Recent ruling proves that a creditor’s application for a pre-judgment remedy should identify specific assets of a debtor before seeking an order of attachment
As many creditors know, the purpose of Connecticut’s unique pre-judgment remedy ("PJR") procedure is to put the "cart before the horse" in a civil action. Simply stated, a PJR permits a creditor to seek to freeze or attach assets of a debtor at the very outset of a civil claim. The attached assets are subsequently subject to execution and can be used to satisfy any final judgment entered in favor of the creditor. Pursuit of a PJR is often an integral part of a case strategy which takes into account not only the ultimate goal of litigation, namely, collection of the eventual judgment debt, but also the leverage which can be associated with the PJR process, such as bringing the parties together at an early stage of the proceedings which may facilitate compromise and settlement of claims.
However, in a recent case, one of the Superior Court judges, notwithstanding a finding of probable cause as to the creditor’s claim and ordering that a PJR should enter, refused to issue an Order of Attachment as proposed by the creditor because there were no specifically identified assets of the debtor that would be subject to attachment. In refusing to enter the attachment order, the Court expressed concern that issuing a "blanket" attachment could result in an abuse of process or result in the creditor attaching assets in excess of the amount of its claim.
In short, the Court is going to require the creditor to undertake more costly discovery of the debtor and will issue an order of attachment only after specific assets are identified in the amount of its probable cause finding. The implication of the Court’s ruling may result in assets disappearing or being dissipated prior to attachment by the creditor and, ultimately, potential diminution of the value of pursuing a PJR as a litigation tool.
How can a creditor avoid this situation?
If you are a creditor considering a PJR, it is recommended to research the debtor’s assets prior to filing an application for PJR as any proposed order of attachment should now specifically outline what assets are sought to be attached. While the extra time or cost involved in searching for assets prior to application may seem burdensome, doing so may permit the Court to issue a prompt attachment and alleviate the need for the creditor to have to resort to discovery after the probable cause hearing before obtaining an order of attachment. This recent experience also demonstrates the importance of including ex parte waiver language in loan documents in commercial transactions which are not subject to judicial proceedings prior to the creditor attaching the debtor’s assets.