Yates v. Hendon :
Supreme Court Resolves the ERISA Status of Working Owners

By: Kamyar Mehdiyoun
© Aspen Publishers

 

Introduction

On March 2, 2004, the United States Supreme Court decided the case of Yates, M.D., P.C., Profit Sharing Plan v. Hendon.1 The issue in Yates was whether the sole shareholder of a corporate employer may be considered a “participant” under Section 3(7) of the Employee Retirement Income Security Act of 1974 (ERISA).2 The case is significant because a sole shareholder’s standing to sue for plan benefits is one of the most common contexts in which the ERISA standing issue arises. Civil enforcement mechanisms under ERISA’s § 502(a)(1) are only available to either a “participant”3 or a “beneficiary”4 of an employee benefit plan. In Yates, the Supreme Court, in a unanimous decision, reversed the Sixth Circuit’s holding that a sole shareholder did not have standing under ERISA’s enforcement mechanisms because such a shareholder could not be considered an ERISA plan participant.5 Prior to the Court’s ruling, federal appeals courts had split on the issue. While the First Circuit had adopted a similar position to that of the Sixth Circuit, other circuits had disagreed.6

This article will first examine the relevant judicial landscape before the Supreme Court’s intervention. The analysis will then proceed to the Supreme Court’s decision in Yates and its consequences for the status under ERISA of sole shareholders of incorporated entities. The article argues that the Court’s reversal of the Sixth Circuit’s decision correctly relied on the legislative history of ERISA and the relevant regulations promulgated by the Department of Labor. The Court’s recognition of sole shareholders’ status as ERISA participants contributes to ERISA’s fundamental goal of consistency and uniformity in provision and administration of employee benefits.

 

Definitions of Key Terms

ERISA defines ’employer’ as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan”.7 An ’employee’ is defined simply as “any individual employed by an employer.”8 The unhelpful nature of this latter definition has contributed to the prevailing confusion among the circuit courts as to whether working owners should be categorized as employers or employees. The Supreme Court has stated that ERISA’s definition of ’employee’ is “completely circular and explains nothing.”9

The ambiguity regarding who may properly be considered an employee under ERISA is also reflected in the definition of ‘participant’, since the status of an ERISA participant essentially derives from that of an employee. The term ‘participant’ is defined as “any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.”10 In addition to participants, ERISA §502(a)(1) also grants standing to plan beneficiaries. The term ‘beneficiary’ is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.”11

 

Circuit Courts’ Split Before the Supreme Court’s Intervention

A discussion of judicial decisions that considered standing under ERISA must begin by distinguishing among different types of working owners: sole shareholders of incorporated businesses, sole proprietors of unincorporated entities and partners in a partnership. Each of these three entities may be found to have standing to sue either as a participant or as a beneficiary. Under specific facts of Yates, the Supreme Court was confronted by the case of a sole shareholder of a corporate entity who claimed the status of an ERISA participant.12 The Supreme Court’s resolution of the issue, however, is now expected to serve as a guide to lower courts’ deliberations on standing as it applies to working owners generally.13

The courts that had held that working owners did not have standing to sue began their analysis by pointing out that under ERISA, employers and employees were exclusive categories and a single person could not be considered simultaneously both an employer and an employee. The First Circuit’s holding in Kwatcher v. Massachusetts Serv. Employees Pension Fund is a prominent example of this position.14 In Kwatcher, the issue was whether the sole shareholder of a corporation could be considered a participant in his company’s employee benefit plan.15 The court stated that “‘[E]mployee” and “employer” are plainly meant to be separate animals; under Part I [of ERISA], the twain shall never meet.”16 The court then reasoned that since a sole shareholder dominates the actions of a corporate entity, he acts in the interest of the corporation and, therefore, is an employer under ERISA.17 The court then went on to state “[T]he rest follows inexorably. Once a person has been found to fit within the “employer” integument, ERISA prohibits payments to him from a qualified plan.”18 In the Kwatcher court’s opinion, this prohibition was based on ERISA’s so called ‘anti-inurement’ provision.19 The non-inurement rule provides “[T]he assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan.”20

Finally, in order to bolster its holding that ERISA excluded a sole shareholder from ’employee’ status, the Kwatcher court examined the regulations promulgated by the Department of Labor.21 The regulation cited by the court states:

 

