When do Florida Courts Have Jurisdiction Over Out of State Defendants in Proceedings Supplementary?

By: Mark A. Levy

It is a fundamental principal of the law and due process that if a party ever finds itself as a defendant in a lawsuit, the court must have in personam, or personal, jurisdiction over it.  Florida courts always have in personam jurisdiction over Florida residents.  However, if a party is from outside the state, a Florida court only will have in personam jurisdiction if the party has  sufficient contacts with the State of Florida, in accordance with Florida’s long arm statute.  If a defendant contests in personam jurisdiction, Florida has a well-established procedure whereby the court will conduct a limited factual analysis to determine if the defendant’s contacts are sufficient to confer in personam jurisdiction over that defendant.   That procedure is outlined in a Florida Supreme Court case which is commonly referred to as Venetian Salami., 554 So. 2d 499 (Fla. 1989).

Once a plaintiff has filed a lawsuit and gotten a judgment against a defendant, one of the options a plaintiff may utilize in order to try to collect that judgment is by instituting proceedings supplementary.  Proceedings supplementary are governed by Florida Statutes section 56.29, and give a judgment creditor various rights, including the right to implead third parties in order to try to collect the judgment from those third parties.  One example of such a scenario is if the plaintiff alleges that funds of the judgment debtor were fraudulently transferred to a third party.  Unfortunately, Section 56.29 and the costs interpreting it are vague as to the precise procedure for many aspects of proceedings supplementary, including the treatment of out of state parties.  Fortunately, some recent cases have clarified that a plaintiff seeking to implead an out of state party in proceedings supplementary must satisfy the requirement that the party have sufficient contacts with the State of Florida so that the court may exercise in personam jurisdiction over them.

In The Jarboe Family and Friends Irrevocable Living Trust v. Spielman,  — So. 3d –, 2014 WL 185215 (Fla. 2d DCA Jan. 17, 2014), the court directly addressed the issue of whether a Florida court may exercise in personam jurisdiction over a nonresident third-party defendant through impleader absent a basis for personal jurisdiction under Florida’s long arm statute.  The underlying case involved a lawsuit by Spielman against Ronald E. Jarboe which resulted in final judgment for $754,720.40 against Jarboe.  Spielman filed motions for proceedings supplementary and to implead third parties.  Those third parties filed motions to dismiss arguing that because they were residents of Kentucky and otherwise did not have sufficient contacts with the State of Florida, the claims against them should be dismissed.  The impleader defendants made their arguments based upon the numerous cases which state that the only requirements for a judgment creditor seeking to initiate proceedings supplementary is that there be an unsatisfied judgment and to file an affidavit stating that the judgment is valid and outstanding.  Those cases say that once a judgment creditor satisfies this requirement, third parties may be joined in the proceedings by impleader without reference to any personal jurisdiction issues.   The Jarboe court rejected this argument and held that the long arm statute must be followed and that courts must follow the procedure outlined in by the Supreme Court in Venetian Salami.

In another recent case, the appellate court affirmed that in proceedings supplementary, impleaded third parties must have an opportunity to raise defenses and protect their interests in a manner consistent with due process.  Schron v. Nunziata, — So. 3d –, 2014 WL 444019 (Fla. 5th DCA Feb. 5, 2014).  At issue in Schron was whether an impleaded defendant had the right to an immediate appeal of the order impleading him. The plaintiff in that case argued that Section 56.29 does not require the full panoply of protections as required in direct proceedings.  The Court, finding it significant that the impleader defendant sought to dismiss for lack of personal jurisdiction, reversed and remanded the case to the trial court, and directed the trial court to conduct a limited evidentiary hearing pursuant to Venetian Salami.

Finally, a third recent case addressed the issue of whether Florida courts had jurisdiction over property located out of state in proceedings supplementary, and found that they did not. Sargeant v. Al-Saleh, — So. 2d –, 2014 WL 836755 (Fla. 4th DCA March 5, 2014).  The Sargeant case involved an effort to force parties to turn over stock certificates as part of proceedings supplementary.  The debtors argued that the stock certificates concerned assets located outside Florida – in the Bahamas, the Netherlands, Jordan, Isle of Man, and the Dominican Republic – and the court lacked jurisdiction to compel the turnover.  The statute in question, Florida Statutes Section 56.29(5), provides that “the judge may order any property of the judgment debtor, not exempt from execution, in the hands of any person or due to the judgment debtor to be applied toward the satisfaction of the judgment debt.”  The court ruled, despite recognizing that section 56.29 does not contain any express territorial limitation on the court’s ability to order a judgment debtor to transfer money or property in the State of Florida, that sound policy required that such a limitation be imposed.  The court expressed concern over the practical implications of permitting Florida court to order judgment debtors to turn over assets located out of state, citing (1) there may be competing claims to the assets in the different forums, and (2) allowing the transfer would “eviscerate” the domestication of foreign judgment statutes.

In conclusion, these recent decisions signal the agreement of Florida courts that proceedings supplementary conform with due process by ensuring that Florida courts have proper jurisdiction of the people and property that are the subject of those proceedings.

As a Partner with Brinkley Morgan’s Business Litigation and Appellate group in Ft. Lauderdale, Mark A. Levy represents a wide range of clients, including companies, individuals and local governments, assisting them with avoiding and resolving all types of business, commercial and financial disputes. His practice focuses primarily on commercial litigation, including creditors’ rights, bankruptcy, business torts, corporate disputes, contract disputes, real property disputes, employment and non-compete agreements, intellectual property, and local government issues. He can be reached by telephone at 954.522.2200 or by email at Mark.Levy@brinkleymorgan.com