Opinion
105638/07.
Decided on January 9, 2008.
Law Office of Paul J. Hyams, PLLC, White Plains, New York.
Frankel Abrams, Esqs., By: Sandor Frankel, Esq., New York, New York and Sharp Associates, Esqs., For Defendant.
Plaintiff moves pursuant to CPLR 3213 and CPLR Article 53 to recognize and enforce an Australian money judgment for attorneys' fees and litigation expenses.
Defendant had sued plaintiff in Australia for property damage. Even though defendant won at trial, the Australian court awarded plaintiff attorneys' fees and expenses because plaintiff had offered defendant a pre-trial monetary settlement that exceeded what defendant proved at trial. Although the trial verdict was several hundred Australian dollars less than the settlement offer, the Australian court awarded plaintiff, the ostensible loser at trial, nearly fifteen times more than what defendant, the ostensible winner, had proven at trial. That anomaly raises important questions of comity and public policy.
BACKGROUND
Defendant, currently a New York resident, bought a racing sailboat in 2000 while residing in Australia. She contracted with plaintiff, an Australian transportation company, to arrange for the shipping of the boat to her in the United States. Defendant received the boat in the United States on June 30, 2001, but realized after it was uncrated that it had been damaged in transit. She sued plaintiff and others in Australia for the damage. In June 2003, as part of the pre-trial proceedings in Australia, plaintiff offered defendant a AU $7,000 settlement but defendant, seeking to do better at trial, turned it down. In August 2004, defendant won AU $6,035 from plaintiff after trial. (Plaintiff's moving Aff. Exh A, Judgment/Order 4 Aug. 2004). However, in accordance with Australian law, the trial judgment also provided that, because defendant's trial award was less than the settlement offer defendant rejected, defendant was responsible for plaintiff's costs including attorney's fees from June 2003 ( Id.) After an ancillary proceeding in which plaintiff proved the amount of litigation costs, a reviewing court adjudged plaintiff's costs to be AU $89,247.53 ( id., exhibit B). It is that net judgment amount minus the amount of defendant's entitlement a net of AU $83,212.53 converted without objection to $69,374.28 in U.S. currency which plaintiff now seeks to enforce against defendant by having the court convert it to a New York judgment.
Under CPLR 5303 a conclusive judgment from a foreign country which meets the requirements of CPLR 5302 is enforceable in New York unless one of the factors set forth by CPLR 5304 applies. At issue here is whether plaintiff's judgment is incompatible "with the requirements of due process of law" (CPLR 5304(a)[1]), in which case the New York court must reject the judgment, or "repugnant to the public policy of this state" (CPLR 5304(b)[4]), in which case the court has the discretion to deny recognition.
In opposition to plaintiff's motion, defendant argues that the Australian judgment should not be recognized in New York because it offends due process of law and the public policy of this state to have defendant, the prevailing party in her suit against plaintiff, emerge from the litigation owing plaintiff nearly fifteen times the amount of her recovery.
I
On this motion, plaintiff "bears the burden of proving that no mandatory basis for non-recognition pursuant to CPLR § 5304(a) exists" ( Dresdner Bank AG v. Haque, 161 F Supp 2d 259, 263 [SDNY 2001]). However, that burden is not onerous.
"CPLR 5304(a)(1) does not demand that the foreign tribunal's procedures exactly match those of New York. Rather, the statute is satisfied if the foreign court's procedures are compatible with the requirements of due process of law" ( CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 100 NY2d 215, 222, cert den 540 US 948). "[I]t is well established that mere divergence from American procedure does not render a foreign judgment unenforceable. . . . Under New York law, foreign decrees and proceedings will be given respect even if the result under the foreign proceeding would be different than under American law" ( Pariente v. Scott Meredith Literary Agency, Inc., 771 F Supp 609, 616 [SDNY 1991], citations omitted; see also Intercontinental Hotels Corporation [Puerto Rico] v. Golden, 15 NY2d 9, 13).
