                   NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                              File Name: 14a0928n.06

                                       Case No. 14-5290

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                                                                  FILED
                                                                             Dec 15, 2014
IN RE: COLLIE ALONZO LAWLESS;                      )                     DEBORAH S. HUNT, Clerk
SANDRA PURKEY LAWLESS,                             )
                                                   )
      Debtors.                                     )      ON APPEAL FROM THE UNITED
_____________________________________              )      STATES DISTRICT COURT FOR
COLLIE ALONZO LAWLESS, et al.,                     )      THE EASTERN DISTRICT OF
                                                   )      TENNESSEE
       Appellants,                                 )
                                                   )
v.                                                 )
                                                   )
JOHN P. NEWTON, JR.,                               )
                                                   )
       Appellee.                                   )


                                         OPINION

       BEFORE: SILER, SUTTON, and McKEAGUE, Circuit Judges.

       McKEAGUE, Circuit Judge. Tennessee law generally protects a debtor’s assets in a

retirement plan from his creditors. But that protection disappears when the debtor can accelerate

his plan’s payout to receive payment as a lump sum. In this Chapter 7 bankruptcy proceeding,

the bankruptcy court held that Collie Lawless could not protect his deferred-compensation assets

because of his ability to accelerate payment from the plan. We affirm.

       For over thirty-two years, Lawless has worked as an agent at Nationwide Insurance. In

1986, he executed an Agent’s Agreement with Nationwide that is still effective (in amended
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form) today. The Agreement enrolled Lawless in the Agent Security Compensation Plan, a non-

qualified deferred-compensation plan now authorized by 26 U.S.C. § 409A. Under the Plan,

Nationwide credits Lawless’s account each year with “Deferred Compensation Incentive

Credits,” which Lawless cannot access until a qualified cancellation of the Agreement (his death,

total and permanent disability, or retirement).

       Despite his stable job, Lawless’s finances were not in order. On December 27, 2010, he

and his wife filed for bankruptcy, putting their property interests into the bankruptcy estate to

distribute to creditors. 11 U.S.C. § 541(a). But to help debtors start fresh and ensure they have

the “means necessary for their subsistence,” Jones v. Williams, 32 Tenn. 105, 106 (Tenn. 1852),

Tennessee law protects certain assets through its exemptions. Tenn. Code Ann. § 26-2-112.

       During the bankruptcy proceedings, Lawless sought to protect his deferred-compensation

credits. He claimed that they constitute the “right to receive . . . a payment under a stock bonus,

pension, profitsharing, annuity, or similar plan or contract on account of death, age or length of

service” and are thus exempt. § 26-2-111(1)(D). John Newton, the Trustee, objected. Fed. R.

Bankr. P. 4003(b). The bankruptcy court sustained the objection, and the district court affirmed.

Lawless appealed. Giving fresh review to the bankruptcy court’s legal conclusions, In re AMC

Mortgage Co., Inc., 213 F.3d 917, 920 (6th Cir. 2000), we must determine whether Lawless may

exempt his deferred-compensation credits from the bankruptcy estate.

       As Newton now correctly concedes, Lawless’s deferred-compensation plan fits the

statute’s general language. It is a “pension, profitsharing, annuity, or similar plan or contract”

payable “on account of death, age or length of service.” § 26-2-111(1)(D); see Rousey v.

Jacoway, 544 U.S. 320, 326–27, 330 (2005) (holding similar plans exempt under the federal

analogue). It is thus exempt unless one of the statute’s exceptions applies. One does.



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       The statute disqualifies assets from the exemption when “the debtor may, at the debtor’s

option, accelerate payment so as to receive payment in a lump sum or in periodic payments over

a period of sixty (60) months or less.” § 26-2-111(1)(D) (emphasis added). Lawless concedes

that he could have accelerated his payments in this way. Reply Br. 4–5. In 2006, he filled out an

“Initial Election Form,” which gave him the option to choose a lump-sum payment. But he did

not pick that option, and his past choice matters. We determine exemptions as of “[t]he date of

the filing of the bankruptcy petition” (here, December 27, 2010).           Walkup v. Covington,

114 S.W.2d 45, 48 (Tenn. 1938). And we ordinarily construe a statute that uses a present-tense

verb like “may . . . accelerate” to not include past options. Carr v. United States, 560 U.S. 438,

448 (2010). It is not enough, therefore, that Lawless had the past option to accelerate payment as

a lump sum; he needed a present option as of the date of filing to accelerate in that way.

       The amended Agent’s Agreement gave him that present option. The Agreement allows

Lawless to “elect the form in which [his] payments will be made including, but not limited to, a

lump sum or as installments.” R. 1-7 at 46 (section 11(d)(3)(B)). He initially elected to receive

equal annual installment payments over ten years. Id. at 62. But he may “change [the] election

for the time or form of payment” “at any time prior to the cancellation of [his] agreement” so

long as his request is received “in writing.” Id. at 46 (section 11(d)(3)(D)). And although

previous versions of section 11(d)(3) restricted him from choosing a lump-sum payment after the

initial election, id. at 39–40 (1987 version), the 2009 amendment—which “delete[s]” the

previous versions “in [their] entirety”—makes no such restriction. Id. at 46. By implication,

Lawless had the option as of the date of filing to elect a lump-sum payment even though he did

not choose that option initially.     That option disqualifies his assets from the Tennessee




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exemption because, simply, Lawless “may . . . accelerate payment so as to receive payment in a

lump sum.” § 26-2-111(1)(D).

