In a personal injury case there may be a concern about a defendant’s financial status and if they will be able to satisfy a judgment. When a lawsuit is filed, some defendants may even move to sell or transfer their assets in an effort to protect them from being used to satisfy a judgment. A plaintiff’s attorney may file a motion for a preliminary injunction to freeze assets to prevent a defendant from concealing, selling off or transferring assets that can be used to satisfy damages.
FRCP 64 provides the basic guideline for when a plaintiff may be able to seize property or freeze assets in order to secure satisfaction of a potential judgment.
- (a) Throughout a case, any remedy under the applicable state law that provides for seizing property to secure satisfaction of a potential judgment is available to the plaintiff. But a federal statute governs to the extent it applies.
- (b) Remedies under this rule include – attachment, garnishment, sequestration, and other corresponding or equivalent remedies.
Case Example: Reebok II
The United States District for the Southern District of California granted a preliminary injunction to Reebok against another shoemaker, Marnatech, ordering Marnatech to stop counterfeiting and distributing shoes and froze Marnatech’s assets to ensure that relief would be available to Reebok. Reebok Int’l, Ltd. v. Marnatech Enters., 970 F.2d 552 (9th Cir. 1992) (Reebok II). The Ninth Circuit considered whether the District Court had the authority to freeze the defendant’s assets in a case arising under the Lanham act. Id. at 558. First, the Court looked to FRCP 64, which provides that prejudgment seizure of property for purposes of securing satisfaction of a future judgment is permitted to the extent it is permitted under the state law in the state where the federal district court is located. Id. at 558. State laws regarding prejudgment attachment are superseded by any applicable federal law in which such attachments or seizures are permitted. Id. The Court found that section 1116(a) of the Lanham Act “undisputedly authorized” the injunction issued in Reebok I, which enjoined the defendant from the continued infringement on Reebok’s trademark. Id.
The Court then considered whether section 1116 of the Lanham Act authorizes the asset freeze at issue in Reebok II. Section 1116(a) provides that the “several courts vested with jurisdiction of civil actions arising under this chapter shall have the power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable . . . to prevent the violation of any right of the registrant of a [Trademark].” Id. Section 1117 of the Lanham Act permits a plaintiff to recover the defendants’ profits as well as damages for the dilution of a trademark. Id. at 559. The Court found that, based on prior rulings in which it was held to be a per se abuse of discretion to fail to award relief under §1117 for trademark infringement, that such award may be considered a “right” as contemplated in §1116(a). Id.