Based on this standard, the Court finds that plaintiff has met its burden by establishing "(1) a final judgment, conclusive and enforceable where rendered; (2) subject matter jurisdiction; (3) jurisdiction over the parties or the res; and (4) regular proceedings conducted under a system that provides impartial tribunals and procedures compatible with due process" ( Dresdner Bank AG v. Haque, supra, 161 F Supp 2d at 263, citing Ackermann v. Levine, 788 F2d 830 [2nd Cir 1986]; CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 296 AD2d 81, 97 [1st Dept 2002], affd 100 NY2d 215, cert den 540 US 948).
Due process of law is not restricted to our laws; it presupposes an objective system of rules with no unfair surprises, where a prospective litigant has notice of the applicable law and its consequences. Defendant voluntarily sued plaintiff in Australia and relied on that country's system of laws to pursue her claim. The Australian pleadings submitted as exhibits indicate that defendant was represented by counsel. (Pltff's Reply Aff., Exh A, "Second Further Amended Statement of Claim"). Nowhere in her affidavit does defendant assert that she was unaware of the Australian rule at the time she made her choice to proceed to trial against plaintiff instead of accepting the settlement. Defendant's own counsel states that awards of fees and costs such as the one at issue here are reviewable in Australian courts "on a reasonable basis" so as to prevent the awards from "result[ing] in substantial injustice." Defendant does not deny that she was aware of those safeguards in Australia. It appears that defendant did not seek review of the determination of plaintiff's costs but plaintiff did. Indeed, the Australian reviewing court increased the amount of plaintiff's recoverable costs from that awarded plaintiff by the trial court. The reviewing court specifically found that the recoverable costs it awarded were justified by the complexity of the hard-fought litigation and the amount and quality of the legal work required. Whether or not defendant sought review or appeal in Australia, she may not ask this Court to engage in the review process that an Australian court might have performed. Neither may she ask this Court to second-guess the Australian court whether using New York or Australian law.
Having knowingly and voluntarily played the game under Australian rules, defendant may not now cry foul. She "received the basic requisites of notice and the opportunity to be heard. . . . [Her] decision not to [accept the settlement offer] . . . cannot form the basis of a claimed denial of due process" ( CIBC Mellon Trust Co. v. Mora Hotel Corp., supra, 292 AD2d at 91).
Defendant contends that the award of litigation costs is punitive, akin to punitive damages, and that it should be considered violative of due process as excessive, unreasonable and disproportionate. See BMW of North America v. Gore, 517 US 559 (1996); State Farm Mutual Automobile Insurance Co. v. Campbell, 538 US 408 (2003). Defendant's contentions lack merit. The award of litigation costs is intended as compensation, not as a penalty. Unlike punitive damages, which are usually awarded by a jury at the trial of the underlying case, the costs in question here were awarded after a separate proceeding where plaintiff was put to its proof, and a review process akin to an appeal, where the courts analyzed each of the component parts of the legal work performed, including the time devoted and the amounts sought. The Supreme Court of New South Wales essentially found the amount awarded reasonable as compensation for the work actually performed. Juries assessing punitive damages may well run the risk, if not properly "cabin[ed]," of awarding grossly excessive amounts as arbitrary retribution ( Philip Morris USA v. Williams, U.S., 127 SCt 1057, 1062. In contrast, the Australian process at issue enabled the Australian courts to analyze evidence according to objective, articulated, rational standards to award reasonable compensation.
Having chosen to sue in Australia, and having had notice of the rules and the review process and an opportunity to be heard, defendant was accorded whatever process she was due in Australia. The magnitude of the award at first glance, and its apparent disproportionality both to the amount in controversy and to the difference between the settlement offer and defendant's proven property damage, is therefore not relevant to a consideration of due process. Under the guise of a due process analysis applicable to a punitive damages award and not applicable to the situation presented, defendant is attempting to relitigate matters that were appropriately decided by the Australian courts, or to litigate issues that she could have raised there. Due process does not require a transoceanic second bite of the proverbial apple.
