New York Law Review

Tag: Enforcement of Foreign Judgments

  • Sung Hwan Co. v. Rite Aid Corp., 7 N.Y.3d 78 (2006): Enforcing Foreign Judgments Based on Tortious Acts Causing Economic Injury

    7 N.Y.3d 78 (2006)

    New York courts will generally enforce foreign judgments under the principles of comity, even if the foreign court’s substantive law differs from New York’s, provided the foreign court had jurisdiction and the judgment doesn’t violate New York’s public policy.

    Summary

    Sung Hwan Co., a Korean company, sought to enforce a Korean court judgment against Rite Aid Corporation in New York. The Korean judgment was based on a tort claim alleging that Rite Aid’s defective ice cream caused economic injury to Sung Hwan in Korea. Rite Aid argued that the Korean court lacked jurisdiction because the claim was essentially a breach of contract, and New York law doesn’t allow economic damages for negligence. The New York Court of Appeals reversed the lower courts, holding that the Korean court’s exercise of jurisdiction was proper under New York’s long-arm statute (CPLR 302) and that the difference in substantive tort law between Korea and New York was not a sufficient basis to deny comity.

    Facts

    Sangshin Trading Co., a Korean company, contracted with Thrifty Payless, Inc. (later acquired by Rite Aid) to purchase ice cream for resale in Korea.

    Sung Hwan Co. contracted with Sangshin to buy Thrifty ice cream for its stores in Korea.

    Sales of Thrifty ice cream grew rapidly, but declined sharply after the Korean government found listeria in the ice cream.

    Sung Hwan sought compensation from Thrifty (later Rite Aid) for losses but received no offer of settlement.

    Sung Hwan sued Rite Aid in Korea, alleging a tort claim based on Rite Aid’s negligence in failing to properly test the ice cream.

    Rite Aid failed to respond to the Korean lawsuit, and a default judgment was entered against them.

    Procedural History

    Sung Hwan sought to enforce the Korean judgment in New York.

    The Supreme Court dismissed the complaint, finding no basis for personal jurisdiction over Rite Aid.

    The Appellate Division affirmed the dismissal.

    The New York Court of Appeals granted leave to appeal and reversed the Appellate Division’s order.

    Issue(s)

    1. Whether the Korean court’s exercise of jurisdiction over Rite Aid was consistent with New York’s concept of personal jurisdiction, specifically under CPLR 302(a)(3), which allows jurisdiction over non-domiciliaries who commit tortious acts outside the state causing injury within the state.

    2. Whether the difference in substantive tort law between Korea and New York, specifically regarding the recovery of economic damages for negligence, is a sufficient basis to deny comity to the Korean judgment.

    Holding

    1. Yes, because for purposes of establishing long-arm jurisdiction, a tort should be broadly defined to encompass one that causes economic injury.

    2. No, because differing remedies do not violate the principles of comity between the two jurisdictions.

    Court’s Reasoning

    The Court of Appeals stated that New York has a history of generously enforcing foreign judgments under the doctrine of comity. CPLR Article 53 codifies this principle, allowing enforcement of foreign judgments unless the foreign court lacked jurisdiction or the judgment violates New York’s public policy.

    The court focused on whether the Korean court’s exercise of jurisdiction was consistent with CPLR 302(a)(3), New York’s long-arm statute, which allows jurisdiction over non-domiciliaries who commit tortious acts outside the state causing injury within the state. The court determined that the key question was whether Rite Aid committed a “tortious act” outside of Korea causing injury within Korea.

    Rite Aid argued that Sung Hwan’s claim was essentially a breach of contract claim disguised as a tort, and that New York law doesn’t allow recovery for economic loss based on negligence. The Court rejected this argument, stating that the focus should be on whether a tortious act occurred, not on the remedy sought. The court cited Sybron Corp. v. Wetzel, stating that CPLR 302 does not limit the kinds of tortious acts covered to personal injury and property damage.