“Employees: For purposes of this section:
1) an individual and his or her spouse shall not be
deemed to be employees with respect to a trade or
business, whether incorporated or unincorporated,
which is wholly owned by the individual or by the
individual and his or her spouse, and
2) A partner in a partnership and his or her spouse
shall not be deemed to be employees with respect
to the partnership.” 22

The court concluded that DOL regulations were entitled to Chevron style deference,23 and held that under ERISA sole shareholders could not be considered employees or plan participants.24 Relying on the above DOL guidance, other courts had reached similar conclusions.25

Probably the most frequent scenario involving a working owner’s ERISA standing arises when the working owner attempts to bring a state law cause of action against his insurer who has denied his claim for benefits. Typically, the working owner argues that as a sole shareholder, or a sole owner, he does not have standing to sue under ERISA, but since his claim is not preempted by ERISA he should be allowed to bring his claim in a state court. The working owner prefers a state forum because state tort laws usually afford the claimant broader relief than ERISA’s limited remedies.

In Fugarino, a leading Sixth Circuit case, the plaintiff, Mr. Fugarino, was a sole proprietor and operator of a business.26 He purchased a group health insurance policy that, in addition to himself, covered at least one employee of the business as well.27 After the benefit claim by one of Mr. Fugarino’s dependents was denied by the insurer, the plaintiff sought recovery from the insurer under state law.28 The Sixth Circuit discussed the DOL regulations quoted above, codified under 29 C.F.R. § 2510.3-3(c)(1), and concluded that although an ERISA plan existed, as a sole proprietor Mr. Fugarino could not be considered a participant in such a plan.29 Therefore the court held that although ERISA applied to the employees of the business covered under the same plan, it did not apply to the sole owner who could proceed with his state law claims.30

In Agrawal v. Paul Revere Life Insurance Co., the Sixth Circuit applied the same reasoning to the case of a corporation’s sole shareholder.31 In Agrawal, the plaintiff argued that as a sole shareholder his state law claims were not preempted by ERISA because he did not have standing to sue under the ERISA civil enforcement provisions.32 The court cited Fugarino and extended the holding in that case by concluding that a sole shareholder was neither a participant nor a beneficiary under ERISA.33 The Agrawal court, however, recognized that the reasoning in Fugarino was not consistent with the goals of ERISA.34 As the court stated, “under Fugarino a self-employed individual who participates in a disability plan that covers him and all of his employees will have a unique advantage: the self-employed individual can pursue a parade of state law claims that are withheld from his employees by preemption.”35

In opposition to the First and the Sixth Circuits, several federal appeals courts had held that sole shareholders, sole owners and partners had standing to sue under Section 502 (a)(1) of ERISA. Since the specific issue in Yates concerned the status of sole shareholders of incorporated entities, the following discussion will primarily focus on this category of working owners. For analytical purposes, however, it is useful to distinguish these different types of working owners.

To summarize, the circuits holding that sole shareholders were ERISA participants based their reasoning on four main propositions. First, they noted that the proper methodology for determining who may be considered an ’employee’ under ERISA was mandated by the Supreme Court in Darden.36 Second, these courts rejected the First and the Sixth circuits’ broad reading of 29 C.F.R. § 2510.3-3(c)(1) and held that the correct interpretation of these regulations focused exclusively on identifying whether an employee benefit plan existed.37 These courts pointed out that if 29 C.F.R. § 2510.3-3(c)(1) was read to exclude working owners from participation in ERISA plans, an anomalous situation developed whereby two separate bodies of law would govern owners and nonowners. While working owners could bring state law causes of action against insurers, other employees covered under the same plan would be limited to ERISA remedies.38 Finally, according to these courts, ERISA’s ‘anti-inurement’ provision in no way prohibited payments of benefits to sole shareholders of corporations.39

The Fourth Circuit’s decision in Madonia was representative. In that case, Dr. Madonia was the president and sole shareholder of “MNA,” a professional corporation.40 MNA established an employee welfare benefit plan for the benefit of the corporation’s employees. The plan listed Dr. Madonia as policyholder and his family members as beneficiaries.41 Subsequently, the insurer failed to pay for cancer treatment undergone by Dr. Madonia’s wife and she brought state law causes of action against the insurer.42 The district court found that MNA had established an ERISA ’employee welfare benefit plan’ and because Dr. Madonia was an ’employee’ of MNA, and thus an ERISA ‘participant,’ his wife had standing to sue as a plan ‘beneficiary.’43

