Petition for Writ of Certiorari — Michael A. Kennedy, Petitioner v. Michigan State Treasurer

UNITED STATES

IN THE SUPREME COURT

MICHIGAN STATE TREASURER,

Respondent,

USSC No. NEW FILING

Michigan Supreme Court No. 157122

-vMichigan Court of Appeals No. 336202

MICHAEL A. KENNEDY,

Petitioner.

Trial Court No. 16-105227-CZ

I

PETITION FOR WRIT OF CERTIORARI

NOW COMES Petitioner, in Pro Personam, and submits this Petition

for consideration by the United States Supreme Court to grant a Writ of

Certiorari.

Submitted by:

Michael A. Kennedy (No. 972647)

Central Michigan Correctional Facility

320 N. Hubbard

Saint Louis, Ml 48880

TABLE OF CONTENTS

Table of Contents

II

Question Presented

III

List of Parties

iv

Index of Appendices

V

Table of Authorities

vi

Opinions Below

VIII

Statement of Jurisdiction

ix

Constitutional Issues Involved

x

Statement of the Case

I

Background

1

Timeline

I

Lien Priority Discussion

3

Conclusion

Relief Requested

QUESTION PRESENTED

I: DID MICHIGAN'S EMMET COUNTY CIRCUIT COURT ("TRIAL COURT")

VIOLATE ARTICLE VI CLAUSE 2 OF THE UNITED STATES CONSTITUTION BY

FAILING TO RULE THAT THE UNITED STATES' CRIMINAL RESTITUTION LIEN ON

PETITIONER'S PENSION WAS SUPERIOR TO MICHIGAN'S STATE CORRECTION

FACILITY REIMBURSEMENT ACT'S LIEN ON THE SAME PENSION?

Petitioner says "Yes".

The Michigan Trial Court says "No" but "Maybe".

The Michigan Court of Appeals says "No".

The Michigan Supreme Court says "No".

LIST OF PARTIES

This action involves the following two parties:

Petitioner: Michael A. Kennedy

Respondent: The State of Michigan

(JP Morgan Chase Bank and the Michigan Office of Retirement Services are no

longer parties. They were only named, initially, as receiverships of Petitioner's pension

by the Trial Court and have since been dismissed because their receiverships have

ended.)

iv

INDEX OF APPENDECIES

Michigan Court of Appeals Order, January 9, 2018

Michigan Supreme Court Order, July 3, 2018

U.S. Judgment in a Criminal Case (Sentencing), April 11, 2016

State Judgment of Sentence, February 22, 2016

U.S. Writ of Continuing Garnishment, June 6, 2016

State Final SCFRA Order, November 18, 2016

U.S. District Judge Neff's Order (Re: Lien Priority), August 10, 2016

State Opinion and Order Denying Motion for Reconsideration, December 8, 2016

Petitioner's Motion to Trial Court for Reconsideration

V

TABLE OF AUTHORITIES

Cases

Page

Caterpillar Inc. v. Williams, 482 U.S. 386; 107 S.Ct. 2425; 96 L.Ed2d

318 (1987)

5

Ponzi v. Freesenden, 258 U.S. 254; 42 S.Ct. 309; 66 L.Ed 607 (1922)

1

Printz v. United States, 521 U.S. 898; 1175 S.Ct. 2365; 138 L.Ed2d

914 (1997)

9

Quwi-El Bay v. Probate Court, 2012 U.S. Dist. LEXIS 111193 (ED Mich

August 8, 2012)

5

Richmond v. Daimler Chrys/er,2000 U.S. Dist. LEXIS 583 (ED Mich

January 13, 2000)

5

State Treasurer v. Bences, 318 Mich. App. 146; 896 NW2d 93 (2016)

4 n.1

State Treasurer v. Lacrosse, 203 U.S. Dist. LEXIS 104667 (ED Mich

July 26, 2013)

5

United States v. First National Bank and Trust Co., 386 F.2d 646 (1967) 8

United States v. Ford, 857 F.Supp2d 660 (2012)

4

United States v. Mason, 2012 U.S. Dist. LEXIS 7980 (D VT 2012)

1

United States v. McDermitt, 507 U.S. 497; 123 S.Ct. 1526; 123 L.Ed2d

128 (1993)

8

United States v. New Britain, 347 U.S. 81; 74 S.Ct. 367 (1954)

4,9

United States v. Vermont, 377 U.S. 351; 84 S.Ct. 1267; 12 L.Ed2d

370 (1964)

8

Constitution, Statutes and Court Rules

United States Constitution Article VI, Cl. 2

9

MCL 570.1117

4 n.1

MCL 600.5803

0

vi

4 n.1

MCL800.401

1,3

MCL 800.404

5

15USC1673

7n.3

1, 2, 3, 4, 4 n.1, 7, 8

18USC3613

28USC1441

5

28USC1442

5

Im

OPINIONS BELOW

State Trial Court Opinion: November 18, 2016: The Emmet County Circuit

Court held that the State's SCFRA lien was superior to the earlier Federal restitution lien

of April 11, 2016. (Appendix 6).

