                            In the

United States Court of Appeals
              For the Seventh Circuit

No. 08-2885

IN RE:
  B ARRY G. R ADCLIFFE,
                                                 Debtor-Appellee.
A PPEAL OF:

   INTERNATIONAL P AINTERS AND A LLIED
   T RADES INDUSTRY P ENSION F UND


             Appeal from the United States District Court
      for the Northern District of Indiana, Hammond Division.
               No. 07 C 285—Philip P. Simon, Judge.



    A RGUED F EBRUARY 13, 2009—D ECIDED A PRIL 23, 2009




 Before K ANNE, R OVNER, and E VANS, Circuit Judges.
  E VANS, Circuit Judge. This is an appeal from an order
of the district court, in turn affirming a judgment of
the bankruptcy court in an adversary proceeding.
  Barry G. Radcliffe owned a company called Glass
Service, Inc. As part of a labor agreement the company
contributed to the International Painters and Allied
Trades Industry Pension Fund. When the company’s
payments became delinquent, Radcliffe signed a personal
2                                                No. 08-2885

guarantee to pay the contributions, but he failed to do so.
The Fund sued for breach of contract and obtained a
default judgment against him. He declared bankruptcy,
but not before requesting his own pension benefits from
the Fund. The Fund agreed that he was entitled to
benefits but told him that it would withhold payment
and apply the amounts withheld to his debt arising
from the default judgment.
   Radcliffe informed the Fund of his belief that the “setoff”
violated the automatic stay that took effect when he
filed for bankruptcy (see 11 U.S.C. § 362). The Fund,
nevertheless, withheld payment. Radcliffe filed this
adversary action to enforce the stay and he prevailed in
the bankruptcy court. International was ordered to pay
compensatory damages, interest, punitive damages, and
attorney fees. In a decision with considerable flair,1 the
district court affirmed. We commend both the bank-
ruptcy and the district courts for the clarity of their dis-
cussion of these issues. And we agree with them even
though we are somewhat uneasy with the end result
which gives a seemingly undeserved windfall to
Mr. Radcliffe.
  It is not hard to guess that this situation presents a
thicket of legal issues in which, if one is not careful, it



1
  The district judge (the Honorable Philip P. Simon) set the
stage in the first paragraph of his 28-page decision by noting
(correctly, we think) that Radcliffe was a four-flusher who
“didn’t stand behind his personal guaranty and so he stiffed
the fund.”
No. 08-2885                                                  3

would be possible to get hopelessly tangled. For that
reason, we ignore side issues, such as standing (Radcliffe
has standing) and mutuality (a concept thrown about
but never really grounded in the case), and address
what we see to be the dispositive issues before us.
   The first issue is whether the setoff (or freeze on pay-
ments as the Fund terms it) violates the automatic stay
under 11 U.S.C. § 362(a)(6). If it does, the second issue
is whether the stay should have been lifted to allow the
setoff. Involved in that issue is whether the setoff
violates the anti-alienation provisions of the Employee
Retirement Income Security Act (ERISA), 29 U.S.C.
§ 1056(d)(1). If it does, there would be no reason to
lift the stay. On then to the first issue.
   Immediately upon the filing of a bankruptcy petition,
§ 362 of the bankruptcy code provides for an automatic
stay of efforts outside the bankruptcy proceeding to
collect debts from the bankrupt debtor. Aiello v. Providian
Fin. Corp., 239 F.3d 876 (7th Cir. 2001). Bringing all debts
within the jurisdiction of the bankruptcy court allows
for the orderly distribution of assets. Holtkamp v. Little-
field (In re Holtkamp), 669 F.2d 505 (7th Cir. 1982). The
stay prevents pre-petition creditors from taking any
action to collect their debts. In re Vitreous Steel Prods. Co.,
911 F.2d 1223 (7th Cir. 1990). But in cases where the
stay will simply delay the inevitable—that is, the creditor
will be allowed at some point to collect his debt—
the bankruptcy code in § 362(d) permits relief from the
automatic stay on “the request of a party in interest
after notice and a hearing . . . .”
4                                                No. 08-2885