II
On this motion, defendant bears the burden of proving that the Australian judgment violates New York public policy. "[T]he defendant opposing enforcement [of a foreign country's judgment] bears the burden of proving that a discretionary basis for non-recognition pursuant to CPLR 5304(b) applies" ( Byblos Bank Europe, S.A. v. Sekerbank Turk Anonym Syrketi, 40 AD3d 497, 499 [1st Dept 2007], cross app dism 9 NY3d 885, lv granted 9 NY3d 805, citations omitted; Dresdner Bank AG v. Haque, supra, 161 F Supp 2d at 262-263).
"New York State courts must recognize the judgments rendered in a foreign country under the doctrine of comity, absent some showing of fraud in the procurement of the judgment or that recognition of the judgment would do violence to some strong public policy of this State" ( Fickling v. Fickling, 210 AD2d 223, 223-224 [2nd Dept 1994], citing Greschler v. Greschler, 51 NY2d 368, 376). "The narrowness of the public policy exception to enforcement would seem to reflect an axiom fundamental to the goals of comity and res judicata that underlie the doctrine of recognition and enforcement of foreign judgments. . . . [and to] indicate a jurisprudential compromise between two guiding but sometimes conflicting principles in the law of recognition and enforcement of foreign judgments: (1) res judicata . . . and (2) fairness to litigants" ( Ackermann v. Levine, supra, 788 F2d at 842, citations omitted).
A.
Historically, the Court of Appeals has been loathe to nullify judgments from another country merely because of a difference in laws. "[P]lainly, not every difference between foreign and New York law threatens our public policy" ( Cooney v. Osgood Machinery, Inc., 81 NY2d 66, 78 [Kaye, J, 1993]). "If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home" ( Loucks v. Standard Oil Company of New York, 224 NY 99, 110-111 [Cardozo, J, 1918]). "To hold otherwise would undermine the fundamental principles of comity by interfering with the acts of a foreign jurisdiction's legislature or judicial body" ( Sung Hwan Co., Ltd. v. Rite Aid Corporation, 7 NY3d 78, 85, citing Hilton v. Guyot, 159 US 113, 163-164).
"A judgment is unenforceable as against public policy to the extent that it is repugnant to fundamental notions of what is decent and just in the State where enforcement is sought. . . . The standard is high, and infrequently met. As one court wrote, '[o]nly in clear-cut cases ought it to avail defendant.'. . . In the classic formulation, a judgment that tends clearly to undermine the public interest, the public confidence in the administration of the law, or security for individual rights of personal liberty or of private property is against public policy" ( Ackermann v. Levine, supra, 788 F2d at 841, citations omitted). The public policy inquiry rarely results in refusal to enforce a judgment unless it is 'inherently vicious, wicked or immoral, and shocking to the prevailing moral sense'" ( Sung Hwan Co., Ltd. v. Rite Aid Corporation, supra, 7 NY3d at 82).
The Australian rule responsible for defendant's predicament is none of the above. The in terrorem effect of assessing costs so as to encourage settlement is not entirely foreign to our own system ( see CPLR 3219-3221). Indeed, but for Australia's inclusion of attorneys' fees in the assessment of costs and the operative date, the Australian rule is similar to CPLR 3221 ("If the offer is not accepted and the claimant fails to obtain a more favorable judgment, he shall not recover costs from the time of the offer, but shall pay costs from that time"). It is that difference which defendant contends makes plaintiff's judgment unenforceable as contravening New York's public policy.
Under New York law, "attorneys' fees and disbursements are incidents of litigation and the prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties or by statute or court rule. . . . The rule is based upon the high priority accorded free access to the courts and a desire to avoid placing barriers in the way of those desiring judicial redress of wrongs" ( Matter of A.G. Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 5, citations omitted; Rivkin v. Brackman, 167 AD2d 239, 242 [1st Dept 1990]).
The attorney's fees at issue here are authorized by the Australian law, which defendant attacks as deterring access to the courts in violation of our public policy. Yet, access to the courts is really not the issue here. Australia, not New York, has the primary interest in determining how litigants have access to Australian courts, how settlements should be encouraged and how its judicial resources should be conserved. Australian law did not deter defendant from access to Australian courts. Having obtained access and having chosen to proceed to trial under Australian rules, while aware of the risk, defendant cannot ask this Court to substitute our rules.
