Nicol Nagel, individually and ESY Investments, LLC, a California limited liability company, Respondents,
Tracy A. Westen, et al., Appellants
Hennepin County District Court File No. 27-CV-14-3422.
A debt owed by a garnishee to an out-of-state garnishment debtor may be attached in Minnesota so long as (1) the garnishment debtor could sue the garnishee in an action on the debt in Minnesota, (2) Minnesota garnishment law authorizes the attachment, (3) a Minnesota court acquires jurisdiction over the garnishee, and (4) the exercise of jurisdiction comports with due process.
For Respondents: Christopher J. Knapp, David A. Orenstein, Barnes & Thornburg LLP, Minneapolis, Minnesota; and Paul J. Laurin (pro hac vice) Barnes & Thornburg LLP, Los Angeles, California.
For Appellants: Michael J. Orme, Dana K. Nyquist, Orme & Associates, Ltd., Eagan, Minnesota; and Howard M. Spector (pro hac vice), Spector & Johnson, PLLC, Dallas, Texas.
Schellhas, Presiding Judge; Larkin, Judge; and Minge, Judge.[*]
Appellant garnishment debtors challenge an order in garnishment proceedings granting respondent garnishment creditors' claim to funds in appellants' Ameriprise Financial Inc. brokerage account. Appellants argue that (1) the district court lacked jurisdiction over the garnishment action, (2) the district court's exercise of jurisdiction did not comport with due process, and (3) Minnesota's choice-of-law principles required application of Texas exemption law. We affirm.
In February 2014, respondents Nicol Nagel and ESY Investments LLC, obtained a $4.5 million judgment against appellants Tracy A. Westen and Linda Lawson from a California court, based on appellants' failure to make material disclosures in connection with the sale of their Los Angeles home. Appellants, who moved to Texas in 2013, made no payments in satisfaction of the judgment. After garnishing less than $4,000 from appellants' Texas bank account, respondents docketed the judgment in jurisdictions across the United States, including Minnesota, " where they believe[d] [appellants held] assets."
Appellants have an investment account with Ameriprise Financial Inc. The record describes the account as a " Select Variable Annuity." In June 2014, respondents served Ameriprise with a garnishment summons at its Minneapolis headquarters, and Ameriprise provided respondents with nonearnings disclosure forms. The forms
state that at " the time of service . . . there was due and owing [appellants] from [Ameriprise] . . . personal property, instruments, or papers belonging to [appellant Westen] and in the possession of [Ameriprise]," which Ameriprise described as, " [account number] Ameriprise Brokerage $547,645.14 Ownership: Tracy Westen and Linda Lawson, joint tenants Assets Held in an annuity within the brokerage account." In addition, the words " Money Market" are written next to the $547,645.14 figure on the forms. Ameriprise placed a hold on appellants' funds pending the outcome of the garnishment proceedings.
In July, appellants filed an exemption notice, claiming that all of the funds in their Ameriprise account " were exempt from execution because the funds were an 'accident, disability, or retirement pension or annuity' under Texas exemption law." Appellants also moved to quash and dismiss the garnishment action, arguing that the district court lacked subject-matter and personal jurisdiction.
The district court held an evidentiary hearing regarding the jurisdictional and exemption issues. At the hearing, appellants presented testimony from an Ameriprise representative. The representative testified that Ameriprise Financial Inc., is a holding company, that " Ameriprise Financial Services is the broker," and that " [Ameriprise Financial Services] holds the brokerage account which holds the annuity" that is the subject of this garnishment action. The representative also testified that an Ameriprise subsidiary, River Source Life Insurance Company, issued the annuity, and that the account containing the annuity is " the only account that Ameriprise . . . is in control of [that is] subject to the writ" in this proceeding. The representative agreed that " the annuity is in the custody of Ameriprise."
Appellant Lawson also testified at the hearing. She explained that she and her husband purchased the annuity in 2011 at her broker's office in California and that she later interacted with Ameriprise through its broker in Dallas, Texas, where she and her husband moved in 2013. Lawson testified that she had never been to Minnesota before the hearing and that her husband had never been to Minnesota. She also testified that neither she nor her husband has ever owned property or a business in Minnesota, served as an officer or director of a Minnesota company, or opened a bank account in Minnesota.
The district court received an Ameriprise Brokerage Client Agreement dated May 2014. The client agreement explains the role of the " Introducing Broker and Clearing Broker."
