Category: Judgment Collections

Tennessee Courts will give Pro Se Litigants “Some Leeway,” But Not Much

Some of the hardest trials to handle aren’t when there’s a good attorney on the other side. Instead, the toughest cases can be when there’s a non-attorney on the other side, meaning the other party is representing himself.  In the legal world, this is called “pro se” representation.

With a lawyer on the other side, there’s an expectation that they know the rules of civil procedure, the local rules, and the relevant law. As a result, you can expect that you will be able to cut to the chase and narrow the issues.

With a pro se litigant, everything could be at issue and, worse, a pro se party probably doesn’t know the rules of the court, meaning objection deadlines will be missed and all other types of procedural missteps can occur. This places the lawyer and the Judge in a strange situation–do you hold the pro se litigant to same standards as a party who goes to the trouble of hiring a lawyer? Shouldn’t they  be held to that standard?

A fairly recent Tennessee Court of Appeals case (click here to review) considered that issue in a dispute where a property owner was fighting a foreclosing creditor. The Court noted that “there are a multitude of problems with Defendant’s brief,” including a complete failure to comply with the Tennessee Rules of Appellate Procedure.  The Court called the pro se filing “a rambling and, at times, incoherent brief.”

The Court went on to say it “must not excuse pro se litigants from complying with the same substantive and procedural rules that represented parties are expected to observe.” Young v. Barrow, 130 S.W.3d 59, 63 (Tenn. Ct. App. 2003). “It is well-settled that, ‘[w]hile a party who chooses to represent himself or herself is entitled to the fair and equal treatment of the courts, [p]ro se litigants are not . . . entitled to shift the burden of litigating their case[s] to the courts.’” Chiozza v. Chiozza, 315 S.W.3d 482, 487 (Tenn. Ct. App. 2009). However, “[t]he courts give pro se litigants who are untrained in the law a certain amount of leeway in drafting their pleadings and briefs.” Young, 130 S.W.3d at 63.

This is good text to remember the next time a person appears on their own behalf in a matter. This frequently happens in debt collection cases for the obvious reason: if a person can’t pay their bills, then how can they afford to hire a lawyer.

General Sessions Court Refresher

One of the great things about blogging about esoteric issues that come up in my law practice is that, sometimes, I get to consult myself when a legal issue arises.

Like, right now, when I’m preparing for a Davidson County General Sessions trial that starts in an hour, and I’m trying to remember what Tennessee statute allows you to exceed the $25,000 jurisdictional limit in small claims court.

It’s Tenn. Code Ann. § 16-15-501, which allows you to exceed $25,000 in calculating a judgment, where the excess amount is comprised of attorneys fees (and/or court costs and/or discretionary costs).

So, thanks a lot, Creditor Rights 101.

Want to Avoid Garnishment of Your Wages? Find a Job Where You are Paid in Cash Tips

Judgment debtors with non-traditional employment are always a headache to collect from. This includes self-employed people, independent contractors, and people who work for tips.

Here, I’m talking about waiters, valets, and anybody else who may earn a nominal hourly rate, but the bulk of their income comes from tips or gratuities. How do you garnish $5 in cash handed to a valet?

In Tennessee, you can’t. The Tennessee Court of Appeals recently considered the issue of whether tips reported by the Garnishee’s employees are to be included in the calculation of disposable earnings for the purposes of garnishment in determining the withholding under the garnishment statute, Tenn.Code Ann. § 26–2–106.

This case was Erlanger Med. Ctr. v. Strong, 382 S.W.3d 349, 351 (Tenn. Ct. App. 2012). In that case, the judgment debtor was a server at Shoney’s.  In deciding whether tips could be garnished, the Court looked at how “wages” was defined in Tenn.Code Ann. § 26–2–102 (which suggested that tips are included), but the Court went on to note that federal law excludes tips from garnishment because tips “do  not pass to the employer.”

This makes sense, because how can an employer withhold 25% of funds that it never has control over?

