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United States v. Krol

United States District Court, E.D. North Carolina, Western Division

November 22, 2017

UNITED STATES OF AMERICA,
v.
KURT MICHAEL KROL, Defendant.

          ORDER

          JAMES E. GATES, MAGISTRATE JUDGE.

         This post-judgment proceeding comes before the court on petitioners' motion (D.E. 97) to quash three writs of garnishment directed, respectively, to Branch Bank & Trust ("BB&T") (D.E. 80), Universal Mania, Inc. ("Universal") (D.E. 81), and USAA Federal Savings Bank ("USAA") (D.E. 82). The government responded in opposition. D.E. 98. Subsequently, petitioners filed a supplemental memorandum (D.E. 105) in support of their motion to quash. The government requested and was allowed to respond (D.E. 113) to the supplemental memorandum. Petitioners requested and were allowed to file a reply. D.E. 115. Additionally, at the 7 November 2017 status conference, the parties presented argument on their respective stances on petitioners' motion and petitioners submitted additional materials in support of it. See 7 Nov. 2017 Minute Entry (D.E. 117). For the reasons set forth below, the motion will be denied.

         BACKGROUND

         On 15 December 2015, defendant Kurt Michael Krol ("defendant") pleaded guilty, pursuant to a plea agreement, to one count of trafficking in counterfeit goods, in violation of 18 U.S.C. § 2320(a)(1). 15 Dec. 2017 Minute Entry (D.E. 7). On 3 May 2017, a criminal judgment was entered against defendant with a directive that defendant pay restitution in the amount of $4, 214, 371.08 ("restitution order"). J. (D.E. 55) 7. The court further ordered with respect to restitution as follows:

Payment of restitution shall be due and payable in full immediately. However, if the defendant is unable to pay in full immediately, the special assessment and restitution may be paid through the Inmate Financial Responsibility Program (IFRP). The court orders that the defendant pay a minimum payment of $25 per quarter through the IFRP, if available. The court, having considered the defendant's financial resources and ability to pay, orders that any balance still owed at the time of release shall be paid in installments of $100 per month to begin 60 days after the defendant's release from prison. At the time of defendant's release, the probation officer shall take into consideration die defendant's ability to pay die restitution ordered and shall notify the court of any needed modification of die payment schedule.

J. 8.

         On 12 July 2017, in an effort to collect on the restitution order, the government fded four applications for writ of garnishment as to BB&T (D.E. 63), JP Morgan Chase Bank NA (D.E. 64), Universal (D.E. 65), and USAA (D.E. 66), respectively. On 28 July 2017, the writ of garnishment was issued as to JP Morgan Chase Bank NA.[1] D.E. 74. On 8 August 2017, the remaining three writs were issued. D.E. 80, 81, 82. USAA fded an answer to the writ it was issued asserting that defendant maintained an interest in one account. USAA's Answer (D.E. 94) 2. BB&T fded an answer stating that defendant maintained interests in multiple accounts, as more fully discussed below. BB&T's Am. Answer (D.E. 106) 3. Universal answered diat defendant did not maintain an "ownership interest in any property in [its] possession, custody or control" and that it was not indebted or under any liability to defendant. Universal's Answer (D.E. 93) 1.

         Petitioners seek to quash die writs of garnishment as to USAA, BB&T, and Universal on the following bases: (1) the property the government is seeking to garnish is not the property of defendant ("Objection One"); (2) the writs of garnishment are procedurally defective ("Objection Two"); (3) the writs should not apply to property covered by the Claim for Exemptions Form attached to each writ (D.E. 80-1, 81 -1, 82-1) ("Objection Three"); (4) defendant's outstanding debt is significantly overstated ("Objection Four"); (5) to the extent that property is joint property of defendant and either Regina Krol[2] or Universal, defendant is not the "equitable owner" of such property ("Objection Five"); and (6) the language of the payment schedule in the criminal judgment controls and the government cannot collect money outside of that schedule ("Objection Six").

         Petitioners also make the following requests: (1) that the court impose a payment plan regarding defendant's remaining debt; (2) that the court prohibit the government from collecting the remainder of the debt in a manner that harms or embarrasses innocent individuals; (3) that the court enter any order which justice requires to protect petitioners and other innocent parties from undue hardship, burden, or expense; and (4) that the court hold a hearing on this matter.

         DISCUSSION

         I. APPLICABLE LEGAL PRINCIPLES

         The Federal Debt Collection Procedures Act of 1990 ("FDCPA"), 28 U.S.C. §§3001 et seq., provides several post-judgment remedies to collect on a debt, one of which is a writ of garnishment, 28 U.S.C. § 3205. The government may use a writ of garnishment to collect on a restitution judgment. See United States v. Idema, 118 Fed.Appx. 740, 744 n.5 (4th Cir. 2005) (affirming district court's holding that the government may utilize a writ of garnishment to collect on a restitution judgment). The FDCPA allows a writ of garnishment to be entered

against property (including nonexempt disposable earnings) in which the debtor has a substantial nonexempt interest and which is in the possession, custody, or control of a person other than the debtor, in order to satisfy the judgment against the debtor. Co-owned property shall be subject to garnishment to the same extent as co-owned property is subject to garnishment under the law of the State in which such property is located.

28 U.S.C. § 3205(a).

         The court has discretion in managing garnishment proceedings and may "on its own initiative or the motion of any interested person, and after such notice as it may require, make an order denying, limiting, conditioning, regulating, extending, or modifying the use of any enforcement procedure . . .." 28 U.S.C. § 3013.

         II. ...


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