One of the concerns of every plaintiff is that as he approaches victory, his adversary will conceal his assets someplace that will prevent the plaintiff from satisfying his judgment. To prevent that, equity has evolved a remedy called an order of attachment which allows the plaintiff to freeze an asset, such as a bank account or a piece of real property in place until the litigation is adjudicated.
Because an order of attachment has such a harsh effect on the defendant, the requirements for obtaining the order of attachment are quite stringent. They're set forth in § 6201 of the New York Civil Practice Laws and Rules, and also govern the applications for orders of attachment in federal courts.
Section 6201 provides that:
"An order of attachment may be granted in any action, except a matrimonial action, where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants, when:
- the defendant is a nondomiciliary residing without the state, or is a foreign corporation not qualified to do business in the state; or
- the defendant resides or is domiciled in the state and cannot be personally served despite diligent efforts to do so; or
- the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts; or
- the action is brought by the victim or the representative of the victim of a crime, as defined in subdivision six of section six hundred twenty-one of the executive law, against the person or the legal representative or assignee of the person convicted of committing such crime and seeks to recover damages sustained as a result of such crime pursuant to section six hundred thirty-two-a of the executive law; or
- the cause of action is based on a judgment, decree or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, or on a judgment which qualifies for recognition under the provisions of article 53."
As a practical matter, the only provision that most litigants might fit under is § 6201(3):
"the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts..."
The first thing to notice is that § 6201(3) limits attachments of the property of defendants. If the property doesn't belong to a defendant, it can't be attached. So if a group of prospective defendants has one particular asset that the plaintiff wishes to attach, it's crucial that the owner of the asset be made an owner.
The next thing to notice is that § 6201(3) has an intent element. The conduct that the defendant has engaged in or is about to engage is has to be done:
"with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor."
Thus, it isn't sufficient that the conduct may have the undesired effect if it isn't undertaken for the purpose of having that effect. Thus, for example, if the defendant is thinking of shutting down his business, and the shutdown would render a judgment meaningless, the assets of the business can't be attached. The shutdown was done for legitimate business reasons, and not for the purpose of defrauding the creditor or for frustrating the enforcement of the judgment. Thus, under such circumstances, an order of attachment would not be issued.
Because of the difficulties in proving fraudulent intent, courts ask whether the conduct exhibits characteristics called "badges of fraud". Those “badges of fraud” include (1) gross inadequacy of consideration; (2) close relationship between transferor and transferee; (3) transferor's insolvency as result of conveyance; (4) that transfer is questionable transfer not in ordinary course of business; (5) secrecy in transfer; and (6) retention of control of property by transferor after conveyance.