USA Law and Practice Contributed by: Steven Molo, Robert Kry, Megan Cunniff Church and Walter Hawes, MoloLamken LLP
State Relief Different states provide different mechanisms to pre - vent the dissipation of assets. Most states provide procedures for pre-judgment attachment. Under New York law, for example, an order of attachment may be granted in certain circumstances where the plain - tiff shows it is entitled to a money judgment and the defendant has taken steps to dispose of or secrete property to frustrate the judgment. Attachment orders may operate either in personam or in rem, depending on the circumstances. Mere allegations of fraud do not justify pre-judgment attachment. Instead, the plaintiff must present evi - dence of intent to defraud. Failure to Abide by Injunction or Attachment If a defendant fails to abide by a preliminary injunction, temporary restraining order or pre-judgment attach - ment, the plaintiff may move for an order holding the defendant in contempt. A contempt order may include a requirement for the defendant to pay a fine for failing to abide by the court’s prior order. Federal Rule of Civil Procedure 26 allows parties to obtain discovery “regarding any nonprivileged mat - ter that is relevant to any party’s claim or defense and proportional to the needs of the case”. The US Supreme Court has liberally construed this standard to encompass any matter that could reasonably bear on any issue that is or may be in the case. To the extent a party’s financial information relates to specific elements of a claim or defence, a defendant may seek discovery through both the production of documents and the provision of testimony at a deposition. Ordinarily, a party seeks asset discovery from the defendant or from third parties once the court has entered judgment on the claim. In those circumstanc - es, the plaintiff has broad rights to seek discovery without any prior approval from the court, and may even seek discovery of assets located in other juris - dictions. 2. Procedures and Trials 2.1 Disclosure of Defendants’ Assets
Courts also have discretion to permit asset discovery even before judgment. Typically, a plaintiff seeking pre-judgment asset discovery has filed a motion for preliminary injunction or sought pre-judgment attach - ment and is seeking asset discovery in aid of that motion. Discovery seeking asset disclosure ordinarily does not require an undertaking by the claimant. If the defendant fails to respond to discovery demands, the plaintiff must first attempt to resolve the issue by conferring with the defendant. It may then file a motion to compel under Federal Rule of Civil Procedure 37 (a). If the court grants the motion to compel but the defendant still refuses to produce the discovery, the plaintiff may then seek sanctions, which may include significant daily fines until the defendant complies. 2.2 Preserving Evidence Under US law, the duty to preserve evidence exists independent of a court order directing such preserva - tion. Federal Rule of Civil Procedure 37 (e) imposes a duty on a party to preserve evidence from the time litigation can reasonably be anticipated. Often, once litigation is reasonably anticipated, a party will issue what is known as a “litigation hold” to custodians who may have relevant documents. If a party fears that evidence may be destroyed or suppressed despite the obligation to preserve it, the party may move for a preservation order. It must dem - onstrate that the order is necessary and not unduly burdensome. First, the movant must show that with - out a court order there is a risk that relevant evi - dence will be lost or destroyed. This is often shown by demonstrating that the opposing party has previ - ously destroyed evidence or has inadequate retention policies. Second, the movant must also show that the proposed preservation steps will be effective but not overly broad. In general, courts are not inclined to wade into discov - ery disputes between parties. However, where neces - sary and upon the requisite showing, courts will order relief. Courts in the United States are not likely to allow a physical search of an opposing party’s documents by another party. Generally, parties and their attorneys
384 CHAMBERS.COM
Powered by FlippingBook