Lesson. When considering the remedy of prejudgment attachment – i.e. freezing a defendant’s assets during the pendency of a lawsuit – make sure you evaluate the statutory bond requirement.
Legal issue. Whether Plaintiff was entitled to prejudgment attachment.
Vital facts. Plaintiff sued Defendant for breach of contract associated with the supply of auto parts, including custom bolts and fasteners. Defendant countersued for Plaintiff’s failure to pay for the allegedly non-confirming products.
Procedural history. The Wayne Mfg. opinion arises out of Plaintiff’s motion for writ of prejudgment attachment of Defendant’s assets.
Key rules. Federal Rule 64(a) states: “at the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located [here, Indiana law], provides for seizing a person or property to secure satisfaction of the potential judgment.” Rule 64(b) provides that the remedies available under section (a) include, among others, attachment.
Indiana authorizes prejudgment attachment under Indiana Code 34-25-2-1 and Trial Rule 64. Please click on the links to review in full.
I.C. 34-25-2-4 also is relevant as it outlines the affidavit required to be filed by the Plaintiff seeking prejudgment attachment.
Moreover, I.C. 34-25-2-5 states that a bond must be posted in order to obtain the relief. Plaintiff shall:
[E]xecute a written undertaking, with sufficient surety, to be approved by the clerk, payable to the defendant, to the effect that the plaintiff will: (1) duly prosecute the proceeding in attachment; and (2) pay all damages that may be sustained by the defendant if the proceedings of the plaintiff are wrongful and oppressive.
Holding. United States Magistrate Judge Collins denied Plaintiff’s motion based on the failure to meet the surety requirements in I.C. 34-25-2-5(2).
Policy/rationale. Plaintiff pursued prejudgment attachment because it sought a sizable judgment in Indiana against an Ohio corporation. Plaintiff filed the statutory affidavit in support, but the Court’s opinion did not focus on the factual bases for the requested relief. Instead, the Court concentrated on the bond requirement. Plaintiff stipulated it was prepared to post a cash bond of 300k. The Court found that amount to be “woefully inadequate.” Defendant argued that attachment “would drastically impact its business and ability to continue operations.” Defendant’s affidavit detailed that the bond offered by Plaintiff would not cover Defendant’s projected damages of over $2 million. Further, Defendant’s affidavit specified that that attachment would cause its business to fail altogether. The fact that Defendant had a pending counterclaim for damages bolstered its position.
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Part of my practice involves the collection of business debts. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.