Winning a lawsuit is not enough if you cannot collect the money you were awarded because the defendant got rid of their assets before being found liable. As a result, it is important to consider the risks of this happening as part of your pre-litigation strategy. Where the danger is high, you may be able to obtain a pre-judgment attachment that enables you to restrict a defendant’s property before litigation. This remedy is only available in limited situations so good legal advice is essential.

“Pre-judgment attachment” allows a plaintiff to seize and safeguard the defendant’s assets before a judgment is entered. Because an attachment significantly impairs a party’s property rights before being found liable, the law attempts to balance the right of the defendant to be heard in court before losing property with the risk that the plaintiff will be left with no way to collect on the judgment. As such, pre-judgment attachment can only be obtained in the following situations:

• The defendant is a nondomiciliary residing outside of New York State, or a foreign corporation not qualified to do business in New York.
• The defendant resides or is domiciled in the state but cannot be personally served after diligent efforts.
• The defendant has disposed of, encumbered, secreted or removed property from the state or is about to do so, with the intent to defraud creditors or frustrate potential judgment.
• The action is brought by a crime victim against the convicted perpetrator.
• The lawsuit is based on a foreign state judgment.

In order to prevent the defendant from disposing of property, the plaintiff can request an order of attachment from the court without giving the defendant prior notice. However, following the attachment order, the plaintiff has five days to file a motion to confirm the order and must serve the defendant with notice of that motion. The plaintiff must then establish the existence of one of the grounds listed above as grounds for attachment as well as demonstrate the likelihood of success in the lawsuit. At this stage, the defendant has an opportunity to present his or her arguments in opposition to the motion.

If the court allows attachment, the defendant may post a bond in the amount of the value of the attached property to serve as a security in lieu of the actual piece of property. This allows a defendant to remove restrictions on the property since it has been replaced with an equivalent amount in cash.

A recent decision of the New York Supreme Court, Appellate Division, Third Department highlights when pre-judgment attachment is allowed. The case of Haise v. Hussain involved a lawsuit by an estate representative against a limousine operator after an accident resulting from a catastrophic brake failure. The defendants were the three individual owners of the limousine company. The plaintiff sought pre-judgment attachment of four parcels of real property. The Court held two grounds for pre-judgment attachment were satisfied.

First, the Court found that the Defendant’s listing of four parcels for sale when litigation was pending (or when the Defendants knew litigation was imminent) was an attempt to “dispose” of property. Further, an intent to defraud creditors was established both by the timing of the attempted sale, as well as other improper transfers of property by Defendants.

Second, the attachment was justified based on the fact that one Defendant was a non-domiciliary residing outside the state based on newspaper articles that indicated he had returned to Pakistan with no intent to return. While one justice questioned the second ground, all the justices agreed that there was sufficient basis to allow attachment of the property.

If you are considering a lawsuit, make sure your attorney considers such pre-litigation strategic issues or contact us for a consultation.