Wednesday, August 19, 2020

U.S. v. Swenson (9th Cir. - Aug. 19, 2020)

Despite the strong disagreement between the majority and the dissent in this Ninth Circuit opinion, on the whole, I agree with Judge Smith.

Which is easier to say than you might imagine.  Since the majority opinion is written by Milan Smith and the dissent is written by Randy Smith.

It's actually a difficult question.  I'll summarize the doctrinal issue in this (fairly straightforward) way:  

Federal law says that you can attach "property" belonging to a debtor.  Whether something is "property" that belongs to the debtor is generally determined by state law.  Here, state law says that a particular type of property doesn't belong to the debtor because federal law controls and preempts state law.

Under such circumstances, does "state law" make the funds "property of the debtor?"

Reasonable minds could -- and do -- go both ways on this one.  On the one hand, state law doesn't grant the debtor any rights over the property (e.g., the debtor couldn't exercise dominion over them), so if you determine ownership under state law, you might say he has no rights.  On the other hand, you might say that it's only federal law (via preemption) that stops the state from granting property rights, and where (as here) there's a different federal law that, in the context, stops the preemption, then state law does grant a property right.

Those two hands basically summarize the dispute between the Judges Smith.  Milan Smith basically takes the first view and Randy Smith takes the second.  Hence the competing results.

Though I might take a slightly different approach than either of these jurists.  Which befits, perhaps, the fact that my last name is not Smith.

To me, Judge (Randy) Smith seems right that if state law expressly includes a particular property as an asset of a debtor, and is stopped from treating that property as an asset only by the preemptive effect of a federal law, then state law does indeed define that asset as the "property" of the debtor and it can be attached as requested here.  For example, if state law said "All animals obtained during a marriage shall be community property and deemed owned by both spouses," but federal law said that "Cows shall be deemed to be exclusively owned by the spouse whose first name is alphabetically before the other" but (simultaneously) that the cow-specific federal statute didn't apply for purposes of criminal restitution orders, then I agree that both spouses are deemed (under state law) to own the cow when you're looking at whether the cow can be seized pursuant to a criminal restitution order.  The federal law doesn't apply given its limited preemptive effect, so state law does, and pursuant to state law, both spouses own all the animals jointly.  So even though the state can't split up any cows in, say divorce proceedings, the cow is still community property (pursuant to the general state law) for restitution purposes.

This is basically a less doctrinal way of saying what Judge Randy Smith says in his dissent.

But notwithstanding my overall agreement with that doctrinal approach, that's not actually what the state law here says.  It says something different.  Meaningfully different, in my view.

As Judge (Randy) Smith concedes, all that state law here says is that assets acquired during a marriage are presumed to be community property.  That's not a categorical dictate.  And, as Judge (Milan) Smith notes, Idaho courts have decided that Social Security benefits are not community property.

But Judge Randy Smith is right that the reason the Idaho courts have said that Social Security benefits are not community property is due to the preemptive effect of federal law.  A preemptive effect that does not apply here.

Nonetheless, contra Judge Randy Smith, that doesn't mean that state law would treat Social Security as a community asset.  Remember:  It's just a presumption.  There are lots of exceptions.  The Idaho courts haven't needed to decide if that presumption applies -- or if an exception applies -- because it's a moot point given that federal law typically preempts state law anyway.  Just not here.  "Here" being a context that Idaho state courts haven't yet had to confront.

Which means the state law issue is, in my mind, open.  Now, Judge Randy Smith is right that one way to resolve that issue is to certify the question to the Idaho Supreme Court.  That'd be fine with me.  But that's also not necessarily either necessary nor definitively the right way to go.  Given that Idaho courts don't typically have to deal with this issue (due to preemption), I'm not sure it makes eminent sense to ask them the hypothetical question "Well, if there wasn't preemption, what would you do?"  Maybe it does.  But maybe not.  Federal courts could alternatively permissibly answer that question themselves.  Either way is procedurally legitimate.

Judge Randy Smith's says that state law declares Social Security benefits to be community property because that's the presumption.  To me, that's way too fast.  Again:  It's a presumption.  Not the end of the story at all.  You gotta go a lot deeper than that.  I suspect that Idaho courts -- indeed, many state courts -- would say that's not true.  That even if federal law permitted them to take Social Security benefits from one spouse and give 'em (or part of 'em) to another -- or (more accurately, and as sought here) give the Social Security assets of one spouse to a creditor of the other spouse -- the state wouldn't do so.  They'd say that, pursuant to state law, the Social Security assets of the one spouse aren't property of the other spouse.  Which would mean they're not attachable here either.

That said, I also think that Judge Milan Smith's approach is similarly too facile.  Judge Milan Smith says that state law says there's no property rights because federal law preempts, hence if you can't grab the assets under state law you can't grab them in this context either.  Again:  Not so fast.  That's because of preemption.  Whether they'd do the same thing without preemption is another question.  And as I've tried to show in the "cow" hypothetical, it's very possible for federal law that incorporates state law to obtain a different result than what happens in a state context once you remove the preemptive effect of federal law.

So what Judge Milan Smith would have to do is to decide not what Idaho courts say when there is preemption, but rather what they'd say when there isn't preemption.  Which is something that his opinion doesn't even attempt.  He thinks he already knows what state law says given what it's decided in the preemption context, but Judge Randy Smith is right that the one doesn't necessarily follow the other.  You've got to do more.

So you could ask Idaho, or you could try to predict what they'd do.  Either makes sense.

But if you're doing the latter, I think you'd have to do something a little different than either of the Smiths does here.

Both have very good points.  But there's also a little bit missing on both sides.