Ditto v. McCurdy5/12/1999
Defendant-appellant John A. McCurdy, Jr. (McCurdy or Defendant) has taken consolidated appeals from the first circuit court's (1) August 19, 1998 order granting in part and denying in part plaintiff-appellee Janie Ditto's motion for issuance of garnishee summons after judgment, (2) September 22, 1998 garnishee order, and (3) October 16, 1998 order denying Defendant's motion for stay on appeal and for an interlocutory appeal. Briefly stated, this appeal arises out of a medical malpractice suit in which Ditto prevailed and thereby obtained a -1- -1-judgment against McCurdy. Notwithstanding that McCurdy filed for bankruptcy, Ditto instituted garnishment proceedings, seeking to collect on the judgment from McCurdy's interests in two pension plans.
In this appeal, we are asked to determine whether the anti-alienation provision, or section 206(d)(1), of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 88 Stat. 829 (codified as amended at 29 U.S.C. § 1001, et seq. (1994)), precludes the garnishment of two ERISA-qualified pension plans, thereby preempting Hawaii Revised Statutes (HRS) § 651-124 (1993), which governs attachment and execution with respect to pension money. Pursuant to HRS § 651-124, the right of a debtor to pension money is "exempt from attachment, execution, seizure, the operation of bankruptcy or insolvency laws under 11 [U.S.C.] section 552(b), or under any legal process whatever." The statute provides, however, that "this section shall not apply to[,]" inter alia, "contributions made to a plan or arrangement within the three years before the date a debtor files for bankruptcy, whether voluntary or involuntary, or within three years before the date a civil action is initiated against the debtor[.]" The circuit court, relying upon this exception, granted Ditto's motion for issuance of garnishee summons after judgment and "order that a garnishee summons be issued to Hawaiian Trust Company, Ltd. [(Hawaiian Trust)] directing it to disclose and immediately deliver the amount of $65,910.00 to Ditto's attorneys[.]"
McCurdy challenges the circuit court's orders, arguing that, because section 206(d)(1) of ERISA prohibits garnishment of his ERISA pension plan benefits, the exception to HRS § 651-124 is preempted. For the reasons stated below, we agree with McCurdy and, accordingly, reverse.
I. BACKGROUND
A. The Underlying Case
Ditto was disfigured as a result of breast augmentation surgery performed by McCurdy and numerous complications that arose therefrom. In 1989, Ditto filed a medical malpractice action against McCurdy, alleging negligence and fraud and claiming punitive damages. Following a three-week trial, the jury, in a special verdict, found McCurdy liable for negligence, fraud, and punitive damages, awarding Ditto $3,500.00 in special damages, $1,000,000.00 in general damages, $400,000.00 in damages for fraud, and $600,000.00 in punitive damages. Judgment was entered on July 7, 1992 [hereinafter, the July 7, 1992 judgment]. On appeal, the Intermediate Court of Appeals (ICA) affirmed the jury's award of special, general, and punitive damages for negligence, but vacated the jury's finding of liability for fraud and remanded the case for a new trial on the fraud claim. See Ditto v. McCurdy, 86 Hawaii 93, 947 P.2d 961 (App. 1997), aff'd in part and rev'd in part, 86 Hawaii 84, 947 P.2d 952 (1997) [hereinafter, Ditto I]. After granting McCurdy's petition for writ of certiorari, this court reversed the jury's finding of liability with respect to fraud, vacated the jury's award of punitive damages, and remanded the case with instructions to the trial court to dismiss the fraud count and conduct a new trial solely on the i
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