Michigan Court of Appeals in Docket No. 336202: January 9, 2018: The

Michigan Court of Appeals in an unpublished opinion upheld the decision of the Emmet

County Circuit Court. (Appendix I).

Michigan Supreme Court Decision in Docket No. 157122: July 3, 2018:

The Michigan Supreme Court denied the appeal and upheld the decision of the lower

courts. (Appendix 2).

Viii

STATEMENT OF JURISDICTION

The Petitioner was denied leave to appeal by the Michigan Supreme Court on

July 3, 2018. The Petitioner makes this Petition within 90 days of the entry of said

Order from the Michigan Supreme Court.

The Petitioner asserts that jurisdiction is proper in the United States Supreme

Court as his Petition is timely and raises a significant issue relating to Article VI, Cl. 2, of

the United States Constitution.

This case affects all State (Michigan)

-

ix

Federal prisoners.

CONSTITUTIONAL ISSUE PRESENTED

The Petitioner's petition involves the proper interplay between Federal and State

liens. Specifically, this petition involves the Supremacy Clause of Article VI, Cl. 2, of the

United States' Constitution because the State of Michigan has failed to recognize that a

valid United States restitution lien takes priority over Michigan's State Correctional

Facility Reimbursement Act (SCFRA) lien. Petitioner believes that state courts,

including the Michigan Court of Appeals and the Michigan Supreme Court, will continue

to violate the tents of Article VI, Cl. 2, unless this Court grants Petitioner a Writ of

Certiorari.

x

STATEMENT OF THE CASE

Background: Petitioner has been prosecuted for the same event by both the

United States (Appendix 3) and the State of Michigan (Appendix 4). Subsequently, the

two sovereigns seek to control Petitioner's pension to either (1) collect restitution for

Petitioner's victims by liening and garnishing Petitioner's pension (U.S.) or collect

reimbursement for Michigan's costs of incarcerating Petitioner by seizing 90% of

Petitioner's pension by a SCFRA civil suit (Michigan).

Courts have long recognized that problems may arise in executing state and

federal sentences on a single defendant. United States v. Mason, 2012 U.S. Dist.

LEXIS 70980 (D VT 2012); Ponzi V. Freesenden, 258 U.S. 254, 255; 42 S.Ct. 309; 66

L.Ed 607 (1922). In this case, the problem is over competing state and federal liens'

priorities to a pension.

Timeline: On February 22, 2016, Michigan issued its Judgment of Sentence

upon Petitioner. (Appendix 4). The Michigan Judgment did not automatically create a

SCFRA lien on Petitioner's pension. Michigan had to still file in the future a SCFRA civil

suit in Emmet County Circuit Court and obtain a final judgment before it had a SCFRA

lien on Petitioner's pension. MCL 800.401 et. seq.

On April 11, 2016, the United States District Court for the Western District of

Michigan issued its own sentence on Petitioner which included a restitution order for

$1,388,467.20. (Appendix 3). The District Court's Order automatically created a

restitution lien on all of Petitioner's property, including his pension. 18 USC § 3613(c).

The restitution lien is automatically treated as a tax liability under the Internal Revenue

1

ir

Code of 1986. 18 USC § 3613(c).

On June 6, 2016, the United States also garnished Petitioner's pension under a

Writ of Continuing Garnishment. (Appendix 5). Consequently, by the time that the

United States had acquired its statutory restitution lien on Petitioner's pension and

garnished Petitioner's pension, Michigan had only filed its SCFRA complaint to seize

90% of the same pension but without yet obtaining a final Trial Court order awarding

Michigan 90% of the pension. (Appendix 6). It was not until November 18, 2016, that

Michigan concluded its SCFRA civil suit, in rem, against Petitioner's pension when the

Trial Court issued its Final Order awarding Michigan 90% of Petitioner's pension. But,

Michigan's November 2016, SCFRA Final Order was issued seven months after the

United States' restitution lien had already attached to the same pension (April 11, 2016)

and three months after the United States had garnished the pension (June 6, 2016).