As a result, a judgment debtor whose primary income comes from tips and gratuities (that do not pass through the employer’s hands) may be able to escape garnishment.

But, where the tips are paid via the employer, there’s still a chance that those funds can be captured. Since at least 75% of restaurant transactions are paid via credit card (including payment of tips), there’s a strong argument that such tips could be garnished if the employer disbursed those tips in the form of a paycheck.

Attorneys Fees Can be Recovered in a Tennessee Lawsuit, but only if the contract or statute allows them

I always tell clients that Tennessee is a creditor friendly state, and it is.

But, just because it’s fair to creditors, doesn’t mean a Tennessee Court will give a plaintiff everything. I’m talking today about attorney fees. The rule in Tennessee is that, unless you have an agreement in writing that you are entitled to recover your attorney fees, a court will not award those fees to you.

Here’s why: Tennessee follows the “American Rule” on awarding attorney’s fees which states that “a party in a civil action may recover attorney fees only if: (1) a contractual or statutory provision creates a right to recover attorney fees; or (2) some other recognized exception” applies. Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn. 2009).

The contract provision allowing attorney fees to be recovered has to be very specific. In the Cracker Barrel case, the contract at issue provided that the prevailing party should recover “all costs and expenses of any suit or proceeding.” The Tennessee Supreme Court held that this language was not specific enough to award attorney fees (instead, it allowed recovery of court costs and litigation expenses).

This is an important issue, as the ability to recover your expenses and costs as part of your action will be a big consideration in any decision to file a lawsuit. Lawyers are expensive. Keep that in mind on the front end, when you’re preparing a contract or agreement, and get very specific text allowing for recovery of attorney fees.

Why Do Tennessee Court Clerks Hold Garnished Funds for Twenty Days?

You’ve got your judgment. You’ve waited for the appeal period to expire. You’ve issued your garnishment. And, finally, the Clerk has some money for you. But, they say they have to hold it for 20 days. 20 more days!?!

Why? Where does this 20 day period come from? It’s on the garnishment forms, I know, but what’s the basis for holding the funds under the Rules of Procedure or under Tennessee statutes?

The answer is Tenn. Code Ann. § 26-2-407, which allows a judgment debtor to file a motion to quash a garnishment, in order to assert certain exemption rights, within twenty (20) days from the levy.

Wait a second, you might be thinking. What about Tenn. Code Ann. § 26-2-114, which says that “a claim for exemption filed after the judgment has become final will have no effect as to an execution which is issued prior to the date the claim for exemption is filed, and as to such preexisting execution the claim for exemption shall be deemed waived.”

In layman’s terms: If you don’t claim the exemption before the garnishment is issued, then it’s waived. Why on earth, then, a procedure exist to assert a claim that was waived?

Here’s how this works: Tennessee statutes allow some assets to be absolutely exempt. These assets include: social security benefits; certain government pensions; certain health care aids; unemployment and veterans benefits; and certain insurance benefits. (See Tenn. Code Ann. § 26-2-404 for a list.)

These assets are “untouchable,” and, as a result, the motion to quash procedure exists to make sure that the garnishment doesn’t catch those specific items.

As a practical matter, a judgment debtor may use this time period to file a Slow Pay Motion or file a Bankruptcy, but, under Tennessee law, they’ve actually got a very limited basis to attack your garnishment during the 20 days. If it’s not one of those listed exemptions, you’ll probably get your money…in twenty days.

Post-Judgment Interest Rates in Tennessee Have Finally Increased (by .25%)

Back in July 2012, the Tennessee legislature passed a new “post-judgment” interest statute, which can be found at Tenn. Code Ann. § 47-14-121. As I said back then, it was a big change: Instead of a blanket “10%” rate, Tennessee would be using a variable rate, tied to the “formula rate published by the commissioner of financial institutions.”

Long story short: I hate it when the law replaces something simple with something complicated.

