Power Rental Op Co. v. V.I. Water & Power Auth.

• Decision Date: 27 January 2021
• Docket Number: Case No. 3:20-cv-1015-J-32JRK
• Citation: 515 F.Supp.3d 1237
• Parties: POWER RENTAL OP CO, LLC, Plaintiff, v. VIRGIN ISLANDS WATER & POWER AUTHORITY, Defendant.
• Court: U.S. District Court — Middle District of Florida

515 F.Supp.3d 1237

POWER RENTAL OP CO, LLC, Plaintiff,

v.VIRGIN ISLANDS WATER & POWER AUTHORITY, Defendant.

Case No. 3:20-cv-1015-J-32JRK

United States District Court, M.D. Florida, Jacksonville Division.

Signed January 27, 2021

Aleksey Shtivelman, Harold E. Patricoff, Ana Rosa Portal Mendez, Shutts & Bowen, LLP, Miami, FL, John A. Carlisle, Ryan J. Mittauer, Rutledge Richardson Liles, The Liles Firm, P.A., Jacksonville, FL, for Plaintiff.

Anna G. Dimon, Pro Hac Vice, Edmund M. O'Toole, Pro Hac Vice, Venable LLP, New York, NY, Daniel M. Mahfood, Frank Edward Morreale, Holland & Knight LLP, Jacksonville, FL, for Defendant.

ORDER

TIMOTHY J. CORRIGAN, United States District Judge

This Florida garnishment case asks this question: In the era of online and electronic banking, where is the situs of a bank account for the purposes of prejudgment garnishment? The case comes before the Court on Defendant Virgin Islands Water & Power Authority's ("WAPA") Motion to Dissolve Pre-Judgment Writs of Garnishment (Doc. 23).

In February 2020, Plaintiff Power Rental Op Co, LLC ("OpCo") notified WAPA that WAPA had defaulted on its obligations under a promissory note and demanded immediate payment. (Doc. 6-4 at 3). WAPA did not comply. Thus, in June 2020, OpCo filed a suit in the Duval County Circuit Court alleging three counts—breach of promissory note (Count I), services rendered (Count II), and quantum meruit (Count III). (Docs. 6; 1-1). On July 28, 2020, OpCo filed an ex parte motion for prejudgment writs of garnishment to garnish WAPA bank accounts at FirstBank and Banco Popular. (Doc. 23 at 2). The state trial court granted OpCo's motion on July 29, 2020 and the Clerk of Court issued writs on July 30, 2020. (Docs. 23 at 2; 32-5). Subsequently, WAPA removed the case to this Court, and filed the pending motion to dissolve. (Docs. 23 at 2; 1). WAPA claims that the writs must be dissolved because: (1) OpCo's motion for prejudgment writs of garnishment contains falsehoods; (2) WAPA's accounts are located outside of Florida; and (3) WAPA's accounts are protected under the Virgin Island's sovereign immunity laws. (Doc. 23 at 6).

I. BACKGROUND¹

OpCo is a Florida limited liability company with its principal place of business and headquarters in Florida. (Docs. 6 at ¶ 2; 34 at 4). WAPA is a municipal corporation existing under the laws of the United States Virgin Islands ("USVI") with a mandate to provide water and power to residential and commercial customers in USVI. (Doc. 6 at ¶ 3).

On February 15, 2012, General Electric International ("GE") entered into a contract with WAPA (the "Rental Agreement") for the provision of water and energy-related services and rental of power generation equipment and water treatment systems. (Doc. 6 at ¶ 7). In exchange for the equipment and services, WAPA was required to make monthly payments. (Doc. 6 at ¶ 8).

As a result of an acquisition of GE businesses in 2013, OpCo assumed the beneficial ownership of the Rental Agreement. (Doc. 6 at ¶ 9). While OpCo performed its obligations under the Rental Agreement, WAPA failed to make required monthly rental payments to OpCo. (Doc. 6 at ¶¶ 11–14). On April 30, 2019, the amount due and owed by WAPA to OpCo under the Rental Agreement was $14,291,986.00. (Doc. 6 at ¶ 12). OpCo subsequently agreed to a reduction of the outstanding balance to $9,310,971.00 in exchange for WAPA issuing a promissory note (the "Note") for the agreed upon reduced amount. (Doc. 6 at ¶ 13). The Note contains a clause on waiver of immunities, and is governed by New York substantive law. (Doc. 6-1 at 6).

OpCo filed its ex parte motion for prejudgment writs to garnish $2,696,760.90 from WAPA bank accounts at FirstBank and Banco Popular, purportedly located in Florida. (Docs. 32-4 at ¶ 1; 23 at 2). In support of its motion, OpCo submitted that WAPA failed to maintain a letter of credit as required under the Note. (Docs. 32 at 13). Additionally, OpCo filed a 2019 letter from a USVI congresswoman to the USVI Governor expressing her concern over WAPA's negative cash operating balance of $13 million and approximately $252 million debts in bonds, as well as a brief from a separate lawsuit that suggests WAPA is insolvent. (Docs. 32 at 13; 32-3). After the state court granted OpCo's motion, OpCo served the writs of garnishment on branches of FirstBank and Popular Bank, a subsidiary of Banco Popular, in Miami, Florida. (Docs. 32-4; 23 at 2; 26).² WAPA, Banco Popular, and FirstBank assert that WAPA opened and maintains its bank accounts outside of Florida. (Docs. 21-1; 19).

