Collection agencies here are coming under fire from two Spokane attorneys who accuse them of violating federal and state laws pertaining to garnishments, the legal procedure by which debtors wages or other money or property can be attached for payment of delinquent bills.


The attorneys, Michael Kinkley and Tim Durkop, have filed six class-action lawsuits in U.S. District Court here, all against different collection agencies, since receiving a favorable ruling from the Washington Supreme Court on related state statutes about four months ago. They say they might file more such actions.


Agencies named in the suits include Automated Accounts Inc.; Bonded Adjustment Co.; Peterson Enterprises Inc., which does business as Valley Empire Collection; Associated Credit Service Inc.; and Credit Bureau Services. A suit against one other agency, Rotchford & Associates, already has been settled.


The suits allege that the agencies collected or attempted to collect attorneys fees and costs, including on unsuccessful writs of garnishment, without first being awarded those monies through a garnishment judgment.


They accuse the agencies of violating the federal Fair Debt Collection Practices Act, the Washington Collection Agency Act, and the Washington Consumer Protection Act. The Fair Debt Collection Practices Act allows statutory damages of up to 1 percent of a defendant companys net value, or $500,000, whichever is less.


Garnishments have been done wrong in Spokane County and most of the surrounding counties for 30 years or more, Kinkley claims. Garnishment is viewed under the law as an extraordinarily harsh remedy, and it requires strict adherence to statutory procedures, but some collection agencies here have turned it into a tool of choice because its so powerful, and have violated statutory procedures routinely, he contends.


Collection-agency representatives deny any wrongdoing and say theyve simply been operating as instructed by local courts in trying to recoup money rightfully owed to their clients.


Michael Peterson, president of 23-year-old Peterson Enterprises, says, It wasnt at our discretion how we handled garnishments. These two attorneys felt (with the state Supreme Court decision) theyd hit the promised land.


He rejects any possible insinuation that the collection agencies have been trying to exploit debtors by slapping them with unauthorized costs, and says, If its a legitimate bill, then our loyalty lays with the people who lost the money. If we dont have the latitude to go and get peoples money back, its going to be detrimental.


Petersons son, Troy, who is vice president of the company, called the attorneys bottom feeders who are taking a fine point of law and trying to make a career out of it. They havent proven a damn thing. It is a clarification of a law that was vague.


Jim Keenan, owner of Bonded Adjustment, says, Weve only done what the courts have instructed us to do. The courts around the state arent uniform; they dont operate under the same rules. Then the bottom feeders come along and say, Nope, youve been doing it wrong. Its so damn frustrating to try to comply. Were trying to do the right thing. I think its indicative of Gonzaga (University) turning out too many attorneys.


Kinkley predicts, that the recent state Supreme Court decision, which was written by Justice Barbara Madsen and involved a Spokane case that he and Durkop argued, will bring an end to what he calls knee-jerk garnishments.


If the collection agency has to pay its own attorney fees and costs for unsuccessful garnishments, they will be more careful who they garnish, he asserts. The practical reality is businesses will be less burdened by (having to fill out paperwork responding to) what essentially are frivolous garnishments, and fewer people are going to be driven into bankruptcy by garnishment.


Collection agencies here will be forced to spend more time working with debtors on payment plans, rather than resorting quickly to garnishments as a matter of convenience, Kinkey suggests.


He argues also that employers likely will face less liability exposure than in the past because their obligations to their employees in regard to garnishment proceedings will be set forth with greater certainty. Currently, employers are violating their employees rights to be paid wages if they garnish workers paychecks without having received proper garnishment judgments ordering them to do so, he says.


The state Supreme Court decision involved state legal issues raised in a suit filed here in U.S. District Court against Peterson Enterprises. The suit was filed in November 1996, but the federal court a year later certified, or referred, three questions of state law raised in the suit to the Washington Supreme Court.


In the lawsuit, plaintiffs Percy Watkins and Diane Bohnet said Peterson Enterprises sought to collect on default judgments against them by filing several writs of garnishment against their employers and banks. They claimed the company then sought improperly to collect cumulating attorney fees and costs associated with each writ, regardless of whether the contacted employer or bank answered the writ or held property or funds owing to the plaintiffs.


Rather than seeking judgments on each writ, which entails going through a formal process, Peterson Enterprises obtained more expedient pay orders from Spokane District Court judges that required remittance of the money to the court, or directly to the collection agency, and that reflected both the underlying judgment and the additional costs associated with subsequent writs.


Peterson Enterprises argued before the state Supreme Court that statutes dont address whether a garnishment judgment is needed to collect attorneys fees and costs, nor whether such costs may be added cumulatively to the amount owed by the debtor if more than one writ is filed to collect a single judgment.


It urged the state Supreme Court to interpret that absence of statutory language on the contested issues not only as permitting its collection practices, but also as indicating the Legislatures recognition that a creditor may choose the amount and method of collecting attorney fees and filing costs.


In a unanimous opinion, however, the Supreme Court rejected Peterson Enterprises extremely broad reading of the law, which it said runs counter to the traditionally strict interpretation of garnishment statutes.


It held that creditors must obtain a regular judgment to collect an owed amount, attorneys fees, and filing costs, and must obtain a default judgment in the case of a nonresponsive garnishee. It also ruled that creditors may not recover attorneys fees and costs for the filing of writs that are unsuccessful because the garnishees dont hold money or property belonging to the debtors.


In the wake of the state Supreme Courts ruling, a U.S. District Court judge earlier this month granted a summary judgment in favor of plaintiffs Watkins and Bohnet and ordered Peterson Enterprises to pay them each the statutory maximum in such cases of $1,000 in damages. It also ordered the collection company to reimburse Watkins certain unauthorized fees and costs that he had paid. Kinkley and Durkop also shortly will seek payment of their attorney fees and costs in the case, which are expected to be substantial.


Kinkley, an attorney who does mostly personal injury, consumer law, and employment law, and Durkop, who does a lot of bankruptcy work, dont practice together, but rather became affiliated because some of their clients have had similar encounters with collection agencies.