By: Lisa Schachne & Leslie Beaudin
Our firm is licensed and has offices in California and New York. Many of the issues discussed below are handled generally the same across the United States, including in both California and New York, and unless noted otherwise the answers below will apply to both states. For certain issues where the law is different in California and New York, we have provided a separate answer applicable to the law in each state.*
What information can you find out about a judgment debtor before and during the recognition and enforcement proceedings?
There are various investigations and asset searches that may be conducted before going through the recognition and enforcement proceedings. These can include:
Real property searches using the judgment debtor’s name or other related parties.
Public records searches (for example, Westlaw’s PeopleMap) that compiles a comprehensive report about an individual judgment debtor, that includes but is not limited to criminal proceedings, addresses, liens, licenses, real property, and any other judgments. Note: most public records searches are fee based.
Review of an entity’s file in the applicable Secretary of State’s online portal to review whether or not the judgment debtor is still administratively active, conducting business, or involved with any other business in the state.
Internet search, including social media to find assets such a personal property (jewelry, cars, art, etc.) or real property (vacation homes, investment properties, etc.) through the judgment debtor’s posts.
Do you need to have a foreign judgment recognized before enforcement steps are taken or interim measures are obtained?
Primarily, yes. Without a recognized judgment from the proper Court, the judgment creditor may not take certain steps to enforce their judgment or obtain interim measures, since their judgment will lack proper authority. Once a court recognizes a foreign judgment, the judgment creditor may then use the court’s power to enforce its judgment. For example, a judgment creditor may utilize the local sheriff’s department to enforce a bank levy to empty known bank accounts or place liens on a judgment debtor’s real property. If a creditor attempts to enforce and collect on its judgment, it provides the judgment debtor with notice and opportunity to transfer, sell, or otherwise dispose of their assets.
However, there is nothing stopping a judgment creditor from demanding payment of a foreign judgment. In practice though, simply demanding payment of a foreign judgment that is not recognized by a local authority will have no teeth and therefore is usually unsuccessful.
What are the conditions and the process for having an EU judgment recognized?
The process of a local authority in the U.S. recognizing a foreign judgment is called “domestication”.
CA: A judgment creditor domesticates a foreign country judgment by commencing an action in California court pursuant to California's Uniform Foreign-Country Money Judgments Recognition Act (“UFMJRA”) (Cal. Civ. Proc. Code § 1718(a).
A California court generally must recognize a foreign judgment if it meets the following criteria:
It grants or denies the sum of money;
It is final and enforceable under the law of the foreign country where it was rendered; and
It is not for taxes, fines, penalties, divorce, child/spousal support, or other domestic relations matters.
The requesting party bears the burden of proving a prima facie case of the above, and it is the opposing party’s burden to assert grounds for recognition as discussed below in Question 7.
The process to domesticate a foreign judgment in California is as follows:
File a legal complaint with the applicable California court in the jurisdiction where the judgment debtor resides and/or has assets. The complaint must set forth claims that establish that the foreign judgment is entitled to recognition under the UFMJRA.
Once filed, the judgment creditor must serve the judgment debtor with the complaint and other initiating documents.
When the judgment debtor is served, they will have 21 days to respond to the complaint in California federal court or 30 days in California state court. In their response, the judgment debtor (defendant) may argue grounds for non-recognition.
If the judgment debtor (defendant) does not respond to the Complaint, the judgment creditor may request the clerk to enter default and, later, for the judge to enter default judgment against the debtor that recognizes the foreign judgment.
NY: In New York, a judgment creditor domesticates a foreign country judgment by commencing an action in New York court under New York’s Uniform Foreign Country Money Judgments Recognition Act (“UFCMJRA”) (CPLR Article 53). The UFCMJRA sets forth the same criteria as the California Act and generally requires the same process. The only difference is that in New York, a judgment creditor may file a motion for summary judgment in lieu of a complaint, which is the most common method of domestication (CPLR § 5303(c)).
What are the conditions and the process for having a non-EU judgment recognized?
CA and NY: In California, the process will remain the same as it is for EU countries because the UFMJRA does not differentiate between EU and non-EU countries. The Act defines a “foreign country” to be any government other than the United States or a United States territory. (Cal. Civ. Proc. Code § 1714(a));(CPLR § 5301(a)).
How long will this take?
The domestication of a judgment process can take between six (6) months to two (2) years depending on whether the judgment debtor opposes recognition and the applicable court’s schedule. The parties have very little control over how long the Court takes to rule on motions or when the matter is set for final adjudication.
