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Benefit of Filing First in a Foreign Jurisdiction May Not Belong to the Swift

Posted on May 26th, 2010 | Author: Tim McKeown

For a foreign litigant, filing a complaint in its home country may be cost effective and convenient. In doing so, however, it is critical that the foreign court chosen by the litigant has personal jurisdiction of the defendant. Failure of personal jurisdiction may result in judgments being unenforceable in the United States.  Our due process clause requires at least minimum contacts with the forum state sufficient that the exercise of personal jurisdiction does not offend notions of fair play and substantial justice. The “minimum contacts” test requires a showing either that defendant’s contacts with the forum are “substantial” or “continuous and systematic” (general jurisdiction) or that there is a strong relationship between the quality of the defendant’s activities within the forum and the cause of action (specific jurisdiction). Without personal jurisdiction, all of the upside in choosing one’s own forum is lost along with the ability to enforce the foreign judgment in the United States.

New Jersey’s Foreign Country Money-Judgments Recognition Act applies to any foreign country money-judgment that is “final and conclusive.” Any such judgment is enforceable in the same manner as the judgment of a sister state which is entitled to full faith and credit under the Uniform Enforcement of Foreign Judgments Act, which has been adopted in New Jersey.

If, however, the foreign judgment is not “conclusive”, then its enforceability in New Jersey is subject to attack.  A foreign country money-judgment is not conclusive if:

  1. the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law;
  2. the foreign country court did not have personal jurisdiction over the judgment debtor; or
  3. the foreign country court did not have jurisdiction over the subject matter.

An inconclusive foreign judgment can result in significant delay and prove quite costly to one’s enforcement efforts in New Jersey (and presumably elsewhere in the U.S., as well).

This potential pitfall was highlighted by the recent New Jersey Appellate Division case of Kitchens International, Inc. v. Evans Cabinet Corp., LTD. Kitchens is a Louisiana corporation, which has a satellite office in Montreal, Quebec, Canada. It distributes kitchen cabinets. Evans is a manufacturer of cabinets and is located in Georgia. The parties entered into an agreement in which Evans promised to deliver to Kitchens certain cabinets.

Kitchens filed a lawsuit in Quebec alleging that Evans failed to deliver the cabinets in accordance with the contract specifications. Evans failed to appear and the Quebec court entered default judgment against it. Evans then filed suit against Kitchens in Federal District Court in Massachusetts alleging breach of contract.  Kitchens filed a motion to dismiss Evans’ federal case, which the Federal District Court granted. The District Court found that Evans’ claim was barred by the doctrine of res judicata (which prohibits a litigated matter from being re-litigated). The Quebec court had personal jurisdiction over Evans and Kitchens’ default judgment against Evans was entitled to enforcement under the law. Evans appealed this ruling to the First Circuit Court of Appeals.

Kitchens then filed a second lawsuit in Quebec seeking additional contract damages. Again, Evans failed to appear and the court entered a default judgment against it in the second suit.

Kitchens next sought to enforce both of its judgments in New Jersey.

At or about the same time, the First Circuit Court of Appeals reversed the Federal District Court’s dismissal of Evans’ breach of contract case on the grounds that a fact issue existed over whether the Quebec court actually had personal jurisdiction over Evans.  Apparently, the parties submitted dueling affidavits to the trial court in which Evans alleged that its contracts with Kitchens were entered into in Georgia and that Evans had not engaged in any business in Quebec.  Kitchens claimed that the parties had agreed to establish a showroom in Montreal.  Evans denied this and maintained that there was no connection between any alleged showroom and its alleged breach of contract.  The First Circuit sent the case back to the Massachusetts Federal District Court for further proceedings to determine whether the Quebec courts actually had personal jurisdiction over Evans when it entered default judgment against it.

Evans next filed a motion with the New Jersey trial court seeking to strike Kitchens’ foreign judgments in New Jersey.  The trial court denied Evans’ motion.  Evans, of course, appealed, and the New Jersey Appellate Division affirmed the trial court’s denial of Evans’ motion to strike the judgments – meaning that the judgments remained in place in New Jersey; however, the Appellate court stayed enforcement of Kitchen’s judgments pending the Massachusetts District Court’s resolution of whether the Quebec court in fact had personal jurisdiction over Evans in the first instance.

The upshot of this rather convoluted sequence of events is that Kitchens’ Quebec judgments – obtained in May and September of 2007 – may not be enforceable in New Jersey (or other States, as well). Thus, it is critical for a litigant first proceeding in a foreign court to marshal sufficient facts to support the exercise of personal jurisdiction by the chosen forum. Failure to do so could very well jeopardize any judgments obtained in the foreign court.