Imagine you’re a hard-working business owner. Suddenly, an unknown creditor tries to freeze your accounts and garnish money from your Limited Liability Company (LLC), due to a judgment that’s got nothing to do with your company, but with one of your partners.
The consequences of this can be brutal, because the account frozen may be your payroll account, or your main operating account. As a result, the impact on your business can be financially catastrophic.
So, what do you do in this situation?
Firstly, you need to understand the process. The “garnishment” process, as it is known in law, starts with a “writ of garnishment’s” service of process. Additionally, it requires a trial on damages.
Service of Process
“Service of process” is a legal term for the delivery of legal documents to a person or entity, and it is required in order to respond to a legal proceeding, such as a lawsuit. The legal documents could include a summons, complaint, subpoena, or a writ of garnishment.
Florida law requires strict compliance with all statutory requirements for service of process. Mattress One, Inc. v. Sunshop Props., LLC, 282 So. 3d 1024, 1025 (Fla. 3d DCA 2019) (“A challenge to service of process relates to the court’s personal jurisdiction over [a party].”). Sierra v. U.S. Bank Tr., N.A., 299 So. 3d 402, 403 (Fla. 4th DCA 2020). “Proper service of process is indispensable for the court to obtain personal jurisdiction.” Modway, Inc. v. OJ Com., LLC, 331 So. 3d 723, 726 (Fla. 4th DCA 2021). “Absent strict compliance with the statutes governing service of process, the court lacks personal jurisdiction.” Anthony v. Gary J. Rotella & Assocs., P.A., 906 So. 2d 1205, 1207 (Fla. 4th DCA 2005).
Now, there are certain special requirements for serving process on an LLC.
“Process against a limited liability company . . . may be served on the registered agent designated by the limited liability company.” § 48.062(1), Fla. Stat. (2021).
Process against an LLC requires an attempt on the registered agent first, before serving somebody else. Tuscan River Est., LLC v. U.S. Bank Tr. Nat’l Ass’n, 351 So. 3d 1233, 1237 (Fla. 1st DCA 2022) (“Section 48.062(1) requires an attempt at service of process on an LLC’s registered agent.”). “If service cannot be made on the LLC’s registered agent,” then “process may be served on a member, manager, or designated employee as set forth in section 48.062(2)(a)-(c).” Jupiter House, LLC v. Deutsche Bank Nat’l Tr. Co., 198 So. 3d 1122, 1123 (Fla. 4th DCA 2016).
If the writ of garnishment was not served according to Florida law, you can challenge the service of process’ legitimacy.
Trial on Damages
Additionally, you can request a trial on damages. Remember, the writ of garnishment we are discussing here is against another party. So, even if that other party is your partner, your partner is a third party. Due to this, your LLC has its own juridical persona under the law. Thus, Florida mandates a trial on damages to determine the amount you, as the garnishee, owe to the creditor.
Oftentimes, this is ignored, because the creditor believes that the judgment—which has a dollar amount—is already liquidated. But that is not the case vis à vis the garnishee. A determination of the exact amount owed by the garnishee from the judgment being enforced is needed.
Florida law states as much: It is well established that a writ of garnishment “asserts a claim for an unliquidated sum.” Bellsouth Advert. & Publ’g Corp. v. Sec. Bank, N.A., 698 So. 2d 254, 256 (Fla. 1997). That is because “the extent of the garnishee’s liability is the amount that it owes to the judgment debtor.” SunTrust Bank v. Arrow Energy, Inc., 199 So. 3d 1026, 1028 (Fla. 4th DCA 2016).
Even after default, parties have an unquestionable “due process entitlement to notice and opportunity to be heard as to presentation and evaluation of evidence necessary to a judicial determination of the amount of unliquidated damages.” Cellular Warehouse, Inc. v. GH Cellular, LLC, 957 So. 2d 662, 666 (Fla. 3d DCA 2007). Indeed, “the setting of unliquidated damages without the required notice and without proof is regarded as fundamental error.” Wells Fargo Bank, Nat’l Ass’n v. Sawh, 194 So. 3d 475, 481 (Fla. 3d DCA 2016).
For more information on LLCs or any other type of business matter, contact experienced commercial attorney Eduardo A. Maura at eduardo@ayalalawpa.com, or call 305-570-2208.
You can also schedule your case evaluation here.
