Michigan Court of Appeals Overturns Judgment Against Ford Motor Company in Garnishment Action

Michigan Court of Appeals Overturns Judgment Against Ford Motor Company in Garnishment Action

2/21/2008
In Shah v City of Farmington Hills, Oxford Estates Condo Assoc and Ford Motor Co, ___ Mich App ___; ___ NW2d ___ (2008), the Michigan Court of Appeals reversed a judgment entered against Ford Motor Company arising out of a garnishment action. After a judgment was entered against Ford's former employee, Ajay Shah, in favor of Shah's condominium association, the association sought to garnish a lump-sum severance payment that Ford was required to pay Shah. Instead of withholding the entire amount of the severance payment, Ford only withheld 25% of the payment in accordance with the Federal Consumer Credit Protection Act's (FCCPA) limitation on the amount of an employee's "earnings" that can be garnished. The trial court held that Ford should have withheld the entire amount because the lump-sum nature of the severance payment took it outside the statutory definition of "earnings," i.e., "compensation paid or payable for personal services." Accordingly, the trial court entered a judgment against Ford in the full amount of the severance payment, plus attorney fees. The Court of Appeals, however, reversed in a 2-1 decision, concluding that the severance payment did constitute "compensation paid or payable for personal services." The Court agreed with Ford's argument that the trial court had erred in relying on outdated federal authority holding that only periodic payments can be considered "earnings" under the FCCPA, and that the trial court should have followed more recent authority from the Michigan Supreme Court holding that the proper focus of the statute is the nature of the payment rather than its frequency. Ford was represented in this action by Dickinson Wright attorneys Khalilah V. Spencer and Phillip J. DeRosier. For more information, the Court of Appeals' opinion in Shah v City of Farmington Hills, Oxford Estates Condo Assoc and Ford Motor Co is available at: Shah v City of Famington Hills, Oxford Estates Condo Assoc and Ford Motor Co.
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