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Appeals Case No.

: 09-13144-H
__________________________________________________________________

UNITED STATES COURT OF APPEALS


FOR THE ELEVENTH CIRCUIT
__________________________________________________________________

In re: Bankruptcy Case No.: 9:08-BK-11158-ALP


Chapter 7
SARAH E. BAKER
District Court Civil Case No.: 2:09 CV 238
Debtor.
____________________________

SARAH E. BAKER,

Appellant.

v.

ROBERT E. TARDIFF, JR. as Chapter 7 Trustee,

Appellee.
________________________________________/

ON APPEAL OF ORDER FROM THE UNTIED STATES DISTRICT COURT


MIDDLE DISTRICT OF FLORIDA, FORT MYERS DIVISION
__________________________________________________________________

APPELLANT’S REPLY TO APPELLEES’ BRIEF OF AMICUS CURIAE


NIXON PEABODY LLP IN SUPPORT OF APPELLEE AND FOR
AFFIRMANCE
__________________________________________________________________

Charles PT Phoenix, Esq. Phoenix Law PA


The Florida Bar No. 535591 12800 University Drive, Suite 260
Fort Myers, Florida 33907
(239) 461-0101
CPTP@corporationcounsel.com
Attorney for Appellant
Found at:
The Florida Legal Blog
{2161-2161.001 00045468.DOC;1} www.floridalegalblog.org
TABLE OF CONTENTS

TABLE OF CONTENTS ...........................................................................................2

TABLE OF AUTHORITIES .....................................................................................3

ARGUMENT .............................................................................................................4

II.  Amicus Curiae Nixon Peabody LLP grossly misportrays I.R.C. § 401(a) as
only qualifying profit-sharing plans more than one employee in the face of
numerous code provisions clearly indicating that I.R.C. § 401(a) also applies
to plans containing a single employee ............................................................. 4 
III.  Amicus Curiae Nixon Peabody LLP asserts that Debtor made arguments
Debtor did not actually assert and, worse, suggests that the lower courts
considered evidence when the record clearly does not contain an evidentiary
hearing ............................................................................................................. 6 

CONCLUSION ..........................................................................................................7

CERTIFICATE OF COMPLIANCE WITH RULE 32(a) ........................................8

CERTIFICATE OF SERVICE ..................................................................................9 

Found at:
{2161-2161.001 00045468.DOC;1}2 The Florida Legal Blog
www.floridalegalblog.org
TABLE OF AUTHORITIES

Cases

None

State Statutes

FLA. STAT. ch. 222.21 (2)(a)(1) ..............................................................................7

Federal Statutes

26 U.S.C. 401; I.R.C. §401 ........................................................................................4

26 U.S.C. 401(a); I.R.C. §401(a) ...................................................................... 4, 5, 6

26 U.S.C. 401(a)(10)(A); I.R.C. §401(a)(10)(A).......................................................4

26 U.S.C. 401(a)(35)(A); I.R.C. §401(a)(35)(A).......................................................4

26 U.S.C. 401(a)(35)(E)(iii); I.R.C. §401(a)(35)(E)(iii) ...........................................4

26 U.S.C. 401(a)(35)(E)(iv)(I); I.R.C. §401(a)(35)(E)(iv)(I) ....................................4

26 U.S.C. 401(c)(1)(A); I.R.C. §401(c)(1)(A)...........................................................5

26 U.S.C. 401(c)(3); I.R.C. §401(c)(3) ......................................................................5

26 U.S.C. 401(d); I.R.C. §401(d)...............................................................................5

Treas. Reg. Sec. 1.401(e)-1 ........................................................................................5

Found at:
{2161-2161.001 00045468.DOC;1}3 The Florida Legal Blog
www.floridalegalblog.org
ARGUMENT

I. Amicus Curiae Nixon Peabody LLP grossly misportrays I.R.C. § 401(a)


as only qualifying profit-sharing plans more than one employee in the
face of numerous code provisions clearly indicating that I.R.C. § 401(a)
also applies to plans containing a single employee.

Amicus Curiae Nixon Peabody LLP argues that I.R.C. § 401(a) does not

apply to profit-sharing plans containing only a single owner-employee, as does

Sarah Baker’s (“Debtor”) plan. Amicus Curiae Nixon Peabody LLP states that

I.R.C. § 401(a) does not allow exemption when “it is created by an employer for

the exclusive benefit of a single, self-employee employee.” (Brief of Amicus

Curiae Nixon Peabody LLP in Support of Appellee and for Affirmance p. 5). This

argument flies in the face of numerous provisions within I.R.C. § 401 that

expressly reference one-participant retirement plans and plans benefitting only an

owner-employee.

For example, I.R.C. § 401(a)(35)(A) indicates that a trust will not be

“qualified unless the plan meets [certain] diversification requirements,” but I.R.C.

§ 401(a)(35)(E)(iii) goes on to clarify that those requirements do not apply to a

“one-participant retirement plan.”1 Perhaps more forcefully, I.R.C. §

401(a)(10)(A) provides that “in the case of any plan … for employees some or all

1
I.R.C. § 401(a)(35)(E)(iv)(I) defines a “one-participant retirement plan” as “a retirement plan that on the first day
of the plan year covered only one individual … and the individual owned 100 percent of the plan sponsor (whether
or not incorporated).” Found at:
{2161-2161.001 00045468.DOC;1}4 The Florida Legal Blog
www.floridalegalblog.org
of whom are owner-employees (as defined in subsection (c)(3)2), a trust forming

part of such plan shall constitute a qualified trust under this section only if the

requirements of subsection (d) are also met” (emphasis added). I.R.C. §

401(c)(1)(A) indicates that “the term ‘employee’ includes … a self-employed

individual” and I.R.C. § 401(d) states that “a trust forming part of a pension or

profit-sharing plan … for employees some or all of whom are owner-employees

shall constitute a qualified trust” if certain conditions are met. The Internal

Revenue Service provides more clarification:

The provisions of section 401(a) relating to qualification requirements


which are generally applicable to all qualified plans … are also
generally applicable to any plan covering a self-employed individual.