  The district court found that the Fund’s conduct vio-
lated the provision of the stay found in § 362(a)(6), which
prohibits “any act to collect, assess, or recover a claim
against the debtor that arose before the commencement”
of the case. The prohibition includes threats of immedi-
ate action by creditors. Matter of Duke, 79 F.3d 43 (7th
Cir. 1996). What the Fund did here which, in the district
court’s view, violated the stay was to inform Radcliffe
by letter that his “monthly pension benefits will be
offset against [his] debt to the Pension Fund until such
time as the judgment has been satisfied.”
  The Fund claims that the pension benefits were not
property of the estate and therefore the offset was proper.
It argues that the letter it sent to Radcliffe was not in
violation of § 362(a)(6) because it was not coercive or
harassing. Relying primarily on Citizens Bank of Mary-
land v. Strumpf, 516 U.S. 16 (1995), the Fund says that
nothing prohibits it from freezing payments until the
validity of the offset is determined.
  The situation here differs in at least two material respects
from Strumpf. First, in Strumpf there was an undeniable
right to a setoff. The bank had a right under Maryland
law to set off a defaulted loan against Strumpf’s
checking account balance. The Court pointed out that,
under section 553(a) of the bankruptcy code, “whatever
right of setoff otherwise exists is preserved in bank-
ruptcy.” Here, as we shall soon see, there was no right to
a setoff. Secondly, in Strumpf, even though, except for
the stay, the bank had a clear right to a setoff, it merely
placed an administrative hold on the checking account
No. 08-2885                                                5

until it could seek relief from the automatic stay, which
it in fact sought five days later. The Court found that there
was no violation of the stay because the action the
bank took was not a setoff at all. The bank was holding
the payment only for a brief period of time while it
sought relief from the stay. It did not “purport perma-
nently to reduce respondent’s account balance by the
amount of the defaulted loan.”
  In our case, the Fund did not move for relief from
the stay until six months had passed. It had requested
that the stay be modified in its answer to Radcliffe’s
complaint, but even this came two months after the
Fund’s letter to Radcliffe stating its intention to with-
hold payment and well after the first payment was, in
fact, withheld. The bankruptcy court found that the
Fund’s request in its answer to the complaint was not
sufficient to modify the stay, especially since no affirma-
tion action was requested at the time regarding any
right to a setoff. The bankruptcy court found even the
ultimate motion for relief from the stay to be “woefully
inadequate under the requirements of Fed.R.Bank.P.
9013,” and it was filed only after the court required it. The
Fund went far beyond placing a temporary hold on the
benefits so that it could promptly seek relief from the
stay. Rather, it refused to pay the pension and did
nothing about the stay until urged to do so by the court.
The Fund’s comparison of its situation to Strumpf is way
off the mark.
  Furthermore, the Fund’s letter to Radcliffe is in viola-
tion of § 362(a)(6). As the district court correctly noted,
6                                               No. 08-2885

the Fund held all the cards. Without seeking court ap-
proval, it simply made a unilateral decision not to pay
the pension benefits. It informed Radcliffe that it did not
need court approval because it did not believe the bank-
ruptcy law applied to it. We discern no abuse of discre-
tion in the decision that the Fund violated the auto-
matic stay.
  But because damages are only available for a willful
violation, see section 362(h) of the code, the question
remains as to whether the Fund acted willfully. We
think it’s clear that it did. A willful violation does not
require specific intent to violate the stay; it is sufficient
that the creditor takes questionable action despite the
awareness of a pending bankruptcy proceeding. Price v.
United States (In re Price), 42 F.3d 1068 (7th Cir. 1994). It
is indisputable that the Fund acted with knowledge
of the bankruptcy proceeding. Its letter to Radcliffe an-
nouncing that it would offset the debt against the
pension payments explicitly stated, “We have received
notice that you filed a Chapter 7 bankruptcy petition on
October 13, 2005.”
  The next and more complex issue is whether the stay
should have been lifted. Resolution of the issue takes us
to ERISA’s anti-alienation provisions. ERISA is, of course,
designed among other things to safeguard employment
benefits. Boggs v. Boggs, 520 U.S. 833 (1997). One of the
ways it protects benefits is through an anti-alienation
provision which states simply that “[e]ach pension plan
shall provide that benefits provided under the plan may
not be assigned or alienated.” 29 U.S.C. § 1056(d)(1). The
No. 08-2885                                                  7

