                                                                         FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                   August 3, 2010
                    UNITED STATES COURT OF APPEALS
                                                 Elisabeth A. Shumaker
                                                                    Clerk of Court
                                 TENTH CIRCUIT



 TINA GARCIA,

               Plaintiff - Appellee,                     No. 09-1109
          v.                                             (D. Colorado)
 BERKSHIRE LIFE INSURANCE                    (D.C. No. 04-CV-01619-LTB-BNB)
 COMPANY, a wholly-owned
 subsidiary of The Guardian Life
 Insurance Company of America; THE
 GUARDIAN LIFE INSURANCE
 COMPANY OF AMERICA, a foreign
 insurance company,

               Defendants - Appellants.


                            ORDER AND JUDGMENT *


Before HARTZ, ANDERSON, and BRORBY, Circuit Judges.



      After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist in the determination

of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.


      *
        This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
      Defendant and appellant Berkshire Life Insurance Company (“Berkshire”)

appeals the denial of its motion for attorneys’ fees and a set-off of the cost

judgment it had been awarded against disability payments it owed to the plaintiff

and appellee, Tina Garcia. Ms. Garcia’s attorney withdrew as counsel during the

pendency of this appeal, and Ms. Garcia therefore proceeds pro se. She has not

filed an appellate brief. We reverse and remand.



                                  BACKGROUND

      In 1991, Ms. Garcia purchased a disability policy from Berkshire, under

which she would receive benefits if “due to injury or sickness [she was] unable to

perform the material and substantial duties of [her own] occupation,” and she was

“not engaged in any occupation in which [she] might reasonably be expected to

engage with due regard for [her] education, training, experience, and prior

economic status.” Garcia v. Berkshire Life Ins. Co., 569 F.3d 1174 (2009)

(“Garcia I”) (quoting the record in that case). 1 In 1998, Ms. Garcia filed for

benefits under the policy, and Berkshire eventually paid full benefits through

August 6, 2003. At that date, Berkshire suspended payment of benefits, claiming

that Ms. Garcia had failed to comply with certain provisions of her policy.


      1
       This matter was before our court previously, when we affirmed the
dismissal of Ms. Garcia’s underlying lawsuit claiming Berkshire denied her
benefits in bad faith, as a sanction for Ms. Garcia’s abusive litigation practices.
We discuss the procedural history further, infra.

                                          -2-
Berkshire eventually approved Ms. Garcia’s claim for total disability benefits as

of February 1, 2007. It refused, however, to pay benefits for the period between

August 2003 and February 2007, “primarily because of Ms. Garcia’s alleged

failure to comply with critical policy provisions.” Id. at 1177. 2

      During this period of dispute, Ms. Garcia filed an action against Berkshire,

claiming it was denying her benefits in bad faith and in violation of the Colorado

Consumer Protection Act, Colo. Rev. Stat. § 6-1-101 et. seq. Both sides

eventually filed motions for summary judgment, and Berkshire filed an additional

motion for sanctions, claiming that Ms. Garcia had falsified or fabricated at least

four discovery documents. The magistrate judge to whom the matter was referred

concluded that Ms. Garcia had, indeed, prepared fabricated evidence, and

recommended that Berkshire’s motion for sanctions be granted and that

Ms. Garcia’s claims be dismissed with prejudice. The district court adopted the

magistrate judge’s recommendation in full, and granted Berkshire’s motion for

sanctions. Separately, “the district court granted Berkshire’s motion for summary

judgment on the merits, largely premised on the conclusion that Ms. Garcia did

not comply with the proof of loss requirements in her policy, and that therefore

Berkshire did not breach the insurance policy as a matter of law.” Garcia I, 569

F.3d at 1179.

      2
       Further details concerning this initial litigation between Ms. Garcia and
Berkshire may be obtained from our prior opinion. We only cite those facts
relevant to the precise issue before our court in this appeal.

                                          -3-
      Ms. Garcia appealed those rulings to our court, which affirmed the sanction

of dismissal and did not reach the merits of the summary judgment issues. See

Garcia I. We remanded the case for the limited purpose of determining whether

Ms. Garcia falsified additional documents during the appeal, and, if so,

determining the amount of a reasonable attorneys’ fee award. We retained

jurisdiction over that appeal, however, “for the purpose of determining whether to

impose sanctions on appeal.” Garcia I, 569 F.3d at 1183.

      Meanwhile, while that prior appeal was ongoing, Berkshire filed a motion

in the district court seeking attorneys’ fees and a set-off of the cost judgment it

had been awarded against Ms. Garcia’s disability payments. The district court

summarily denied the motion, without explanation. Berkshire now appeals that

denial.



                                   DISCUSSION

      At the time this appeal was filed, Berkshire was paying Ms. Garcia $5530

per month. 3 The district court entered a cost judgment against Ms. Garcia for

$15,986.23. Berkshire claims that “[s]ubject to maximum limits for statutory

exemptions, Berkshire is entitled to offset from any future obligations for Garcia

the amount of the cost judgment and any subsequent attorneys’ fees or appellate

      3
        In its motion before the district court, Berkshire opined that those
disability payments were “upon information and belief” Ms. Garcia’s primary
asset.

