Eleventh Circuit Affirms Deposit of Judgment Amount with District Court Registry as Proper, Awards Attorneys Fees to Bank Due to Litigious Garnishment Proceedings

The Eleventh Circuit affirmed a ruling by the Southern District of Florida that Defendant John Zelaya had properly satisfied a judgment entered against him in the Southern District of New York upon Zelaya’s deposit of that judgment with the Southern District of Florida’s registry. Further, the Eleventh Circuit affirmed the award of attorney’s fees to Deutsche Bank under Florida law on grounds that Zelaya Capital’s litigation strategy in garnishment proceedings had increased those costs for Deutsche Bank.

This appeal stemmed out of a disputed satisfaction of judgment and several parties’ claims to that judgment. The Securities and Exchange Commission obtained a $4.5 million judgment against Peter Tosto in 2002. Zelaya/Capital International Judgment, LLC, v. Zelaya, No. 12-15351, slip op. at 3 (Oct. 23, 2014). In 2004, Tosto and several other parties obtained a $2.7 million judgment against John Zelaya. Id. at 2. The prevailing parties in that 2004 case against Zelaya assigned their interest in the judgment to Plaintiff Zelaya/Capital International Judgment, LLC (“Zelaya Capital”), while Tosto retained a 25% interest in any amount recovered by Zelaya Capital. Id. at 4. The judgment was registered with the Southern District of Florida in 2006, where Zelaya Capital subsequently sought a writ of execution against Zelaya and served writs of garnishment against several banks it thought held some of Zelaya’s assets, one of which was Deutsche Bank, who intervened in this action. Id. at 2, 4. Meanwhile, the SEC also intervened in the action and claimed it was entitled to a portion of the 25% interest Tosto had retained in the 2004 judgment against Zelaya based on its 2002 judgment against Tosto. Id. at 3. In 2010, Zelaya deposited the 2004 judgment and interest in full with the Southern District of Florida, upon which the court dissolved the writs of garnishment Zelaya Capital had sought and entered an order that the judgment had been satisfied. Zelaya Capital appealed the district court’s granting of Zelaya’s motion that he had satisfied the judgment through depositing the funds with the court registry and the award of attorneys fees to Deutsche Bank.

The Eleventh Circuit held that allowing Zelaya to deposit the funds in the district court did not err in allowing Zelaya to deposit the amount of the judgment with the district court’s registry or in granting Zelaya’s motion for a satisfaction of the judgment based on that deposit. While Zelaya capital contended that the deposit of the funds with the court registry constituted an “impermissible collateral attack on the 2004 judgment,” the Eleventh Circuit nonetheless agreed with the Southern District of Florida that Zelaya was ready, willing, and able to satisfy the judgment but that issues involving other actors prevented him from doing so. Id. at 12–13. Relying on Rule 67 of the Federal Rules of Civil Procedure and case law from the Southern District of New York relevant to this issue, the court held that a debtor may deposit some or all of a sum of money where others are contesting the distribution of that fund with the district court’s registry. Id. Notwithstanding Zelaya Capital’s objection to the deposit as preventing their immediate access those funds, the court recognized that it was not Zelaya’s job to decide the validity of competing claims to a judgment based on a long line of caselaw. Id. at 14. Regarding the district court’s dissolution of the writs of garnishment, Zelaya Capital argued that the district court dissolved them prematurely before the funds had been distributed. Id. at 16. The court held that the district court did not err because, under Florida law, a court may dissolved a writ of garnishment “on its own motion for any number of reasons” and that, ultimately, “the writs of garnishment against the banks served no purpose” since Zelaya had deposited the disputed judgment. Id. Finally, the court held that Zelaya’s actions constituted a satisfaction of the judgment because, under Florida law, “the debtor’s deposit of the full amount of the judgment plus post-judgment interest in the court’s registry” is a satisfaction of the judgment and that there is no requirement for “the plaintiff to accept the tendered amount before a satisfaction of the judgment may be issued. Id. at 17.

Finally, the Eleventh Circuit held that the district court did not err in awarding attorneys fees and costs to Deutsche Bank. While the court acknowledged Zelaya Capital’s argument that it should have a jury trial on the issue of attorneys fees in the writ of garnishment dispute, that issue was rendered moot when Zelaya deposited the funds. Id. at 18. Additionally, the court took the opportunity to point out that Deutsche Bank was due attorneys’ fees and costs because of the extent that Zelaya Capital aggressively litigated the writs of garnishment and that “Deutsche Bank had no choice but to invest substantial time in this case due to [Zelaya Capital’s] aggressive conduct.” Id. at 20. Finally, the court held that these fees were to come not in addition to the judgment but out of the judgment amount deposited because Zelaya had not been responsible for this litigiousness in the garnishment proceedings. Id. at 21

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