Opinion
Civil Action No. 02-521 SECTION "N"
May 6, 2002
ORDER AND REASONS
Before the Court is plaintiff's Motion to Compel Deposit of Garnished Funds into the Registry of the Court and Determination of Ownership of Garnished Funds. For the reasons that follow, the motion is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Plaintiff, Pioneer Shipping S.A., commenced this action by obtaining an order of attachment and garnishment, pursuant to Supplemental Rule B(1), against all property of defendant, Argonaut Shipping International ("Argonaut"), held by garnishee, Chaffe, McCall, Phillips, Toler Sarpy, L.L.P. ("Chaffe, McCall"). The stated purpose of the attachment was to obtain security for arbitration proceedings plaintiff has initiated against defendant for alleged breach of a charter party. In response to garnishment interrogatories, Chaffe, McCall admitted that it held $31,250 in trust for Argonaut, but stated that $15,000 of these funds represented a retainer for legal services performed and to be performed in connection with a matter pending in Section "L" of this Court. (Rec.Doc. 13, Exh. B at p. 2). Argonaut had sent $5,000 of this amount directly to Chaffe, McCall to provide for these legal services and had sent the remainder ($26,250) to its husbanding agent, Swenson Bros. Shipping, Inc., to pay costs associated with discharging the chartered vessel at issue in that dispute. Id. When the owner of that vessel paid the costs associated with discharge, Swenson Bros. tried unsuccessfully to wire the $26,250 back to Argonaut. (Rec.Doc. 14 at p. 2). Argonaut ten asked Swenson to transfer the funds via check to Chaffe, McCall, who would retain $10,000 toward future legal fees and wire the remainder to Argonaut. Plaintiff served the garnishment order before Chaffe, McCall made the wire transfer.
Plaintiff now moves to have the ownership of the funds determined and to compel Chaffe, McCall to deposit the funds into the registry of the Court.
II. LAW AND ANALYSIS
Under Louisiana law, where "the client pays the lawyer an advance deposit against fees which are to accrue in the future on an hourly or other agreed basis, the funds remain the property of the client." La. Rev. Stat. Title 37, Chap. 4, Appendix, Art. XVI, Rule 1.5(f)(3). As the fees are earned, the lawyer may transfer the funds from the trust account to his operating account without further authorization from the client Id. At the time of the garnishment, Chaffe, McCall had earned only $2,887.31 in fees. Thus, the remaining $28,362.69 held in its trust account constituted the property of the Argonaut at the time of the garnishment.
Chaffe, McCall does not disagree. Rater, it argues that $12,112.69 (the unearned portion of the funds which had been designated as a deposit against future legal fees) should be exempted from the garnishment for policy reasons: garnishing these amounts will hinder Argonaut's ability to maintain legal representation. The law, however, is to the contrary. See, e.g., Board of Trustees of East Baton Rouge Mtg. Fin. Authority v. All Taxpayers, 361 So.2d 292, 295 (La.App. 1st Cir. 1978) ("An attorney at law who possesses property for his client is subject to garnishment proceedings by the judgment creditor."); George A. Riemer, Can They Do That?: Garnishing Lawyer Trust Accounts, 58 ORE. St. BAR BULL. 31 (July 1998) ("client funds in a lawyer's possession are generally subject to garnishment by the client's creditors"); K.R. Newell, Funds in Hands of His Attorney as Subject of Attachment or Garnishment by Client's Creditor, 35 A.L.R. 3d 1094 (1971) ("[T]he general rule is that . . . client's funds are not immunized from garnishment merely because they are in the hands of his attorney. . . . Nor should the argument be relied on that counsel is entitled to retain the funds to secure payment of any fees due or to become due in any business for which he has been retained by the client before the service of process on him."). Accordingly, the funds held by Chaffe, McCall (except for the $2,887.31 earned before service of the garnishment) are the property of Argonaut and are subject to garnishment. Whether Chaffe, McCall is entitled to a lien on any portion of these funds and, if so, the priority of such lien, is not before the Court. Nor has Argonaut challenged the reasonableness of the amount of the security.
Plaintiff argues that, because Chaffe, McCall has made the argument addressed above, it should be compelled to deposit the garnished funds into the registry of the Court. The Court disagrees. Where, as here, the garnishee admits to debts, credits, or effects of the defendant, Rule B(3)(a) requires that the property "be held in the garnishee's hands or paid into the registry of the court." Fed.R.Civ.P. Supp. Rule B(3)(a) (emphasis added). The attorneys at Chaffe, McCall are officers of this Court. For more than two months, they have held the funds subject to the garnishment order, and the Court is confident that they will continue to do so, subject to further order of this Court.
III. CONCLUSION
Accordingly, for the foregoing reasons, IT IS ORDERED that plaintiff's Motion to Compel Deposit of Garnished Funds into the Registry of the Court and Determination of Ownership of Garnished Funds is GRANTED IN PART, in that the Court finds that $28,362.69 of the funds in Chaffe, McCall's trust account constitute the property of Argonaut and remain subject to the garnishment order, to be held by Chaffe, McCall subject to further order of the Court, and DENIED IN PART, in that it is denied in all other respects.