United States – New York
Below is a brief summary on New York’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. New York’s attachment procedures authorize the seizure of property within its jurisdiction. If a defendant has property in more than one state, a claimant needing to secure assets for a foreign proceeding might need to initiate attachment proceedings in multiple states.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No. However, the Court has the ability to give specific orders in combination with the decision, 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 seeking attachment of assets in New York as security for a potential judgment in a commercial case must:
(i) show there is a cause of action and it is probable the plaintiff will succeed on the merits;
(ii) show the defendant is (a) a non-resident or non-registered foreign corporation or a resident that cannot be served or (b) the defendant intends to defraud or frustrate a judgment or (c) the action is based on a judgment entitled to full faith and credit (i.e. a judgment from another jurisdiction which the Court is obliged to respect); and
(iii) show the amount demanded from the defendant exceeds all counterclaims known to the plaintiff.
A plaintiff should succeed in obtaining a prejudgment attachment by demonstrating it has a good claim and the respondent is not based in New York. Still, a plaintiff seeking prejudgment attachment of assets for security must show “an identifiable risk that the defendant will not be able to satisfy the judgment.”
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
A plaintiff must make a motion – with or without notice – to obtain an order of attachment. The plaintiff shall show by affidavit the legal standard as outlined under #3. Within ten days after an order of attachment is granted, the plaintiff shall file the order, the affidavit, and the summons and complaint in the action. The plaintiff must then deliver the order of attachment to the sheriff to levy on the real property.
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 give an undertaking of not less than US$500, to be fixed by the Court. If the claim is unsuccessful or if judgment is rendered in favor of the defendant, the plaintiff will pay costs to the defendant, together with damages, which the defendant may have sustained by reason of the attachment. The plaintiff’s liability shall not be limited by the amount of the undertaking.
6. Can it be sought against third parties?
No.
7. What assets are covered by a freezing (or equivalent) order?
Any debt or property against which a money judgment may be enforced is subject to attachment.
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. New York permits prejudgment attachment as security for a future arbitration award that is pending or will be commenced inside or outside the state.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
A plaintiff may file for an order of attachment before serving summons or prior to judgment.
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 order of attachment if she determines doing so is proper. The plaintiff must then serve a copy of the order and the supporting affidavit to the defendant and deliver a copy to the sheriff of the county where the property is located. The sheriff then attaches and takes into custody as much of the lands, tenements, goods, and chattels as is sufficient to satisfy the order.
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 or freezing 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 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 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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