United States v. Stinson
In United States v. Stinson, 125 F.4th 191 (5th Cir. 2024), the Fifth Circuit held that the district court had erred in ordering that a criminal defendant’s wife should have her separate retirement accounts liquidated to pay for her husband’s restitution obligations. Under Mississippi law, the wife’s accounts were not marital property, so the husband did not have a property interest in them.
Background: After Ralph Stinson pled guilty to conspiracy to engage in bank fraud, the district court ordered him to pay more than $3.6 million in restitution. The Government then served a writ of garnishment on a brokerage firm that held retirement accounts in the name of his wife, Ellen Stinson. After Ellen moved to dismiss the writ of garnishment, the court “concluded that (1) Ellen’s retirement accounts were presumably marital property, and (2) Leon and Ellen both had a ‘100% undivided interest’ in them because Ellen offered no evidence to establish that ‘her IRA accounts’ were ‘solely hers.’” As a result, it ordered the brokerage firm to liquidate her accounts and transfer the cash value to the court clerk.
Legal Standard: The Government has the right to enforce restitution orders “against all property or rights to property” of the defendant. 18 U.S.C § 3613(a); see 18 U.S.C. §§ 3663A(d), 3664(m)(1)(A). State law “defines the property interests” to which that right will attach. United States v. Berry, 951 F.3d 632, 635 (5th Cir. 2020). Similarly, the Federal Debt Collection Procedures Act (“FDCPA”) allows courts to issue a writ of garnishment against property in which the person has “a substantial nonexempt interest,” and “[c]o-owned property shall be subject to garnishment to the same extent as co-owned property is subject to garnishment under the law of the State in which such property is located.” 28 U.S.C. § 3205(a).
Analysis: Mississippi law “has an equitable distribution system for dividing marital property rather than a community property system,” but equitable distribution principles only apply at divorce. See Carnathan v. Carnathan, 722 So. 2d 1248, 1252 (Miss. 1998). So Ellen’s husband Leon would only have a property interest in her retirement accounts at the time of divorce.
The Government argued that instead, Mississippi law should be read to create property rights for both spouses in property acquired during the marriage, although it only allowed marital property to be equitably divided at a later time. In short, it claimed that, “during marriage, each spouse has a whole, ‘undivided, equal interest in marital property,’” although the named spouse may unilaterally dispose of the property until a spouse files for divorce.
The Fifth Circuit recognized that no Mississippi authority squarely answered this question, so it needed to make a guess “as to how the Mississippi Supreme Court would decide the question.” Keen v. Miller Env’t Group, Inc., 702 F.3d 239, 243 (5th Cir. 2012) (cleaned up). Ultimately, the court decided that Mississippi law did not convey to Leon the type of “substantial interest” required under the FDCPA. 28 U.S.C. § 3205(a). This sentence sums up the court’s decision:
Putting these pieces together, we conclude the Mississippi Supreme Court would likely hold that Leon has no property right, i.e., no substantial interest, in Ellen’s Edward Jones retirement accounts.
For that reason, the court vacated the district court’s decision and remanded the case with instructions that the district court should grant Ellen’s motion to dismiss the writ of garnishment against her retirement accounts.