In expensive lawsuits involving fraud claims, the temptation of a defendant to play hide and seek with its assets can be high. To prevent this result, CPLR § 6201 provides a mechanism (i.e., prejudgment attachment order) to preserve such assets. However, in a recent decision from the Suffolk County Commercial Division, Justice Elizabeth H. Emerson reminds us that a party seeking to obtain a prejudgment attachment order faces a heavy burden.
In Fritch v Bron, plaintiff Maureen Fitch (“Plaintiff”) and defendant Igor Bron (“Mr. Bron”) agreed to form an electrical construction contracting company, E. Electrical Contracting LLC (“EEC”). In or around 2004, Plaintiff and Mr. Bron signed an operating agreement for EEC, naming Plaintiff as the sole manager. As part of their duties, Plaintiff was responsible for contract administration and other administrative tasks at EEC, while Mr. Bron was responsible for EEC’s field operations. In or around 2016, Plaintiff and Mr. Bron signed an amended operating agreement (“Amended Operating Agreement”) for EEC, whereby the parties agreed that they would not perform any electrical contracting work outside of EEC, including for defendant Sajiun Electric, Inc. (“Sajiun Electric”). However, according to Plaintiff, since 2003, Mr. Bron, along with defendants Sajiun Electric, Richard Sajiun (“Mr. Sajiun”), and Rita Bron (“Mrs. Bron”), concocted an extensive scheme to divert EEC’s assets from Plaintiff, for the benefit of Sajiun Electric and other named defendants.
As a result, in March 2021, Plaintiff commenced an action to recover damages for fraud, aiding and abetting fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, constructive trust, and unjust enrichment. Thereafter, Plaintiff brought a motion for a prejudgment attachment order under CPLR §§ 6201 (1) and (3), arguing (a) Mr. Sajiun was a nondomiciliary who resided in Florida; (b) there was substantial evidence that Mr. Bron, Mrs. Bron, Mr. Sajiun, and Sajiun Electric were hiding assets for the purpose of defrauding creditors and frustrating the enforceability of a judgment; and (c) that she has shown a probability of success on the merits. Justice Emerson rejected each of Plaintiff’s arguments.
First, the Court addressed the applicable legal standard in determining whether to grant a prejudgment attachment order. Specifically, the Court stated that “[t]o obtain an order of attachment, the moving party must demonstrate through affidavit or other written evidence (1) the existence of a cause of action for a money judgment, (2) a probability of success on the merits, (3) the existence of one or more grounds enumerated in CPLR 6201 (e.g., the defendant is a nondomiciliary residing without the state, or the defendant with the intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff’s favor, disposes of secreted property), and (4) that the amount demanded from the defendant exceeds all counterclaims known to the plaintiff” (see CPLR 6212 (a); Ford Motor Credit Co. v Hickey Ford Sales, 62 NY2d 291, 301 ). In addition, the Court noted that since attachment is a harsh remedy, CPLR § 6201 is strictly construed in favor of those against whom it may be employed (651 Bay St., LLC v Discenza, 189 AD3d 952, 953 [2d Dept 2020]).
Second, the Court rejected Plaintiff’s argument for a prejudgment attachment order against defendant Mr. Sajiun on the ground that he was a nondomiciliary residing in Florida because (a) Mr. Sajiun submitted an affidavit stating that he resided in Suffolk County and worked in New York City; and (b) the record reflected that Mr. Sajiun was served in Hampton Bays, New York. Moreover, the Court found that Plaintiff’s allegations that Mr. Sajiun sold his New York residence in June 2021 for the purpose of transferring the proceeds from New York to Florida, was not enough to support a prejudgment attachment order.
Third, the Court found that Plaintiff failed to establish her burden under CPLR § 6201 (3) that defendants Mr. Bron, Mrs. Bron, Mr. Sajiun and Sajiun Electric attempted to frustrate the enforcement of a judgment by disposing of secreted property. Indeed, the Court noted that the transfer of the Bron residence to a family trust was in 2017, long before the commencement of the action. In addition, the Court acknowledged that many of Plaintiff’s allegations involving fraudulent concealment of assets were based on “information and belief,” which is insufficient to support a prejudgment attachment order.
Fourth, the Court found that Plaintiff failed to establish a probability of success on the merits of her claims, which is a necessity to obtain a prejudgment attachment order. Accordingly, the Court denied Plaintiff’s motion for a prejudgment attachment order.
As pointed out by Justice Arlene P. Bluth in Erensel v Abitbol, the purpose of a prejudgment attachment order “is not merely to ensure a plaintiff can recover the amount sought if he or she prevails in a case. Otherwise, a plaintiff would be entitled to an attachment in nearly every case.” Thus, this decision highlights that obtaining a prejudgment attachment order is an uphill battle and attorneys must educate their clients on the onerous burden needed to obtain such relief.