Can a judgment creditor restrain and collect payments due under an at-will service agreement? Answer: No.
In Verizon New England, Inc. v. Transcom Enhanced Services, Inc., 21 NY3d 66 (2013), the Court of Appeals considered whether “an at-will, prepayment service agreement, which lack[ed] any obligation to continue services or a commitment to engage in future dealings, constitute[d] a property interest or debt subject to a CPLR 5222(b) restraining notice”. Id. at 68. The Court of Appeals held such a restraining notice was unenforceable.
Verizon obtained a judgment in 2009 from the United States District Court in the District of Massachusetts against Global NAPs, Inc. (“GNAPs”). In an effort to enforce the judgment against GNAPs, Verizon served a restraining notice on Transcom, with whom GNAPs did business.
Verizon commenced a special proceeding against Transcom for a turnover of property and debts that Transcom owed to GNAPs. The Supreme Court dismissed the petition, and a divided Appellate Division affirmed.
The Court of Appeals held that the Transcom agreement with GNAPs was not an attachable or assignable property because “when Transcom received the restraining notice it had an oral agreement that if Transcom paid GNAPs, GNAPs would provide one week’s worth of services. This agreement was terminable at will, at any time, without prior notice, meaning that Transcom had no obligation after receiving one week’s of services to engage GNAPs for another week’s worth of services.” Id. at 71. The Court of Appeals concluded that, “because Transcom prepaid for services to be provided by GNAPs on a week-to-week basis, without any commitment or promise for additional services, or any assurance of a continued purchase of services, Transcom neither owed any debt to, nor possessed any property of, GNAPs that could be subject to a restraint notice.” Id. at 71-72.