In response to the Trial Court's SCFRA Order in favor of Michigan, Petitioner

filed with the Trial Court a Motion for it to reconsider its November 18, 2016, SCFRA

Order citing the Honorable United States District Judge Neff's August 10, 2016, Order

that granted a permanent garnishment of Petitioner's pension pursuant to enforcing the

United States' restitution lien. Judge Janet Neff expressly stated in her August 10,

2016, Order that the United States' "government's restitution lien has priority over the

State's civil suit" (sic SCFRA suit). See Appendix 7.

The Trial Court denied Petitioner's Motion for Reconsideration and let stand its

SCFRA Order that has, in fact, been used to seize 90% of Petitioner's pension to

reimburse Michigan for the costs of incarcerating Petitioner but which ignores the

priority of the United States' restitution lien designed to reimburse Petitioner's victims.

2

•

(Petitioner has raised as an affirmative defense to Michigan's SCFRA suit the priority of

the United States' restitution lien on the pension.)

Noteworthy, in the Trial Court order denying Petitioner's Motion for

Reconsideration is the Trial Court's admission that "If such an order were issued (sic by

U.S. Judge Neff on April 10), this Court would be obligated to follow it." See Appendix

E;J

Thus, by December 8, 2016, when the Trial Court denied Petitioner's Motion for

Reconsideration, the United States had already obtained a statutory restitution lien on

Petitioner's pension, garnished it, and obtained United States District Court Judge

Neff's order stating that the United States' restitution lien had priority over Michigan's

SCFRA lien on the same pension. And, the Trial Court itself had admitted that it would

have to follow Judge Neff's Order that stated that the United States' restitution lien has

priority over Michigan's SCRFA civil suit!

After denial of his Motion for Reconsideration, Petitioner appealed the SCFRA

judgment to the Michigan Court of Appeals and to the Michigan Supreme Court. Both

appeal courts denied Petitioner's appeals without providing any legal analysis. See

Appendixes I and 2. The Michigan Supreme Court simply stated "...we are not

persuaded that the issues presented should be reviewed by this Court." See Appendix

2. Thus, this Petitioner appeals to the United States Supreme Court so that the issue of

federal restitution lien priority over Michigan's SCFRA lien may be adjudicated. (Note:

There are no reported cases involving United States restitution liens versus Michigan

SCFRA liens.)

3

e

Lien Priority Discussion and Argument

Preamble: Petitioner focuses his appeal upon the priority of the United States'

restitution lien (18 USCS § 3613(c)) over Michigan's SCFRA lien issued by the Trial

Court. This focus does not require any interpretation of the SCFRA statute, MCL

800.401 et. seq. Instead, it requires only knowledge of the interplay of federal and state

law between state and federal sovereigns when their competing liens arise. If the

Supreme Court finds that the United States' restitution lien is superior to Michigan's

SCFRA lien on Petitioner's pension, then the Court must vacate the Trial Court's

SCFRA order that seizes 90% of Petitioner's pension and order a refund of the monies

already seized by Michigan to be returned to the Michigan Office of Retirement

Services to be disbursed by law.

Analysis: When a federal lien competes with a Michigan lien, state law is only

applied to determine if the Petitioner owns any property (e.g. owns a pension). Once

state law determines that Petitioner owns property, then federal law determines the

priority of the competing state and federal liens that attach to that property. United

States v. Ford, 857 F.Supp.2d 660, 663-4 (ED Mich 2012). (All parties agree that

Petitioner owns a pension).

It is undisputed that when a federal lien is involved, the relative priority between

competing claims to property is determined by the federal principle that "the first in time

is first in right." United States v. City of New Britain, 347 U.S. 81, 87; 74 S.Ct. 367

(1954). A prior lien gives to that prior claim priority satisfaction out of the subject it

binds. Id. at 87.1

1 Michigan has argued that a lienor must undertake collection efforts to perfect its lien and cites State Treasurer v.

Bences, 318 Mich. App. 136, 152, for authority. Bences, however, does not involve a competing federal lien.

4

The Petitioner properly raised, in the first instance, the defense of the federal

restitution lien as a bar to Michigan collecting pension monies under a SCFRA lien in

the Trial Court. The Trial Court is given exclusive jurisdiction over all SCFRA actions.

MCL 800.404(1). When a state court has exclusive jurisdiction, a party's recourse is to

raise a federal defense in state proceedings "even if both parties concede that the

federal defense is the only question truly at issue, even if a federal defense is

anticipated." Quwi-El Bey v. Probate Court, 2012 U.S. Dist LEXIS 111193 (E.D. Mich.

