Foreign Judgment Enforcement
In recent years, there have been many lawsuits against businesses and individuals in U.S. courts for alleged conduct occurring outside the United States. The Supreme Court’s recent rulings limiting such cases – such as Kiobel v. Royal Dutch Petroleum (2013) and Morrison v. National Australia Bank (2010) – will likely mean a new strategy for plaintiffs and their lawyers: lawsuits in foreign courts but attempts to enforce any judgment in U.S. courts by seeking the seizure of a company’s U.S. assets. This raises the troubling prospect of abusive and improper foreign judgments being enforced in the United States – in violation of the spirit and principles of the U.S. Constitution and our justice system. read more...
In an effort to standardize the state laws governing foreign judgment enforcement, the Uniform Law Commission (ULC) developed model statutes in 1962 and 2005. While some states have adopted laws based on these models, others have gone their own way, and even those states adopting a model law have differing judicial interpretations. These differing standards open the door to forum shopping as plaintiffs seek enforcement under the most lax state standard.
The inadequacy of some state standards was highlighted by recent legal proceedings involving the $18 billion judgment against Chevron in an Ecuadorean court – awarded in proceedings that multiple U.S. courts have found were tainted by fraud. When Chevron sought an injunction against enforcement in U.S. courts, the Second Circuit Court of Appeals rejected the company’s request, holding that New York’s enforcement law did not allow such a preemptive injunction. Ultimately, the U.S. District Court for the Southern District ruled that the Ecuadorian judgement was the product of fraud and racketeering, finding the judgment unenforceable. The plaintiffs have appealed. The Second Circuit ruling and the Chevron case demonstrate how plaintiffs can shop for the most plaintiff-friendly state court to seek enforcement of judgment.
To prevent abusive forum shopping, Congress should adopt uniform federal standards governing the recognition and enforcement of foreign judgments. In addition, states that have not yet adopted the 2005 model act should consider doing so. Congress and the states should include a provision to allow judgement debtors like Chevron to bring a preemptive declaratory judgment action for non-recognition of abusive foreign judgements.