HR leaders need to make sure their company doesn't end up in a similar situation
A court recently said that a company acting as an agent for service of process was negligent in an incident where its employee improperly read a notice of levy, which led to delay in freezing certain bank account funds.
In Bergstrom v. Zions Bancorporation, N.A., a Nevada state court issued a judgment against Northamerican Sureties, Ltd. and Robert Michaels in 2007. In 2019, the plaintiff, who was the judgment creditor, learned that Michaels’ wife held two Los Angeles-based bank accounts.
On Apr. 2, 2019, the plaintiff tried to seize the bank accounts’ funds through serving a notice of levy on Corporation Service Company (CSC), the bank’s agent for service of process for California-based matters.
CSC’s employee glanced at the underlined words – “Northamerican Sureties, Ltd.” – in the form. The employee wrongly believed that these words referred to the party to be served with the levy, in line with a certain common practice of process servers. Because CSC’s principal was the bank, not Northamerican Sureties, the employee therefore rejected the notice of levy.
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On Apr. 3, CSC mailed the plaintiff a rejection letter. That same day, Michaels’ wife withdrew $15,000 from the first bank account. On Apr. 9, the plaintiff received the letter and called CSC to notify it about the mistake.
The bank, in line with its internal policy, froze the money in the bank accounts at 4 p.m. the following day, Apr. 10. However, at past 2 p.m. on Apr. 10, Michaels’ wife had already withdrawn $102,172.35 from the first account and $438.62 from the second account.
The plaintiff filed a motion asking the court to impose third-party liability on the bank for its noncompliance with the notice of levy. She wanted to hold the bank liable for the delay in freezing the funds withdrawn on Apr. 3 and Apr. 10, amounting to $117,815.97. The trial court denied the plaintiff’s motion.
The California Court of Appeal for the Second District reversed the trial court’s decision in the bank’s favor and directed the trial court to award the amount of $102,610.97 to the plaintiff.
One should read the content of documents they receive, particularly if those documents are legal documents being served, the appellate court ruled. The failure of CSC, via its employee, to properly read the standardized notice of levy form was unreasonable and negligent, especially since it was an entity whose purpose was to read papers served on it. The one-page levy form expressly required a judgment creditor to write in a specific space the party who was subject to the notice of levy.
The bank, as CSC’s principal, was aware of the notice of levy. The bank was liable for the two withdrawals on Apr. 10 but not liable for the amount withdrawn on Apr. 3, the appellate court concluded.
