Freezing Assets in a Federal Case

Litigants often assume that a federal court, having the whole apparatus of federal jurisdiction behind it, can freeze a defendant's bank accounts on a motion. It generally cannot. Federal courts have no home-grown attachment regime for ordinary civil actions, they borrow the state's, and the equitable alternative is narrower than most people expect. The result is that federal asset preservation is a state law question with a federal ceiling on top of it.

The borrowed writ

Rule 64 does the borrowing. Throughout an action, every remedy available under the law of the state where the court is located, providing for seizure of person or property to secure satisfaction of a potential judgment, is available. The rule names the familiar categories, including arrest, attachment, garnishment, replevin and sequestration, and preserves any applicable federal statute that governs instead.

Two consequences follow immediately. The first is that the conditions are the state's conditions: the grounds, the affidavit contents, the bond, the exemptions and the hearing all come from the state statute, and a federal plaintiff has to satisfy them exactly as a state plaintiff would. The variations described in the account of attachment and the grounds it requires therefore reach into federal court unchanged.

The second is that forum matters more than it looks. A case filed in a district within a state with a broad probable cause regime is easier to secure than the same case filed across a state line where attachment is confined to liquidated contract claims. Because the borrowing is of the law of the state where the court is located, a transfer of venue can change what remedies exist.

The limit on the equitable route

Where no state writ is available, plaintiffs have asked district courts to achieve the same result by injunction, restraining the defendant from disposing of assets pending judgment. The Supreme Court closed that route for the ordinary damages case, holding that a district court has no authority to enter a preliminary injunction preventing a defendant from transferring assets in which no lien or equitable interest is claimed.

The reasoning is historical. The equity jurisdiction conferred on the federal courts is the jurisdiction exercised by the English Court of Chancery at the time the first judiciary act was passed, and that court did not grant such relief to a general creditor who had not reduced a claim to judgment. Whatever the practical case for a freeze, the Court held that creating one was a legislative task rather than a judicial one.

The holding is narrower than it is sometimes described. It concerns a plaintiff asserting only a claim for money, with no interest in the particular property. Where the plaintiff claims the property itself, or seeks a constructive trust, an equitable lien, rescission, disgorgement or restitution of identifiable funds, courts have continued to enter preservation orders, and the divide between those two situations is where most of the litigation now happens.

Timing complicates the distinction further. A plaintiff that pleads a tracing claim at the outset stands differently from one that adds it after a freeze is refused, and courts notice the sequence. Where the tracing case is genuine, the evidence supporting it is usually available early: transfer records, account statements and the documents showing where identified funds went. Where it is not, the amendment tends to read as a device and is treated as one.

Statutory freezes and who may use them

Congress has legislated in specific areas. A criminal fraud provision authorizes the government to commence a civil action to enjoin an offense affecting a financial institution and related conduct, and to restrain dealings with property obtained from or traceable to such an offense. Financial regulators have their own enforcement powers under their governing statutes, exercised through actions those agencies bring.

The United States as creditor has a complete scheme. Federal debt collection provisions make prejudgment attachment, receivership, garnishment and sequestration available for debts owed to the government, with statutory conditions of their own. None of this assists a private plaintiff, and the pattern illustrates the Court's point: where Congress wanted a freeze power it created one.

The general writs statute is not a substitute. It authorizes writs necessary or appropriate in aid of jurisdiction and agreeable to the usages and principles of law, and the second clause carries the same historical limit that defeated the general equitable freeze. Courts have declined to read it as conferring a power the equity tradition withheld.

What remains available in practice

The realistic sequence in a federal damages case is to start with the state writ. That means satisfying the state's grounds, posting the state's bond and accepting the state's exemptions, with the defendant's response governed by the motion to dissolve a writ already issued. It also means the constitutional floor applies in full, as described in the hearing owed before property is frozen.

Where the claim genuinely reaches identified property, the ordinary injunction machinery is available and the application is assessed on the usual test. The four factors, the security requirement and the specificity rules all apply, and an order freezing assets is drafted to the same standard as any other decree. Counsel should expect the scope question to dominate, because a freeze framed around the defendant's general accounts invites the objection the Supreme Court's holding supplies.

Finally, the alternatives outside the writ are worth weighing. A recorded notice against real property, described in the notice that litigation affects title, requires no federal power at all and operates through the state recording system. Expedited discovery into asset location, and a claim for fraudulent transfer if assets have already moved, often achieve more than an application for relief the court has no authority to grant.