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The Role of Federal Courts in the Judgment Collection Process

Judgment Collection is a creature of state law. Rule 69(a) of the Federal Rules of Civil Procedure very clearly articulates the procedures that will apply if a judgment is collected in federal court: “The procedure on execution — and in proceedings supplementary to and in aid of judgment or execution — must accord with the procedure of the state where the court is located …” It is important to note that the language of Rule 69(a) goes beyond the traditional outlines of the Erie doctrine. Rule 69(a) does more than graft state substantive law onto federal procedure; Rule 69(a) authorizes the federal courts to utilize state procedural tools to aid in the execution of judgments. This means that the federal courts are not limited to Writs of Execution as defined in Rule 69(a), but are also able to provide the full panoply of post-judgment collection proceedings, including garnishments. See, e.g., Grenada Bank v. Willey, 694 F.2d 85 (5th Cir. 1982); Skevofilax v. Quigley, 810 F.2d 378 (3rd Cir. 1987).

Although Rule 69(a) may provide the federal courts with power that is coterminous with coordinate state courts to enforce judgments, it begs the question as to why a judgment creditor would want to enforce a judgment in the federal courts. After all, it seems fairly self-evident that state courts would be better arbiters of state procedure than the federal courts. An initial analysis may conclude that the geographic scope of the federal courts would be beneficial to a judgment creditor. A federal court can, at least in theory, enter an order that has nationwide effect; conversely, a state court is geographically limited. This analysis, however facially appealing, is faulty. A federal court engaged in execution proceedings may actually be more geographically limited than a state court. A recent opinion from the Western District of Virginia held that a garnishment sued out of a federal court is only enforceable against wages earned within the territorial limits of Virginia. Memorial Hospital of Martinsville v. D’Oro, Docket No. 4:10MC00001 (July 8, 2011). The opinion further notes that the Writ of Execution is limited to property located within the territorial confines of the Western District of Virginia. Id.

If the availability of procedural tools for collection of judgments and the geographic limitations of state and federal courts are, at least, co-extensive, what then would be a compelling reason to attempt to enforce a judgment in federal court? In our practice at Gross & Romanick, P.C. in Fairfax, VA, we have identified two types of cases where it is advantageous to attempt execution in the federal courts.

The first is where the judgment debtor lives out of state and the creditor has little information regarding the assets of the judgment debtor. In a Virginia state court, the judgment creditor has the ability to issue a summons to the judgment debtor to answer interrogatories regarding the judgment debtor’s assets. Va. Code § 8.01-506. However, if the debtor resides outside of the Commonwealth, it is usually impossible to compel the debtor to return to the Commonwealth to answer interrogatories. However, Rule 69(b) of the Federal Rules of Civil Procedure allows a judgment creditor to simply conduct discovery in accordance with the Federal Rules. Thus, depositions in aid of execution can simply be noticed, subpoenas can have nationwide effect and the judgment creditor can issue interrogatories in aid of execution on a judgment.

The second class of cases where federal execution is useful is when the federal court holds some property of the judgment debtor. Principals of federalism prevent state courts from issuing orders directing the federal courts how to dispose of property; thus, state court enforcement in these circumstances is impossible. Typically, these cases occur when the judgment debtor has obtained a judgment against a third party or when the judgment debtor has posted some kind of bond with the federal court. In these circumstances, enforcement in the federal courts is required.

While there are many reasons to use the federal courts to enforce a judgment, there also good reasons to avoid federal courts. Future articles will discuss the pros and cons of utilizing federal courts.

If you have a judgment to enforce, please contact us a Gross & Romanick.

 

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