Appeals Court Sides with Collection Lawyer in Garnishment Case

The U.S. Court of Appeals for the Sixth Circuit ruled in favor of a debt collection law firm in a case where the consumer alleged a violation of the FDCPA over an affidavit filed to garnish non-wage assets.

Cleveland-based Javitch, Block & Rathbone (JB&R) represented a debt buyer client in February 2006 who attempted to collect a $2,800 credit card debt from Norma Lee. After obtaining a default judgment in state court against Lee, JB&R attorney Victor Javitch filed for a non-wage garnishment of Lee’s bank account. To do so, Javitch signed and filed a required affidavit stating that he had a “reasonable basis to believe that [Lee’s Bank] may have property, other than personal earnings, of [Lee] that is not exempt under the laws of this state or the United States.” The state court initially garnished the money from Lee’s bank accounts.

But Lee later proved that the bank account included only Social Security disability payments, which are exempt from garnishment. The court returned the money to Lee’s account.

Lee then sued JB&R in September 2006, alleging that the firm had violated the Fair Debt Collection Practices Act (FDCPA) by filing a false affidavit. Specifically, Lee alleged that Javitch did not have the reasonable basis alleged in his affidavit when he signed that document.

The district court held a five-day jury trial in January 2008. A jury determined that, when Javitch signed the affidavit, he did not have “a reasonable basis to believe that Plaintiff’s bank account may have contained funds, other than personal earnings, that were not legally exempted from garnishment”; that the signing of the affidavit therefore violated the FDCPA and; and that Lee was entitled to $49,603 in damages. Post-trial motions reduced the damage award to $35,595.26, but the district court also awarded Lee attorneys’ fees of $125,315.30.

JB&R appealed the decision, arguing that the affidavit was true.

On appeal, Lee argued that JB&R should have taken additional steps to ensure that the bank account contained non-exempt funds, going as far to suggest that the firm should have subpoenaed her bank records. When the legality of subpoenaing bank records was brought before the appeals court, Lee called no witnesses, while JB&R offered testimony arguing that such a subpoena was unheard of.

Given the unanimous testimony that issuing a bank subpoena in the context of filing for a non-wage garnishment was of uncertain legality and the absence of evidence that it had ever been done previously, reasonableness did not demand that Javitch issue such a subpoena before signing the affidavit. Thus, because Lee did not establish that a reasonable attorney would have conducted additional investigation, the court said that JB&R was entitled to judgment as a matter of law and reversed the district court ruling.

The court did note in the ruling that “We are loath to overturn a jury verdict regarding whether conduct is reasonable,” noting that the original ruling came from a jury trial rather than from the bench.

The full text of the ruling can be found here.

The Court of Appeals for the Sixth Circuit covers Kentucky, Michigan, Ohio and Tennessee.