United States – Delaware
Below is a brief summary on Delaware’s treatment of freezing orders, otherwise known in the United States as prejudgment attachments. Prejudgment attachment is a provisional remedy that allows for seizure of a defendant’s property prior to judgment. This ensures that a plaintiff successful on the merits may recover the amount owed by the defendant.
Note: Federal Courts only allow for prejudgment attachment to the extent that applicable state statutes allow it.
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. Delaware allows for a writ of attachment, which authorizes an in rem order that prohibits the transfer of assets prior to judgment. Prejudgment attachment is a limited remedy and does not offer the same protection as an asset-freezing order. The writ of attachment applies only to assets within the jurisdiction of the Court and which are known to the party seeking the remedy.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No. However, the Court can provide specific orders in combination with issuing a writ of attachment, such as prohibiting the respondent from making any changes to the property covered by the order.
3. Briefly what is the relevant legal test?
The plaintiff must show the defendant cannot be found, or the defendant is justly indebted to the plaintiff in a sum exceeding US$50, and – with intent to defraud his or her creditors or to elude process – has absconded from the defendant’s usual place of abode, is about to leave the state, or has left the state.
For a writ of attachment to a foreign defendant, the plaintiff must show the defendant cannot be found, the defendant resides outside of Delaware, and the plaintiff has a good cause of action against the defendant in a sum exceeding US$50.
For a writ of attachment to a foreign corporation not created by or existing under Delaware law, the plaintiff must show a good cause of action against the defendant in a sum exceeding US$50.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
To obtain an attachment, a plaintiff must file a complaint, affidavit, and bond. The affidavit must set forth facts supportive of the legal test in answer #3 to meet the proof requirements for the issuance of an interim writ of attachment.
A plaintiff seeking to compel the appearance of a non-resident defendant must provide that defendant’s last known address or a statement that such address is unknown and cannot with due diligence be ascertained.
The plaintiff’s affidavit must also include the following information regarding the property of each defendant sought to be seized:
(i) a reasonable description thereof;
(ii) the estimated amount and value thereof;
(iii) the nature of the defendant’s title or interest therein, and if such title or interest be equitable in nature, the name of the holder of the legal title;
(iv) the source of affiant’s information as to any of the items as to which the affidavit is made on information and belief; and
(v) the reason for the omission of any of the required statements.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. The plaintiff must post a bond in an amount approved by the Court to recompense the defendant for awarded costs and damages sustained by the attachment, not exceeding the amount of the bond.
6. Can it be sought against third parties?
Yes. Garnishment is the method by which a party can seize money of the defendant that is in the possession or under the control of a person or entity other than the defendant. Garnishment is simply an attachment in which the writ of attachment is directed to the garnishee. The procedure is identical to that of attachment.
7. What assets are covered by a freezing (or equivalent) order?
Goods, chattels, rights, credits, moneys, effects, lands, and tenements may be attached. Delaware does not permit proceedings against insurance companies, banks, or similar financial institutions.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
We have not identified any Delaware state Court cases addressing this question.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
Once a plaintiff initiates action against a debtor-defendant based on an existing debt, the plaintiff may seek a writ of attachment against the defendant’s property.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
No.
12. What happens after a freezing (or equivalent) order is granted?
The judge will issue the writ of attachment if they determine that such is proper.
The plaintiff serves the defendant with a copy of the writ and the supporting affidavit and delivers a copy to the sheriff of the county where the property is located.
The sheriff seizes and retains the property until the plaintiff obtains a judgment (and the property becomes available for execution). If the property cannot be seized within the state, the plaintiff must obtain a Court order that directs the person possessing the property to retain the property and recognize no further transfer until further order of the Court.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The plaintiff.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
No.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who disobeys an attachment order may be held in contempt of Court.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
No.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes. Enforcement abroad can be sought by the applicant itself; the question of enforcement will then be subject to the laws of the relevant jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Yes. The recognition of the foreign Courts’ judgments (including a decision on attachment) is conditioned on a number of factors with certain grounds for non-recognition (for example, the law of the rendering state is not compatible with due process standards and public policy).
Contacts
William O’Brien Partner – Head of Cross-Border Litigation & International Commercial Arbitration Eversheds Sutherland Washington, DC, United States williamobrien@eversheds-sutherland.us www.eversheds-sutherland.com Kymberly Kochis Partner – Co-Head of GAlobal Litigation Co-Head of Insurance Litigation and Class Action groups Eversheds Sutherland New York, United States kymberlykochis@eversheds-sutherland.us www.eversheds-sutherland.com Francis X. Nolan IV Partner Eversheds Sutherland New York, United States franknolan@eversheds-sutherland.us www.eversheds-sutherland.com
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