Ruling in a case of first impression, the Georgia Supreme Court has declared that an insurance company named in a garnishment action does not qualify as a “financial institution” when it is being garnished for earnings owed to a current or former employee.   

The distinction means a man seeking to garnish a former Aflac executive's pension payments does not have to use forms created under a 2016 rewrite of Georgia's garnishment statute that limit the length of time a financial institution can be garnished to five days, rather the 29 days available under a general garnishment.

The justices issued the unanimous ruling at the request of a federal judge in Columbus overseeing a tussle between a man trying to collect a nearly $160,000 judgment against former Aflac executive Sal Diaz-Verson.   

After plaintiff Harold Blach filed a garnishment action in 2012 targeting retirement funds paid to Diaz-Verson, Judge Clay Land of the U.S. District Court for the Middle District of Georgia ruled that 25 percent of the bimonthly payments were subject to garnishment.

But then, Diaz-Verson's former lawyer entered the dispute as a third-party claimant, arguing Diaz-Verson owes him nearly $300,000 in unpaid legal fees.

Last year, Land ruled Diaz-Verson's former lawyer, Robert Frey, had a superior claim and that any proceeds from Blach's garnishment must go to Frey until he was paid off. Aflac had deposited more than $140,000 into the court registry at the time.

The case took another turn last year when Diaz-Verson's attorney, Hunton & Williams partner Kurt Powell, said Blach was using the wrong garnishment forms and that most of the money must be returned.  

The new law was enacted after the late U.S. District Judge Marvin Shoob ruled the old one unconstitutional because it failed to give debtors proper notice of exemptions or provide a prompt means for addressing exemption claims.

Among other changes, the law cut the garnishment period against a financial institution from up to 45 days to just five, and it mandated new forms be used when filing such garnishments.

The garnishment period for nonfinancial institutions was shortened to 29 days.

Powell filed a motion arguing that any garnishments filed after the new statute took effect in May 2016 were improper because they were filed on forms used for nonfinancial institutions and that any collected funds from that point on must be returned to Diaz-Verson.

The new law has an extensive list of “financial institutions” such as savings banks, savings and loans companies, trust companies, insurance companies “or other organizations held out to the public as a place of deposit of funds or medium of savings or collective investment.”

Blach's attorney, A. Binford Minter of Sandy Springs' Wagner, Johnston & Rosenthal, argued that law was meant to safeguard depositors' funds and did not mean a garnishment filed against an employee of a bank or insurance company would require the use of the special forms.

In his certified question to the state Supreme Court, Land seemed to agree with Diaz-Verson that such an interpretation would mean anyone attempting to garnish a financial institution's employee or retiree would have to file a new garnishment action every five days and use the appropriate forms.

The law “clearly states that insurance companies are financial institutions for purposes of the statute,” Land wrote. Nonetheless, he said, “an argument can be made that this court's plain meaning interpretation cannot be what the General Assembly intended.”

The high court heard arguments in August, and Monday's opinion came down squarely on Blach's side.

Writing for the court, Justice Michael Boggs conceded the statute's language explicitly included insurance companies, he also said that it should  be viewed within the context of the entire code section it occupies.

The financial institution form includes language requiring the garnishment defendant's “account, identification, or tracking number,” and includes a subsection for those a defendant who “does not have an active account with” or any money or property held by the garnishee.

The forms “demonstrate that 'financial institution,' for purposes of garnishment … is intended to include only those entities that hold funds of the defendant in some type of account.”

If Diaz-Verson's position were to prevail, Boggs wrote, an insurance company, bank or other such institution “could never be the garnishee of a general garnishment, continuing garnishment or continuing garnishment for support as the employer or former employee of the defendant.”

Minter welcomed the ruling.

“Obviously my client is pleased with the court's unanimous decision in his favor,” said Minter via email. “It removes yet another obstacle to collection of his six-year-old judgment.”

Minter said the case was his first appearance at the high court.

Powell did not immediately respond to requests for comment.