       The statute’s context bolsters this reading. Immediately preceding the sentence about

lump-sum payments being disqualified, the statute makes clear that a plan’s assets “are exempt

only to the extent that the debtor has no right or option to receive them except as monthly or

other periodic payments beginning at or after age fifty-eight.” Id. The converse of receiving

payments “as monthly or other periodic payments” is what the statute goes on to explicitly

disqualify: lump-sum payments. Whenever a debtor may receive a lump-sum payment as of the

date of filing, therefore, his assets enter the bankruptcy estate.

       Courts reviewing similar plans have reached a similar result. Where an employee could

receive a lump-sum payment upon retirement, for example, his assets were not exempt, even

though he “had not [yet] made an election as to a method of distribution.” In re Clark, 18 B.R.

824, 827 (Bankr. E.D. Tenn. 1982); see In re Elsea, 47 B.R. 142, 145–46 (Bankr. E.D. Tenn.

1985) (same for lump sum one year after retirement). Ditto for the debtor who could receive “a

lump sum payment . . . on the voluntary termination of his employment.” In re Cassada, 86 B.R.

541, 543 (Bankr. E.D. Tenn. 1988). And so too for Lawless, who may elect to receive his full

account balance as a lump-sum payment. His assets are not exempt.

       Against that plain reading, Lawless injects a complexity.        He argues that Internal

Revenue Code section 409A changes the case. Abiding by that section, his plan mandates that

for a change in the initial election for post-2004 assets “to become effective, [Lawless] must

submit the [written] change . . . at least twelve months before a separation from service occurs.”

R. 1-7 at 29. Then, after the year, payout on the post-2004 assets “will not commence until five

years after the distribution under the prior election would have occurred” if Lawless would



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retire. Id. (emphasis added); see 26 U.S.C. § 409A(a)(3); 26 C.F.R. § 1.409A-2(b)(1)(ii). Since

his current election’s distribution is set to occur “within 60 days following the [qualified]

cancellation,” R. 1-7 at 62, acceleration of his $86,420.21 in post-2004 credits would occur

“within 60 days” plus five years (the deferral)—or sixty-two months—following Lawless’s

retirement. Appellants’ Br. 27. So Lawless says that he may not in fact accelerate payment to

receive it “over a period of sixty (60) months or less.” § 26-2-111(1)(D).

       True, but that complexity does not change our conclusion. Because Lawless had the

option on the date of filing to elect a lump-sum payment, his assets are unqualified for the

exemption—even though the lump-sum payment would not occur until over five years after

retirement. Recall that the acceleration exception disqualifies assets that

       the debtor may, at the debtor’s option, accelerate payment [on] so as to receive
       payment in a lump sum or in periodic payments over a period of sixty (60)
       months or less.

§ 26-2-111(1)(D). Lawless’s argument turns on what the phrase “period of sixty (60) months or

less” modifies. He says it modifies either form of payment—periodic or lump sum—such that a

lump-sum payment received six years after retirement would fall outside of the exception.

       But that reading distorts the statute’s plain language. Naturally read, the period of sixty

months or less modifies only “periodic payments,” not “a lump sum.” Id. For we don’t naturally

speak of receiving payment in “a lump sum . . . over a period” of time. Rather, a lump sum

inherently comes at one time—not over “a period.” A lump-sum payment received at any

time—even five years and a day after retirement—thus fits within the statute’s language.

       His reading also neglects the statute’s structure. The specific exception for “periodic

payments” disqualifies assets that can be received over a period of sixty months or less

independent of assets that can be received as a lump-sum payment. And a third part of the



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statute’s acceleration exception separately disqualifies assets that the debtor may access before

“age fifty-eight.” Id. According to the only Tennessee appellate court to review the issue, these

three parts show that the legislature “intended to limit the exemption to retirement plans that

cannot . . . be accessed by the debtor before 58-years of age, as a lump sum, or accelerated such

that payments may be received over a period of 60 months or fewer.” Massey v. Casals, No.

W2010-00284-COA-R3-JV, 2011 WL 1734066, at *9 (Tenn. Ct. App. May 3, 2011). In all,

then, the acceleration exception disqualifies three independent types of acceleration: (1) payment

before fifty-eight; (2) payment as a lump sum; and (3) payment as periodic payments over a

period of sixty months or less. Lawless at least meets one type of acceleration: payment as a

lump sum.

       Because the “plain language of the provision read in the context of the entire statutory

scheme . . . yield[s] a clear interpretation,” “we must conclude our inquiry there.” Storey v.

Bradford Furniture Co., 910 S.W.2d 857, 859 (Tenn. 1995). Lawless’s plan gives him the

present option to “accelerate payment so as to receive payment in a lump sum.” § 26-2-

111(1)(D). His assets accordingly fall within the acceleration exception; the bankruptcy court

correctly ruled that they are not exempt.

       For these reasons, we affirm.




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