Georgia’s garnishment statute, O.C.G.A. § 18-4-60 et seq., is unconstitutional, a federal judge in Atlanta has held earlier this month in Strickland v. Alexander, 2015 U.S. Dist. LEXIS 121958, No. 1:12-CV-02735-MHS (N.D. Ga. Sept. 8, 2015). The decision puts the future of garnishments in George in doubt and on hold in some courts.
The basis for the Court’s decision was that the garnishment statute fails to give debtors adequate notice about (1) what types of property may be exempt from garnishment under state and federal law and (2) the procedures for claiming available exemptions. The Court also held that the statute violates due process rights because it fails to provide for a “prompt and expeditious” process for resolving exemption claims. As a result of this decision, Gwinnett County courts have been enjoined from issuing any garnishment summons until further notice.
Factual and Procedural Background
Plaintiff, Tony W. Strickland was diagnosed with cancer in 2004. He survived his struggle with cancer but his treatments had taken a toll and he was unable to work as many hours as he had before his diagnosis. Subsequently, he developed other health issues which required a prescription to keep his heart in rhythm. He was told that his heart could fall out of rhythm, with serious consequences, if it was not taken as prescribed.
In June 2009, Strickland seriously injured his back at work. In 2011, he received a $30,000 lump-sum workers’ compensation settlement for his injuries. Strickland and his wife opened an account at JPMorgan Chase (“Chase”) for the purpose of setting aside the workers’ compensation settlement for the payment of household and medical expenses.
Meanwhile, in 2005, Strickland defaulted on his Discover credit card. In December 2009, Discover sued Strickland for the unpaid credit card debt. In April 2012, it obtained a default judgment against Strickland. In July 2012, a garnishment action was filed against Strickland naming Chase as the garnishee and seeking about $18,000 as the balance due on the judgment. Richard Alexander, Clerk of the Court of the State Court of Gwinnett County, generated a garnishment summons, which advised the garnishee to “hold all property, money and wages, exempt what is exempt … belonging to the [Strickland].” Accordingly, Chase immediately froze Strickland’s savings account, which contained about $15,000 in remaining workers’ compensation benefits.
In July 2012, Strickland was notified by Discover of the garnishment action, but the notice did not inform him that some forms of property, such as workers’ compensation, were exempt from garnishments, nor did it inform him how to claim such an exemption. Chase notified Strickland the same day that his bank account had been frozen, explained that some forms of income, including workers’ compensation benefits, may be protected from garnishment, but did not advise Strickland of how to claim an exemption. In August 2012, Chase paid the entire balance of Strickland’s accounts, into the court.
In September 2012, Strickland filed a claim in the garnishment action which asserted that he had a superior right to the funds because they were workers’ compensation benefits protected from garnishment. Discover opposed Strickland’s claim.
Meanwhile, by the end of July 2012, Strickland was out of money, could not afford to refill his prescription, and began to skip doses. In October 2012, Strickland developed a blood clot in his hand that required surgery. He delayed scheduling the surgery because he did not have money to pay for the surgery and his workers’ compensation funds were still held by the court. Strickland’s hand became so swollen that he could not use it and it turned black up to his elbow.
In late October, 2012, the day before the scheduled hearing on Strickland’s claim, Discover dismissed the garnishment action. Strickland received a check for the funds in his Chase account nearly four months after his account had been frozen.
Strickland sued Court Clerk Alexander, Discover and Chase in the United States District Court for the Northern District of Georgia. He challenged the constitutionality of Georgia’s post-judgment garnishment statute, O.C.G.A. § 18-4-60 et seq., under the Due Process Clauses of the United States and Georgia Constitutions.
Strickland moved for summary judgment that Georgia’s post-judgment garnishment statute violates constitutional due process requirements because it (1) does not provide judgment debtors with adequate notice that their property may be exempt from garnishment; (2) fails to inform debtors of the process to claim such exemptions; and (3) establishes a process that deprives debtors of their exempt property for an unconstitutionally long period of time. Defendant Alexander, supported by the State, filed a competing motion for summary judgment on all claims.
The District Court’s Decision
The District Court found for Strickland on all three claims, declared Georgia’s garnishment statute unconstitutional, and enjoined Gwinnett County Court Clerk, Alexander from issuing any summons of garnishment insofar as they are inconsistent with the Court’s decision.
First, the Court held that Georgia’ post-judgment garnishment statute is constitutionally deficient because it requires no notice to the debtor that there are certain exemptions under state and federal laws which the debtor may be entitled to claim with respect to the garnished property. Further, the court held that the State’s duty to require that adequate notice of exemptions be sent to all judgment debtors was not satisfied by Chase’s voluntary decision to send Strickland a letter that mentioned possible exemptions.
Second, the Court held that individualized notice of the procedures available for claiming an exemption from garnishment is constitutionally required. The court reasoned that notice of these procedures are necessary because the statute fails to explain how a judgment debtor goes about asserting an exemption claim, no administrative code or policies and procedures manual spells out a judgment debtor’s rights and how to enforce them, nor is the debtor told who to contact to obtain this information. The court reasoned that because the funds subject to garnishment may be essential to the payment of daily living expenses and are frozen and subject to forfeiture just 15 days after the garnishee files its answer it is necessary to assist the debtor in ascertaining and enforcing his rights.
Third, the Court held that the Georgia statute violates due process because it does not provide for a prompt and expeditious procedure to resolve a debtor’s claim that seized property is exempt from garnishment.
On September 10, 2015, Gwinnett Court Clerk Richard T. Alexander issued a bulletin confirming that courts in Gwinnett County will stop issuing garnishment summonses until such time as the garnishment statute is either revised by the legislature or the injunction is removed.
Technically the finding of unconstitutionally does not apply to the other federal districts, but there is a significant possibility of those districts following the lead of the Northern District. Some other state courts in Georgia are following Gwinnett County’s approach in light of the recent injunction and likely more county courts will follow suit.
The federal court ruling may be altered by legislation or court rules in the future. Georgia Attorney General Sam Olens has asked the Court to reconsider its decision and modify its conclusion that the statute didn’t provide a procedure to adjudicate exemption claims quickly enough. However, garnishment activity may remain on hold until the Georgia Legislature addresses this issue when it comes back in session in January. Defendants have until Wednesday, October 7, 2015 to file an appeal.
Takeaway: All employers should continue to garnish, but only monies, such as wages, that are subject to garnishment, until instructed to do otherwise by a court. Employers should be cautious of the garnishment of monies that may be characterized as exempt. Employers who elect to stop all garnishment activity run the risk of falling into default.
Contributor: Jessica A. Schoendienst, Law Clerk | Weintraub Tobin