HOW TO MAKE SURE YOU CAN RECOVER YOUR CONTRACT DAMAGES: PREJUDGMENT ATTACHMENT

by William Dickerman, Esq

     You’ve just won your business contract case at trial--only to discover that the losing party doesn’t have any money to pay you. You learn that he did have the funds when the case began, but that over the time it took to litigate and win the judgment, he spent it. Or went bankrupt. Or stashed it in the Cayman Islands. You could have avoided this disastrous scenario if you had availed yourself of a legal procedure called “prejudgment attachment” (we’ll refer to it as simply “attachment”).

     In my experience litigating and trying cases over three decades, I have found this process to be tremendously valuable, often making the difference between a real victory and a victory on paper only. The procedure is strangely underutilized by lawyers. The main purpose of an attachment is to secure enough assets of the bad guy (“the defendant”) as early in the lawsuit as possible, so that if you get a judgment against him, his assets will have been set aside to satisfy the judgment. Your risk in suing should be that you might lose; it shouldn’t be that if you win, after much time, expense, and aggravation, you don’t recover the fruits of your victory.

     Attachments are governed by an intricate statutory scheme in California, but here’s the gist of how it works. First, you must have a commercial contract. Let’s say you’re a television producer who signed a contract for your producing services, under which you were guaranteed 10 weeks of work at $5,000 per week. At the end of two weeks you were fired for no valid reason, and are still owed $40,000. You file not only a lawsuit but also papers to obtain a writ of attachment, asking the court to allow law enforcement officials to take into custody assets of a value sufficient to pay the ultimate judgment; you might also be able to attach the money in a bank account. The attachment filing consists of some pre-printed forms with information to supply; other papers include your sworn declaration and any other written evidence that supports your case.

     If the court, after considering your papers, opposing papers, and argument in court, finds that you are more likely than not to ultimately win your case, the court will make one or more rulings that will secure the assets. If you prevail in the attachment proceedings, you will have to post a bond, for which you will pay a modest premium. You will then direct law enforcement to execute the writ of attachment. Obtaining an attachment is not a walk in the park. The applicant must jump through many hoops prescribed by the Code of Civil Procedure. Disadvantages include legal expense, which may be considerable depending on how big a fight the bad guy puts up. If the attachment turns out to be “wrongful,” you could be liable to the bad guy for damages. There are other pitfalls. Therefore, attachment might not be what the doctor ordered; experienced legal counsel is clearly needed.   

     On the other hand, the advantages are considerable. Most important is that where you were once an unsecured creditor, the attachment makes you a secured creditor, with priority over the opponent’s unsecured creditors. Significantly, attachments often result in the rapid settlement of the lawsuit, since the court has formally opined that you will likely win the lawsuit, and you now have enhanced creditor status. In almost every case in which my client has obtained a writ, the opponent has quickly caved. One of our recent successes was obtaining a writ of attachment for a client who was owed a significant real estate commission from a broker. They had had a falling out and the broker simply refused to pay. We produced evidence that persuaded the judge that our client would likely win the lawsuit, and the judge therefore issued the writ. Fearful that we would levy execution against the broker’s bank account, tying up his much-needed funds, he followed us to our office after the hearing, and agreed to pay the full commission. End of case.

     We also recently obtained an attachment order in a case in which the debtor company, not wanting us to discover what and where its assets were, voluntarily gave us possession of the funds pending resolution of the lawsuit—which settled very favorably for our client for even more than the amount of the attachment.

     One additional feature of attachments is well worth noting. Under circumstances that would likely result in the assets’ disappearance if you gave notice of seeking an attachment to the other side, you might be able to obtain an ex parte writ of attachment so that you might secure the assets before your opponent knows what happened. Although rarely awarded, we have obtained them several times by establishing that the assets were in danger of being disposed of if we had to give notice to the other side. In each case—including the one featuring the TV producer—the writ led to a quick conclusion to the lawsuit.
The moral of the story: If you have a potential case involving a business contract and significant money damages, discuss with your lawyer the advisability of applying for a writ of attachment.

 

William Dickerman, the principal attorney of Dickerman & Associates, has been litigating business, real estate, and other commercial and personal lawsuits for over 30 years in and around Los Angeles. For more information, go to www.dickermanlaw.com. This article is not meant to constitute legal advice; please consult and rely only on competent counsel after a thorough review of your individual circumstances.

© William Dickerman 2015 - All Rights Reserved