California business owners often find themselves involved in litigation to enforce their rights as creditors. Provisional remedies are a valuable tool of the California legal system. The purpose of a provisional remedy is to preserve the status quo until a matter reaches its final disposition. When time is money, parties may find temporary relief and avoid irreversible damages through provisional remedies.
In California, the term “provisional remedy” includes the following:
(1) Attachments and temporary protective orders (Cal. Civ. Code § 481.010).
(2) Writs of possession (Cal. Civ. Code § 512.010).
(3) Preliminary injunctions and temporary restraining orders (Cal. Civ. Code § 527).
(4) Receivers (Cal. Civ. Code § 564).
For such a remedy to serve its purpose, procedural safeguards are sacrificed and therefore fewer than in a typical “lawsuit to trial to judgment” scenario. Because provisional remedies deprive parties of life and liberty prior to trial or judgment, due process analysis and considerations apply.
Courts still employ some safeguards before ordering provisional remedies. First, some type of hearing is held, even if it is ex parte. Courts may bypass a hearing when issuing temporary restraining orders (“TRO”) and instead require the requesting party to post a bond sufficient to pay any ensuing damages for any wrongful issuance of the TRO. Courts will consider a movant’s inability to pay when ordering the “payment” of a bond. Other safeguards or procedures may apply as well, depending on the jurisdiction, remedy, and situation. See, e.g., Mitchell v. W. T. Grant Co., 416 U.S. 600. See also State Civil Procedure Rules.
Rule 65 of the Federal Rules of Civil Procedure authorize federal courts to issue temporary restraining orders and preliminary injunctions. Rule 64 authorizes federal courts to use any provisional remedy available to state courts in the state in which the federal court sits.
A major question facing a business enterprise on the brink of involvement in litigation to collect a business debt is whether the debtor has the assets to satisfy a money judgment and whether the assets will be available once a court renders judgment on the business’s behalf. Provisional remedies are a valuable legal mechanism for helping any business avoid damaging delays, preserve assets, and increase the likelihood of receiving just compensation in many business litigation matters.
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