Your Introducing Broker and the Clearing Broker have an agreement in which the Introducing Broker introduces customer accounts to the Clearing Broker on a fully disclosed basis. This means that the Introducing Broker is responsible for opening, approving and monitoring your account and for accepting securities orders. The Clearing Broker will provide recordkeeping, delivery and receipt of securities and funds; receive and distribute payments thereof; and safeguard all funds and securities received. The Clearing Broker also receives and distributes dividends and other distributions and processes exchange offers, rights offerings, warrants, tender offers and redemptions.
The client agreement contains a notice provision that states, " You may contact us using the following address and telephone number" and lists Ameriprise's Minneapolis, Minnesota address and an 800 telephone number. Another provision states, " You may contact us using [Ameriprise's Minneapolis, Minnesota address and 800
telephone number]. You may also write to us at the Introducing Broker location identified on the client application."
The client agreement also sets forth three provisions regarding the " Governing Law," " Disputes," and " predispute arbitration." The first provides that:
THIS AGREEMENT AND ITS ENFORCEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES, UNLESS SUPERSEDED BY FEDERAL LAW OR STATUTE; AND SHALL COVER INDIVIDUALLY AND COLLECTIVELY ALL BROKERAGE ACCOUNTS WHICH YOU MAY OPEN OR REOPEN WITH US, OR WHICH MAY BE INTRODUCED TO US, INCLUDING OUR SUBSIDIARIES AND AFFILIATES, THROUGH THE COURTESY OF THE AFOREMENTIONED INTRODUCING BROKER.
The second provides that:
In the event of a dispute regarding the Account, you agree to resolve the dispute by looking to this Agreement. You agree that this Agreement is the complete and exclusive statement of the Agreement between us and you which supersedes any proposal or prior agreement, oral or written, and any other communications between us relating to the subject matter of this Agreement.
And the third provides that " The parties agree that venue and personal jurisdiction is proper in Minneapolis, Minnesota."
After the hearing on appellants' motion, the district court issued its findings of fact, conclusions of law, and order. The district court noted that " none of the parties [question] the validity of the underlying California judgment" and that the district court was required to provide full faith and credit to that judgment. The district court described its exercise of jurisdiction as " in rem" and concluded that " the property at issue, [appellants'] Ameriprise funds, is located within Minnesota [because] Ameriprise has headquarters in [Minnesota]." The district court further concluded that appellants could " reasonably foresee being subjected to jurisdiction in Minnesota," based on the Ameriprise client agreement. The district court reasoned that the agreement " listed Minnesota as the venue to resolve disputes between the parties, and [appellants] received numerous account statements from Ameriprise listing its Minneapolis, Minnesota address."
The district court ruled that its " exercise of jurisdiction to garnish [appellants'] Ameriprise funds [was] proper" and that it " must apply Minnesota exemption law." The district court also ruled that appellants' " attempt to exempt their entire Ameriprise fund from [respondents] is improper" and that only $69,000 of the funds are exempt under Minn. Stat. § 550.37, subd. 24 (2014). The district court therefore granted respondents' claim to the funds in appellants' Ameriprise account, subject to the $69,000 exemption.
This appeal follows.
I. Did the district court have jurisdiction over respondents' garnishment action?
II. Did the district court's exercise of jurisdiction comport with due process?
III. Did the district court err by applying Minnesota exemption law?
We first consider whether the district court had jurisdiction over respondents'
garnishment action. Appellants argue that the district court lacked " subject matter jurisdiction over the annuity."
Jurisdictional Principles in General
" The existence of jurisdiction is a question of law that we review de novo." In re John Ward Gillman Engraved June 20, 1775 Copper Printing Plate, 806 N.W.2d 861, 864 (Minn. App. 2011) (quotation omitted). Jurisdiction is of two types: subject-matter and personal. Subject-matter jurisdiction refers to a court's authority to hear the type of dispute at issue and to grant the type of relief sought. Williams v. Smith, 820 N.W.2d 807, 812-13 (Minn. 2012). " Jurisdiction of the subject matter means authority to hear and determine a particular class of actions and the particular questions which the court assumes to decide." Robinette v. Price, 214 Minn. 521, 526, 8 N.W.2d 800, 804 (1943). " Put differently, subject matter jurisdiction is a court's 'statutory or constitutional power to adjudicate the case.'" Gie ...