In her appeal, Mrs. Madonia argued that under Kwatcher’s interpretation of ERISA, a person could not simultaneously be both ’employer’ and ’employee,’ and a sole shareholder like Dr. Madonia should be categorized as ’employer.’ An ’employer,’ she continued, may not be an ERISA ‘participant.’44

The Fourth Circuit began its analysis by pointing out that in Darden, the Supreme Court had noted ERISA’s inadequate definition of the term ’employee,’ and had directed the lower courts to use common law principles in order to define the proper meaning of that term.45 Using this tool of statutory interpretation, the Fourth Circuit stated that under Virginia law a corporation such as MNA was a legal entity separate and distinct from its shareholders. Hence, the court concluded Dr. Madonia was an employee of MNA corporation.46

Mrs. Madonia had also argued that under 29 C.F.R. § 2510.3-3(c) her husband could not be considered an ’employee.’47 As noted above, that regulation states that “[f]or purposes of this section: (1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse….” The court reasoned that since 29 C.F.R. § 2510.3 dealt with the definition of ’employee benefit plan,’ the introductory clause of the regulation, i.e. ‘for the purposes of this section,’ meant that the definition of ’employee’ under the regulation should be exclusively used as an aid in determining whether an ’employee benefit plan’ existed.48

The court noted that a different reading of the regulation would result in the disparate treatment of corporate employees’ claims, which in turn would violate ERISA’s policy of consistency and uniformity.49 The above analysis led the court to conclude that Dr. Madonia was a ‘participant’ in MNA’s employee benefit plan. As his spouse, Mrs. Madonia had standing to sue as a ‘beneficiary,’ and her state law claims were, therefore, preempted by ERISA.50

Madonia’s holding to the effect that sole shareholders could be ERISA participants was followed by the Fifth Circuit in Vega.51 In reaching its conclusion, the court in Vega also explicitly rejected the argument that the congressional intent behind the so called “anti-inurement” provision was to exclude business owners from participation in ERISA plans. The court stated that the provision “refer[red] to the congressional determination that funds contributed by the employer… must never revert to the employer, it does not relate to plan benefits being paid with funds or assets of the plan to cover a legitimate pension or health benefit claim by an employee who happens to be a stockholder or even the sole shareholder of a corporation.”52

The issue of ERISA standing for other types of working owners, i.e. sole owners and partners in a partnership, had also divided the circuits. While some courts held that sole owners and partners had standing as either participants or beneficiaries under section 501(a)(1) of ERISA, others disagreed.53

 

TheYates Decision
A.  Facts of the Case and the Sixth Circuit’s Reasoning

Unlike Fugarino and Agrawal, in which the working owners argued that they were not covered by ERISA, the petitioner in Yates eagerly sought the protection of ERISA. Dr. Raymond Yates was the sole shareholder of his professional corporation.54 The corporation maintained a profit sharing plan in which Dr. Yates, along with at least one other employee of the corporation, participated.55 In addition, Dr. Yates was the plan’s administrator and trustee.56 Pursuant to ERISA’s requirement that employee benefit plans contain an anti-alienation provision,57 Yates’s profit sharing plan included a so-called “Spendthrift Clause” which provided that “[e]xcept for Plan loans to Participants…, no benefit or interest available hereunder will be subject to assignment or alienation, either voluntarily or involuntarily.58 In December 1989 Dr. Yates borrowed $20,000 from the plan.59 Thereafter, he failed to make the installment repayments as required under the plan. In mid-November of 1996, however, he made a single payment to the plan which covered both the principal and the accrued interest. Three weeks after this repayment, an involuntary bankruptcy petition was filed against Dr. Yates under Chapter 7, Title 11, of the United States Code.60 Subsequently, the trustee in bankruptcy sued the plan and asked the court to set aside the repayment as a preferential transfer and order that the money be turned over to the bankruptcy trustee.61 The plan trustee opposed the action by arguing that Yates’s interest in the plan was not subject to recapture by the trustee in bankruptcy under 11 U.S.C. § 541(c)(2), which provides that “[a] restriction on a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.”62 The bankruptcy court held for the trustee in bankruptcy and the district court affirmed. Yates appealed to the Sixth Circuit.63 The Sixth Circuit also affirmed and held that Dr. Yates could not enforce the terms of the profit sharing plan.64 The three judge panel that heard the appeal did not advance any independent reasoning for this conclusion and declared that the panel was bound by the Sixth Circuit decisions on the point.65 The court quoted Fugarino to the effect that “a sole proprietor or sole shareholder of a business must be considered an employer and not an employee of the business for purposes of ERISA.”66 As an ’employer’ a sole shareholder could not qualify as an ERISA ‘participant or beneficiary’ and therefore did not have standing under the ERISA enforcement mechanisms.67

B.  Supreme Court’s Decision

Justice Ginsburg’s opinion began by noting that because ERISA’s text contained multiple indications that Congress intended working owners to qualify as plan participants there was no need to resort to common law.68 Consequently, the Court accepted the Solicitor General’s argument that application of the Darden court’s two-step analysis resolved the issue against application of the common law factors enumerated in Darden.69

The Court provided several examples from the tax code and ERISA in order to support its argument that Congress never intended to exclude working owners from participation in ERISA-covered employee benefit plans.

