Washington State Department of Social and Health Services, et al., v. Guardianship Estate of Danny Keffler, et al.
Offsets: The U.S. Supreme Court Speaks 2/25/03
The U.S. Supreme Court handed down a decision on 2/25/03 in the case of Washington State Department of Social and Health Services, et al., v. Guardianship Estate of Danny Keffler, et al. Although it did not directly involve a financial institution, the case is still of interest to the financial services industry because it represents a clear statement of the nation's highest court on the issue of how the federal statute which bars execution and attachment against Social Security benefit funds should be interpreted. The Supreme Court opted for a narrow reading of the statute, saying:
The case boils down to whether those activities are “other legal process.” The statute uses that term restrictively, for under the established interpretative canons of noscitur a sociis and ejusdem generis, where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar to those enumerated by the specific words. E.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114–115. Thus, “other legal process” should be understood to be process much like the processes of execution, levy, attachment, and garnishment, and at a minimum, would seem to require utilization of some judicial or quasi-judicial mechanism, though not necessarily an elaborate one, by which control over property passes from one person to another in order to discharge or secure discharge of an allegedly existing or anticipated liability." [Taken from the Syllabus of the case]
Looks to us like a financial institution's use of offset would not rise to the level of process the Supreme Court says is covered under this federal law and should thus be permissible. See what your legal counsel has to say!