In litigation, obtaining a judgment is step one. Step two – often as, if not more, difficult than winning a lawsuit – is collection. In a short, interesting Memorandum of Decision and Order (the “Decision”), Judge Dales of the United States Bankruptcy Court for the Western District of Michigan (the “Bankruptcy Court”), writes about some of the practical and legal considerations involved with pursuing collection of a bankruptcy court judgment.
In a Chapter 7 proceeding In re Sharon Buchner, the Chapter 7 trustee obtained a default judgment against a defendant in the amount of $71,200. The trustee sought to collect the judgment by obtaining writs of garnishment, as well as a writ of execution by filing a “Request and Order to Seize Property” with the Bankruptcy Court.
As explained in the Decision, pursuant to Federal Rule of Bankruptcy Procedure 7069 and Federal Rule of Civil Procedure 69, federal courts employ the collection procedures of the state in which they are located. Accordingly, the Bankruptcy Court has garnishment and collection forms available to litigants, which are based on Michigan court forms, modified to meet the Bankruptcy Court’s needs. One modification on the Bankruptcy Court’s form to “Request and Order to Seize Property” is that it “authorizes” rather than “directs” state officials such as “any sheriff, deputy sheriff, or court officer” involved in judgment execution to execute the writ, if they so elect. As stated in the Decision, “Under our system of government, one sovereign should not hijack the agents of another.”
The Bankruptcy Court entered the Order sought by the Chapter 7 trustee. It did so after considering a recent conflicting decision from the United States District Court for the Eastern District of Michigan, which affirmed a bankruptcy judge’s refusal to direct a writ of execution to state officials rather than the United States Marshal. The conflicting decision was based on a reading of 28 U.S.C. § 566(c) that the United States Marshal is the exclusive agent for executing federal writs.
The Bankruptcy Court declined to adopt that interpretation, relying instead upon precedent from the United States Court of Appeals for the Sixth Circuit which specifically rejected the argument that 28 U.S.C. § 566(c) makes the United States Marshal the exclusive agent for executing federal writs. Although that case involved a writ of garnishment rather than execution, the Bankruptcy Court held that its reasoning was equally relevant and applicable to the facts of the case before it.
There are a few important takeaways from this case:
First, judgment creditors in the United States Bankruptcy Court for the Western District of Michigan – at least those with cases before Judge Dales – may seek enforcement of writs of garnishment and execution by state officials such as a sheriff or court officer.
Second, an alternative method for execution is to domesticate in a state court a judgment obtained in the Bankruptcy Court pursuant to the Uniform Enforcement of Foreign Judgments Act.
Third, if a judgment is obtained in the United States Bankruptcy Court for the Eastern District of Michigan, then execution must be sought by the United States Marshal as the exclusive agent for service of federal writs.