Since the enactment of the statute, the post-judgment interest rate has been 5.25%, until January 1, 2016, when it jumped up to 5.5%.

The sky has not yet fallen, however, like I said it would. My biggest concern was: “[t]here appears to be an obligation to research and modify the rate every six months. Payoffs just got a lot more difficult.” I don’t like math.

After a few years with the statute, I’m of the opinion that the interest rate on a judgment is set at the date of the judgment and then doesn’t change. As a result, there’s no need to track the ups and downs of the statutory rate.

But, to be entirely safe, I always recite the exact post-judgment rate in effect at the time of my judgment in my judgment, to save any confusion and subsequent research.

Erin Andrews Judgment May Not be Easy to Collect Against Hotel Defendants

After a stalker took authorized “peephole” footage in her Nashville hotel room, Erin Andrews filed a lawsuit in Nashville in 2011 against the the stalker and the hotel entities for invasion of privacy, negligence, and negligent infliction of emotional distress. Here’s my post about the initial lawsuit, with a link to the Complaint.

For the past two weeks, Nashville has had the attention of sports and legal fans, as Andrews’ case was tried in front of a local jury. I was in the courtroom on Friday, to watch the lawyers make their closing arguments to the jury. It’s not often you get to see a fight over $75 million dollars.

Yesterday, the jury announced their verdict: A judgment of $55 million, with the stalker responsible for 51 percent of the blame, and the two hotel companies responsible for 49 percent (Note: Tennessee is a “comparative negligence” state). By my math, the hotel defendants are liable for about $27 million of the judgment.

After the judgment was announced, a number of media outlets analyzed the judgment. Some said that it may be appealed as excessive. Others focused on how much the lawyers are going to profit from it.

Sports Illustrated ran a story on her ability to actually collect the money. The article makes a good point about the stalker–that he’s in prison and probably “judgment proof.” That means that, even though he’s obligated to pay the money, his ability to earn money is diminished and he’ll be broke for the rest of his life.

The hotel defendants, however, are a different story. They appear to have strong cash flow, and they’ll probably look to their insurance carriers for some funds. Corporate bankruptcy may be an option, given the amount of the award. Most likely, the article concludes, the corporate defendants may appeal the amount of the award and, at the same time, work on a settlement agreement.

Here is my sales pitch: I will collect this Judgment. If you’ve read this blog or attended any of my collection seminars, you know the first thing I’d do: Record a Judgment Lien.

The hotel property at 2555 West End Avenue is in the heart of Nashville’s hottest district, and the property has a tax appraisal of $36,477.600. If the Judgment is recorded, then the defendants can’t refinance, sell, or do anything with the property without paying the judgment.

So, that’s that, right? Not so fast.

West End Hotel Partners, LLC doesn’t own the property; Vanderbilt is owner and West End Hotel Partners operates the hotel on the land pursant to to a 40 year ground lease. This means that Vanderbilt owns the property, but that the hotel has a long-term right to use the property, including construction of improvements. At the end of the lease, the hotel may revert to the ownership of Vanderbilt.

Regardless, a judgment lien attaches to whatever interest in the land a defendant holds, including this ground lease. The creditor may not get everything, but the lien would attach to enough to get their attention and complicate any future transactions related to the property.

Here, as always, record a judgment lien as the first step in collecting on a judgment.

Insufficient Service of Process Arguments May be Recognized Under Tennessee Law

Note: This post contains updated information after its original posting date.

When it comes to creditor rights deficiency lawsuits, it’s rare that I see something new.

Most defendants’ Answers to my lawsuits to collect unpaid debts follow the same pattern: They admit the jurisdictional/party paragraphs, claim they lack sufficient information on the amount of the debt, and then deny all paragraphs alleging default and asking for a judgment.

Recently, however, I saw a creative argument that, honestly, freaked me out.

