As implied by my prior posting on trustee process attachments (“Gain Leverage By Freezing Bank Accounts – Part I, Offense“), the best way to avoid having your own bank account frozen is to make sure that you do not use a bank that has branches in Massachusetts. Even if your company does bank in Massachusetts, however, there are measures that can be taken to decrease the chances of having the company’s bank account frozen through a trustee process attachment.
An often overlooked fact about trustee process attachments is that payroll accounts are exempt from being attached. Thus, one prophylactic strategy you can employ is to fund your payroll account early and abundantly in order to shield as much money as possible from being attached. Be forewarned, however, that the payroll account exemption only applies if the account is used exclusively for payroll. Thus, if a company places money in its payroll account and later uses it for something other than payroll, the entire account can be attached – even those funds that are needed to comply with the company’s payroll obligation. Accordingly, and because there may be no better way to bring a company to its knees than to prevent it from making its payroll, it is critical to ensure that once money is deposited into a payroll account, it never is used for any purpose other than payroll.
Another fact in-house counsel should be aware of regarding trustee process attachments is that only judges have the ability to grant trustee process attachments; arbitrators do not. Further, while it is not uncommon for an arbitration clause to state that “notwithstanding the foregoing, either party may apply to a court of competent jurisdiction for injunctive or other equitable relief,” a trustee process attachment is not considered “equitable relief.” Thus, unless a specific exception is set forth in an arbitration clause, agreeing that disputes will be arbitrated eliminates the ability of your contracting party (or you) from obtaining a trustee process attachment. (Whether an injunction could issue, precluding a defendant in an arbitration from disbursing funds from a bank account is another matter, but, as discussed in Part I, obtaining an injunction would require a showing of irreparable harm, which is not necessary to obtain a trustee process attachment.)
Keeping in mind how trustee process attachments work can be the difference between having potential leverage or being leveraged if a dispute arises. Thus, while most in-house counsel don’t want to think about litigation when entering into business relationships, thinking like a litigator can pay big dividends.