    The Court emphasized that interfering with another jurisdiction’s legislative and judicial actions undermined the principles of comity. The Court concluded that although Korean law may be more expansive than New York law in imposing liability for economic loss under a tort theory, this difference alone is not enough to deny comity to the Korean judgment, citing Loucks v Standard Oil Co. of N.Y.

    “If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home.”

  • CIBC Mellon Trust Co. v. Mora Hotel Corp., 100 N.Y.2d 215 (2003): Enforcing Foreign Judgments and Voluntary Appearance

    CIBC Mellon Trust Co. v. Mora Hotel Corp., 100 N.Y.2d 215 (2003)

    A defendant who appears in a foreign court to argue the merits of a case, after unsuccessfully contesting jurisdiction, makes a voluntary appearance and waives the right to challenge the foreign court’s jurisdiction in a subsequent enforcement action in New York.

    Summary

    CIBC Mellon Trust sought to enforce English judgments against Mora Hotel and Chascona in New York. The defendants had previously contested jurisdiction in the English courts but later defaulted by failing to comply with discovery orders. They then applied to the English High Court to set aside the default judgments and defend on the merits. The New York Court of Appeals held that by arguing the merits in the English court, the defendants made a voluntary appearance, precluding them from challenging the English court’s jurisdiction when CIBC Mellon sought to enforce the judgments in New York. The court emphasized that CPLR 5305(a)(2) retains the distinction between general and special appearances for recognition actions.

    Facts

    CIBC Mellon Trust and DaimlerChrysler Canada lost millions in investments due to fraud allegedly perpetrated by Wolfgang Stolzenberg. They sued Stolzenberg and others, including Mora Hotel and Chascona, in England. Mora and Chascona were Netherlands Antilles corporations that owned and operated the Gorham Hotel in New York. CIBC Mellon obtained Mareva orders (asset-freezing injunctions) against Mora and Chascona. The High Court granted these after finding CIBC had a “good arguable case.” Mora contested the English court’s jurisdiction over Stolzenberg, but this challenge was ultimately unsuccessful. Mora and Chascona failed to comply with the Mareva orders, leading to default judgments against them in England.

    Procedural History

    CIBC Mellon sued in New York to recognize and enforce the English judgments. Supreme Court granted summary judgment to CIBC Mellon, recognizing the judgments and ordering the sale of the Gorham Hotel. The Appellate Division affirmed. Mora and Chascona then unsuccessfully sought to set aside the default judgments in the English High Court before appealing the New York judgment to the Court of Appeals. The Court of Appeals initially withheld decision pending the outcome of the High Court application.

    Issue(s)

    Whether defendants, by applying to the English High Court to set aside the default judgments and to defend the case on its merits, made a voluntary appearance in the English proceedings, thus precluding them from challenging the English court’s jurisdiction in a subsequent New York action to enforce the judgments under CPLR 5305(a)(2)?

    Holding

    Yes, because by arguing the merits of the case in their application to the English High Court, the defendants did more than was necessary to preserve a jurisdictional objection, thereby making a voluntary appearance and waiving their right to challenge jurisdiction in New York.

    Court’s Reasoning

    The Court of Appeals noted New York’s tradition of enforcing foreign judgments, codified in CPLR Article 53. CPLR 5305(a)(2) states a foreign judgment shall not be refused recognition for lack of personal jurisdiction if the defendant voluntarily appeared, unless solely to protect seized property or contest jurisdiction. The court emphasized that by arguing the merits of the conspiracy claims in their application to set aside the English judgments, the defendants did more than was necessary to preserve their jurisdictional objection, which was already foreclosed. The court cited the Restatement (Second) of Conflict of Laws, stating that a defendant may submit to a court’s jurisdiction by taking steps in the action after judgment. The court reasoned that CPLR 5305(a)(2) retains the traditional distinction between general and special appearances for recognition purposes, even though New York no longer formally distinguishes them. Because the defendants sought affirmative relief by asking the High Court to adjudicate the case on its merits, they made a voluntary appearance, preventing them from later challenging the English court’s jurisdiction in New York. The Court also addressed the use of Mareva orders, stating that, while potentially disruptive, their use does not inherently render the English legal system incompatible with due process.