anti-alienation language removes Radcliffe’s pension
benefits from the bankruptcy estate. See Patterson v.
Shumate, 504 U.S. 753 (1992); In re Baker, 114 F.3d 636
(7th Cir. 1997).
  Despite this provision, there are certain exemptions
from the ban on alienation. Section 1056(d)(4) says that
the ban on alienation does not apply if
    (A) the order or requirement to pay arises—
        (i) under a judgment of conviction for a crime
        involving such plan,
              [or]
        (ii) under a civil judgment . . . entered by a court in
        an action brought in connection with a violation (or
        alleged violation) of part 4 of this subtitle
              ....
              [and]
    (B) the judgment, order, decree, or settlement agree-
    ment expressly provides for the offset of all or part
    of the amount ordered or required to be paid to the
    plan against the participant’s benefits provided
    under the plan . . . .
However, these exemptions do not apply to the Fund’s
actions. There is no criminal activity here, and the only
civil judgment involves a straightforward breach of
contract, not a breach of a fiduciary duty—i.e., a violation
of part 4 of the subtitle.
  Nevertheless, the Fund says it did not violate the anti-
alienation provisions. First, citing Coar v. Kazimir, 990
8                                               No. 08-2885

F.2d 1413 (3rd Cir. 1993), it argues that the anti-alienation
provisions apply only when a third party is involved,
and there is no third party here. It is true that in Coar the
court said “we read section 206(d)(1) and, by extension
Guidry [v. Sheet Metal Workers Nat’l Pension Fund, 493
U.S. 365 (1990)], as shielding only the beneficiaries’
interest under the pension plan from third-party credi-
tors.” At 1420-21. However, the context of the statement
is that trustees must “undo any harm they have done to
the pension plan . . . .” At 1420. In other words, the
court was considering the anti-alienation provisions in
the context of fiduciaries. As we have said, there is no
claim in the present case of any fiduciary duty.
  In a similar vein, the Fund argues that our decision in
Northcutt v. General Motors Hourly-Rate Employees Pension
Plan, 467 F.3d 1031 (7th Cir. 2006), allows a setoff for
contractual remedies due a plan. The case is not on point.
In Northcutt the plan was using the offset to recover
overpayments to a beneficiary. The plan had originally
paid disability benefits to the beneficiary, who then
obtained social security disability benefits. The plan
required that, in such a situation, the beneficiary repay
the benefits the plan paid, which duplicate the social
security benefits. The plan had the right to recover
the overpayment by withholding future payments.
Here, of course, because no payments were ever made
to Radcliffe, there were no overpayments to recoup.
  The Fund also cites a recent Supreme Court case—
Kennedy v. Plan Administrator for DuPont Savings and
Investment Plan, 129 S. Ct. 865 (2009)—and claims it sup-
No. 08-2885                                              9

