HB269 By Representatives Faulkner, Hill (J), Wadsworth, South, Weaver, Rowe, Fridy, Hill (M), McCutcheon, Gaston, Drake, Carns, Garrett, Clouse and Mooney RFD Judiciary Rd 1 12-MAR-15

SYNOPSIS: Under current law, the primary remedy against asset dissipation has traditionally been an "in rem" order prohibiting the transfer of specific assets. Such prejudgment attachments are based in equity and require particularized showings of fraud.

This bill would enact the Alabama Uniform Asset-Preservation Orders Act. The bill would create a process for the issuance of asset preservation orders, which are in personam orders that prevent the dissipation of assets of parties to a civil action and imposing collateral restraint on nonparties such as the party's bank, in order to preserve assets from dissipation, pending judgment.

A BILL TO BE ENTITLED AN ACT

To enact the Alabama Uniform Asset-Preservation Orders Act; to provide procedures in civil actions for the court to issue asset-preservation orders against parties and nonparties to the civil action under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act may be cited as the Uniform Asset-Preservation Orders Act.

Section 2. DEFINITIONS. In this act:

(1) "Asset" means anything that may be the subject of ownership, whether real or personal, tangible or intangible, or legal or equitable, or any interest therein, which is not exempt from execution under applicable law. The term includes the plural unless the context indicates otherwise.

(2) "Asset-preservation order" means an in personam order preserving an asset by restraining or enjoining a person from dissipating an asset directly or indirectly.

(3) "Consumer debt" means a debt incurred primarily for personal, family, or household purposes. The term includes a debt that has been reduced to judgment.

(4) "Debtor" means a person that allegedly owes money to a party.

(5) "Nonparty" means a person that is not a party and has custody or control of an asset of a party which is subject to an asset-preservation order. The term includes a person that holds a joint ownership interest in an asset with a party against which an asset-preservation order has been entered.

(6) "Party" means a person that brings an action or against which an action is brought, whether or not service has been made on or notice given to the person.

(7) "Person" means an individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.

(8) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(9) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

Section 3. SCOPE.

(a) This act applies to a right accruing to a nonparty after the entry of an asset-preservation order if:

(1) the nonparty has been served with the order pursuant to Section 6(a); or

(2) the party obtaining the order has filed, recorded, or docketed the order in the appropriate jurisdiction and office in which the party would be required under applicable law to file, record, or docket the order to give notice of, establish, or perfect a lien, security interest, mortgage, or comparable interest, and the order as filed, recorded, or docketed, if it were a judicial lien in favor of a party, would give priority to the interest of a party over the interest of the nonparty under applicable law.

(b) This act does not apply in an action:

(1) against an individual for a consumer debt; or

(2) that arises under the family or domestic relations law of this state.

(c) This act does not apply to or limit a right or remedy available to a party or nonparty to the extent that a law, regulation, or treaty of the United States preempts this act.

(d) This act does not affect a right or remedy including a right or remedy arising from the creation, perfection, priority, or enforcement of a security interest or other interests that existed before an order takes effect.

(e) This act does not prevent recognition under principles of comity of an asset-preservation order not within the scope of this act.

(f) This act does not prevent the exercise of other remedies not inconsistent with this act.

Section 4. ASSET-PRESERVATION ORDER ISSUED WITH NOTICE.

(a) In an action in which monetary damages are sought, a court may issue an asset-preservation order on motion with notice to the party against which the order is sought and with an expedited opportunity to be heard prior to the issuance of the order if the court finds that:

(1) there is a substantial likelihood that the party seeking the order will prevail on the merits of the action;

(2) if the order is not granted, there is a substantial likelihood the assets of the party against which the order is sought will be dissipated so that the moving party will be unable to receive satisfaction of a judgment because of the dissipation;

(3) any harm the party against which the order is sought may suffer by complying with the order is clearly outweighed by the risk of harm to the moving party if the order is not issued; and

(4) the order, if issued, would not be adverse to the public interest.

(b) A party against which an asset-preservation order is issued may apply for relief from the order by posting a bond or other security in the amount of the damages sought or in an amount determined by the court.