August 8, 2012); Caterpillar Inc. v. Williams, 482 U.S. 386, 393; 107 S.Ct. 2425; 96

L.Ed2d 318 (1987). Thus, Petitioner is required to raise the federal defense of a prior

federal restitution lien in the State's Trial Court. In turn, the Trial Court, having

exclusive jurisdiction over SCFRA actions must hear federal defenses in that state court

action.

Furthermore, Petitioner cannot remove the state-court action to a U.S. District

Court. Removal is possible only if the state court action could have been originally filed

in a federal court. Caterpillar at 392; State Treasurer v. Lacrosse, 203 U.S. Dist. LEXIS

104667 (E.D. Mich. July 26, 2013); 28 USCS 1441(a). Then, removal to a federal court

can only be by a defendant who is:

The United States or any agency thereof or any officer (or person acting

under that officer) of the United States or any agency thereof, in an official

or individual capacity, for or relating to any act under color of any right,

title, or authority claimed under any Act of Congress for the apprehension

or punishment of criminals or the collection of the revenue. 28 USCS

1441(a), 28 USCS 1442(a)(1); Richmond v. Daimler Chrysler, 2000 U.S.

Dist. LEXIS 583 (E.D. Mich. January 13, 2000).

Bences is a ruling about the States' rights relative to its citizens' rights to money. Indeed, collection efforts are never

a requirement for perfecting a lien. Choate liens can have years to be collected upon: Mechanics liens can be

collected upon within one year of becoming choate (MCL 570.1117(1)); mortgage liens can be collected upon 15

years after a default (MCL 600.5803)); and federal restitution liens have 20 years to be collected upon (18 USC §

3613(c)).

Petitioner, however, is obviously not the "United States or any agency or

officer.. .thereof". Therefore, Petitioner has no right to seek removal of his federal

defense to a federal court for argument. Indeed, since the Trial Court has exclusive

jurisdiction over SCFRA actions, the SCFRA claim itself could never have been

originally filed in the federal court, which is one prerequisite to removal.

Thus, the Petitioner must remain in the state's Trial Court. Therein, he must raise

his federal defense that the United States' restitution lien is a bar to the Trial Court

seizing Appellant's pension because the United States restitution lien has priority over

all the State's SCFRA lien to the same pension .2 Unfortunately, the Trial Court

concluded that Petitioner's priority arguments between federal and state liens "are not

his to make in opposition to Plaintiff's SCFRA action." (Appendix 8, p. 1).

The U.S. Court's August 10, 2016, Order by Judge Neff was presented to the

Trial Court in Petitioner's Motion for Reconsideration on November 28, 2016.

(Appendix 9). The Trial Court, further dismissed Judge Neff's Order by ruling that

Judge Neff's reference to the "State's civil suit", (over which Judge Neff rules the U.S.

restitution lien has priority over the State's civil suit), did not specifically refer to

Michigan's SCFRA suit; and that the Neff Order, in any event, did not adjudicate the

U.S. restitution lien priority to Michigan's SCFRA judgment lien over Petitioner's

pension. (Appendix 8).

2

The Trial Court misunderstands the Petitioner's motive for raising the federal defense. The Trial Court

believes that Petitioner is 'championing' a 'claim' for the benefit of the U.S. Court. (TCO, p. 2, T 4;

Appendix 8). But, Petitioner raises the U.S. restitution lien priority only as a defense to the State's SCFRA

civil suit. It is brought into the State's Trial Court as a defense against the State's SCFRA civil suit,

creating the expected U.S. versus State 'problems" between two sovereigns executing their respective

sentences against this single Defendant—a problem that Respondent cannot resolve in its favor being last

in time, therefore last in right.

.

n

A reading of Judge Neff's August Order, however, shows that the U.S. Court was

writing in the context of Michigan suing to freeze and seize Petitioner's pension (sic

"State's civil suit"). (Appendix 7, p. 2). Judge Neff states that "On June 6, 2016, a (sic

Federal ) writ of continuing garnishment was issued against Petitioner's portion of his

ex-wife's 'pension' account at the Michigan Public School Employees Retirement

System". Id. That is the same pension that Michigan attempts to seize by its SCFRA

"civil suit".

Also, the United States District Court clearly ruled that the U.S. restitution lien

has "priority over the State's civil suit". (Appendix 7, p. 2). The Federal Court actually

uses the word "priority" in its prioritization of the U.S. restitution lien.

Statutory Federal Lien Priority Explained (beyond Judge Neff). The United

States restitution lien arose when the United States District Court's "Judgment in a

Criminal Case" was issued on April 11, 2016. That Judgment ordered restitution.