  • Intercontinental Hotels Corp. v. Golden, 15 N.Y.2d 9 (1964): Enforcing Foreign Gambling Debts Under Public Policy

    Intercontinental Hotels Corp. v. Golden, 15 N.Y.2d 9 (1964)

    New York courts will generally enforce rights validly created by the laws of another jurisdiction, even if those rights arise from activities (like gambling) that are restricted or prohibited in New York, unless enforcing those rights would violate a strong public policy of New York.

    Summary

    Intercontinental Hotels Corp. sued Golden to recover $12,000 in gambling debts evidenced by a check and I.O.U.s Golden incurred at the plaintiff’s licensed casino in Puerto Rico. The debts were valid and enforceable under Puerto Rican law. The issue before the New York Court of Appeals was whether New York’s public policy against gambling prevented its courts from enforcing these legally contracted debts. The Court of Appeals held that it did not, reasoning that New York’s public policy, as reflected in evolving social attitudes and the legalization of certain forms of gambling, did not preclude the enforcement of gambling debts validly contracted in jurisdictions where such activity is legal and regulated. The Court reversed the Appellate Division’s decision and reinstated the Supreme Court’s judgment in favor of Intercontinental Hotels.

    Facts

    Plaintiff, Intercontinental Hotels Corp., owned and operated a government-licensed gambling casino in Puerto Rico.
    Defendant, Golden, incurred gambling debts at the casino, totaling $12,000.
    Golden provided a check and I.O.U.s to cover the debts.
    Golden failed to pay the debts.
    Under Puerto Rican law, the gambling debts were validly contracted and enforceable.

    Procedural History

    Plaintiff sued Defendant in the Supreme Court, New York County, to recover the gambling debts.
    The Supreme Court, New York County, entered judgment in favor of the Plaintiff.
    The Appellate Division reversed the Supreme Court’s decision, dismissing the complaint.
    The Plaintiff appealed to the New York Court of Appeals.

    Issue(s)

    Whether New York courts must deny access to a party seeking to enforce obligations validly entered into in the Commonwealth of Puerto Rico and enforceable under Puerto Rican law, specifically gambling debts.

    Holding

    Yes, because in this case enforcing the gambling debt does not offend New York’s sense of justice or menace the public welfare, given the evolving social attitudes toward gambling and the fact that the gambling was legal and licensed in Puerto Rico.

    Court’s Reasoning

    The Court of Appeals considered whether enforcing a foreign right (the gambling debt) would violate New York’s public policy. The Court noted that foreign-based rights should be enforced unless the underlying transaction is “inherently vicious, wicked or immoral, and shocking to the prevailing moral sense.”

    The Court reviewed past New York decisions, including Thatcher v. Morris, Harris v. White, and Ormes v. Dauchy, where the Court upheld contracts involving activities illegal in New York but legal and valid elsewhere. The court quoted Loucks v. Standard Oil Co., stating that courts should not refuse to enforce a foreign right unless it violates some “prevalent conception of good morals.”

    The Court rejected the argument that New York’s policies against gambling rendered all gambling contracts void, stating that such considerations apply only to transactions governed by New York domestic law. The Court emphasized that “Public policy is not determinable by mere reference to the laws of the forum alone. Strong public policy is found in prevailing social and moral attitudes of the community.”

    The Court pointed to the legalization of pari-mutuel betting and bingo games in New York as evidence that the public no longer considers authorized gambling a violation of good morals. The Court distinguished cases involving Nevada gambling debts, noting that Nevada law does not provide for the enforcement of such debts, whereas Puerto Rican law does.

    The Court concluded that enforcing the Puerto Rican gambling debt would not be “repugnant to the ‘public policy of this State’” and that it would be unjust to allow New York citizens to benefit from legal gambling in another jurisdiction but renege on their debts. The Court also pointed out that Puerto Rican law allows courts to reduce or decline to enforce gambling obligations if they exceed what “a good father of a family” would typically spend.