Arbitration Enforcement? The Potential Expansion of Debt Collection

Robins Kaplan LLP

There’s a storm brewing in the Southern District of Florida, and plaintiffs’ attorneys are hoping it rains.

Last week, a federal magistrate judge issued an order for the parties to submit supplemental authority on the question of whether a writ of garnishment can be issued based on an unconfirmed arbitration award.

In the underlying arbitration, the petitioner took its opposition to the cleaners to the tune of $32 million. It then sought a writ of garnishment based on the award without having confirmed or converting it into a judgment. The respondent opposed issuance of the writ, but the court noted that “neither party has cited cases expressly holding that a party who holds an arbitration award is able — or unable — to obtain a writ of garnishment under Florida’s garnishment statute before that prevailing party has an actual judgment.”

After providing the parties with detailed instructions for their submissions, if any, the court stated, “I’m looking for a case, for example, holding that a party who holds an arbitration award is permitted to obtain a writ of garnishment under Florida’s post-judgment garnishment procedure before the award is converted into a judgment. Or a case which holds that this is prohibited.”

Days later, the petitioner seeking the writ submitted two authorities – one state, one federal – where courts issued writs of garnishment based upon an unconfirmed arbitration award.

If courts are amenable to issuing writs of garnishment under these circumstances, a prevailing party’s collection efforts would benefit greatly. Immediate, post-arbitration garnishment would undoubtedly catch the opposition off-guard, and forego any opportunity for unseemly assert transfers or other acts in evasion or frustration of collection efforts.  It may also prevent the opportunity for debtor recalcitrance, which brings delay and hemorrhaging of costs with it.  In nearly every situation, arbitration included, swift and aggressive action will help to avoid litigation success from becoming an otherwise hollow victory.

While practitioners will need to stay tuned for more certainty, there is exciting potential for another means of accomplishing debt collection and satisfaction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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