                                          -4-
costs awarded by the Court in the present appeal or in Case No 08-1022 [the other

appeal still pending in our court].” Appellant’s Br. at 4-5.

      Berkshire essentially relies upon one Colorado case, as well as two

particular Colorado statutes, to resolve this matter of Colorado law. Berkshire

cites Finance Acceptance Co. v. Breaux, 419 P.2d 955 (Colo. 1966), for the

proposition that “the state Supreme Court has ruled that an employer may set off

amounts owed under a promissory note given by its former employee, from the

amount of wages still to be paid, up to the statutory exemption limit.”

Appellant’s Br. at 5.

      It also relies upon two Colorado statues relating to exempt property and

exemption from garnishment. The first statute, Colo. Rev. Stat.

§ 13-54-102(1)(v), exempts “[a]ny claim for public or private disability benefits

due, or any proceeds thereof, not otherwise provided for under law, up to three

thousand dollars per month. Any claim or proceeds in excess of this amount shall

be subject to garnishment in accordance with section 13-54-104.” Colo. Rev.

Stat. § 13-54-104, in turn, states that the maximum amount of “earnings” of an

individual that may be subject to garnishment or levy are “[t]wenty-five percent

of the individual’s disposable earnings for that week; or . . . [t]he amount by

which the individual’s disposable earnings . . . exceed thirty times the federal

minimum hourly wage. . .; or . . . the amount by which the individual’s disposable

earnings . . . exceed thirty times the state minimum hourly wage . . .” Id.

                                         -5-
(2)(a)(I)(A), (B), (C). “Earnings” includes “[f]unds held in or payable from any

. . . disability insurance.” Id. (1)(b)(I)(B). Thus, Berkshire argues that after

deducting $3000 from the monthly payment stipulated in the disability policy, the

remaining $2530 would be subject to garnishment. But, Berkshire would only be

entitled to withhold up to twenty-five percent of $2530 from each payment made,

until all judgments are repaid. While Berkshire argues that Ms. Garcia conceded

this point in her response brief filed before the district court, in fact she did no

such thing. She argued “Berkshire’s attempt to offset monthly disability benefits

should be denied as a matter of law.” Plaintiff’s Reply to Def.’s Mot. for Award

of Attorneys’ Fees and Mot. for Setoff Against Disability Payments at 43,

Appellant’s App. at 223.

      Because Berkshire relies upon Finance Acceptance Co., we consider

whether it stands for the proposition Berkshire claims it does. In that case,

Joseph Breaux had been a long-time employee of Finance Acceptance Co. When

his employment was terminated in November 1962, Mr. Breaux owed Finance

Acceptance nearly $10,000, evidenced by two promissory notes. Finance

Acceptance, in turn, owed Mr. Breaux $617.91 as wages due for overtime work,

as well as $437.04, which represented Mr. Breaux’s interest in a retirement plan

operated by Finance Acceptance for its employees. Thus, the trial court found

that Mr. Breaux owed Finance Acceptance $9,652.36, and Finance Acceptance

owed him $617.91 in unpaid wages.

                                           -6-
      Mr. Breaux “claimed that 70% of his wage claim was exempt from levy

under C.R.S. 77-2-4 [the predecessor to § 13-54-102] and that, being exempt from

levy, it was by the same token also exempt from being in any matter set-off

against his indebtedness to plaintiff.” Finance Acceptance Co., 419 P.2d at 956.

The trial court agreed and set-off only 30% of the total claim for unpaid wages.

The trial court held that none of the money owed Mr. Breaux from his payments

into the retirement fund could be set-off.

      On appeal, the Colorado Supreme Court noted that there were no Colorado

cases directly on point on the question of “whether property which by statute is

exempt from levy under execution, attachment or garnishment is also exempt

from the law of set-off.” Id. at 957. The Court observed that “[t]he decided

weight of authority . . . from other jurisdictions is that such exempt property is

not subject to being set-off against any indebtedness on the part of the employee

to his employer.” Thus, the Court concluded that “the trial court did not err in

refusing to set-off against the defendants’ admitted indebtedness to the plaintiff

70% of Joseph Breaux’s claim against plaintiff for unpaid wages.” Id. at 958.

      On the other hand, the Court held that the entire amount of Mr. Breaux’s

claim for the return of pension funds paid into the retirement plan was subject to

set-off. These monies were not considered “earnings,” but, rather, were paid

pursuant to a contract and therefore, because they were not statutorily exempt,

they were subject to being set-off.

                                         -7-
      In sum, this case supports Berkshire’s argument that Ms. Garcia’s disability

payments (“earnings” under the relevant statutes) can be set-off up to the

statutory exemption levels. We thus agree that Berkshire is entitled to withhold

up to twenty-five percent of $2530 (i.e., approximately $600) from each payment

it makes, until the entire judgment owed by Ms. Garcia to Berkshire is fully paid.

      For the foregoing reasons, we reverse the district court’s decision and

remand this case for further proceedings consistent herewith.



                                  CONCLUSION

      The district court’s decision is REVERSED and we REMAND this matter

to the district court for further proceedings consistent with our decision.

                                               ENTERED FOR THE COURT


                                               Stephen H. Anderson
                                               Circuit Judge




                                         -8-
