Endicott Johnson Corp. v. Encyclopedia Press, Inc.

Background

A publishing company won a money judgment against one of its debtor’s employees and used a New York statute to seek an ex parte order requiring the employee’s employer to pay ten percent of weekly wages toward the judgment. The statute allowed a creditor to get such a garnishment without giving the judgment debtor prior notice when the debtor’s weekly earnings were at least twelve dollars. The employer refused to withhold the percentage, the creditor sued the employer to recover the withheld amounts, and the state courts upheld the creditor’s recovery.

Reasoning

The main question was whether the law violated the Fourteenth Amendment by allowing a garnishment order without a new notice or hearing, and whether it unlawfully interfered with the debtor’s or employer’s freedom to make contracts. The Court explained that once a person has had a full hearing and lost, the law does not require a second hearing before ordinary supplemental procedures reach property to satisfy the judgment. Applying that principle, the Court held the statute’s ex parte garnishment procedure did not deny due process, and it did not unlawfully disrupt contract freedom; a bookkeeping burden on the employer was not a constitutional injury.

Real world impact

The decision means state statutes that allow creditors to obtain garnishments after judgment without separate notice are constitutionally permissible. Creditors can enforce money judgments by attaching wages under similar state rules, employers who ignore such orders may be sued, and debtors generally will not receive a new hearing before these supplemental collections proceed.