Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-02161/USCOURTS-azd-2_03-cv-02161-2/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Henry J. Wojtunik, )

)

Plaintiff, ) No. CV-03-2161-PHX-PGR

)

vs. )

) ORDER

Joseph P. Kealy, et al., )

)

Defendants. ) )

Pending before the Court is Carolina Casualty's Motion to Quash Writ of

Garnishment (doc. #139). Having considered the parties' memoranda in light of

the relevant record, the Court finds that the motion should be granted.

The plaintiff obtained a stipulated $8 million judgment in his favor in this

securities fraud action on December 19, 2006. The Honorable Frederick

Martone entered a judgment on February 9, 2007 in a related action, Kealy v.

Carolina Casualty Ins. Co., CV 05-911-PHX-FJM, that in part declared that the

settling defendants in the instant action were covered by a $2.5 million directors

and officers liability insurance policy issued by Carolina Casualty Insurance

Company and that Carolina Casualty was required to reimburse them for their

Case 2:03-cv-02161-ROS Document 154 Filed 06/05/07 Page 1 of 4
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1

 Because the Court finds this issue to be dispositive, it does not reach the

various other issues raised by the parties concerning the propriety of the writ of

garnishment.

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attorneys' fees and costs incurred in defending this action; the judgment did not

set forth any amount for those fees and costs. The judgment further dismissed

with prejudice all other claims in the complaint, including those for breach of

contract, bad faith, and for punitive damages. The judgment is currently on

appeal before the Ninth Circuit. In an attempt to collect on the judgment in the

instant action through the benefits that Judge Martone decreed were owed to the

settling defendants under the directors and officers policy, the plaintiff filed an

application for a writ of garnishment on February 15, 2007 against Carolina

Casualty; the Clerk of the Court issued the writ on February 21, 2007. On April 4,

2007, Carolina Casualty filed an answer to the writ, along with an objection to the

writ and a motion to quash the writ.

 The validity of the writ of garnishment is governed by Arizona law. 

Fed.R.Civ.P. 69(a). Under Arizona law, a garnishee is not liable unless at the

time the writ of garnishment is served, there is "a clear, ascertainable debt" owed

by the garnishee to the judgment debtor that is "not contingent on other events." 

Reeb v. Interchange Resources, Inc. of Phoenix, 106 Ariz. 458, 478 P.2d 82, 83

(1970). Carolina Casualty argues in part, and the Court concurs, that it did not 

owe a garnishable debt to the settling defendants at the time the writ was served

because the underlying indebtedness established by Judge Martone's judgment

was then neither clear and ascertainable nor non-contingent.1

First, while Judge Martone's judgment included a declaration that the

settling defendants' insurance claim was covered by Carolina Casualty's policy

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and that Carolina Casualty was therefore indebted to the settling defendants for

their attorneys' fees and costs incurred in defending this action, that indebtedness

was not clear and ascertainable for garnishment purposes because those

amounts were not quantified in the judgment. 

Second, any indebtedness arising from Judge Martone's judgment is in any

case contingent given that the judgment is currently on appeal. While the Arizona

Supreme Court may not have proclaimed that a judgment subject to reversal on

appeal is subject to a contingency for garnishment purposes, as the plaintiff's

contends, the Arizona Court of Appeals has expressly adopted what it has

described as "the general rule throughout the United States" that while a

judgment which is being appealed may be final for some purposes, e.g., it may be

res judicata as between the parties pending appeal, such a judgment is not final

for purpose of creating a debtor-creditor relationship which will support a writ of

garnishment. Davidson-Chudacoff/Kol-Pak of Arizona, Inc. v. Pioneer Hotel Co.,

129 Ariz. 254, 630 P.2d 550, 553-54 (App. 1981) ("Although no Arizona cases

are directly on point, our garnishment law supports the general rule. In Arizona,

before a debt can be subject to garnishment, it must at the time the writ was

served be existing, ascertainable and not contingent upon other events. 

Obviously, a judgment subject to reversal on appeal is subject to a contingency.")

(Internal citation omitted); see also, Amfac Distribution Corp. v. Miller, 138 Ariz.

155, 673 P.2d 795, 797 (App. 1983) (Court noted that the DavidsonChudacoff/Kol-Pak case "held that a judgment from which an appeal has been

taken is not subject to garnishment" because at the time the writ of garnishment

was served the obligation to pay "was wholly contingent upon that judgment

/ / /

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being affirmed on appeal.") Therefore,

IT IS ORDERED that Carolina Casualty's Motion to Quash Writ of

Garnishment (doc. #139-1) is granted and that the writ of garnishment (doc.

#131) issued by the Clerk of the Court on February 21, 2007 against Carolina

Casualty Insurance Company is quashed.

IT IS FURTHER ORDERED that Carolina Casualty's Alternative Request

for Hearing (doc. #139-2) is denied.

DATED this 5th day of June, 2007.

Case 2:03-cv-02161-ROS Document 154 Filed 06/05/07 Page 4 of 4