
the CCPA may limit payments from an employer to a
retirement plan, but such funds are no longer re-
stricted once the money entered the plan and distribu-
tions are received.
The MVRA requires a sentencing court to impose
restitution in the full amount of the victim’s losses, United
States v. Newman, 144 F.3d 531, 537 (7th Cir. 1998), and
this court has held that a district court may consider the
defendant’s retirement account as a source of funds to
provide restitution. United States v. Hosking, 567 F.3d 329,
335 (7th Cir. 2009). Specifically, the MVRA allows the
government to enforce restitution fines “against all prop-
erty or rights to property of the person fined.” 18 U.S.C.
§ 3613(a). But, enforcement is not without limits and
the CCPA establishes a garnishment ceiling of 25% of
a debtor’s “disposable earnings” for a week, or the
amount by which the debtor’s disposable earnings for
that week exceed 30 times the federal minimum hourly
wage, whichever is less. 15 U.S.C. § 1673(a).
“Disposable earnings” are defined as “that part of the
earnings of any individual remaining after the deduction
from those earnings any amounts required by law to be
withheld.” 15 U.S.C. § 1672(b). The CCPA, in turn,
defines “earnings” as “compensation paid or payable
for personal services, whether denominated as wages,
salary, commissions, bonus, or otherwise, and includes
periodic payments pursuant to a pension or retirement
program.” 15 U.S.C. § 1672(a) (emphasis added).

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6 No. 10-3117
Notwithstanding this plain language, the district
court held that the CCPA was not intended to protect
retirement distributions because they are not wages. The
Supreme Court in Kokozska v. Belford, 417 U.S. 642, 648
(1972), cautioned that earnings do not pertain to every
asset traceable in some way to compensation; however,
the issue in Kokozska was whether an income tax refund
check was subject to the 25% garnishment limitation.
Id. at 648-49. Neither the statutory language nor the
legislative history or purpose supported treating the
tax refund as earnings even though it was traceable to
earnings. Unlike the reference to “periodic payments
pursuant to a pension or retirement program,” § 1672
does not mention tax refunds.
The district court cited United States v. DeCay, 2009
WL 36623 (E.D. La. 2009), a decision that was not
reported, for its holding that the plan benefits subject to
garnishment are not subject to the 25% limitation of the
CCPA. However, DeCay was reversed one month after
the district court issued its decision. The Fifth Circuit
Court of Appeals held that the CCPA statutory limita-
tion is unambiguous in that it defines “earnings” to
include “periodic payments made pursuant to a pension
or retirement program.” 620 F.3d 534, 544 (5th Cir. 2010).
Where a pension or retirement program authorizes pay-
ments, the payments are made “pursuant to” the fund
and therefore constitute “earnings.” Id. Hence, the gov-
ernment cannot garnish more than 25% of pension dis-
tributions.
The statutory language refers to periodic payments,
which describe the $2,000 and $3,000 annual payments

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No. 10-3117 7
from Lee’s 401(k) and defined benefit pension plan.
Although the statutory definition of “earnings” cover
compensation paid or payable for personal services
regardless of whether they are labeled as wages, salary,
bonus or otherwise, the plain language also embraces
“periodic payments made pursuant to a pension or retire-
ment program.” 15 U.S.C. § 1672(a). Black’s Law Diction-
ary defines the term “pursuant to” as “in compliance
with; in accordance with; under [or] . . . as authorized
by . . . [or] in carrying out.” Black’s Law Dictionary 1356
(9th ed. 2009). Given the unambiguous language of the
statute, periodic payments from a pension or retirement
savings plan made in accordance with its terms would
be made “pursuant to” the pension or retirement plan
and therefore be subject to the 25% limitation of the CCPA.
For these reasons, the court VACATES the district court’s
order granting the government’s motion for turnover
and REMANDS for further proceedings consistent with
this decision.
10-3-11

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