Mayers v. New York Community Bancorp Incorporated

No. CV-03-5837 (CPS) (E.D.N.Y. Aug. 31, 2005) ; Clearinghouse Number: 55979

Description

Court Allows Constitutional Challenge to Proceed Against Freezing Bank Accounts Containing Exempt Federal Benefits

Abstract

The district court let stand plaintiffs’ challenge to the constitutionality of the New York state garnishment statute requiring banks to freeze bank accounts, even those containing only exempt funds, upon receiving a restraining order from a creditor; the statute gives debtors only postseizure notice and remedies. Plaintiff elderly and disabled recipients of Social Security Income and social security disability benefits held bank accounts containing only those benefits. Plaintiffs each had their accounts temporarily frozen when collectors attempted to garnish their accounts. Before the bank unfroze their accounts, plaintiffs bounced checks, incurred late fees, and had trouble paying for rent, food, and medicine. Suing defendants—banks, creditors, attorney representing creditors, chief judge, chief administrative judge, and superintendent of banks—plaintiffs argued that the garnishment statute was invalid under the supremacy clause because it conflicted with the Social Security Act’s antigarnishment provision and that the statute violated plaintiffs’ federal and state due process rights because banks receiving restraining notices could immediately determine whether money in a judgment debtor’s account was exempt. Denying dismissal of plaintiffs’ preemption claim, the court found that the garnishment statute, as applied to accounts containing only electronically deposited exempt funds, contradicted the Social Security Act’s purpose to ensure that recipients have the resources necessary to meet their most basic needs. Also denying dismissal of the due process claims, the court found that the garnishment statute did not meet due process standards and that, because of widespread electronic deposits of social security benefits, the competing interests of debtors, creditors, and the state should be reexamined. The court found that bank defendants were acting under color of state law for 42 U.S.C. § 1983 purposes when a statute compelled them to act and that state defendants (chief judge, chief administrative judge, and superintendent of banks) could be named proper parties under Ex Parte Young, 209 U.S. 123 (1908).

Additional Information

Attorney Information
Plaintiffs represented by Edward Josephson, Johnson Tyler, South Brooklyn Legal Services, 105 Court St., Brooklyn, NY 11201 (718.237.5538); Jane Greengold Stevens, New York Legal Assistance Group, 450 W. 33rd St., New York, NY 10001 (212.613.5031).
Docket Date
2005-08-31 00:00:00+00:00
Attorney Email
edwardj@sbls.org