Thought Leadership

Post judgment collections in the digital age: Garnishing websites and web domains

Under Minnesota law, a judgment creditor may garnish nonexempt property of a debtor to help satisfy a judgment.  While this is a well established proposition, up until very recently it was entirely unclear whether a website and a web domain were property subject to garnishment and it was also unclear the precise legal procedure for effectuating such a garnishment.  In the recent case of Sprinkler Warehouse, Inc. v. Systematic Rain, Inc., d/b/a, et. al., the Minnesota Court of Appeals answered both questions.

First, the Sprinkler Warehouse Court determined that both websites and web domains were property subject to garnishment even if the value of the website or the domain was nominal.  The Court went on to find that the proper mechanism to garnish this property was for the judgment creditor to move the court to have a receiver take possession of the property and then liquidate it and apply the proceeds to the outstanding judgment.

While the decision here was logical, and seemed simple, the ramifications of this decision are profound.  Now, any time a business has a judgment against it, there is the threat that the creditor can completely shut down the company’s web presence using the above procedure.  And, even if the company started up a new website afterwards, the creditor could simply shut down that website next.  As a result, creditors now have a powerful new source of leverage against business debtors that could help spur earlier and better post judgment settlements.

However, it is worth noting that the Minnesota Supreme Court has just accepted review of this case, so it is possible that this useful new procedure will be quickly shut down in its infancy.  Only time will tell whether the procedure will stand, but it should be utilized to the maximum degree possible in the meantime as it is currently good law.