Your firm has been asked to represent O.J. Simpson in an
action in a federal bankruptcy court in California in which creditors are
attempting to seize assets of his profit-sharing plan. O.J. Simpson had set up a corporation (which
sponsored a profit-sharing plan) for his commercial endorsements. There is approximately four million dollars
in the plan. The senior partner at your
firm informs you that the federal statute, ERISA, generally protects profit-sharing plans from the reach of
creditors. However, because O.J. Simpson was
the sole shareholder of his corporation, the plan is not deemed to have any
employees, and consequently does not fall under the exemption provisions
(i.e., it is not exempt from creditors under ERISA).
You have been asked to find out if, after 1990, any
Federal bankruptcy court (or appellate court) in California has applied
exemptions under California law (Federal bankruptcy law allows debtors to elect
to use state exemptions under 11 U.S.C. 522(b)) to successfully block
creditors from reaching the assets of a profit-sharing plan (and specifically,
a “single-person” plan which didn't fall under ERISA).
You are reminded to search the Courts of Appeal for the Ninth Circuit, as
bankruptcy matters are often appealed to the Federal Courts of Appeal
and District Court.