May 13th, 2014
Foreign-country money judgments can be enforced in California. This right is becoming increasingly important given the ever-growing internationalization of commerce and banking, and the movement of people. It is not uncommon for debtors on unsatisfied foreign-country money judgments to own high-value assets located in California. For instance, significant California real estate is owned by foreign nationals, and such assets can be reached to satisfy judgments rendered abroad.
However, before California’s extensive collections procedures can be utilized, the foreign country judgment must be recognized in California. To obtain such recognition, the creditor must file a lawsuit under California’s Uniform Foreign Country Money Judgments Recognition Act (the Act). Code Civ. Proc. §§ 1713-1724.
In a lawsuit brought by Lim Ruger, the California Court of Appeal ended decades of procedural uncertainty by deciding an issue of first impression: actions for recognition under the Act are subject to the same procedural requirements as all other civil actions, including summary judgment procedures and trial, as needed to establish that the judgment is eligible for recognition in California. Hyundai Securities Co., Ltd. v. Lee (2013) 215 Cal. App. 4th 682.
This process does not involve re-litigation of the factual or legal merits of the underlying foreign lawsuit.
With procedural certainty established, it nonetheless takes counsel with expertise in litigating under the Act to navigate the nuances and pitfalls of the Act’s deceptively simple elements and defenses. For instance, after remand by the Court of Appeal of the Hyundai Securities case, Lim Ruger prevailed on a motion for summary judgment and obtained a California judgment for its client in the amount of $8,818,628. To grant summary judgment, the Superior Court decided another issue of first impression in favor of Lim Ruger’s client: even though the Act does not generally apply to “fines” or “penalties,” the Act does apply to a foreign judgment that provides compensation to an employer for having to pay a penalty to a foreign government due to the wrongdoings of an employee.
In regard to the threshold elements of a claim for recognition, the Act applies broadly to foreign judgments that are compensatory in nature, as long as the judgment is final, conclusive and enforceable under the law of the foreign rendering country. Code Civ. Proc. § 1715 (a). Outside the scope of the Act are non-compensatory judgments for taxes, fines or other penalties, or domestic relations decrees. The judgment creditor has the burden of proving that the Act applies. Code Civ. Proc. § 1715 (c). If the judgment creditor proves that the Act applies, the Court has no discretion to refuse recognition unless a defense stated in the Act also applies. Code Civ. Proc. § 1716 (a); Hyundai, 215 Cal. App. 4th at 688.
The party resisting recognition (typically the judgment debtor), bears the burden of establishing any defenses available under the Act. Code Civ. Proc. § 1716 (d); Hyundai, 215 Cal. App. 4th at 689. The defenses available under the Act are set forth in Sections 1716 (b) & (c) and “include, in essence, when the foreign-country money judgment was rendered under circumstances that violated due process or lacked impartiality or integrity, was without jurisdiction, was without notice, or was in conflict with California public policy or another judgment.” Hyundai, 215 Cal. App. 4th at 689; see also, Code Civ. Proc. § 1716 (b) & (c) (listing the defenses available under the Act.) Crucially, foreign-country judgments can be recognized even if the foreign procedures vary markedly from our own, and the public policy exception is narrow and strictly construed.
Finally, the judgments of some foreign countries are favored. For instance, Korean judgments are elevated to the status of the judgments of U.S. states pursuant to “The Treaty of Friendship, Commerce and Navigation Between the United States of America and The Republic of Korea.” Otos Tech Co., Ltd. v. OGK America, Inc. (3rd Cir. 2011) 653 F.3d 310, 312. Such favoritism can be used to fashion arguments for recognition for Korean judgments that don’t necessarily fit neatly within the scope of the Act.