General counsel know what it’s like to be on the receiving end of a complaint and to guide litigation through the trial court and the appeal. Perhaps less familiar is being on the receiving end of an opponent’s efforts to enforce a judgment rendered outside the United States. The litigation has taken place abroad under different rules and a different constitution, and maybe in a different language. Now the plaintiff arrives in a U.S. court with judgment in hand, seeking to invoke the domestic court’s enforcement powers.
Some commentators, including the U.S. Chamber Institute for Legal Reform, have noted an increase in this type of litigation. Such cases seem to be on the uptick in Pennsylvania, although they are not yet flooding the dockets. Westlaw identifies about 10 cases dealing directly with recognition of foreign judgments. But more than half of those cases were decided in the last six years—despite the fact that the state statute governing recognition of foreign judgments was passed nearly 25 years ago. As a point of comparison, the situation is similar in Delaware. That state’s recognition statute is more than 15 years old, but virtually all of the handful of cases that cite it were decided in the last eight years.
Given the proliferation of international litigation, the number of foreign judgment recognition cases should continue to accelerate here and elsewhere. A close look at the state’s enforcement procedures, therefore, is timely and helpful. The Pennsylvania Superior Court recently demonstrated as much when it ruled that a corporate plaintiff, which sought to enforce a British judgment, had invoked the wrong statute and followed the wrong procedure.
Recognition and enforcement litigation takes place in both state and federal courts, but it is a matter of state law. Pennsylvania, like most states, has passed a version of the Uniform Foreign Money Judgment Recognition Act, 42 P.S. Sections 22001-22009. Pennsylvania’s Recognition Act provides that if a foreign judgment is “final and conclusive and enforceable where rendered,” it may be enforced “in the same manner as the judgment of another state.” There are discretionary bases upon which a court may refuse to recognize a judgment, including that it is based on a cause of action that is repugnant to Pennsylvania’s public policy, conflicts with another judgment or was obtained by fraud. There are also mandatory bases for nonrecognition: a judgment is not “conclusive,” and hence it is unenforceable, if it was rendered by a court that lacked personal or subject-matter jurisdiction or in a system that does not provide impartial tribunals and due process. In addition, although a judgment that is on appeal in a foreign court is considered conclusive, the defendant may stay enforcement proceedings pending the resolution of the foreign appeal.
In a recent Pennsylvania Superior Court decision, Louis Dreyfus Commodities Suisse S.A. v. Financial Software Systems, 2014 Pa. Super. 163 (July 29, 2014), Louis Dreyfus Commodities Suisse S.A. brought a breach of contract claim against Financial Software Systems Inc. in British court. The result of the British litigation was that Dreyfus obtained a judgment for nearly $750,000. Dreyfus filed a praecipe to file and index a foreign judgment in the Montgomery County Court of Common Pleas, but rather than invoking the Foreign Money Judgment Recognition Act, it invoked the Uniform Enforcement of Foreign Judgments Act, 42 Pa. C.S. Section 4306. Dreyfus later filed a writ of execution. The court granted Financial Software Systems’ motion to strike the judgment and vacate execution, ruling that the proper statutory authority was the Recognition Act, not the Enforcement Act. Dreyfus appealed to the Superior Court.
On its face, Dreyfus’ mistake is an understandable one. After all, the Enforcement Act lays out procedures for the enforcement of “any foreign judgment.” In order to understand why the Enforcement Act does not apply to judgments rendered in other countries, it is necessary to look to both the statutory language and U.S. Supreme Court precedent. The Enforcement Act defines a “foreign judgment” as “any judgment, decree or order of a court of the United States or of any other court … which is entitled to full faith and credit in this commonwealth.” While the U.S. Constitution provides that each state must give “full faith and credit” to the judicial proceedings of every other state, the legal acts of foreign nations are not given full faith and credit. Instead, the extent to which a foreign nation’s law is recognized in the United States is a matter of comity, as the Supreme Court ruled in the 19th century. The Enforcement Act’s definition of a foreign judgment therefore applies only to the judgments of other U.S. courts.
With the Enforcement Act off the table as a vehicle for Dreyfus to enforce its British judgment, the Recognition Act plainly was the controlling authority. And while the enforcement of another U.S. court’s judgment under the Enforcement Act is relatively automatic, undertaken simply by filing a praecipe, recognition of a foreign judgment under the Recognition Act is not in the least automatic. The statute provides important safeguards for defendants, including by denying recognition under Pennsylvania law to judgments that were not obtained through due process of law in a court with jurisdiction over both the subject matter and the person.
The Dreyfus opinion highlights key takeaways for general counsel dealing with litigation involving recognition of foreign judgments. First, a judgment obtained in a foreign nation can be enforced under Pennsylvania’s Enforcement Act only if it has first been recognized under the Recognition Act. Second, a procedural misstep like Dreyfus’ may not be permanently fatal to efforts to enforce a foreign judgment under Pennsylvania law—the Superior Court noted that Dreyfus could prospectively comply with the proper procedures. Third, holding a plaintiff to the proper recognition and enforcement procedures can be crucially important. By ensuring that a foreign judgment is vetted under the Recognition Act, a defendant will be able to invoke the statute’s full range of safeguards and defenses. •
Paige H. Forster is a member of Reed Smith’s appellate litigation group and a former law clerk to Judge D. Michael Fisher of the U.S. Court of Appeals for the Third Circuit. She handles appeals in federal and state courts and dispositive motions at the trial level, as well as providing support during complex trials. Her representation covers a wide range of substantive areas including products liability, financial services, contract disputes, employment and class actions.