In an economy in which the trial attorney's triumphs are often foiled by an insolvent judgment debtor, prior secured creditors, and bankruptcy, we should all keep in mind the advantages that may be offered to our clients by prejudgment relief in the form of provisional process. Often property can be returned to a plaintiff or held by a sheriff or a security interest can be imposed against the property long before the judge drops his gavel in judgment. A little prejudgment planning may make the difference between whether the judgment you and your client have worked so hard to obtain is satisfied or remains unsatisfied.
Oregon's statutory scheme for provisional process is set forth in Rules 81 through 85 of the Oregon Rules of Civil Procedure. ORCP 81 contains definitions, ORCP 82 covers bond requirements, ORCP 83 relates to procedural matters, ORCP 84 deals with attachment, and ORCP 85 covers claim and delivery.
1. Types of Provisional Process
There are essentially four types of provisional process: claim and delivery, prejudgment attachment, restraining orders, and ORCP 81 A(9) relief. Claim and delivery entitles a plaintiff who is an owner of property, or is otherwise entitled to immediate possession of property (perhaps because of a security interest), to have the property returned to the plaintiff by the sheriff or marshal pending judgment. Attachment entitles a plaintiff with a contract, express or implied, for the direct payment of money that is not secured, to have the sheriff or marshal hold the defendant's property pending judgment. A restraining order entitles a plaintiff to have a court order a defendant to refrain from taking any action, making it potentially difficult or impossible for the plaintiff to eventually satisfy a judgment. Finally, ORCP 81 A(9) offers an expansive definition of provisional process, which should allow an inventive plaintiff's attorney to fashion appropriate prejudgment protection to ensure that his client's eventual judgment will be satisfied (i.e., obtaining a prejudgment security interest in the defendant's property to protect against intervening secured creditors and certain bankruptcy problems).
Provisional process relief is most often used in contract cases. It is important for a trial attorney to keep in mind, however, that it can also be available in tort cases. For instance, claim and delivery is potentially available anytime a plaintiff asserts a conversion claim. Moreover, attachment is available if the plaintiff asserts a claim for money damages for injury to property in this state and the defendant is not residing in this state. ORCP 84 A(2)(c).
The pleadings that are needed for provisional process relief include a complaint, a motion or a petition, an affidavit, an order, and a bond. The complaint must assert at least one claim that qualifies the plaintiff for provisional process relief, such as claim and delivery (e.g., conversion), attachment (e.g., unsecured contract claim or property damage claim against a nonresident defendant), a temporary restraining order or preliminary injunction (e.g., to protect an asset that otherwise might be dissipated or lost), or ORCP 81 A(9) (e.g., a security interest in the defendant's property).
The affidavit should include the checklist of items listed under ORCP 83 A. It is important to recognize, however, that the legislative history discloses that all items listed in ORCP 83 A are not pertinent for each type of provisional process. For instance, if the defendant's property that the plaintiff seeks to have held is a consumer good, it is pertinent only if the remedy sought is attachment. Although ORCP 83 B prohibits issuance of provisional process to effect attachment of a consumer good or to effect attachment of any property if the underlying claim is based on a consumer transaction, there is no prohibition against effecting provisional process by way of claim and delivery against consumer goods or property if the underlying claim is based on a consumer transaction.
The standard for the granting of relief for provisional process remedies is probable cause for sustaining the validity of the underlying claim." ORCP 83 C(2). Accordingly, the affidavit or affidavits must demonstrate that the plaintiff will probably eventually prevail.
The motion or petition should simply identify the relief sought and the authorities supporting the granting of that relief.
A bond is required pursuant to ORCP 82. The amount of the bond is fixed by the court in an amount to "pay all costs that may be adjudged to the defendant, and all damages which the defendant may sustain by reason of the attachment or taking, if the same be wrongful or without sufficient cause." ORCP 82 A(3)(a). A recent amendment to this statute also allows a letter of credit issued from a commercial bank to be filed as a substitute for the bond.
An order to show cause will be needed announcing the date and time at which the provisional process hearing will be held, at which time the defendant or anyone else with a direct interest in or control of the pertinent property will be given an opportunity to show cause why the provisional process remedy requested should not be granted. As discussed below in Section 5, a separate order or additional provisions in the order may be necessary if temporary relief is sought pending the hearing for order to show cause.
Normally, at the time the complaint is filed, the plaintiff presents the motion or petition, affidavit, bond, and order to show cause at ex parte to the duty judge. Although not required by statute, a judge will usually ask, if the defendant is represented, whether or not an effort has been made to invite opposing counsel to the ex parte hearing. As much notice as possible should be given to opposing counsel so any appropriate objections can be raised at the ex parte hearing (local practice may require the setting of a separate hearing if opposing counsel will appear).
At the ex parte hearing, the judge will make a ruling whether the probable cause standard of ORCP 83 C(2) has been met. If it has, the order to show cause setting the date and time for a full hearing on the matter will be set.
As discussed below in Section 5, in certain situations it may be prudent to seek additional temporary relief pending the hearing for order to show cause.
Between the ex parte hearing and the hearing for the order to show cause, the order to show cause must be served on not only the defendant but any other party having possession or control of the claimed property. ORCP 83 G(1).
ORCP 83 G(1) requires that any defendant or third parties must be served so that the hearing is held "the third day after service of the order and before the seventh day after service of the order to show cause." Although a court is unlikely to rule that service that does not heed this rule is ineffective, it is likely that a plaintiff who fails to comply with these timing requirements may have the hearing for order to show cause continued to a later date. Such a continuance may be critical to a plaintiff's effort to reach property that may, in the meantime, be impaired or lost.
Although ORCP 81 B(1) allows the order to show cause to be served the way a summons is served (for instance, by acknowledgment of service), unless the order to show cause is personally served on a defendant, the defendant will not be subject to contempt proceedings pursuant to ORS Chapter 33.
