Donovan v. Southern California Gas Co.

The Southern California Gas Company (Southern) (defendant) received two garnishment notices from different creditors for its employee, Dianne Allen. Allen was recently divorced. While she was still married, Allen had incurred substantial debts, and she was working to discharge them. Allen promptly obtained a release from the second creditor, and Southern never withheld any wages with respect to the notice. Southern withheld wages from two paychecks with respect to the first order. Shortly thereafter, Allen obtained a release from the first creditor as well. Southern notified Allen that she was being discharged pursuant to company policy regarding garnishments. Allen opted to resign rather than be terminated, and Raymond Donovan, United States secretary of labor (secretary) (plaintiff), brought an action against Southern for violation of the Consumer Credit Protection Act (act), which prohibited an employer from discharging an employee whose earnings have been subjected to garnishment on account of only one indebtedness. The secretary argued that a garnishment occurred only if earnings were actually withheld, but Southern contended that a garnishment occurred immediately upon an employer’s receipt of a legally binding garnishment notice. On cross-motions for summary judgment, the district court ruled in favor of Southern because California’s garnishment statute obligated an employer to withhold a debtor’s earnings from the time a writ of execution was served. The secretary appealed.