At the conclusion of a typical lawsuit, a decision or verdict is rendered in favor of one party and against the other. If the plaintiff is the prevailing party, then the plaintiff will seek to enter a judgment against the defendant, at which point the plaintiff may begin to enforce the judgment (using the tools and methods described in many of our previous articles).
However, judgments are not entered instantaneously, and plaintiffs may wait weeks or even months after receiving a favorable decision or verdict before a judgment is entered. During this critical juncture, unscrupulous defendants may attempt to transfer, conceal, or dissipate their assets in order to frustrate the plaintiff’s eventual efforts to enforce the judgment.
Fortunately for plaintiffs, the CPLR provides an opportunity to protect against this type of conduct before a judgment is entered. Under CPLR § 5229, a plaintiff who has prevailed in a lawsuit, but for whom a judgment has not yet been entered, may seek to restrain the defendant’s assets with the same effect as if the plaintiff had served a restraining notice under CPLR § 5222 after a judgment had been entered. The statute also allows the plaintiff to force the defendant to appear for a deposition and testify as to the amounts and locations of the defendant’s assets, with the same effect as a post-judgment subpoena served under CPLR § 5224.
Plaintiffs may move for relief under CPLR § 5229 in writing, but they can also make the motion orally as soon as the verdict is rendered at the conclusion of a trial. Although the judge has discretion to grant or deny the motion, the only prerequisite that a plaintiff must satisfy is to be the prevailing party. Therefore, as soon as the outcome is decided, the judge has the authority to order the defendant to appear for a deposition and to refrain from transferring or concealing any assets. One significant limitation is that the relief provided under CPLR § 5229 is only available against the defendant, and cannot be used against third parties, such as banks, who may be in possession of the defendant’s assets. Of course, once the judgment has been entered, a creditor can serve a restraining notice pursuant to CPLR § 5222 on any person or entity who may be in possession of the defendant’s assets.
In some instances, courts have granted a plaintiff’s motion under CPLR § 5229 during the lawsuit. For example, in Sequa Capital Corp. v. Nave, 921 F. Supp. 1072 (S.D.N.Y. 1996), the plaintiff was granted summary judgment as to liability only, and the Court scheduled a hearing on damages. Prior to the hearing on damages, the plaintiff filed a motion under CPLR § 5229 to (a) restrain the defendant’s assets, and (b) depose the defendant regarding his assets prior to the final verdict being entered. In another case, Gallegos v. Elite Model Mgmt. Corp., 1 Misc.3d 200 (Sup. Ct., N.Y. County, 2003), the plaintiff prevailed after a trial but the defendant filed a motion to set aside the verdict. Even though the motion to set aside the verdict was pending and could have changed the outcome of the case, the Court granted the plaintiff’s motion under CPLR § 5229.
CPLR § 5229 provides effective relief and protections to plaintiffs who have proven successful in their claims but are awaiting a judgment. If you have questions about how this statute can be used to protect you from a defendant who may attempt to dispose of its assets before a judgment is entered, contact our office to speak with one of our attorneys.
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