If a plaintiff is seeking interim relief between the time of the ex parte hearing and the hearing for order to show cause, the plaintiff may want to have the court sign two orders. One order could be served to comply with the three- to seven-day rule. The other order could be served immediately to ensure compliance with the interim relief.
5. Interim Relief
If there is a risk of immediate and irreparable injury, a plaintiff may seek interim relief between the time of the ex parte hearing and the hearing for order to show cause. ORCP 83 F entitles a plaintiff to a temporary restraining order to protect property if there is a finding that "because of impending injury, destruction, transfer, removal, or concealment of the property in which provisional process is sought there is probable cause to believe that immediate and irreparable injury, damage, or loss to the plaintiff is imminent." Such a showing is made by affidavit. It is important for the supporting affidavit to detail the actual facts that support such a finding. Otherwise, even though the court may issue a temporary restraining order, the attorney may later expose his client to claims of wrongful provisional process, conversion, or punitive damage claims--and himself to a malpractice claim.
In those circumstances in which a defendant, who is threatening immediate and irreparable damage to the pertinent property, is the kind of a defendant who is unlikely to abide by a temporary restraining order, a plaintiff may request pursuant to ORCP 83 E that the sheriff or marshal take immediate possession of the property. The standard for ORCP 83 E relief is to demonstrate that there is probable cause to believe that those "in possession or control of the claimed property [are] engaging in, or [are] about to engage in, conduct which would place the claimed property in danger of destruction, serious harm, concealment, removal from this state, or transfer to an innocent purchaser," and that they would not comply with the temporary restraining order. Again, it is important that an affidavit detailing the facts to support such a finding be filed to protect the plaintiff from wrongful process, conversion, and punitive damage claims.
6. Hearing for Order to Show Cause
At the hearing for order to show cause, the plaintiff will be entitled to put on evidence to substantiate that it is probable that the plaintiff will ultimately prevail on the claim in the plaintiff's complaint, entitling the plaintiff to provisional process relief. Of course, the defendant and third parties will also be entitled to put on evidence. The plaintiff may submit evidence by affidavit or live testimony.
In the interest of time, the plaintiff should consider putting on its prima facie case by affidavit and have the witnesses available for cross-examination. Often courts have limited the time available for hearings for order to show cause, and failure to complete a hearing on a date at a scheduled time may result in a continuance and the loss or impairment of the property sought to be subjected to the provisional process.
A bankruptcy filing by a defendant when a plaintiff is seeking provisional process can substantially affect provisional process. To begin with, the normal provisional process remedies sought will be barred by the automatic stay pursuant to 11 USC § 362. (Under such circumstances, a plaintiff is eligible to seek relief from stay in the bankruptcy court pursuant to 11 USC § 362(d) if the plaintiff can prove that the debtor has no equity in the property and such property is not necessary for an effective reorganization or for other sufficient cause, such as lack of adequate protection.)
Provisional process type of relief, however, may still be available. 11 USC § 362(f) entitles a plaintiff to obtain relief from the bankruptcy court to prevent irreparable damage "without a hearing" if the circumstances warrant. It is likely that the state law requirements, including filing of the bond, would pertain in such a situation.
In the face of a bankruptcy filing, a plaintiff should keep in mind reclamation and perfection action, which is not barred by 11 USC § 362. Despite a bankruptcy filing, a plaintiff may be able to reclaim goods from the debtor-defendant. A creditor who discovers in the ordinary course of business that a debtor has received goods on credit while insolvent may reclaim the goods by written demand within ten days after the receipt of the goods by the debtor. A plaintiff-creditor seeking the reclamation of such goods should ensure that the written demand is personally delivered or sent by facsimile to the defendant and not rely on the mail.
A plaintiff-creditor is also eligible, pursuant to 11 USC § 362(b)(3), to perfect a security interest obtained prior to the bankruptcy if perfection takes place within the relation-back period under the Uniform Commercial Code. Accordingly, a debtor may still be able to perfect a security interest in certain kinds of property, such as equipment under a purchase money security interest or proceeds.
It is important that any plaintiff carefully analyze the facts and ORCP 81 through 85, and weigh the risks of proceeding with provisional process relief. Provisional process exposes a plaintiff to a number of factors that may weigh against proceeding with provisional process, including risks, costs, practicalities, and circumstances.
There is always the risk of exposing a plaintiff to damages for wrongful process. It is important to review a client's files completely, interview critical witnesses, and ensure that affidavits supporting provisional process relief are specific and particular and that they fulfill the evidentiary statutory requirements.
Costs involved in provisional process can be substantial. Provisional process usually involves, at a minimum, the attorney fees for two court appearances. In addition, there is the expense of a bond or letter of credit. To the extent a sheriff is involved in holding property, the sheriff will require fees, may require a bond, and may require special handling and storage costs.
A number of practicalities and circumstances should be considered, including whether the property is valuable enough to warrant the expenditure of predicted costs, whether the property might be subject to a claimed exemption, and whether the property is consumer property or arises from a consumer transaction that would bar attachment. To the extent the provisional process requires the involvement by a sheriff or marshal, it is important that the attorney work closely with that sheriff or marshal to ensure that local practice requirements have been met and that property is specifically and sufficiently identified.
Further risks are offered by bankruptcy. A bankruptcy can bar provisional process remedies and force a plaintiff to disgorge property gained by provisional process.
Alternatively, failure to exercise a plaintiff's opportunity for provisional process may mean that property that could have ensured that your client's judgment would be satisfied will be lost.
The next time you and your client are about to launch a substantial effort to obtain a judgment, see whether the magic of provisional process might guarantee for you and your client that the judgment you will eventually obtain will be satisfied.