How much will it cost?
The cost of domesticating a judgment in the U.S. varies state to state. However, the cost to domesticate a judgment is cheaper than litigating a matter from the beginning. This is because there is little to no discovery process in domesticating a foreign judgment, and any trials of a recognition case are in front of judge, not a jury.
The cost of domestication depends on a variety of factors, including: (1) location of domestication and cost of local counsel; (2) whether the judgment debtor (defendant) responds to the Complaint; (3) if the judgment debtor substantively opposes the Complaint. The majority of the cost will be in the form of attorney’s fees in filing and litigating the domestication, with a small percentage of associated expenses.
On what grounds can recognition of a EU judgment be challenged?
CA and NY: The UFMJRA provides mandatory grounds for non-recognition, so if a judgment creditor successfully sets forth any of these grounds, then the foreign judgment must not be recognized.
The grounds for non-recognition are:
The judgment was not rendered by an impartial tribunal or the procedures did not comply with due process of law;
The foreign court did not have personal jurisdiction over the defendant; or
The foreign court did not have subject matter jurisdiction.
(Cal. Civ. Proc. Code § 1716(b); (CLPR § 5304).
Additionally, a California court cannot recognize a judgment for defamation, unless the foreign country's law regarding freedom of speech and press is at least equivalent to US law (Cal. Civ. Proc. Code § 1716(f); 28 U.S.C. § 4102).
The UFMJRA also provides permissive grounds for non-recognition, which the court may rely on if good reason does not outweigh these grounds. These permissive grounds include:
The defendant did not receive notice of the foreign court proceeding with sufficient time to defend;
The judgment was obtained by fraud depriving the defendant of an opportunity to defend;
The judgment, cause of action, or claim for relief is adverse to the public policy of California or the US;
The foreign court proceeding was contrary to an agreement between the parties for resolution of the dispute;
Despite personal service on the defendant, the foreign court was a seriously inconvenient forum;
There is substantial doubt about the integrity of the rendering court regarding the judgment; or
The specific proceeding leading to the judgment was not compatible with due process.
(Cal. Civ. Proc. Code § 1716(c);(CLPR § 5304).
On what grounds can recognition of a non-EU be judgment be challenged?
CA and NY: Recognition will remain the same because the UFMJRA does not differentiate between EU and non-EU countries.
Is there a time limit for having a foreign judgment recognized?
CA: In California, an action must be commenced either (1) within the time during which the judgment is effective in the foreign country or (2) 10 years from the date the foreign judgment became effective, whichever is earlier. (Cal. Civ. Proc. Code § 1721).
NY: In New York, an action must be commenced either (1) within the time during which the judgment is effective in the foreign country or (2) 20 years from the date the foreign judgment became effective, whichever is earlier. (CPLR § 5303(d)).
Can the legal costs of the recognition proceedings be added to the judgment?
CA and NY: Generally, a prevailing party may not recover attorneys’ fees and costs associated with their lawsuit unless they fall within the following exceptions:
If the contract includes a clause specifying that the prevailing party is entitled to recover;
There is a statutory basis to recover; or
If there is an equitable basis for recovery, such as bad faith litigation or unreasonable denial of settlement offer.
What enforcement steps can be taken once recognition is obtained?
Once a judgment creditor obtains a money judgment, it can engage in the asset searches listed in above in #1, or it begin utilizing post-judgment discovery. This discovery is different than the discovery during normal litigation because the scope is broad so that the creditor may investigate traditionally excluded areas, such as financials and tax returns.
To collect on a judgment, a creditor can elect to take advantage of various tools afforded to it by the court system. These tools may include:
Garnishing wages;
Levying and selling personal property;
Placing liens on real property;
Freeze assets;
Levying known bank accounts;
Accessing a debtor’s interest in a partnership or LLC;
Obtaining a court order directing the debtor to turn over property or funds;
Requesting the court to assign a debtor’s right to future payment from a third party to the creditor;
Initiate an action against a third party that possesses or controls property in which the judgment debtor has an interest;
Request the court appoint a receiver to oversee the judgment debtor's property or business;
Move for a restraining order or injunction against the judgment debtor;
Pursue the debtor’s out-of-state assets.
How does this interact with insolvency processes?
Unfortunately, if a judgment debtor files for bankruptcy, an automatic stay is placed on any collection actions, which includes any recognition actions or judgment enforcement/collection. (11 U.S. Code § 362). The creditor is entitled to participate in the bankruptcy in hopes of recovering some portion of their claim.
