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Florida state court decision signals growing support for freezing orders in US

  • Asset recovery
April 7, 2021
Michael Redman

In a ruling on February 17, the Eleventh Judicial Circuit of Florida in Miami-Dade County directly enforced an ex-parte freezing order made in a pending foreign proceeding and issued its own worldwide freezing order in support of those proceedings — the first worldwide asset-freeze seen in the US. This type of order freezes a respondent’s assets globally, preventing the dispersal of valuable assets before a final judgment. The order issued in the case of Gorsoan Ltd. V. Bullock 2020 sided with plaintiff Gorsoan, a Cypriot company, and targeted a $7 million condominium owned by Janna Bullock, the former wife of a Moscow regional Minister of Finance. The order is a positive development for plaintiffs seeking the assistance of Florida courts in pursuing foreign debtors as it suggests a major shift in the state’s stance on asset-freezing orders.

Challenges to worldwide freezing order enforcement in the US

Unlike their common-law counterparts, US courts have generally disapproved of enforcing prejudgment asset-freeze injunctions on the basis that it departs from the principle that creditors and debtors have equal rights under the Judicial act.

The US Supreme Court first considered the action in Grupo Mexicano de Desarollo SA V. Alliance Bond Fund Inc. 1999, in which it overturned a federal district court’s decision to allow the issuance of an asset-freeze order as it would interfere with the defendant’s use of its own property and provide “a new and powerful weapon” to the plaintiff. Most US court rulings since have been consistent with the Supreme Court’s ruling.

The impact of Gorsoan v. Bullock on US freezing order enforcement

The decision in Gorsoan v. Bullock not only directly enforced a foreign freezing order—it issued its own. Gorsoan first sued Janna Bullock in a Cyprus court for misappropriation of funds and successfully moved for the order as part of its action. The company then filed a Florida court action in order to directly enforce the order on Bullock’s Florida assets.

Bullock disputed the action by asserting that nonfinal foreign injunctions do not merit the same level of deference as final monetary judgments and that ruling in favor of the plaintiffs would offend public policy.

The Eleventh Judicial Court rejected both arguments by pointing to its appellate court decisions, which previously enforced the orders on a comity basis specifically on Florida assets alone. The court stated that, according to Florida public policy, it only required the freezing order to be issued by an impartial foreign court with appropriate jurisdiction over the defendants. The court granted Gorsoan’s motion and issued the first worldwide asset-freeze seen in the US.

The ruling in Gorsoan v. Bullock suggests that Florida is willing to act in support of foreign courts and exercise its own jurisdiction over defendants domiciled, or holding assets, in the state. While it is unpredictable whether other US state courts will follow in Florida’s footsteps, global litigants should take note of the ruling as it offers new possibilities for those seeking to recover assets in the region.  

The challenges of securing world-wide freezing order

Claimants seeking freezing orders inevitably face a high burden of cost and risk when securing the order. They are responsible for the financial costs associated with identifying the respondent’s assets and must fully satisfy the court’s “full and frank” disclosure rule. This rule requires applicants to conduct thorough research of the facts, disclose any and all material matters to the court including any potential defenses and flag important details.

Given the time and cost required, claimants may find contingent or fully financed asset recovery professionals useful in helping to identify a respondent’s assets, evaluate the risk of dissipation and provide valuable information to determine the costs and benefits before applying for an order, all of which are necessary to satisfy the “full and frank” test. If granted, an asset recovery team can then assure the successful execution of effective policing of the order.

As the US becomes increasingly involved in asset-freezing measures pushed by foreign proceedings, the debate on the issuance of its own orders has continued. Whether other US courts follow in Florida’s footsteps, the ruling signifies a positive change in the country’s consideration of international comity when regarding worldwide asset-freeze orders. However, it is important that claimants understand the investment required to secure a freezing order and know that partnering with experts can save them time, money and frustration.

Learn more about Burford’s asset recovery team.