(c) On at least 24 hours' notice to the party that obtained an asset-preservation order, a party against which the order is issued may apply for an order permitting it to pay its reasonable and ordinary living expenses, business expenses, and legal representation.

(d) The court may limit an asset-preservation order to a certain amount or type of assets and may order appropriate accounting requirements.

(e) Unless otherwise affected by operation of law, an asset-preservation order remains in effect until it is vacated by the court, or satisfaction of the judgment entered against the party against which the order was issued is satisfied.

Section 5. ASSET-PRESERVATION ORDER ISSUED WITHOUT NOTICE.

(a) In an action in which monetary damages are sought, the court may issue an asset-preservation order on motion without the notice required by Section 4(a) if the court finds that facts in an affidavit offered in support of the motion establish that the moving party is entitled to the order under Section 4(a).

(b) A party moving for an asset-preservation order under subsection (a) shall:

(1) conduct a reasonable inquiry and disclose in the affidavit all material facts that weigh against the issuance of the order; and

(2) disclose in the affidavit all efforts to give notice or the reasons why notice should not be required.

(c) An asset-preservation order issued without notice expires on a date set by the court, not later than 10 days after the court issues the order, unless before that time:

(1) the court, for good cause, extends the order and states in the order of extension the reason for the extension; or

(2) the nonmoving party consents in a record to an extension.

(d) If an asset-preservation order is issued without notice, the party against which the order is issued may move to dissolve or modify the order after notice to the party that obtained the order and may apply for relief under Section 4(c) and (d). The court shall hear and decide the motion or application on an expedited basis.

Section 6. OBLIGATION OF NONPARTY SERVED WITH ASSET-PRESERVATION ORDER.

(a) An asset-preservation order may be served, in compliance with the applicable law, on a nonparty. If the party that obtained the order serves a nonparty with the order, the party shall give notice to all parties in the action of the name and address of the nonparty not later than one day after service.

(b) Subject to subsection (e), a nonparty served with an asset-preservation order shall take all necessary and appropriate actions to preserve assets by preventing any use of the assets of the party against which the order is issued which would violate the order until further order of the court. The nonparty shall comply promptly with this subsection, taking into account the manner, time, and place of service and other factors that reasonably affect the nonparty's ability to comply. If the nonparty believes, in good faith, that complying with the asset-preservation order would violate foreign law, create liability under a foreign legal system or violate an order issued by a foreign sovereign or tribunal, the nonparty immediately may move the court that issued the asset-preservation order to dissolve or modify the order. If the court finds that the nonparty acted in good faith, it may not find the nonparty in contempt of court for failing to comply with the order during the pendency of the petition. The court shall hear and decide the motion on an expedited basis.

(c) If an asset-preservation order is vacated or modified, a party who serves a nonparty under subsection (a) shall give notice within 10 days from such order to the nonparty that was served with the order in the same manner as the nonparty was originally given notice.

(d) Except as otherwise provided for in subsection (b), a nonparty served with an asset-preservation order may not knowingly assist in or permit a violation of the order.

(e) A nonparty served with an asset-preservation order may move to dissolve or modify the order. The court shall hear and decide the motion on an expedited basis.

Section 7. SECURITY; INDEMNITY.

(a) The court shall require security from a party on whose behalf an asset-preservation order is issued under Section 5. The court may require security from a party on whose behalf an asset-preservation order is issued under Section 4 . If the court determines that security is required, it shall require the party to give security to pay for costs and damages sustained by the party against which the order is issued if the order is later determined to have been improvidently granted.

(b) A party on whose behalf an asset-preservation order is issued shall indemnify a nonparty for the reasonable costs of compliance with the order and compensate for any loss caused by the order.

Section 8. RECOGNITION OF ASSET-PRESERVATION ORDER ISSUED BY ANOTHER COURT.

(a) A court of this state shall recognize an asset-preservation order issued by a court in another state unless:

(1) recognition would violate the public policy of this state; or

(2) the order was issued without notice and the issuing court did not use procedures substantially similar to those in Section 5.