Common-law jurisdictions have different procedural rules, some of which reflect different public policy choices. Different does not mean repugnant. Simply because another sovereign may adopt a procedure different from ours for its own policy reasons, does not necessarily make it repugnant to New York public policy. See Siegel, Practice Comm. to McKinney's CPLR C5304:1 (2007 pocket part). The so-called "English rule" under which a loser pays the winner's attorneys' fees, and the usual "American rule", under which each side bears its own attorneys' fees, reflect such choices. Even highly significant differences in procedure and remedies do not prevent American courts from enforcing United Kingdom judgments. See CIBC Mellon Co. v. Mora Hotel, 100 NY2d 215 (2003). Australia, like the United Kingdom, has a legal system much like ours, despite procedural differences. An American court should not be asked to second-guess the judgment of another court of a fellow democratic country having a common law system like our own, lest other such courts be encouraged to second-guess our judgments. Comity requires a basic mutual respect for each other's legal processes; without that, there can be no reciprocity.
B.
New York has a strong "public policy of encouraging the expeditious settlement of claims" ( In re Eighth Judicial District Asbestos Litigation, 8 NY3d 717, 723). "Stipulations of settlement are favored by the courts and not lightly cast aside" ( Hallock v. State of New York, 64 NY2d 224, 230). Like our CPLR 3221, Australia's rule, designed to promote judicial economy and the fair and expeditious resolution of valid claims, is not repugnant to the public policy of this state as to prompt this Court to exercise its discretion to spurn a valid, conclusive judgment emanating from that rule.
"We have no public policy that prohibits exemplary damages or civil penalties. We give them for many wrongs" ( Loucks v. Standard Oil Co. of New York, supra, 224 NY at 112. Australia's policy of punishing needless litigation by imposing attorney's fees does not "conflict so fundamentally with New York's public policy as to justify a denial of comity" (cf. Harris S.A. de C.V. v. Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V., 279 AD2d 263 [1st Dept 2001], lv den 96 NY2d 709; see also Aspinall's Club Ltd. v. Aryeh, 86 AD2d 428, 434 [2nd Dept 1982], app wdn 57 NY2d 682).
In fact, another Justice of this state, albeit under CPLR article 54 instead of Article 53, had occasion to examine a Florida statute which, like the Australian law at issue here, provided that plaintiff had to pay attorney's fees incurred by defendant if the amount of the trial judgment did not exceed the settlement proffered by defendant. The court found that the Florida statute did not violate New York public policy, noting that the Florida law was
supported by the public policy interest of promotion settlement by both plaintiffs and defendants where reasonable demands or offers are made. Recognizing the substantial efforts the trial courts devote to settling . . . cases, it cannot be gainsaid that the goal is one which New York would approve. The only question is whether it discourages a litigant from coming to court. . . . The court concludes that the foregoing statute does not discourage litigation. Rather, it discourages a plaintiff who receives a reasonable offer from pursuing the case to trial unless the litigant's refusal to settle is based upon a reliable assessment that the jury is likely to render a plaintiff's verdict which will not be . . . lower than the offer. . . . In short, the . . . statute encourages reasonable settlements, discourages unreasonable demands and discourages unreasonable refusals to meet an offer. It does not discourage access to the courthouse and, thus, does not offend the public policy of New York. ( Blits v. Renaissance Cruise Lines, Inc., 166 Misc 2d 497, 500-501 [Sup Ct, Nassau Co, Lockman, J, 1995]).
CONCLUSION
On a motion seeking recognition and enforcement of a foreign country money judgment, it is not for the New York court to question the underlying merits of the judgment; rather, the New York court should examine the process through which the foreign country judgment was obtained. This Court finds nothing in the Australian process to render plaintiff's judgment unenforceable. The Australian judgment does not violate due process and is not repugnant to New York public policy.
Accordingly, it is
ORDERED that plaintiff's motion is granted and the Clerk of the Court is directed to enter judgment in favor of plaintiff and against defendant in the amount of $69,374.28.
This decision constitutes the order of the Court.