United States – Illinois
Below is a brief summary on Illinois’ 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. The defendant is prohibited from dealing with the assets referred to in the attachment until final adjudication or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No.
3. Briefly what is the relevant legal test?
Courts grant an order for attachment against the debtor’s property for money claims above $20 when the debtor:
(i) is not an Illinois resident;
(ii) is attempting to avoid process;
(iii) has departed or is about to depart from the state with the intention of removing effects from the state;
(iv) is about to remove their property from Illinois, to the creditor’s detriment;
(v) has or is about to fraudulently convey, assign, conceal or dispose of their effects, or a part of their effects, within two years before the filing of the affidavit for an order for attachment, so as to hinder or delay their creditors;
(vi) fraudulently contracted the debt for which they are being sued; or
(vii) has been convicted of first degree murder, a Class X felony, or other serious felonies against the creditor, making the creditor a “victim”.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant files an affidavit and other documents with the Court setting out the reasons for the application and the basis on which the relevant test is met. The Court examines the applicant under oath about the cause of action before endorsing the amount of damages in the order for attachment. The Court does not need to give the defendant notice of the affidavit if the applicant has established a prima facie case.
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 applicant must provide a bond amounting to double the value of the property to be attached.
6. Can it be sought against third parties?
Yes, where there is good reason to suppose that the third party has possession or control of the defendant’s assets needed to satisfy the judgment.
7. What assets are covered by a freezing (or equivalent) order?
Any liquidated or unliquidated money claim exceeding US$20 is covered. The assets do not need to be within the state of Illinois and attachments are not confined to certain types of property. There are, however, special provisions for seizures of property like livestock and perishable property.
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?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
When filing the complaint or at any time afterward during the pendency of the underlying action.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Assets exempt from judgment under other provisions are similarly exempt from attachment, for example, retirement funds and assets fitting the Homestead Exemption. But there is no express provision exempting living expenses, necessity costs, etc.
12. What happens after a freezing (or equivalent) order is granted?
The defendant is served the order for attachment and summoned to respond to the claims in the applicant’s affidavit. Assuming the original order was obtained without notice, there will be a return hearing, at which time the defendant may challenge the order and deny the facts stated in the affidavit. If the applicant prevails, the defendant may file a motion or answer the complaint in the underlying claims. If the defendant wins, the Court sets aside the order for attachment, the applicant pays the costs, and the civil action proceeds to judgment.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Either the applicant or the defendant may be ordered to pay for the costs of obtaining the order for attachment, which is usually decided at the final determination of the underlying litigation. If the defendant wins, the applicant pays the costs.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
The state law does not expressly provide protections for third parties to orders for attachment. However:
(i) a third party is not prevented from exercising any rights of set-off arising prior being served an order for attachment;
(ii) a third party does not need to inquire as to the application of any money withdrawn by the defendant if the withdrawal appears to be permitted by the attachment order;
(iii) an order for attachment could apply to third parties outside of the jurisdiction;
(iv) as regards assets outside of the jurisdiction, an order for attachment does not prevent a third party from complying with (a) what it reasonably believes to be its obligations under the law of the jurisdiction where the assets are located or the law of any contract between itself and the defendant or (b) any orders of the Courts of the jurisdiction where the assets are located; and
(v) whomever pays the costs any third party incurred as a result of the order is determined when there is a final determination of the underlying litigation.
15. What are the consequences of breach of a freezing (or equivalent) order?
A defendant who disobeys an order for attachment may have their assets seized, and 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.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No.
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 Global 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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