Thus the Court noted that Title I exempted certain plans from ERISA’s fiduciary responsibility requirements.70 An example of such a plan is one “which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.”71 The Court pointed to the Internal Revenue Code’s definition of the term ‘highly compensated employee’ in IRC §414(q)(1)(A) and concluded that some working owners would fit the description ‘highly compensated employees.’ The opinion stated that “exemptions of this order would be unnecessary if working owners could not qualify as participants in ERISA-protected plans in the first place.”72

The Court also discussed exemptions from ERISA’s prohibited transactions provisions as stated in ERISA §408(b)(1)(B). That section exempts loans to “highly compensated employees… in an amount greater than the amount made available to other employees.” Like the exemptions from fiduciary responsibility requirements §408(b)(1)(B) would not be necessary if Congress did not intend to include working owners as ERISA participants.

A key point resolved by the Court’s opinion in Yates is whether ERISA permits working owners to be simultaneously considered both an employee and an employer. As discussed above, the First Circuit in Kwatcher had proclaimed that under ERISA “employee and employer are plainly meant to be separate animals.”73 The Court rejected the First Circuit’s conclusion and clearly stated that “[u]nder ERISA, a working owner may have dual status, i.e., he can be an employee entitled to participate in a plan and, at the same time, the employer (or owner or member of the employer) who established the plan.” The Court pointed to descriptions of “employer” of a sole proprietor or partner in both the Title IV and the IRC and concluded that “these descriptions expressly anticipate that a working owner can wear two hats, as an employer and employee.”74

The Court also advanced two policy reasons to support its conclusion that working owners should be considered ERISA plan participants. The opinion pointed out that Congress’s aim in enacting ERISA was to encourage employers to create benefit plans for their employees. Granting the status of ERISA participants to working owners clearly advanced this aim. In addition, the Court stated that inclusion of such owners as plan participants avoided the anomalous results such as in Agrawal, where sole shareholders could advance state law causes of action, while nonowner employees’ claims were governed by federal law.75

C.  The Supreme Court’s Interpretation of 29 C.F.R. § 2510.3-3 and ERISA’s Anti-Inurement Clause

As discussed above, divergent interpretations of the Department of Labor regulations 29 C.F.R. § 2510.3-3(c), had divided the circuits as to whether working owners could be classified as ’employees’ or ‘participants’ under ERISA.76 While some courts held that those regulations clearly barred working owners from being considered an ’employee’ under ERISA, other courts pointed to the introductory clause of the regulation and concluded that 29 C.F.R. § 2510.3-3(c) must be read less expansively and strictly as an aid in determining whether an ERISA employee benefit plan existed.

It is useful to note the general structure of 29 C.F.R. § 2510.3-3. The section is entitled “Employee benefit plan.” It reads:

 

(a) General. This section clarifies the definition in section
3(3) of the term “employee benefit plan” for purposes of
Title I of the Act and this chapter. It states a general principle
which can be applied to a large class of plans to determine whether
they constitute employee benefit plans within the meaning
section 3(3) of the Act…
(b) Plans without employees. For purposes of Title I of the
Act and this chapter, the term “employee benefit plan”
shall not include any plan, fund or program, other than
an apprenticeship or other training program, under which
no employees are participants covered under the plan…

 

Subsection (c) of the regulation, which is the subject of various courts’ conflicting interpretations was quoted above. A logical reading of the above language indicates that the regulation’s main aim is to identify which plans may be properly categorized as ’employee benefit plans’ under ERISA. Subsection (b) excludes plans that have no employees. Finally, subsection (c), entitled “Employees,” appears to exclude working owners from the definition of ’employee’ in order to determine whether the plan is an ’employee benefit plan.’ That is, for the purposes of determining whether a plan is without employees, and only for this purpose, the owner and his spouse should not be counted as employees. If this interpretation of the regulation is adopted, then a plan that in addition to covering a sole shareholder or his spouse also covers at least one other employee, is an employee benefit plan subject to Title I of ERISA. The working owner who, for purposes of determining whether an ERISA plan existed, was not counted as an ’employee,’ may now be included under the plan. This was the Fourth and Ninth Circuits’ interpretation of the regulation.77

