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Labertew v. Langemeier

United States District Court, D. Arizona

April 7, 2014

Marcus Labertew, et al., Plaintiffs,
v.
Loral Langemeier, Defendant.

ORDER

DAVID G. CAMPBELL, District Judge.

Pending before the Court are United States Magistrate Judge Michelle Burns' Report and Recommendation ("R&R") (Doc. 20) granting the Notice of Lodging Judgment (Doc. 9), Plaintiffs' objections to the R&R (Doc. 21), and Defendants' Motion for Order Terminating Non-Parties and/or for Substitution of Real Party in Interest (Doc. 23). The Court will accept the R&R and deny Defendants' motion.

I. Background.

Plaintiffs filed a complaint in Maricopa County Superior Court against Fred Auzenne and Loral Langemeier, alleging claims for defamation, fraud, and other wrongs. Doc. 1-1. During trial, the parties entered into a stipulated judgment against Loral Langemeier in the amount of $1, 500, 000. Doc. 1-16 at 27-28. The judgment was part of what is commonly called a "Damron Agreement" under Arizona law, and included an assignment of Langemeier's claims against her insurance companies. See Damron v. Sledge, 460 P.2d 997 (Ariz. 1969). On July 29, 2013, Plaintiffs filed applications for writs of garnishment against Langemeier's insurance companies, Chartis Property Casualty Company and 21st Century North America Insurance Company ("Garnishees"), seeking to recover on the $1, 500, 000 stipulated judgment. Doc. 1-16 at 31-35.

The Arizona garnishment statute provides that "[i]f it appears from the answer of the garnishee that he did not owe nonexempt monies to the judgment debtor... and if no written objection to the answer is timely filed, the court shall enter judgment discharging the garnishee." A.R.S. § 12-1581(A). Garnishees removed the proceeding to this Court and filed answers to the writs of garnishment on September 4, 2013, denying that they owed funds to Plaintiffs. Docs. 6-7. Plaintiffs did not file timely objections to the answers, and Garnishees filed a notice of lodging judgment, requesting that the Court enter judgment in their favor. Doc. 9.

The Court referred the proceedings to Magistrate Judge Michelle H. Burns. Doc. 19. Judge Burns recommended that Garnishees' proposed judgment be granted because Plaintiffs did not file timely objections as required by the Arizona garnishment statute. Doc. 20 at 8; A.R.S. § 12-1581(A). Plaintiffs filed objections to the R&R on February 5, 2014. Doc. 21.

In a separate motion, Defendants Fred Auzenne and Loral Langemeier move to terminate themselves as parties to this action. Doc. 23. Defendants also move to substitute Plaintiffs Marcus Labertew, John McDermott, and Jennifer McDermott as real parties-in-interest in Ms. Langemeier's place. Doc. 23.

II. Legal Standard.

The Court may "accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3); 28 U.S.C. § 636(b)(1). The Court must make a de novo determination as to any portion of the report and recommendation that is properly objected to by the parties. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); Thomas v. Arn, 474 U.S. 140, 149-50 (1985). If no objections are filed, the district court is not obligated to review the report and recommendation. United States v. Reyna-Tapia, 328 F.3d 1114, 1121-22 (9th Cir. 2003) (en banc).

III. Analysis.

Plaintiffs object to the R&R's conclusion that the state garnishment procedures, A.R.S. § 12-1580(A) and 12-1581(A), apply after removal to this Court. Doc. 21 at 12. Plaintiffs make several arguments. They contend that Gonzales v. Whitney, 367 P.2d 668 (Ariz. 1962), held that the Arizona Rules of Civil Procedure trump the Arizona garnishment statute, that the Federal Rules of Civil Procedure therefore also trump the Arizona garnishment statute, and that the federal rules do not require a reply to Garnishees' answers. Id. at 3. Citing Beecher v. Wallace, 381 F.2d 372 (9th Cir. 1967), Plaintiffs also argue that the state garnishment proceeding became "null and void" upon removal and that matters contained in Garnishees' answers were denied automatically under Federal Rule of Civil Procedure 7(a). Id. at 4-5. They also argue that Rule 81 requires Garnishees' answers to be treated as federal pleadings and not as responses to a state court garnishment process. Id. at 5-6; Fed.R.Civ.P. 81(c)(1) and (c)(2).

The Court does not agree. Plaintiffs are attempting to execute on the judgment they obtained in state court. They selected garnishment as their method of execution in state court, and commenced garnishment proceedings under Arizona's garnishment statute. Federal courts have long held that garnishment proceedings may be removed to federal court if they satisfy the requirements of diversity jurisdiction. See Swanson v. Liberty Nat'l Ins. Co., 353 F.2d 12, 13 (9th Cir.1965) (state garnishment proceeding removable under 28 U.S.C. § 1441); see also Travelers Prop. Cas. v. Good, 689 F.3d 714, 725 (7th Cir. 2012) (same). This case appears to satisfy all diversity jurisdiction requirements. See Doc. 1.

After removal, Plaintiffs did not seek to have their action remanded to state court. And the action remained a garnishment proceeding. The applications for writs of garnishment were not amended by Plaintiffs in any way, and continued to assert that the insurance companies were garnishees indebted to Plaintiffs. Doc. 1-16 at 31-35.

As post-trial garnishment actions pending in federal court, these proceedings are governed by Rule 69(a) of the Federal Rules of Civil Procedure. That rule provides that "[t]he 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, but a federal statute governs to the extent it applies." Fed.R.Civ.P. 69(a). Garnishment is a proceeding "supplementary to and in aid of judgment or execution" within the meaning of this rule. In re Hurley, 148 B.R. 298, 301-02 (Bankr. N.D.Ill. 1992), aff'd, 158 B.R. 115 (N.D. Ill. 1993). As the Ninth Circuit has held, "[s]tate law has been applied under Rule 69(a) to garnishment, mandamus, arrest, contempt of a party, and appointment of receivers, " when such actions are undertaken in aid of executing on a judgment." Office Depot Inc. v. Zuccarini, 596 F.3d 696, 700 (9th Cir. 2010) (quoting In re Merrill Lynch Relocation Mgmt., Inc., 812 F.2d 1116, 1120 ...


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