(Appendix 3). A restitution lien automatically arose upon the issuance of the United

States'judgment. 18 USCS 3613(c). The lien covers 100% of Petitioner's property. Id.

Consequently, the U.S. restitution lien covers 100% of the Petitioner's pension.

Michigan, however, did not obtain a SCFRA lien on the pension until seven

months later on November 18, 2016, when the Trial Court issued its Final Order

awarding Michigan a SCFRA lien on the same pension. (Appendix 6). Until Michigan

Michigan argues that if the United States had garnished 25% of Petitioner's pension, then the remaining 75% of

the pension is available for seizure by Michigan under SCFRA. But, if Michigan is to seize 75% of Petitioner's

pension, Michigan must show that the United States Restitution Lien that covers all the pension has shrunk by 75%,

leaving 75% of the pension available to Michigan. No federal law, however, exists that says a lienor's lien shrinks to

match the scope of the lien enforcement from time to time. Furthermore, the United States can garnish 25% or 100%

of Petitioner's pension at various times. Since a delinquent federal restitution lien is treated as a delinquent federal

tax owing to the United States, the Federal Consumer Credit Protection Act's limitation upon the United States

garnishing only 25% of Petitioner's pension does not apply. 15 USC § 1673(b)(1)(C). The United States can vary

its garnishment of Petitioner's pension to the extent the Petitioner can afford to pay a greater garnishment. 18 USC §

3664(f)(2)(A)-(C).

7

obtained the Final Order, Michigan only had an inchoate lien on the pension. The

United States, however, held a choate lien already on the pension since its April 11,

2016, sentencing of the Petitioner. The United States' restitution lien became choate

when assessed by the U.S. Judgment. 18 USCS 3613(c); United States v. First Nat'l

Bank and Trust Co., 386 F.2d 646, 647 (1967).

The State SCFRA lien become choate only later when: 1) The identity of the

lienor is known; 2) The identity of.the property is known; and 3) The amount of the lien

is known.. .that is when there is nothing more to be done. First National Bank at 647.

(The standard for choateness of a state lien and a federal lien is the same. First

National Bank at 647).

Although the identity of the lienor (Michigan) and property (pension) was known

before November 18, 2016, Michigan's SCFRA lien became choate only when the

amount of its SCFRA lien was finally determined by the Trial Court on November 18,

2016, by its Final Order that ruled that Michigan could seize 90% of Petitioner's

pension. The United States' restitution lien, however, was choate earlier on April 11,

2016, because: the United States' lienor was known (United States), the property was

identified by statute (18 USCS 3613(c) as being all Petitioner's property), and the

amount of the restitution lien was then known: ($1,388,467.02 as determined by the

United States' April 11, 2016, Judgment of Sentence.)

The relative priority of a state lien to a federal lien depends on the relative time

each lien becomes choate. United States v. Vermont, 377 U.S. 351, 354; 84 S.Ct.

1267; 12 L.Ed2d 370 (1964). For liens first in time is first in right. United States V.

McDermitt, 507 U.S. 447,449; 123 S.Ct. 1526; 123 L.Ed2d 128 (1993). A prior lien is

8

entitled to prior satisfaction out of the thing it binds. United States v. New Britain, 347

U.S. 81, 85; 74 S.Ct. 367; 98 L.Ed 520 (1954). Therefore, the United States' restitution

lien became choate before the State's SCFRA lien and is first in right to Petitioner's

entire pension. The United States' restitution lien of $1,388,467.20 is entitled to

"satisfaction" out of the entire pension by its various U.S. Courts, agencies, and

departments over twenty years. 18 USC § 3613(c). Since there is no unencumbered

pension (it being previously 100% liened by the United States), the Trial Court erred

attempting to seize it for Michigan by failing to recognize the supremacy of federal law

that grants priority to the United States' restitution lien over Michigan's SCFRA lien as

required by Article VI, Clause 2 of the United States Constitution. Yet, it is mandated by

Article VI, Cl. 2, of the Constitution that state courts cannot refuse to apply federal law.

Printz v. United States, 521 U.S. 898; 1175 S.Ct. 2365; 138 L.Ed2d 914 (1997). The

judges in every state shall be bound by federal law. Id. at 928-9.

Relief Requested: Petitioner requests the United States Supreme Court to grant his

Petition for a WRIT OF CERTOARI to consider the issue presented herein.

Respectfully Submitted;

July 2, 2018

Michel A. Kennedy (No. 9727)

Petitioner in Pro Personam

Central Michigan Correctional Facility

320 N. Hubbard

Saint Louis, Ml 48880