UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA THIRD DIVISION In Re: Case No. 13-33165 Judge Gregory F. Kishel Brunhilde B. Bekkering, Debtor. DEBTOR S MEMORANDUM OF LAW FOR DENIAL OF TRUSTEE S OBJECTION TO CLAIMED EXEMPTIONS STATEMENT OF FACTS Brunhilde Bekkering filed her petition for chapter seven (7) bankruptcy on June 27, 2013. Ms. Bekkering choose to use the Minnesota exemptions under Minn. Stat. 550.37. In Schedule B of her filing, Ms. Bekkering listed $500.00 in 3M stock. Ms. Bekkering listed that stock as an exempt asset in her Schedule C, based on Minn. Stat. 550.37, subd. 24, titled Employee Benefits. Ms. Bekkering states that she received the 3M stock under a 3M employee stock purchase plan while she was employed at 3M during the years 1992-1994. Ms. Bekkering was a 3M employee, working in St. Paul, Minnesota from 1964 to 1994. Ms. Bekkering s 3M stock has apparently been managed in an account with Wells Fargo, untouched by Ms. Bekkering, since her retirement in 1994. Ms. Bekkering maintains that at the time of filing of her bankruptcy petition, she was unaware of the amount of stock she owned. Ms. Bekkering has maintained no records of the purchase or ownership of the stock. Ms. 1
Bekkering provided an estimate for the value of the 3M stock of $500.00 based on the recent annual amount of her 2012 3M stock dividend ($550.00 per 2012 IRS Form 1099-DIV). Ms. Bekkering admits some confusion over the valuation and believes it was a mistake that should have been caught by her or her attorney prior to filing, but maintains it was an unintentional error. Ms. Bekkering s candor throughout this proceeding indicates she has earned the benefit of the doubt here. At the July 30, 2013 meeting of creditors, the trustee, Mary Jo Jensen- Carter, stated that she believed the 3M stock was not an exempt asset and requested Ms. Bekkering provide a statement showing how many 3M stock shares Ms. Bekkering owned. Ms. Bekkering obtained a statement from Wells Fargo Shareowner Services, dated August 2, 2013, that shows Ms. Bekkering has 250 shares of 3M stock, valued at $117.43 per share on July 31, 2013, or a total asset value of $29,357.50. Ms. Bekkering maintains this letter was the first instance she became aware of the significant amount of 3M stock she owned. That statement was provided to the trustee. Ms. Bekkering then signed an authorization for her attorney and the trustee to discuss the Wells Fargo stock account with Wells Fargo and 3M representatives. After discussions with those representatives, the trustee and attorney still differed on their opinions of whether the 3M stock was an exempt asset. The trustee allowed Ms. Bekkering 60 days to obtain further information that may prove the 3M stock was exempt. 2
Ms. Bekkering obtained a September 26, 2013 statement from Wells Fargo Shareowner Services that demonstrates Ms. Bekkering received her 3M stock under stock options issued during Ms. Bekkering s employment at 3M, between 1992 and 1994. The statement shows two stock splits (04/08/1994 and 09/29/2003), increasing Ms. Bekkering s shares to the current amount of 250. A September 10, 2013 letter and statement from Wells Fargo claims Wells Fargo has provided all the information available it has on record for Ms. Bekkering s stock account. Unconvinced by this information, the trustee filed this objection October 23, 2013. Ms. Bekkering requested information by subpoena from 3M on October 30, 2013. 3M claims it does not maintain employee information beyond eight years after the employee ends employment at 3M. 3M did provide a description of its General Employee Stock Purchase Plan ( 3M GESPP ), which representatives indicate was the plan Ms. Bekkering participated in while an employee of 3M. LAW AND ARGUMENT I. Debtor s 3M stock received through participation in 3M GESPP is an exempt employee benefit. It is the burden of the trustee to prove the debtor s exemption is not properly claimed. Rule 4003 (c), Fed. R. Bank. P. Further, the Court must interpret the exemption statute liberally. See In re Gagne, 166 B.R. 362, 363 3
(Bankr. D. Minn. 1993) aff'd in relevant part, Gagne v. Bergquist, 179 B.R. 884 (D. Minn. 1994). Minnesota Statutes, 550.37 PROPERTY EXEMPT states the property mentioned in this section is not liable to attachment, garnishment, or sale on any final process, issued from any court. Subdivision 24 to the statute is titled, Employee benefits (emphasis added) and describes the exempt property as: [t]he debtor's right to receive present or future payments, or payments received by the debtor, under a stock bonus, pension, profit sharing, annuity, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent of the debtor's aggregate interest under all plans and contracts up to a present value of $69,000. The trustee objects to debtor listing her 3M stock as an exempt asset on the basis the stocks are not an exempt retirement account. The trustee argues that debtor is owner of the property and that the shares are not held in a retirement plan (See Trustee s Motion, Page 2). The trustee s basis for objection to the exemption does not express the law accurately. The Debtor s stock received through her participation in the 3M GESPP is an exempt employee benefit according to the statute; and recent case law interpreting the Minnesota exemption statute further demonstrates the intent that stock received under a (technically) stock bonus-purchase employee benefit plan such as debtor s is an exempt asset. The Courts have established 4
