Brief ⁽¹⁾

SB 175 amends KSA 50-632, a provision of the Kansas Consumer Protection Act, to clarify the procedural requirements for sequestering assets and to explicitly create a pre-judgement lien on the property sequestered to be applied to any judgement ultimately obtained against the supplier. The bill also allows a court to award actual damages to a defendant if the court finds the state obtained an ex parte order of sequestration with knowledge, or with reason to know, that grounds for sequestration did not exist. The bill makes a technical change by replacing the word "asset" with the word "property."

Background

The bill was requested by the Attorney General's Consumer Protection Division. A proponent said that procedural requirements for sequestration must comport with the requirements of due process. Since the enactment of the Kansas Consumer Protection Act and the sequestration provisions in 1973, the United States Supreme Court has concluded that statutes providing for ex parte sequestration of assets must provide for judicial determination based on facts set forth by affidavit, must provide notice to the defendant that his/her property has been sequestered, and must provide the defendant an opportunity to challenge the sequestration in court promptly after sequestration is ordered in order to satisfy due process requirements. The proponent said the Kansas statute needs updated to avoid constitutional challenges.

The bill also creates a pre-judgement lien on the property sequestered to be applied to any judgement ultimately obtained against the supplier. This is an obstacle which has been encountered in a couple of cases where other creditors have claimed liens on the property sequestered at the time the state had filed suit and shut the businesses down. The Consumer Protection Division has spent substantial time litigating these issues, and ultimately had to compromise claims because the statute does not explicitly create a lien on the property sequestered.

The bill has no fiscal impact.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi