The opinion of the court was delivered by: JAY C. WALDMAN
Plaintiffs brought this action under 42 U.S.C. § 1983, alleging that defendants unconstitutionally deprived them of property without due process of law. Defendant is a law firm ("Fox, Rothschild") which was retained to obtain and execute a confessed judgment against plaintiff Jordan, Mitchell, Inc. pursuant to a cognovit clause in its lease. Defendants entered judgment and thereafter obtained a writ of execution which a sheriff served on Fidelity Bank thereby attaching the account maintained by the corporate plaintiff at that institution. On March 27, 1992, the court granted defendants' motion to dismiss. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 1992 WL 63074 (E.D. Pa. March 27, 1992). Presently before the court is plaintiffs' Motion for Reconsideration.
The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence. See Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985), cert. denied, 476 U.S. 1171, 90 L. Ed. 2d 982, 106 S. Ct. 2895 (1986); Clifford v. Jacobs, 739 F. Supp. 957, 958-59 (M.D. Pa. 1990).
The court determined that the garnishment of corporate plaintiff's bank account did not give rise to a cause of action on behalf of the individual plaintiff-shareholders. The court found that defendants had acted under color of state law by invoking state procedures and enlisting the aid of state officials to effect an ex parte seizure of property. See Lugar v. Edmondson Oil Co., 457 U.S. 922, 933, 73 L. Ed. 2d 482, 102 S. Ct. 2744 (1982). The garnishment of a bank account is deprivation of property within the purview of the Fourteenth Amendment, and was effected here pursuant to a Pennsylvania procedure for executing upon confessed judgments which fails to comport with due process.
Plaintiffs' claim was dismissed because defendants were shielded from § 1983 liability on the facts alleged by reason of qualified immunity.
Plaintiffs now present a new argument as to why the individual plaintiffs have standing. Although never alleged in their complaint or raised in their response to defendants' motion, plaintiffs now state that the corporate plaintiff assigned its rights to the individual plaintiffs for claims against the landlord or its agents. Although a copy of the purported assignment has not been provided,
it was apparently executed during a transaction on April 1, 1989 wherein Jordan, Mitchell ceased business operations. This fact was clearly known to plaintiffs for almost two years prior to the filing of the complaint, and cannot possibly be considered to be newly discovered.
Plaintiffs also contend that the court did not adequately consider in its immunity analysis whether defendants violated a clearly established right in confessing judgment, and should have considered "the validity of the underlying confessed judgment." Plaintiffs argue that defendants are not entitled to qualified immunity because they "should have been aware, that there was no legal or factual basis for them to assume that they had authority to enter judgment on behalf of Jordan, Mitchel [sic] Inc. without a due process hearing."
Plaintiffs appear to misperceive the difference between conduct by a private party which violates an established legal right and conduct by a state actor which violates a clearly established constitutional right. An improper use or abuse by a private party of an otherwise valid state procedure is not cognizable under § 1983. See Lugar, 457 U.S. at 941 (private misuse of state statute is not conduct attributable to the State); Berman, 758 F. Supp. at 278 ("The abuse or misuse of a state procedure by a private party to effect such a deprivation is not action attributable to the State."); Chicarelli v. Plymouth Garden Apartments, 551 F. Supp. 532, 537 (E.D. Pa. 1982) (substantive misuse of Pennsylvania confession of judgment procedures is not a basis for § 1983 liability). Where such procedures are misused or abused, the injured party may seek to redress any injury in an action for malicious use of process.
To be liable under § 1983, however, a private defendant must invoke a state procedure that is itself unconstitutional, with significant aid from state officials. Lugar, 457 U.S. at 937.
The attachment of a judgment debtor's property involves significant aid from state officials and the wielding of the state's compulsive powers. A state procedure permitting private parties to file a complaint and confess judgment essentially involves acquiescence by the state, not compulsion. In such circumstances, private conduct is not attributable to the state. See Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 164, 56 L. Ed. 2d 185, 98 S. Ct. 1729 (1978); Jackson v. Metropolitan Edison Co., 419 U.S. 345, 357, 42 L. Ed. 2d 477, 95 S. Ct. 449 (1974).
To state a cognizable cause of action under § 1983, a plaintiff must be deprived of a constitutional right. The court has rejected plaintiffs' argument that judgment by confession is unconstitutional without a prior hearing and determination as to the validity of the cognovit provision.
Berman, 758 F. Supp. at 278. Plaintiffs' reliance on Swarb v. Lennox, 405 U.S. 191, 31 L. Ed. 2d 138, 92 S. Ct. 767 (1972) is misplaced. If the Supreme Court believed that a judgment could not constitutionally be confessed without a prior hearing on the validity of the debtor's waiver of rights, it likely would not have rejected a per se challenge in Swarb to Pennsylvania procedures which permit creditors to do just that. State procedure allows a debtor to open or strike a confessed judgment on this ground and plaintiffs here moved to do so in the pending state court action.
See Pa. R. Civ. P. 2959.
By confessing judgment, a creditor may obtain priority over other creditors, a lien on real property, clear standing to seek to impede fraudulent secretion of assets should such occur and a claim for interest at the post-judgment rate. Prior to execution, however, no secured right of the debtor is impinged.
Due process requires an opportunity to be heard "at a meaningful time." Parratt v. Taylor, 451 U.S. 527, 540, 68 L. Ed. 2d 420, 101 S. Ct. 1908 (1981). Entry of judgment by confession is not a meaningful time for due process purposes. See Chittester v. LC-DC-F Employees of G.E. Fed. Cr. Un., 384 F. Supp. 475, 479 (W.D. Pa. 1974).
The right to be heard and to contest the validity of a cognovit debtor's waiver of rights arises at the time of an execution of a confessed judgment. See Scott v. Danaher, 343 F. Supp. 1272, 1277-78 (N.D. Ill. 1972) (three judge panel holding Illinois post-confessed judgment garnishment procedure unconstitutional). Thus, even if plaintiffs' argument about the invalidity of the cognovit provision were meritorious, they did not suffer the deprivation of property complained of until a writ of execution was served on their bank.