Commercial Division Blog
Posted: February 25, 2014 / Categories Commercial, Jurisdiction, Judgment and Collection
Foreign Default Judgment Enforceable in New York Even if the Foreign Court Did Not Have Personal Jurisdiction over Defendant Where Defendant Consented to Jurisdiction
On February 25, 2014, the Court of Appeals issued a decision in Landauer Ltd. v. Joe Monani Fish Co., Inc., 2014 NY Slip Op. 01263, holding a foreign default judgment enforceable in New York even though the foreign court did not have personal jurisdiction over the defendant, because the defendant had consented to jurisdiction and had actual knowledge of the action.
In Landauer, the plaintiff "entered into a series of contracts with" the defendant that "included a clause granting the Courts of England exclusive jurisdiction over disputes arising from the transactions. After a controversy arose over the quality of the products [the plaintiff] supplied, [the defendant] refused payment, prompting [the plaintiff] to commence an action for breach of contract in the English High Court . . . . [The defendant] did not appear in the action and a default judgment was entered." When the plaintiff sought to enforce the judgment in New York, the defendant claimed, and the trial court subsequently found, that the defendant had not been properly served and for that reason the judgment was not enforceable under CPLR Article 53, which requires that the foreign court have jurisdiction over the defendant for a foreign judgment to be enforceable in New York. The First Department affirmed the trial court, but the Court of Appeal reversed the decision, explaining:
Although CPLR article 53 generally provides that a foreign judgment will not be enforced in New York if the foreign court did not have personal jurisdiction over the defendant (CPLR 5304(a)(2)), an exception may be made if, prior to the commencement of the proceedings defendant had agreed to submit to the jurisdiction of the foreign court with respect to the subject matter involved (CPLR 5305(3)) and was afforded fair notice of the foreign court proceeding that gave rise to the judgment. We applied this principle in Galliano, where we explained that enforcement of a foreign judgment is not repugnant to our notion of fairness if defendant was a party to a contract in which the parties agreed that disputes would be resolved in the courts of a foreign jurisdiction and defendant was aware of the ongoing litigation in that jurisdiction but neglected to appear and defend. We clarified that, so long as the exercise of jurisdiction by the foreign court does not offend due process, the judgment should be enforced without microscopic analysis of the underlying proceedings (Galliano, 15 NY3d at 81).
(Internal quotations and citations omitted). Because the record showed that the defendant--while not properly served under the CPLR--nonetheless had actual knowledge of the English proceeding against it, the Court of Appeals found the default judgment against the defendant enforceable.
This decision illustrates the power and importance of contract provisions relating to jurisdiction. As a practical matter, it also shows how important it is that businesses have a process for identifying when they have been sued so that they can properly respond as well as the danger of relying on jurisdiction or service arguments rather than dealing with a dispute on the merits.