How to Get a Defendant to the Settlement Table Early in the Litigation: File a Writ of Attachment!
Plaintiffs (mostly creditors) often have a hard time getting defendants to the settlement table early in litigation, even though the defendant clearly owes plaintiff the money. This can lead to lengthy litigation of the action (including discovery, deposition, and probably a few motions) which can result in costs and fees that may eclipse the amount owed. Additionally, given the backlog in the courts caused by COVID-19, progress of litigation has slowed down even further, with defendants taking advantage of this to further delay resolution. There are a few tools to force a defendant’s hand early in litigation and the Writ of Attachment is one of them.
Filing for a Writ of Attachment early in the litigation could be a game changer that would force a defendant to the settlement table and possibly result in early settlement. A Writ of Attachment allows a plaintiff to secure payment on the debt owed by a defendant prior to obtaining a judgment. The attachment can apply to either property, such as equipment, or cash in bank accounts. If cash, the defendant has to deposit the amount awarded with the court or risk the attachment of its bank accounts. If the attachment is issued against personal property, the property will be placed in the custody of a sheriff.
The potential seizure of a defendant’s cash will definitely get the defendant’s attention and will encourage the parties to negotiate an early settlement. For example, Party A enters into a contract with Party B to provide 1,000 widgets at the price of $500 per widget (for a total sales price of $500,000). After accepting delivery of the widgets, Party B refuses to pay for them. Party A sues Party B for breach of contract and related claims. Party B answers the complaint but begins to slow-play the litigation by dragging out discovery in the hopes that the increasing legal fees and costs would force Party A to accept a lowball settlement offer. However, Party A’s attorney files a motion for Writ of Attachment and the Writ is granted by the court. This forces Party B to provide the $500,000 in dispute to the court or have its equipment attached with the Writ (similar to a lien). In this situation, it is very likely that Party B will want a quick settlement and agree to settle the matter closer to the $500,000 amount. Otherwise, Party B has to provide the $500,000 to the court plus incur attorney’s fees and costs to continue litigating the matter.
This procedure can be used only in certain cases and under certain circumstances. In order for attachment to be permitted, the claim must be (1) for money based upon a contract, express or implied; (2) of a fixed or readily ascertainable amount not less than $500; (3) either unsecured or secured by personal property; and (4) a commercial claim. Cal. Civ. Proc. Code § 483.010. Plaintiff also has to show the probable validity of the claims in the underlying action. If the Writ of Attachment is granted, then it shows that plaintiff has a high probability of prevailing in the matter. This provides further pressure on defendant to settle as it shows that plaintiff has a valid claim.
A Writ of Attachment cannot be sought for real property. Instead, it allows for the attachment of all equipment and assets of an entity, including money in bank accounts up to the amount on the Writ (in the above example, it would be $500,000). It is a little bit more restrictive when one is trying to attach the assets of an individual, and unless the individual is wealthy, courts are reluctant to issue the Writ against individuals.
Other considerations that must be taken into account, include whether the Writ would result in the defendant filing bankruptcy, which would complicate matters and increase the legal costs, as well as to see if the defendant indeed can pay the debt or has assets that are substantial enough to make the costs of the Writ of Attachment worthwhile. Otherwise, after spending a substantial amount on the Writ procedure, it turns out that the defendant does not have any significant assets, there would be nothing of value to attach, making the Writ a waste.
The Writ of Attachment procedure is a powerful tool when executed properly and in applicable situations to get an early settlement.
To discuss the above topic, please contact Muhammed Hussain at muhammed@encorelaw.com or any other Encore Law attorney.