II. FLORIDA GARNISHMENT LAW

Garnishment actions in Florida federal courts are governed by the procedures of the applicable Florida statutes.³ Branch Banking & Trust Co. v. Hamilton Greens, LLC, No. 11-80507-CIV-MARRA/MATTHEWMAN, 2015 WL 5257668, at *3 (S.D. Fla. Sept. 8, 2015) ("Actions for garnishment in federal court are governed by applicable state law.") (referencing Federal Rules of Civil Procedure 64 and 69 ). In Florida, prejudgment garnishment is a statutory remedy governed by Chapter 77 of the Florida Statutes:

To obtain issuance of the writ, the plaintiff, or the plaintiff's agent or attorney, shall file in the court where the action is pending a verified motion or affidavit alleging by specific facts the nature of the cause of action; the amount of the debt and that the debt for which the plaintiff sues is just, due, and unpaid; that the garnishment is not sued out to injure either the defendant or the garnishee; and that the plaintiff believes that the defendant will not have in his or her possession, after execution is issued, tangible or intangible property in this state and in the county in which the action is pending on which a levy can be made sufficient to satisfy the plaintiff's claim. The writ of garnishment shall set forth a notice to the defendant of the right to an immediate hearing for dissolution of such writ....

FLA. STAT. § 77.031(2).⁴ Generally, the plaintiff must also provide a bond at least double the amount of the debt demanded. FLA. STAT. § 77.031(3).

As for the effect of writs, the Florida garnishment statute stipulates that "[s]ervice of [a] writ shall make garnishee liable for all debts due by him or her to defendant and for any tangible or intangible personal property of defendant in the garnishee's possession or control ...." FLA. STAT. § 77.06(1).

The questions before the Court are whether trial courts must have in rem jurisdiction over assets to issue a prejudgment writ of garnishment, and what is the situs/location of a bank account in light of modern banking practices. The answers to these questions are not evident based on the plain language of the garnishment statute. Thus, the Court proceeds to examine the jurisprudence of the Florida state courts and the Middle District, as well as interpretations of the Florida garnishment statute advanced by WAPA and OpCo.

A. Florida State Court Jurisprudence

"[T]he highest court of the state is the final arbiter of what is state law. When it has spoken, its pronouncement is to be accepted by federal courts as defining state law unless it has later given clear and persuasive indication that its pronouncement will be modified, limited or restricted." West v. American Tel. & Tel. Co., 311 U.S. 223, 236, 61 S.Ct. 179, 85 L.Ed. 139 (1940). Federal courts sitting in diversity must also "follow the decisions of intermediate state courts in the absence of convincing evidence that the highest court of the state would decide differently." Stoner v. New York Life Ins. Co., 311 U.S. 464, 467, 61 S.Ct. 336, 85 L.Ed. 284 (1940) ; see also Carlson v. FedEx Ground Package Sys., Inc., 787 F.3d 1313, 1326 (11th Cir. 2015) ("By ruling consistently with [the state appellate court], we ensure that this case is decided in a Florida federal court as it would be in a Florida state court, and thereby discourage forum shopping as between federal and state courts in Florida and prevent the inequitable administration of the law.").

The Florida Supreme Court has explained that "[g]arnishment is a creature of statute, unknown at common law." Arnold, Matheny & Eagan, P.A. v. First Am. Holdings, Inc., 982 So.2d 628, 632 (Fla. 2008) ; see also Florida Power & Light Co. v. Crabtree Const. Co., Inc., 283 So.2d 570, 572 (Fla. 4th DCA 1973) ("Garnishment was unknown to the common law and exists only by statutory mandate."). As such, this provisional remedy "is not to be extended beyond the provisions of the statute which must be strictly followed." Thompson v. Commercial Union Ins. Co. of New York, 267 So.2d 18, 20 (Fla. 1st DCA 1972) ; see also Arnold, 982 So.2d at 633 (Courts "must construe the statute in accordance with legislative intent by looking primarily at the statutory language.").

The earliest identified case on the applicability of the Florida garnishment statute to funds held in bank accounts outside the territorial limits of Florida is Ellis v. Barclays Bank PLC-Miami Agency. 594 So.2d 826 (Fla. 3d DCA 1992). In Ellis, the Florida Third District Court of Appeal ruled that a post-judgment writ of garnishment served on the U.S. branch of an international bank could not reach a judgment debtor's deposits held in foreign branches of the bank. Id. at 827. In so ruling, the Ellis court cited two Florida cases, which provide additional insight into the court's interpretation of the garnishment statute. See Tueta v. Rodriguez, 176 So.2d 550, 552 (Fla. 2d DCA 1965) ; State ex rel. Florida Bank & Trust Co. v. White, 155 Fla. 591, 21 So.2d 213, 215 (1944). Specifically, the cases referenced by the Ellis court express that "[a] court may not proceed in-rem or quasi-in-rem when the subject matter of the action is not within the territorial jurisdiction of the court." Tueta, 176 So.2d at 552 ; see also State ex rel. Florida Bank, 21 So.2d at 215 ("A court has no jurisdiction to adjudicate the right of action in the rem when the property in controversy is without the limits of the court's...