The Supreme Court agreed with this reading. The Court emphasized that the regulation itself limited its application by pointing out that its definition of “employee” was “for the purposes of this section,” i.e., the section defining “employee benefit plans.” The Court went on to conclude that “plans that cover only sole owners or partners and their spouses…fall outside Title I’s domain. Plans covering working owners and their nonowner employees, on the other hand, fall entirely within ERISA’s compass.”78

Justice Ginsburg also addressed the argument, advanced by some courts, that ERISA’s anti-inurement provision precluded Title I coverage of working owners as plan participants.79 The Supreme Court rejected this interpretation and stated that the purpose of ERISA’s anti-inurement provision was to “discourage abuses such as self-dealing, imprudent investment, and misappropriation of plan assets, by employers and others… Those concerns are not implicated by paying benefits to working owners who participate on an equal basis with nonowner employees in ERISA-protected plans.”80

As to the specific facts of Yates, the Court instructed the lower court to decide whether Dr. Yates could claim the protection of ERISA’s anti-alienation provisions given the fact that he had clearly violated plan provisions relating to periodic repayment requirements of a loan.81

 

Conclusion

The Court’s decision82 in Yates resolves one of the most contentious issues in ERISA litigation. Even the Sixth Circuit, whose holding was reversed by the Supreme Court, had stated that the exclusion of working owners from ERISA-covered plans appeared to violate a fundamental rationale of ERISA, namely consistency and uniformity in provision and administration of employee benefits.83 Extending the benefits of ERISA coverage to working owners also encourages such owners to create benefit plans for their employees, which was another goal of Congress in enacting ERISA.

 


 

1 See 124 S.Ct. 1330.

2 29 U.S.C. § 1001, et seq.

3 ERISA § 3(7).

4 ERISA § 3(8).

5124 S.Ct. 1330, 1335; Hendon v. Yates (In re Yates), 287 F.3d 521, 525 (6th Cir. 2002), reh’g denied, 2002 U.S. App. LEXIS 12550 (6th Cir. June 20, 2002), quoting Agrawal v. Paul Revere Life Insurance Co., 205 F.3d 297, 302 (6th Cir. 2000).

6 See the discussion below.

7 ERISA § 3(5).

8 ERISA § 3(6).

9 Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992).

10 ERISA § 3(7).

11 ERISA § 3(8).

12 Pet. Br. at 7, 2003 WL 21939861.

13 See Brief for the United States as Amicus Curiae supporting petitioners, 2003 WL 21953912.

14 Kwatcher v. Massachusetts Serv. Employees Pension Fund, 879 F.2d 957 (1st Cir. 1989).

15 Id. at 959.

16 Id.

17 Id. at 960.

18 Id.

19 Id.

20 ERISA § 403(c)(1).

21 Kwatcher, 879 F.2d at 961-2.

22 29 C.F.R. § 2510.3-3(c)(1) & (2).

23 Kwatcher, 879 F.2d at 962.

24 Id. at 968.

25 Peckham v. Board of Trustees, 653 F.2d 424, 427-428 (10th Circuit, 1981) (citing ERISA’s anti-inurement provision and 29 C.F.R. § 2510.3-3(c)(1), and stating that sole proprietors could not be considered participants); Giardono v. Jones, 867 F.2d 409 (7th Cir. 1989) (quoting 29 C.F.R. § 2510.3-3(c)(1) and concluding that sole proprietors may not be participants in ERISA plans).

26 Fugarino v. Hartford Life and Accident Ins. Co., 969 F.2d 178, 181 (6th Cir. 1992).

27 Id. at 181.

28 Id. at 180-1.

29 Id. at 186.

30 Id.

31 Agrawal, 205 F.3d 297, 302 (6th Cir. 2000).

32 Id.

33 Id.

34 Id.

35 Id. at 303.

36 Madonia v. Blue Cross & Blue Shield of Va., 11 F.3d 444, 448-9 (4th Cir. 1993) citing Darden, 503 U.S. 318, 323-4.

37 Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 294 (5th Cir. 1999).

