Pre-Judgment Restraining Notice Issued Against Defendant Following Grant of Summary Judgment to Plaintiff

On January 31, 2025, Justice Joel M. Cohen of the New York County Commercial Division issued a decision in Fortress Credit Corp. v. Cohen, Index No. 651498/2024, issuing a pre-judgment restraining notice against, and ordering an enforcement deposition of, defendant following plaintiff's successful motion for summary judgment, explaining:

CPLR 5229 provides that “before a judgment is entered, upon motion of the party in whose favor a verdict or decision has been rendered, the trial judge may order examination of the adverse party and order him restrained with the same effect as if a restraining notice had been served upon him after judgment.” The purpose CPLR 5229 is to “prevent an adverse party from disposing of assets in order to avoid judgment” (Gallegos v Elite Model Mgmt. Corp., 1 Misc3d 200, 202 [Sup Ct NY County 2003]). “The only statutory requirement is that the application for CPLR 5229 relief be made by the prevailing party” (id. [citing Sequa Capital Corp. v Nave, 921 F Supp 1072, 1076 [SD NY 1996]]). “The remedy provided in CPLR 5229 is designed ‘to secur[e] satisfaction of the judgment ultimately to be entered in the action’ . . . [and] has substantially the same effect as an attachment and a seizure of property” (Sequa Capital, 921 F Supp at 1076). “It is in the court’s discretion whether to grant relief and the manner and limitations in which relief is granted” (id.). It is not required that the moving party “submit evidence that assets are definitively being disposed of or diverted as a prerequisite to obtaining injunctive relief” (Gallegos, 1 Misc 3d at 207).

Here, there is no dispute that Fortress is the prevailing party or that a decision has been rendered in its favor on summary judgment. Rather, the substance of Cohen’s opposition is that he has no intention to transfer or dissipate his assets and that this motion constitutes a “smear campaign” against a “reputable businessman who has never failed to pay his debts” (NYSCEF 122, at 1-2 & n.2). Cohen also has “voluntarily agreed not to sell, transfer, or encumber his net equity in three Class A office buildings located in this State” in lieu of the requested restraining notice (NYSCEF 145).

To be clear, the Court has no reason to question Cohen’s good faith or his business reputation. The fact remains, however, that he has been found liable for a substantial amount pursuant to a personal guaranty and that the sale of pledged business assets was insufficient to cover the underlying debt to which the guaranty attached. While Fortress could agree to accept a pledge of additional business assets as security for the expected judgment, it is not required to do so. CPLR 5229 is a common tool employed by plaintiffs awaiting imminent entry of judgment after a “decision has been rendered” in their favor. The Court sees no reason to deny that relief in these circumstances. Regrettably, in the Court’s experience, judgment preservation/collection is not a genteel business. That said, the restraint should be limited to the amount of the expected judgment and make reasonable accommodation for expenditures required in the ordinary course of the maintenance and operation of Cohen’s personal life and business.

While a plaintiff seeking a pre-judgment restraint on a defendant's assets must typically satisfy the requirements for an attachment--which include a showing that the defendant has dissipated, or is about to dissipate, assets to frustrate judgment enforcement--the requirements for the pre-judgment remedy under C.P.L.R. 5229 are far less demanding. But this remedy is available only in the (usually) short time between when a verdict or decision in plaintiff's favor is issued and entry of judgment. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning pre-judgment remedies against a defendant.