A recent Eight Circuit case, Lind v. Midland Funding, LLC, No. 11-3128 (8th Cir. Aug. 9, 2012), addressed due process considerations arising from a third-party garnishment, finding that lack of separate notice of garnishment to a non-debtor joint account holder was legally harmless where that person had actual notice of the garnishment.

The plaintiffs in the case were a man that had defaulted on a credit card debt and his wife. Default judgment was obtained against the husband, and the defendant served a third-party garnishment on the plaintiffs’ bank. Two accounts were attached – one joint checking account in both plaintiffs’ names and one savings account in only the husband’s name. Notice for the attachments were sent to the husband only, but the wife was aware of the notice sent to her husband.

The plaintiffs argued they were deprived of their Due Process rights under the Fourteenth Amendment because the wife did not receive a predeprivation notice and hearing before the defendant attached funds the bank accounts. The plaintiffs maintained that while the wife had actual notice, it had not been “reasonably calculated” to reach her. The court rejected this argument, find that “a person cannot complain about the constitutionality of the method used to provide notice when he or she has received actual notice (assuming it is timely), for he or she has suffered no harm.” The court further noted that “requir[ing] a creditor or garnishee to carefully review individual deposits into every garnished account in order to determine whether funds properly belong to an individually named account holder” would essentially place the burden to prove the ownership of funds on a the non-account holder and make garnishment of a joint bank account “difficult, and perhaps impossible.”

Plaintiffs also argued that their opportunity to be heard failed to come at a meaningful time, an argument the court also rejected, noting “that predeprivation notice and hearing are not always required for attachment statutes to satisfy due process.” Although the plaintiffs maintained that the Minnesota statute covering this process “d[id] not contain any procedural safeguards that would justify delaying [the wife]’s opportunity to be heard until after the attachment of her funds,” the court noted that attachment had occurred after the defendant had secured a judgment, and that “[a] creditor’s interest should be accorded more weight in a postjudgment context than it should be accorded in a prejudgment attachment.”

Although the court conceded that defendants had a “very limited right under Minnesota law to garnish [a non-debtor]’s funds from a joint account in order to satisfy [a debtor]’s debt,” the court determined that the wife’s “right to the use and possession of her funds changed according to state law when she deposited them into a jointly held account” and that “[b]y operation of Minnesota law, the owners of a joint account bear the burden to prove that funds in the account do not belong to the debtor.”

A copy of the case can be found here

Financial institutions and lenders should periodically review their garnishment and levy protocol to ensure that their processes meet Constitutional Due Process requirements and minimal requirements under federal and state law for all account holders.