Following Through With a Judgment: Working Towards a Successful Debt Collection

Nevada Business Magazine

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By John R. Funk

When your business sells goods or services, you expect to be paid.  However, payment is not always the reality.  If your business is not getting paid, you can seek repayment either informally or formally.  If your informal methods of trying to convince the debtor to pay have been unsuccessful; consider formally seeking payment by filing a lawsuit.  This article focuses on the realities of using the judicial system to collect amounts owed to your business.

Once you file a lawsuit, the debtor has the opportunity to defend the action.  The debtor may assert defenses that it does not owe as much as you think, that the goods were defective, or the services subpar.  Fast forward—the judge has decided the debtor’s defenses are without merit and has awarded you a monetary judgment for the full amount you sought.  Hey, you just won your lawsuit!  Congratulations are in order, right?

Wrong, merely winning a lawsuit and obtaining a judgment does not mean you automatically receive a deposit in your business’s bank account.  Rather, that judgment only allows you to use the courts and sheriff’s office to enforce your judgment.

Satisfying Your Judgment

In Nevada, those who have monetary judgments against another (“judgment creditors”) have a variety of statutory tools at their disposal to compel those who owe them money (“judgment debtors”) to satisfy the judgment.  At its most basic level, Nevada’s debt collection statutes allow judgment creditors to satisfy their judgments by having the sheriff’s office seize property belonging to the judgment debtor.  The sheriff’s office will then sell that seized property and give the proceeds of the sale to the judgment creditor.  The judgment creditor can have this process repeated until the judgment is paid in full.  Thus, judgments are only as good as the judgment debtor’s quality and quantity of assets.

Locating the Judgment Debtor’s Assets

The question then becomes, how do you know what property to have the sheriff seize.  Nevada allows a judgment creditor to obtain information directly from the judgment debtor, or any other person, concerning the judgment debtor’s property.  For instance, judgment creditors may subpoena the judgment debtor’s accountants, managers, or any person when seeking information concerning the judgment debtor’s property.  If that person refuses or fails to answer, they may become responsible for paying the amounts owed to your business.

Sometimes, by the time the judgment creditor obtains its judgment, the judgment debtor has transferred all of its assets to a separate entity or to the entity’s principals in hopes of avoiding the judgment.  Once again, the judicial process has a solution for the judgment creditor.

Discovery of Nonparties’ Assets

The Nevada Supreme Court recently permitted a judgment creditor to obtain information concerning the assets of a non-debtor.  Rock Bay, LLC v. Dist. Ct., 129 Nev. Adv. Op. 21 (Nev. Apr. 4, 2013).  In that recent case, the Nevada Supreme Court allowed the judgment creditor to ascertain information concerning the assets of an entity that was not a debtor, but who participated in various financial transfers with the judgment debtor after a lawsuit was filed.  This third-party was formed by one of the judgment debtors and it appeared to be used as a vehicle to hide money from the judgment creditor.

The Nevada Supreme Court explained that allowing discovery into the assets of non-debtors is permissible if it will lead to the discovery of hidden or concealed assets of the judgment debtor.  To convince a court to allow such discovery, the judgment creditor may show that transfers to the third party took place and that the relationship between the judgment debtor and the nonparty is sufficient to raise a reasonable suspicion concerning the propriety and permissibility of the transfers.

When your business is owed money, you have various options available to you to seek payment.  Typically, you should start by informally seeking to convince the debtor to pay your bill without having to hire a debt collector or without having to file a lawsuit.  However, when that debtor refuses to pay, even though it has the apparent ability or assets to do so, your business should consider filing a lawsuit.

John R. Funk is an Associate at Gunderson Law Firm, and can be contacted directly at jfunk@gundersonlaw.com or by calling (775) 829-1222.

Electronic Service – Three Days for Emailing?

YLS newsletter

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By Austin K. Sweet

The law is often slow to catch up with technology, but thankfully courts moved quickly to adopt electronic filing.  Most members of the Young Lawyers Section living in Washoe County or Clark County have spent our entire careers with electronic filing and can hardly bear the thought of actually leaving the office and go stand in line at the courthouse to file a document.  But the quick adoption of electronic filing left some oddities – namely, the handling of electronic service.

Before electronic filing, documents could be served by hand or by first class mail.  Because service by mail takes longer, the rules provide that a responding party shall have three extra days to respond when a document is served by mail.  NRCP 6(e).  This rule makes perfect sense.

Then fax machines came along, creating a new method of service.  Facsimile service is only acceptable if the parties consent, and still allows for three extra days to respond.  NRCP 5(b)(2)(D); NRCP 6(e).  As technology advanced, service by email became acceptable and was lumped into the rules with service by fax.  Again, three days are added to the prescribed period to respond.  Id.  That’s where the logic starts to get fuzzy.

Things became more convoluted when electronic filing was introduced.  The Nevada Electronic Filing and Conversion Rules (“NEFCR”) were adopted by the Supreme Court and became effective on March 1, 2007.  Second Judicial (Washoe County) has adopted the NEFCR.  NEFCR 9(b) provides that the court’s electronic service provider must send an email to all registered users that a document has been filed.  NEFCR 9(f) provides that electronic service is complete at the time of transmission of the NEFCR 9(b) email.

Eighth Judicial (Clark County) has not adopted the NEFCR, instead adopting its own electronic filing rules.  EDCR 8.05(a) provides that documents electronically served through that court’s electronic filing process are subject to NRCP 5(b)(2)(D) and, by proxy, NRCP 6(e).

So what does all this mean?  When documents are electronically served through the court’s filing system in the Nevada Supreme Court or in Washoe County, three days are not added to the prescribed period to respond.  When documents are electronically served through the court’s filing system in Clark County, three days are added.  Likewise, when documents are electronically served in accordance with an agreement between the parties, three days are added.

Not surprisingly, this has created confusion.  Practitioners in Washoe County regularly misinterpret the relationship between NEFCR 9(f) and NRCP 6(e) and mistakenly believe that they are entitled to an additional three days when documents are served through eFlex.  This confusion is so widespread that the rules are rarely enforced as written and the Second Judicial judges are discussing revisions to the rules.

There is an easy solution to this problem – stop adding three days for emailing.  In today’s world of computers and smart phones, most attorneys check their email constantly.  It is likely that the average attorney reads the automated notifications from eFlex / Wiznet within minutes of receiving them.  By contrast, documents served by hand must be driven (or biked) from one office to another, processed through the firm, and eventually delivered to the attorney handling the case.

Chances are, attorneys are able to access and read electronically-served documents hours, or even days, before they are able to access and read hand-served documents.  Why then are attorneys granted three extra days to respond to documents served electronically?  If logic ever existed for this rule, it does not exist today.

The state and local rules throughout Nevada should be amended to reflect the realities of today’s electronic world.  Adding three days for electronic service is counterintuitive and unduly dilatory.  The rules should be modified and clarified to plainly provide that documents served electronically are deemed received the day they are served without adding three days.

Austin K. Sweet is an Associate at Gunderson Law Firm. He earned his Juris Doctorate from Boston University School of Law and can be contacted directly at asweet@gundersonlaw.com or 775-829-1222.