It was an Answer that contained the following “Affirmative Defense:”

Plaintiff’s claim should be dismissed due to insufficient service of process for failure to include required information on the Return of Service. The Return on Service of Summons for both Defendants fails to include the process server’s name and/or address as required by Tennessee Rule of Civil Procedure 4.01(2). See Lasher v. Robertson, No. 03A01-9402-CV-00075, 1994 WL 579972, *2-3 (Tenn. Ct. App. Oct. 24, 1994).

In that Lasher opinion, the Court of Appeals was faced with a return on a Summons that “contained only the date and the unreadable signature of the process server.” 

Two years later, the defendant filed a motion to dismiss, alleging insufficient service of process of the lawsuit. That motion was granted.

Citing Tenn. R. Civ. P. 4.01, the Court of Appeals agreed.

For starters, “The process server must be identified by name and address on the return.” See Tenn. R. Civ. P. 4.01(2).   Further, “The person serving the summons shall promptly make proof of service to the court and shall identify the person served and shall describe the manner of service.” See Tenn. R. Civ. P. 4.03(1).

Applying those rules, the Court of Appeals wrote:

The Plaintiff’s process server met none of the requirements contained in Rule 4.01(2) of the Tennessee Rules of Civil Procedure. The process server was not identified by name and address on either the return of service or on the affidavit; he did not promptly and within the time during which the person served must respond, make proof of service to the Court; he did not identify the person served nor describe the manner of service. Even considering the very untimely filed affidavit of Daniel C. Derrick, the requirements of Rule 4.03(1) of the Tennessee Rules of Civil Procedure still were not met. Indeed, the record is totally void of the location of Defendant Robertson’s residence. Neither Defendant filed an answer and there is no indication in the record before us of any documents being served upon either Defendant during the pendency of the proceedings in the lower Court.

Id. at *3.

Given the custom and practice regarding service of process Tennessee handling consumer and commercial collection lawsuits, this case and analysis can have broad reaching impact.

In the end, there’s a lesson here: (1) Include the process server’s name and address on the Summons; and (2) When in doubt, include the method, manner, and details of the service on your Summonses.

Domestication of Federal Court Judgments: Really Easy

Four years ago, I talked about the process of domesticating a foreign judgment, which is the process by which a party makes a judgment of one state enforceable in a different state. Under each state’s version of the Uniform Enforcement of Foreign Judgments Act, I said, it’s a pretty easy process.

What I didn’t mention, however, is how much easier it is to enforce a judgment granted in Federal District Court in another District Court.

In the federal system, pursuant to 28 U.S.C. § 1963, all a plaintiff must do is record a certified copy of the final judgment in the other district. “A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.”

To cut through the legalese, once you record your out-of-district, final judgment, it becomes enforceable immediately in the new district. There’s no need to serve a copy on the judgment debtor; there’s no 30 day response or objection period.

The reasoning behind this is simple. When you cross state lines, you take your judgment into a new jurisdiction, with a different state constitution and different laws. Under the federal court system, you’re not truly crossing any boundaries. And that’s a pretty powerful tool to keep in mind when deciding where to file an action against an out of state defendant.

Enforcement of Judgments on Out of State Debtors Made Easy: When the Debtor Comes to You

Four years ago, we talked about domestication of judgments. Long story short, a judgment awarded in Tennessee can only reach a debtor’s assets located inside the State of Tennessee. So, if you have a judgment against somebody who lives in Texas, you may have to file a second lawsuit in Texas to attach his assets.

But maybe not.

I mean, sure, if he owns land in Texas,  owns a car that’s registered in Texas, or has a million dollars in cash under his Texas bed, then your Tennessee judgment is not going to be effective to execute on those assets. To get those, you need to go through the domestication process, which results in your out of state judgment being recognized by that foreign state as a valid judgment for enforcement in that state.

But, here’s a trick: What if the debtor has all his assets in that foreign state, but he banks at a large bank with offices all over the country? And what if that bank has a branch in Tennessee? The answer is that you can levy on that bank account.

So, debtors with accounts at Wells Fargo and Bank of America, watch out.