Maria O. Segovia

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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
MARIA O. SEGOVIA,
Debtor.
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Case No. 06-30387 TEC 7
Chapter 7
MEMORANDUM RE TRUSTEE’S OBJECTION TO CLAIMED EXEMPTION IN WELLS
FARGO LONG-TERM INCENTIVE COMPENSATION PLAN
On June 5, 2008, the court held a hearing on the chapter 7
trustee’s objection to the exemption Debtor claimed in her
interests in the Wells Fargo Long-Term Incentive Compensation Plan
(LTICP). 	For the reasons set forth below, I determine the assets
are not exempt.
Debtor was granted non-qualified stock options under the
LTICP. 	The stated purpose of the LTICP was to motivate key
employees by enabling them to share in the future success of Wells
Fargo. 	To induce the employee to make continued efforts on behalf
of the company, the options generally do not vest immediately, the
Signed and Filed: June 09, 2008
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 10, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-30387 Doc# 142 Filed: 06/09/08 Entered: 06/10/08 17:52:27 Page 1 of
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options may not be sold, and the employee must remain employed by
Wells Fargo. 	If an employee is fired for cause, all unexercised
options are revoked. 	If the employee quits, all vested options are
lost if not exercised within three months, and unvested options are
lost. 	If employment ceases upon death, retirement, or disability,
however, all unvested options immediately become vested and can be
exercised at any time within their stated term. 	The LTICP provides
that options may not be transferred and must be exercised by the
employee or his or her personal representative.
Debtor contends that the LTICP is exempt as a private
retirement plan under California Code of Civil Procedure section
704.115. 	Debtor also contends that the LTICP is a retirement plan
governed by ERISA, that Segovia’s interest should be deemed to be
held in trust to conform with the requirements of ERISA, and that
the anti-assignment provision noted above is enforceable under
ERISA and removes the assets from the estate pursuant to 11 U.S.C.
§ 541(c)(2).
The LTICP is not a private retirement plan because it was not
designed or used as a retirement plan. 	See In re Phillips, 206
B.R. 196, 202-03 (Bankr. N.D. Cal. 1997). 	The purpose of the plan
is to encourage key employees to work for the long-term health of
the company by providing pre-retirement income linked to the future
value of the company stock. 	The fact that vesting of the options
may be accelerated upon retirement is merely incidental to this
purpose. 	See Int’l Paper Co. v. Suwyn, 978 F.Supp. 506, 509-12
(S.D.N.Y. 1997); Lafian v. Electronic Data Systems Corp., 856
F.Supp. 339, 344-48 (E.D. Mich. 1994). 	Nor did Segovia use the
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LTICP as a retirement plan. 	She generally exercised the options
promptly upon vesting and expended the proceeds on improving her
home.
The LTICP is also not a retirement plan under ERISA. 	It does
not so qualify because it does not either provide retirement
benefits or defer income within the meaning of 29 U.S.C.
§ 1002(2)(A). 	See Suwyn, supra, 978 F.Supp. at 344-48; Lafian,
supra, 856 F.Supp. at 510-12.
Nor is the LTICP a trust. 	The plan does not call itself a
trust. 	Nor are any employee assets managed under the LTICP. 	The
plan provides no assets other than contractual option rights, which
are exercised solely by the employee, and any stock purchased is
then held and managed directly by the employee. 	See Marshall v.
Wells Capital Management Inc., 2007 WL 4565164 at pp. 11-13 (D.
Ore. 2007) (Wells Fargo LTICP is not a trust). 	Because the LTICP
is not a trust, 11 U.S.C. § 541(c)(2) does not apply.
Trustee’s objection to Debtor’s claim of exemption in the
LTICP is sustained in its entirety.
**END OF MEMORANDUM**
Case: 06-30387 Doc# 142 Filed: 06/09/08 Entered: 06/10/08 17:52:27 Page 3 of
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Court Service List
Neal H. Konami, Esq.
Law Offices of Neal H. Konami
555 12th Street, Suite 1900
Oakland, CA 94607-4098
Daniel M. Linchey, Esq.
Goldberg, Stinnett, Meyers and Davis
44 Montgomery Street, Suite 2900
San Francisco, CA 94104
Case: 06-30387 Doc# 142 Filed: 06/09/08 Entered: 06/10/08 17:52:27 Page 4 of
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