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CHAO v. VIDTAPE INC.

January 30, 2004.

ELAINE L. CHAO, Secretary of Labor, United States Department of Labor, against VIDTAPE, INC., a Corporation, INVENTIVE TECHNOLOGY SYSTEMS, INC., a Corporation, MOHINDER SINGH ANAND, Individually and as President of Vidtape, Inc., ARJAN SINGH ANAND, Individually and as an Officer of Vidtape, Inc., SATINDER SINGH ANAND, Individually and as an Employee of Vidtape, Inc. and as President of Inventive Technology Systems, Inc., Defendants


The opinion of the court was delivered by: E. THOMAS BOYLE, Magistrate Judge

Before the court is a motion by the Secretary of Labor ("Secretary"), for an installment payment order pursuant to the Federal Debt Collection Procedures Act of 1990 ("FDCPA"), 28 U.S.C. § 3204. The Secretary seeks an order compelling the judgment debtors in this action, Vidtape, Inc., Mohinder Singh Anand, and Satinder Singh Anand (collectively referred to as "defendants"), to make monthly installment payments in the amount of $19,693.64 to the Secretary until the outstanding judgment debt plus the accrued post-judgment interest and costs, in the amount of $236,323.62, have been satisfied. The defendants oppose this motion and assert that they are only financially capable of making payments in the amount of $3,500.00 per month. For the following reasons, the Secretary's motion is granted. Page 2

FACTS

The Secretary commenced this action on May 1, 1998, alleging that the defendants, Vidtape, Inc., Inventive Technology Systems, Inc., Mohinder Singh Anand, Arjan Singh Anand, and Satinder Singh Anand, had engaged in numerous violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. See Chao v. Vidtape, Inc., 196 F. Supp.2d 281, 284 (E.D.N.Y. 2002). Specifically, the Secretary alleged that defendants: (1) failed to pay minimum wages; (2) failed to pay overtime wages; (3) employed a child; (4) violated the "hot goods" provision of the FLSA by putting into the stream of commerce goods produced in violation of the FLSA; and (5) violated the FLSA's record-keeping provisions. See id. The Secretary sought injunctive relief, back-pay, liquidated damages and costs on behalf of 67 employees. See id.

  A bench trial was held and the court found that defendants had wilfully violated the FLSA's minimum wage, overtime, child labor, "hot goods," and record-keeping provisions. See id. at 292-97. Accordingly, the court ordered: (1) all defendants permanently enjoined from violating the various provisions of the FLSA; (2) all defendants, with the exception of Arjan Singh Anand, liable for $119,853.58 in back wages and $119,853.50 in liquidated damages; and (3) costs to be awarded to the Secretary. See id. at 298-300.

  Upon appeal to the Circuit, the decision of the district court was modified and affirmed. See Chao v. Vidtape, Inc., 66 Fed. Appx. 261, 262 (2d Cir. 2003). The Circuit held that defendant Inventive Technology Systems, Inc. should not have been held liable for back wages and reduced the award of back pay and liquidated damages against Vidtape, Mohinder Singh Anand and Satinder Singh Anand by $3,383.46, modifying the final judgment to $236,323.62 plus post-judgment interest. Page 3

  The Secretary brings the instant motion on the grounds that the defendants have failed to make any payments since the judgment was entered and affirmed by the Court of Appeals. The Secretary alleges that the individual defendants — brothers — transferred assets to evade having to pay the debt they were adjudged by the court to owe and that conventional debt collection practices would be fufile in this action. The defendants contend that they have done nothing improper and that they are financially incapable of making payments in an amount greater than $3,500.00 per month.

  DISCUSSION

 I. Legal Standard

  The Federal Debt Collection Procedures Act ("FDCPA"), 28 U.S.C. § 3001 et seq., "provides the exclusive civil procedures for the United States . . . to recover a judgment on a debt." 28 U.S.C. § 3001 (a)(1). One such civil procedure is the installment payment order, as described in 28 U.S.C. § 3204.

  Section 3204 authorizes courts to issue installment payment orders: [I] fit is shown that the judgment debtor —

 
(1) is receiving or will receive substantial nonexempt disposable earnings from self employment that are not subject to garnishment; or (2) is diverting or concealing substantial earnings from any source, or property received in lieu of earnings.
28 U.S.C. § 3204(a). The Secretary contends that the testimony and documents introduced at the evidentiary hearing held before the undersigned on October 20, 2003, and continued on October 30, 2003, satisfy both criteria of Section 3204 and that she is therefore entitled to an installment Page 4 payment order against the defendants.

  The types of debtors for which installment payment orders may be obtained is limited under Section 3204. See Hon. James J. Brown, Judgment Enforcement § 5.03[D] at 5-15 (2d ed. 1999).

 
The debtor must be self-employed like doctors, accountants, and lawyers. The types of debtors would also include the debtor who controls a family business through a corporation to which the debtor provides important services, but who may be paid no salary to prevent creditors from garnishing the same. In turn, the corporation pays for the debtor's expenses, such as medical, insurance, car, and other types of support expenses.
Id.

  Section 3204 sets forth the procedure by which a court may issue an installment payment order. After the motion is made and notice is provided to the debtor, a hearing must be held to determine the appropriateness of the relief requested. In setting the payment amount, "the court shall take into consideration . . . the income, resources and reasonable requirements of the judgment debtor and the judgment debtor's dependents, any other payments to be made in satisfaction of ...


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