MI Appellate Court Throws Out 401(k) Distribution Injunction

The Michigan Court of Appeals threw out a preliminary injunction against James A. DeHaan that had been put in place by a lower court, ruling that the trial judge’s action violated the anti-alienation provisions of the Employee Retirement Income Security Act (ERISA). The appeals court said the injunction violated ERISA’s anti-alienation provision by requiring that DeHaan give H.S.Die & Engineering of Grand Rapids, Michigan, 30 days written notice before taking a distribution of his plan account.

Moreover, the appeals court said the injunction violated DeHaan’s rights under ERISA by requiring him to direct the plan administrator to transfer any rollover IRA distribution to a financial institution selected by H.S. Die.

H.S. Die had requested the injunction after discovering what it said was DeHaan’s scheme to order supplies for H.S. Die in the name of DeHaan’s own company and other vendors. The scheme would then call for DeHaan to provide no goods to H.S. Die even though he was charging inflated prices and then would turn around and pay the vendors at reduced prices, according to H.S Die’s allegation.

The court opinion said another H.S. Die vendor sued DeHaan and his company for its losses, prompting DeHaan to request a 401(k) distribution.   That, in turn, caused H.S. Die to sue DeHaan, seeking the injunction.

As entered, the trial court’s injunction prohibited DeHaan from accessing his plan account and directed that if he were to roll over his benefits to an individual retirement account, the IRA would need to be set up at a financial institution selected by the company that obtained the injunction.

DeHaan appealed, arguing that the trial court’s injunction impermissibly interfered with his rights as a plan participant under ERISA.

The appellate ruling in Self-Lube Inc. v. JJMT Inc.,Mich. Ct. App., No. 261743, 3/25/08 is available here .