38 Madonia, 11 F.3d at 450.

39 Vega, 188 F.3d at 293.

40 Madonia, 11 F.3d at 445.

41 Id.

42 Id. at 446.

43 Id.

44 Id. at 449.

45 Id.

46 Id.

47 Id.

48 Id.

49 Id. at 450.

50 Id.

51 Vega, 188 F.3d at 294.

52 Id. at 293.

53 Wolk v. UNUM Life Ins. Co. of Am., 186 F.3d 352, 356 (3d Cir. 1999) (holding that a law firm partner was an ERISA beneficiary); Harper v. American Chambers Life Ins. Co., 898 F.2d 1432 (9th Cir. 1990) (concluding that a partner could not bring a suit as a ‘participant’ because only employees were participants, but that a partner could enjoy standing as a ‘beneficiary’); Peterson v. American Life & Health Ins. Co., 48 F.3d 404 (9th Cir.) (citing Harper and reaching the same conclusion); Peckham v. Board of Trustees, etc., 653 F.2d 424, 427 (10th Cir.) (citing 29 C.F.R. § 2510.3-3(c)(1) and concluding that under that regulation sole proprietors were excluded from employee pension benefit plans); Giardono v. Jones, 867 F.2d 409 (7th Cir. 1989) (citing 29 C.F.R. § 2510.3-3(c)(1) and concluding that sole proprietors may not be participants in ERISA plans); Gilbert v. Alta Health & Life Ins. Co., 276 F.3d 1292, 1303 (11th Cir. 2001) (holding that partner had ERISA standing as ‘beneficiary’ and stating that 29 C.F.R. § 2510.3-3(c)(1) laid out the test for determining whether an ERISA benefit plan existed and that once the existence of the plan was established, the regulation did not speak to the separate issue of who may or may not be a beneficiary or participant of such a plan.); Robinson v. Linomaz, 58 F.3d. 365, 370 (8th Cir. 1995) (agreeing with Madonia’s interpretation of 29 C.F.R. § 2510.3-3(c)(1) and holding that sole shareholders were ERISA beneficiaries).

54 Yates, 287 F.3d 521, 524.

55 Id.

56 Id.

57 ERISA § 206(d)(1).

58 Yates, 287 F.3d 521, 525.

59 Id. at 524.

60 Id.

61 Id.

62 Id. The Supreme Court has held that ERISA qualifies as “applicable nonbankruptcy law” and, ERISA’s anti-alienation provisions apply in bankruptcy. If Dr. Yates is held to be an ERISA ‘participant’, therefore, he will be able to use the plan’s anti-alienation provision to protect his interest in the plan. See, Patterson v. Shumate, 504 U.S. 753 (1992).

63 Id.

64 Id. at 525.

65 Id.

66 Id.

67 Id. quoting Agrawal, 205 F.3d at 302.

68 124 S.Ct. 1330, 1339.

69 See Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323-4 (1992). According to the Solicitor General, Darden’s two-step methodology first required the court to “determine whether any provisions of ERISA itself furnish[ed] guidance on whether the working owner of a business may be a plan participant. If the statutory text provide[d] no guidance, then common-law principles should be used to resolve the question, provided their application would not thwart the congressional design or lead to irrational consequences.” See Brief for the United States as Amicus Curiae supporting petitioners, 2003 WL 21953912.

70 124 S.Ct. 1330, 1340.

71 29 U.S.C.§1101(a).

72 124 S.Ct. 1330, 1339.

73 See supra note 16.

74 124 S.Ct. 1330, 1341.

75 Id.

76 See the above discussion.

77 Madonia, 11 F.3d at 449; Vega, 188 F.3d at 294.

78 124 S.Ct. 1330,1344.

79 See, e.g. Kwatcher, 879 F.2d at 960; Fugarino, 969 F.2d at 186.

80 124 S.Ct. 1330,1345.

81 Id.

82 Justices Scalia and Thomas wrote concurring opinions. Justice Scalia argued that “authoritative interpretations of law by the implementing agency, if reasonable, are entitled” to Chevron-style deference. Before Yates arose, the Department of Labor in its advisory opinions had stated that working owners may be considered participants under ERISA. Justice Scalia would have decided the case based on this authority alone. Justice Thomas was skeptical about the Court’s finding that an examination of ERISA’s text clearly indicated the congressional intent to include working owners as ERISA participants. He, however, agreed that the Sixth Circuit’s decision was clearly mistaken. 124 S.Ct. 1330,1345-7.

83 See, supra notes 34-35.

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