ports the offset. The Fund says that Kennedy “holds that
the anti-alienation clause in ERISA is similar to a spend-
thrift clause in a traditional trust and looks to the com-
mon law of trusts to interpret the scope of the anti-alien-
ation rule in ERISA in that context . . . .”
   We are at a loss to know how the Fund thinks that
Kennedy is helpful to its position. Kennedy involves a suit
by the estate of a plan participant against the plan ad-
ministrator seeking to recover benefits for the estate. The
participant, whose wife was the beneficiary during their
marriage, did not, upon their divorce, designate a new
beneficiary for a savings and investment plan. The plan
administrator paid the benefits to the then-ex-wife in
accordance with designations of beneficiary. In the suit
by the estate to claim the benefits, one of the issues
was whether the divorce constituted a common law
waiver of benefits. The Court found that the waiver
was valid; that—as in the common law of spendthrift
trusts—a beneficiary can waive her interest in the bene-
fits. But the divorce decree was not a qualified domestic
relations order (QDROs are given special considera-
tion under the statute), and thus there was no designation
of an alternate payee. The Court declined to say that a
waiver—by itself without a designation of an alternate
payee—forfeits a beneficial interest and sends it to the
next in line (in that case, the estate). So the Court con-
cluded that, while the ex-wife’s waiver was valid, it
did not carry the day for the estate: the fact that the
waiver escaped “inevitable nullity under the express
terms of the antialienation clause” did not control the
decision. At 874. Despite the waiver, the plan admin-
10                                              No. 08-2885

istrator was required to do its “statutory ERISA duty”
and pay the benefits to the ex-wife. As relevant to our
case, the Court emphasized that plan administrators are
obligated to act in accordance with plan documents
when those documents are consistent with the statute.
What the Court was after was simplicity in the admin-
istration of plans so that beneficiaries could “get what’s
coming quickly, without the folderol essential under less-
certain rules.” At 875-76 (quoting Fox Valley & Vicinity
Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 283
(7th Cir. 1990)). The point was to prevent plan admin-
istrators from having to examine a “multitude of external
documents” before paying benefits. At 876.
  In the present case, the Fund documents indicate that
Radcliffe is the beneficiary. Under Kennedy, the admin-
istrator is obligated to pay the benefits in conformity
with plan documents without resort to external docu-
ments, in this case a judgment on a contract which falls
far short of establishing the right to a setoff, even if the
added complication of bankruptcy were not involved.
In short, the bankruptcy judge was well within his dis-
cretion in refusing to lift the stay. To act otherwise
would have been an exercise in futility.
  The Fund also disputes the bankruptcy court’s calcula-
tion of compensatory damages for pre-petition pension
benefits, the award of punitive damages, and the
interest rate applied to the damage award.
  The pre-petition pension payments made in Septem-
ber and October 2005, the Fund argues, would, if they
had been paid, be property of the estate, and the debtor
No. 08-2885                                             11

cannot compel the Fund to make payments to him of
property belonging to the estate. This strikes us as a
stunningly bold argument coming from the entity which
improperly failed to make the payments in the first
place. And it is an argument we reject. The Fund relies on
Morlan v. Universal Guaranty Life Insurance Company, 298
F.3d 609, 616 (7th Cir. 2002), and quotes as follows: the
bankruptcy filing “lost the [pre-petition] chunk of [plain-
tiff’s] ERISA claim . . .; it fell into the estate in bank-
ruptcy.” (The Fund added the ellipsis and the brackets.)
The Fund implies that Morlan says all pre-petition ERISA
claims are part of a bankruptcy estate. There is no such
implication in the case. The Morlan quotation without
the ellipsis makes clear that what fell into the bank-
ruptcy estate was the ERISA claim “that we are con-
cerned with in this part of the opinion.” That “part of the
opinion” dealt with welfare benefits, not pension bene-
fits. We said that some welfare benefits, unlike
pension benefits, could be assignable to the bankruptcy
estate. In the present case, of course, we are concerned
only with pension benefits, not welfare benefits. The
Fund’s underhanded use of ellipsis to hide what the
court was talking about, at best, undermines its argu-
ment; the Fund is not entitled to the line-item veto.
Also, the Fund relies on Kokoszka v. Belford, 417 U.S. 642
(1974), for the proposition that a “right to a refund is
therefore property of the estate.” Kokoszka, however,
dealt not with pension benefits, but with an income tax
refund. Use of that case in this context is also disingenu-
ous.
  As to the interest rate applied and the award of puni-
tive damages, we agree entirely with the district court.
12                                              No. 08-2885

 Accordingly, the judgment of the district court is AFFIRMED.




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