(b) Except as otherwise provided in subsection (c) and subject to subsection (d), a court of this state shall recognize an asset-preservation order issued by a court outside the United States.

(c) A court of this state may not recognize an asset-preservation order issued by a court outside the United States if:

(1) the order was rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law;

(2) the issuing court did not have personal jurisdiction over the party against which the order was issued; or

(3) the issuing court did not have jurisdiction over the subject matter.

(d) A court of this state need not recognize an asset-preservation order issued by a court outside the United States if:

(1) the order was issued without notice to the party against which the order was issued and the issuing court did not use procedures substantially similar to those in Section 5;

(2) the party against which the order was issued did not receive notice of the proceeding in sufficient time to allow the order to be modified or dissolved and the interest of justice requires a hearing to determine the issue;

(3) the order was obtained by fraud that deprived the losing party of an opportunity to oppose the order;

(4) the order or the underlying claim for relief is repugnant to the public policy of this state or the United States;

(5) the order conflicts with another order;

(6) the proceeding in the issuing court was contrary to an agreement of the parties under which the dispute in question was to be determined otherwise than by proceedings in the court outside the United States;

(7) jurisdiction was based only on personal service and the court outside the United States was a seriously inconvenient forum for the hearing regarding the order;

(8) the order was issued in circumstances that raise substantial doubt about the integrity of the issuing court with respect to the order; or

(9) the specific proceedings in the issuing court leading to the issuance of the order were not compatible with the requirements of due process of law.

(e) A party resisting recognition of an asset-preservation order issued by a court outside the United States has the burden of proving that a ground for nonrecognition in subsection (c) or (d) applies.

Section 9. PERSONAL JURISDICTION: ORDER ISSUED BY COURT IN FOREIGN COUNTRY.

(a) An asset-preservation order issued by a court in a foreign country may not be refused recognition for lack of personal jurisdiction if the party against which the order was entered:

(1) was served with process personally in a foreign country in which the issuing court is located;

(2) voluntarily appeared in the proceeding other than for the purpose of protecting property seized or threatened with seizure in the proceeding or contesting the jurisdiction of the court over the defendant;

(3) before the commencement of the proceeding, had agreed to submit to the jurisdiction of the court with respect to the subject matter involved;

(4) was domiciled in the foreign country when the proceeding was instituted or was a corporation or other form of business organization that had its principal place of business in, or was organized under the laws of, the foreign country;

(5) had a business office in the foreign country and the proceeding involved a cause of action arising out of the business done by the party through that office; or

(6) operated a motor vehicle or airplane in the foreign country and the proceeding involved a cause of action arising out of that operation.

(b) The list of bases for personal jurisdiction in subsection (a) is not exclusive. A court of this state may recognize a basis for personal jurisdiction other than those listed in subsection (a) as sufficient to support an asset-preservation order issued by a court outside the United States.

Section 10. AUTHORIZATION TO FILE, RECORD OR DOCKET.

Issuance of an asset-protection order grants the party obtaining the order authorization to file, record or docket the order in the appropriate jurisdiction or office. In the event following the filing, recordation or docketing of the asset-protection order in a jurisdiction or office, the order is vacated or modified then the party filing, recording or docketing the order in such jurisdiction or office, shall within ten (10) days from the order being vacated or modified cause the filing, recording or docketing to be amended to reflect the change of the order.

Section 11. ENFORCEMENT OF ASSET-PRESERVATION ORDER.

An asset-preservation order issued or recognized by a court of this state is entitled to full faith and credit in the same manner as a judgment.

Section 12. APPEAL.

The Supreme Court of Alabama has jurisdiction of an appeal from an order granting, continuing, modifying, refusing, or dissolving an asset-preservation order.

Section 13. UNIFORMITY OF APPLICATION AND CONSTRUCTION.

In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among the states that enact it.

Section 14. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.

This act modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).

Section 15. SEVERABILITY. If any provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to this end, the provisions of this act are severable.

Section 16. This act shall be effective January 1, 2016.

Civil Procedure

Uniform State Laws

Courts

Banks and Banking

Property, Real and Personal