What are the conditions and the process for having a (foreign) arbitration award recognized?
Federal: The Federal Arbitration Act (“FAA”) governs the enforcement of arbitration awards that are rendered under a written contract that evidences a transaction involving interstate or foreign commerce or maritime transactions. (9 U.S.C. §§1 and 2).
Process
Pursuant to the FAA, requests for confirmation of an arbitration award must be submitted by a motion or petition in the proper federal district court. Along with the motion or petition, the petition must file: the arbitration agreement, the selection or appointment of the arbitrator, and the arbitration award. (9 U.S.C. § 13). Once filed, the petitioner must serve the award on all other parties. After service is completed, the court may confirm, vacate, modify, correct, or remand the award back to the arbitrator. (9 U.S.C. §§ 9 to 11).
Unless there are grounds to vacate the award, the court will confirm the award through an entered judgment and the award, through the judgment, will have the same force and effect as a judgment in a civil action and may be enforced like any other judgment. (9 U.S.C. § 13).
Timing
Under the FAA, a petition must be filed within one (1) year of the date the award is made. (9 U.S.C. §§ 207 and 302)
CA: Authority for Recognizing and Enforcing Arbitration Awards
There are two acts that California courts may use to recognize and enforce foreign arbitration awards: the California Arbitration Act (“CAA”) or the Federal Arbitration Act (“FAA”).
The CAA governs the enforcement of arbitration awards that are rendered in or outside of California, and the awards must not involve interstate commerce or any scope of federal statutes. (Cal. Civ. Proc. Code § 1286). Otherwise, the FAA applies or the parties can agree to apply the CAA’s enforcement procedures instead.
The criteria for an arbitration award that may be confirmed by a California court are as follows:
The award must be final;
It must be in writing and signed by the arbitrator(s); and
It must include a “determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.”
(Cal. Civ. Proc. Code § 1283.4)
Process
The process under the CAA to enforce an arbitration award is to file a petition to confirm the arbitration award in whichever California or federal court that has both personal and subject matter jurisdiction (unless the arbitration agreement contains a forum selection clause). This process is intended to be expedited and usually proceeds quicker than a normal lawsuit.
The California Court system offers a draft petition to confirm form a party can use which must confirm the following: the names of all parties to the arbitration, the substance of (or a copy attached) of the arbitration agreement, the names of the arbitrators, and the award and written opinion of the arbitrators (if any). (Cal. Civ. Proc. Code §§1285 and 1285.4).
Once filed, the petitioner must be served on the other party, and no less than ten (10) days’ notice before any hearing on the confirmation petition. (Cal. Civ. Proc. Code § 1290.2).
The court is then required to confirm the award as it was made unless a correction must be made. (Cal. Civ. Proc. Code § 1286).
An award may be corrected if there is one of the following:
Evident miscalculation or mistake.
Issuance in excess of the arbitrator's powers.
Imperfection in the form of the award.
(Cal. Civ. Proc. Code § 1286.6)
Otherwise, the court will confirm the award through an entered judgment and the award, through the judgment, will have the same force and effect as a judgment in a civil action and may be enforced like any other judgment. (Cal. Civ. Proc. Code § 1287.4).
Timing
In California, a petition for judicial confirmation must be filed not earlier than ten (10) days after, but not later than four (4) years from the date of service of the executed arbitration award on the petitioner. (Cal. Civ. Proc. Code §§ 1288 and 1288.4).
NY: Authority for Recognizing and Enforcing Arbitration Awards
Article 75 of the New York Civil Practice Law and Rules (CPLR) provides authority for New York’s arbitration law. However, arbitration awards may also be confirmed and recognized in New York through the New York Convention, the Panama Convention, or the FAA.
Process
The process in New York follows the same procedural steps as in California.
Timing
A petition to confirm must be made within one (1) year after the award is delivered to the party seeking to enforce it. (CPLR 7510).
* The above responses are intended to be general in nature. If you have specific questions regarding recognition and enforcement of a foreign Judgment, please feel free to contact Valla, Morrison & Schachne Inc., P.C. for more information.
The above is authored by Lisa Schachne, Shareholder and Executive Vice-President and Leslie Beaudin, Associate Counsel. Both Lisa and Leslie have substantial experience in domesticating and enforcing foreign judgments in Federal Court and in California and New York state courts.