Treas. Reg. Sec. 1.401(e)-1.

Quite simply, I.R.C. § 401(a) incorporates and contemplates the concept that

a single, self-employed person can be the sole participant in a qualified plan. But,

broadly, the requirement under I.R.C. § 401(a) that qualification is only available

where the plan is “for the exclusive benefit of … employees” was not meant to

limit application to plans with multiple employees, but to subsume the concept that

a plan covers a single employee. Any other interpretation would render the owner-

employee and one-participant plan provisions superfluous.

2
I.R.C. § 401(c)(3) defines an “owner-employee” as “an employee who owns the entire interest in an
unincorporated trade or business.” Found at:
{2161-2161.001 00045468.DOC;1}5 The Florida Legal Blog
www.floridalegalblog.org
II. Amicus Curiae Nixon Peabody LLP asserts that Debtor made
arguments Debtor did not actually assert and, worse, suggests that the
lower courts considered evidence when the record clearly does not
contain an evidentiary hearing.

Beginning on page 6 of the Brief of Amicus Curiae Nixon Peabody LLP in

Support of Appellee and for Affirmance, Amicus Curiae Nixon Peabody LLP

begins planting the notion that the lower courts considered evidence as to plan

operation and that Debtor argued that plan compliance was immaterial. But, the

lower courts never held an evidentiary hearing in this case. Instead, the bankruptcy

court ruled as a matter of law that Debtor’s plan and its assets were not exempt.

While Debtor contends that the lower courts erred in interpreting the applicable

exemption statute, it is indisputable that the bankruptcy court never passed on

whether Debtor’s plan complied with I.R.C. § 401(a).

Furthermore, the notion that Debtor argues that as a matter of law that a plan

need not be operationally compliant lacks substance. Debtor never made an

argument of that type and logically could not have as the bankruptcy court ruled

that, compliant or not, Debtor’s plan assets belonged to the trustee3.

3
Regardless, Debtor asserts that the plan was compliant as administered by the unrelated plan administrator and as
the plan assets were held by an independent custodian under the control of an independent trustee, none of which
was disputed by the trustee or put at issue by or before the bankruptcy court. Found at:
{2161-2161.001 00045468.DOC;1}6 The Florida Legal Blog
www.floridalegalblog.org
CONCLUSION

Wherefore, Debtor respectfully moves the court to overrule the United States

Bankruptcy Court’s Order, to rule that FLA. STAT. ch. 222.21 (2)(a)(1) provides

an exemption for Keough (HR-10) plan assets, and to declare that Debtor’s

Keough plan assets are exempt under FLA. STAT. ch. 222.21 (2)(a)(1) and not

subject to the Chapter 7 trustee’s administration.

Dated 16 October 2009

Respectfully Submitted,

/s/ Charles PT Phoenix, Esq.________


Charles PT Phoenix, Esq.
The Florida Bar No. 535591
Phoenix Law PA
12800 University Drive, Suite 260
Fort Myers, Florida 33907
(239) 461-0101
CPTP@corporationcounsel.com
Attorney for Appellant

Found at:
{2161-2161.001 00045468.DOC;1}7 The Florida Legal Blog
www.floridalegalblog.org
CERTIFICATE OF COMPLIANCE WITH RULE 32(a)

1. This brief complies with the type-volume limitation of Fed.R.App.P.32(a)(7)(B)

because this brief contains 1,174 words, excluding the parts of the brief

exempted by Def.R.App.P.32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Fed.R.App.P.32 (a) (5)

and the type style requirements of Fed.R.App.P32(a)(6) because this brief has

been prepared in a proportionally spaced typeface using Microsoft Office Word

in 14-point Times New Roman.

3. /s/ Charles PT Phoenix, Esq.________


Charles PT Phoenix
Attorney for Appellant
Dated: 16 October 2009

Found at:
{2161-2161.001 00045468.DOC;1}8 The Florida Legal Blog
www.floridalegalblog.org
CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true copy of the foregoing has been furnished by

regular U.S. Mail on this 16th day of October 2009 to the following counsel of

record:

Robert E. Tardif, Jr. Dennis P. Waggoner


Hill, Ward & Henderson, P.A.
2430 Shadowlawn Drive, Suite 18 Suite 3700 – Bank of America Plaza
Naples FL 34112 101 East Kennedy Boulevard
Tampa FL 33601
Attorney for Appellee Attorneys for Nixon Peabody LLP

/s/ Charles PT Phoenix, Esq.________


Charles PT Phoenix, Esq.
The Florida Bar No. 535591
Phoenix Law PA
12800 University Drive, Suite 260
Fort Myers, Florida 33907
(239) 461-0101
CPTP@corporationcounsel.com
Attorney for Appellant

Found at:
{2161-2161.001 00045468.DOC;1}9 The Florida Legal Blog
www.floridalegalblog.org