three criteria a plan or contract must meet in order for debtor s employee benefits to qualify for the exemption under Minn. Stat. 550.37, Subd 24: (1) the debtor must have the right to receive, or have received, payments under a stock bonus, pension, profit sharing, annuity, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension or similar plan; (2) the right to receive the payments, or payments received, must be (or have been) on account of illness, disability, death, age or length of service; and (3) the debtor's aggregate interest under all such plans and contracts must have a present value of no more than $66,000 or be reasonably necessary for the debtor's support. In Re Foellmi, 473 B.R. 905, 908 (BAP 8 th Cir. 2012). Regarding the first criteria, there are no definitions of stock bonus plan or stock purchase plan within the Bankruptcy Code. But common understanding or ordinary use of these terms leads to a finding that the 3M plan is essentially a stock bonus plan, a plan clearly included within the statute. 3M employees who participate in the plan are granted, on average, 15% of each stock share purchased through the plan. That 15% amounts to a bonus; an extra amount given to a participating employee, or money or an equivalent given in addition to an employee s usual compensation. 1 If that argument is unpersuasive, in interpreting the federal exemption statute (U.S.C. 522 (d) (10) (E)), nearly identical to the Minnesota exemption statute, the U.S. Supreme Court held to be similar to an unlisted plan, a plan 1 See Merriam-Webster dictionary definition of bonus. 5
or contract must be like, though not identical to, the specific [listed] plans or contracts and consequently must share characteristics common to the listed plans or contracts. Rousey v. Jacoway, 544 U.S. 320, 329 (2005). 2 The Court in Rousey defined and analyzed various plans, specifically profit-sharing plans, which the Court defined as a system by which employees receive a share of the profits of a business enterprise. Id. Further, the Court stated a stock bonus plan is like a profit-sharing plan, except that it distributes company stock rather than cash from profits. Id. The common feature of all of these plans is that they provide income that substitutes for wages earned as salary or hourly compensation But the plans are dissimilar in other respects: Employers establish and contribute to stock bonus, profit-sharing, and pension plans or contracts, whereas an individual can establish and contribute to an annuity on terms and conditions he selects. Moreover, pension plans and annuities provide deferred payment, whereas profit-sharing or stock bonus plans may or may not provide deferred payment. And while a pension provides retirement income, none of these other plans necessarily provides retirement income. What all of these plans have in common is that they provide income that substitutes for wages. Id. (emphasis added by Court). Regardless of whether the court finds the debtor s plan to be a stock bonus plan or not, the 3M GESPP is clearly a similar plan to the plans expressed in the statute. Both the 15 % bonus and the employee contribution amount to income that substitutes for wages. Put another way, the debtor s participation in the 3M GESPP is a result from the 2 See In Re Rosen, 52 B.R. 96 (Bankr. D. Minn. 1985) (stating [b]ecause the language of the Minnesota state exemption statute and the corresponding provision of 11 U.S.C. 522(d) are virtually identical, this Court should construe both statutes consistently to achieve uniform application. In Re Bari, 43 Bankr. 253, 255 (Bankr. D. Minn. 1984) 6
debtor's decision to defer the enjoyment of earned income. 3 Differences are analogous to the acceptable differences pointed out by the U.S. Supreme Court in Rousey; the employer contributes to the plan, but only if employees participate in the plan and in some way match the employer contribution. Stock can be held until retirement, or cashed out earlier. These differences do not exclude the 3M GESPP from meeting the requirement of a similar plan. Turning to the second criteria, debtor s payments received under the 3M GESPP were on account of her length of service. 3M employees are eligible to enroll in the GESPP if they are a regular, active employee and have completed at least two months of service. Further, as expressed in Foellmi, the debtor s share of any increase in value in the benefit is directly related to the number of shares she owns, which in turn is directly related to the debtor s length of service at 3M. See Foellmi at 911. II. Trustee lacks evidence of intentional concealment in her claim debtor s initial understatement of stock value is grounds to deny GESPP stock exemption. The trustee claims that if the 3M stock purchased under debtor s GESPP is found exempt as an employment benefit, the debtor s initial understatement of the value in her Schedule B is grounds to deny the exemption under the rationale in In Re Bauer, 29 B.R. 127 (Bankr. D. Minn. 2003). The Court found in Bauer: Exemptions will not be allowed where property or its substantial value has initially been intentionally concealed from the bankruptcy court and a debtor's estate. In re Miller, 255 B.R. 221, 224 (Bankr. D. Neb. 2000). 3 See In Re Martin, 297 B.R. 750, 751 (Bankr. D. Minn. 2003). 7
Intentional concealment can be inferred from circumstances of the matter, including a non-disclosure that is the result of a reckless disregard by a debtor for the truth of the information furnished. In re Unruh, 278 B.R. 796, 803 (Bankr. D. Minn. 2002). Other than debtor s initial mistake in discovering the value of the 3M stock, review of the entire record in this proceeding will provide nothing else to suggest Ms. Bekkering intentionally concealed the value of her 3M stock. A review of the record will show that Ms. Bekkering has been otherwise honest in reporting information and has complied with all requests for information from the trustee. DOUGLAS J. MENTES, ATTORNEY AT LAW Dated: November 26, 2013. _s/douglas Mentes By: Douglas J. Mentes Attorney for the debtor 265 W. 7 th Street Suite 200 St. Paul, Minnesota 55102 651-645-3673 MN Attorney Registration # 0347735 8