(IvelinRadkov)

Following federal case law interpreting two statutes on the enforcement of foreign and out-of-state judgments, the state Superior Court has ruled that a foreign judgment cannot be valid without first being recognized by state courts.

On July 29, a three-judge panel of the court held that the trial court in Louis Dreyfus Commodities Suissa Sa v. Financial Software Systems correctly declined to enforce a judgment that Louis Dreyfus Commodities obtained in the English court system. The company had sought to enforce the judgment by invoking the Uniform Enforcement of Foreign Judgments Act; however, Judge James J. Fitzgerald III said the company needed to first ensure that the judgment was valid in Pennsylvania courts under the Uniform Foreign Money Judgment Recognition Act.

“Because foreign national judgments are not entitled to full faith and credit … but rather are subject to the principles of comity … a foreign nation judgment cannot be enforced in the commonwealth pursuant to the Enforcement Act unless it is recognized as valid pursuant to the Recognition Act,” Fitzgerald said.

According to Fitzgerald, in 1996, Louis Dreyfus Commodities entered into a license and maintenance agreement with Financial Software Systems. In 2013, Louis Dreyfus Commodities obtained a $717,000 judgment against Financial Software Systems for breach of contract in the High Court of Justice, Queen’s Bench Division, Manchester District Registry, Mercantile Court in Manchester, U.K.

After Louis Dreyfus Commodities served a writ of execution to a bank in Montgomery County where Financial Software Services had an account, the software company petitioned to strike the judgment and vacate execution, arguing that the document was unenforceable under the Enforcement Act. The trial court vacated the judgment.

Fitzgerald cited the 2004 state Supreme Court case of Hilkman v. Hilkman, which held that the Full Faith and Credit Clause of the U.S. Constitution does not extend to foreign countries, and he said the Enforcement Act’s reference to “full faith and credit” did not include money judgments entered in foreign courts.

Fitzgerald also said the U.S. District Court for the District of Columbia’s 1995 decision in Matusevitch v. Telnikoff, which held that filing a foreign judgment is contingent on a U.S. court recognizing the initial judgment, was instructive in determining that a party first must get recognition of the judgment before a court can enforce it.

Turning to Pennsylvania courts, Fitzgerald noted a case in which a company, after obtaining a judgment against another company in an English court, invoked the Recognition Act in a complaint filed in the Western District of Pennsylvania and was later granted summary judgment.

Fitzgerald also noted a similar case in the Eastern District of Pennsylvania in which the court concluded that the statutes and case law clearly indicated that the Enforcement Act applied only to judgments from sister states and not to foreign judgments.

“At its core, this case involves the interplay between the Recognition Act and the Enforcement Act,” Fitzgerald said. “As the foregoing cases illustrate, courts have consistently held that the enforcement act is applicable only to judgments of our sister states entitled to full faith and credit under the U.S. Constitution.”

Fitzgerald noted that Louis Dreyfus had not invoked the Recognition Act until it filed its answer to Financial Software System’s motion to strike. In the filing, Louis Dreyfus argued that it properly enforced the judgment under the Enforcement Act, which it said is the “sole and exclusive procedural mechanism of enforcement” in Pennsylvania.

Fitzgerald disagreed with Louis Dreyfus’ claims, and said the company’s praecipe to enforce judgment was fatally flawed.

Financial Software Systems’ attorney Samantha Southall of Buchanan Ingersoll & Rooney declined to comment. Matthew Goldberg of DLA Piper, who represented Louis Dreyfus, did not return a call for comment.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.

(Copies of the 15-page opinion in Louis Dreyfus Commodities Suissa Sa v. Financial Software Systems, PICS No. 14-1219, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •