Opinion
No. CV 09 4009931
May 21, 2010
MEMORANDUM OF DECISION RE MOTION TO OPEN FOREIGN JUDGMENT [#104]
FACTS
On November 10, 2009, the defendants, Aliki Food, LLC (Aliki) and Michael Pappas, filed a motion to open a foreign judgment filed by the plaintiff, Otter Valley Foods, Inc., or in the alternative, to stay enforcement of the foreign judgment.
Aliki is a frozen foods marketer founded by Pappas in 2003, and located in Old Lyme, Connecticut. Aliki sells frozen sandwiches, entrees and pizzas, primarily to wholesale clubs. The plaintiff is a frozen foods manufacturer located in Tillsonburg, Ontario, Canada. The plaintiff manufactures frozen food products for various distributors, including Aliki.
In September of 2003, the parties entered into an agreement whereby the plaintiff would manufacture, package and label certain frozen food products for Aliki (the 2003 Agreement). On August 9, 2005, the parties entered into a written "Guarantee and Postponement of Claims" agreement (the 2005 Agreement), detailing the terms under which Aliki would pay down the existing debt it owed to the plaintiff, and purchase future orders. Pursuant to the 2005 Agreement, Pappas personally guaranteed Aliki's debt to the plaintiff up to $550,000. The 2005 Agreement further stated that the "[g]uarantor irrevocably submits to the jurisdiction of the courts of the Province of Ontario in any action or proceeding arising out of or relating to this agreement . . ."
On October 20, 2007, a shipment of product manufactured by the plaintiff for Aliki was stopped by the United States Department of Agriculture as the shipment entered this country, and found to be improperly packaged and contaminated with Listeria bacteria. Nonetheless, the product was subsequently shipped to stores, and had to be recalled and subsequently destroyed.
On April 28, 2008, Aliki filed suit against the plaintiff in federal court, asserting claims for a breach of the 2003 Agreement, negligence and breach of implied warranty (the federal action). See Aliki Foods, LLC v. Otter Valley Food, Inc., United States District Court, District of Connecticut, Docket No. 3:08CV00626 (MRK). In June of 2008, the plaintiff filed suit against Aliki and Pappas in the Superior Court of Justice in Ontario, Canada (the Canadian court) seeking to recover payment pursuant to the terms of the 2005 Agreement (the Canadian action).
The defendants filed a motion to stay the Canadian action in the Canadian court in favor of the federal action. On March 27, 2009, the Canadian court denied the defendants' motion.
The plaintiff subsequently moved for an award of costs relating to the defendants' motion, and the Canadian court awarded the plaintiff $40,000 in costs, with 3 percent interest accruing thereon if not paid by July 27, 2009 (the Canadian judgment).
On October 9, 2009, the plaintiff initiated the present action to enforce the Canadian judgment in this state. The defendants filed a motion to open the foreign judgment filed by the plaintiff; or in the alternative, to stay enforcement of the foreign judgment, on November 19, 2009. The defendants also filed a memorandum of law in support of their motion. On November 27, 2009, the plaintiff filed an objection to the defendants' motion.
DISCUSSION I
The defendants first argue that the Canadian judgment is not enforceable by this court under the Uniform Foreign Money-Judgments Recognition Act, General Statutes § 50a-30 et seq. (UFMJRA). General Statutes § 50a-33 provides: "Except as provided in section 50a-34, a foreign judgment meeting the requirements of section 50a-32 is conclusive between the parties to the extent that it grants or denies recovery of a sum of money. The foreign judgment is enforceable in the same manner as the judgment of a sister state which is entitled to full faith and credit."
The defendants claims that the Canadian judgment falls under one of the exceptions enumerated in General Statutes § 50a-34, which provides that "[a] foreign judgment need not be recognized if . . . [t]he cause of action on which the judgment is based is repugnant to the public policy of this state." General Statutes § 50a-34(b)(3). According to the defendants, the Canadian judgment is repugnant to Connecticut public policy because it was rendered under the "English rule" for attorneys fees, which is not recognized by this state. The plaintiff counters that the cause of action on which the judgment is based is not repugnant to this state's public policy. As there is little authority addressing this issue in our courts, the court will also look to the relevant cases from other jurisdictions as persuasive authority.
"The general rule of law known as the `American rule' is that attorneys fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception . . . Connecticut adheres to the American rule." (Internal quotation marks omitted.) Massad v. Greaves, 116 Conn.App. 672, 680, 977 A.2d 662, cert. denied, 293 Conn. 938, 981 A.2d 1079 (2009). By contrast, under the "English rule," followed by the Canadian courts, "counsel fees are awarded by the court to successful parties." Fleming v. Garnett, 231 Conn. 77, 94 n. 12, 646 A.2d 1308 (1994).
In the present case, the defendants have provided no case law, and the court has found none, indicating that the English rule is repugnant to public policy in this state. While the general rule in this state does not grant attorneys fees to the successful party, exceptions exist. See First National Bank of Chicago, Trustee v. Jansson, Superior Court, judicial district of Bridgeport, Housing Session, Docket No. SPBR-9508 30174 (July 21, 1996, Tierney, J.). Therefore, as reasoned by the Pennsylvania Superior Court, "recognition and enforcement of an award of counsel fees is not so obviously against the public health, safety, morals or welfare that there is a virtual unanimity of opinion with regard to it. Nor does an award of counsel fees under these circumstances conjure up a positive, well-defined, universal public sentiment, deeply integrated in the customs and beliefs of the people and in their conviction of what is just and right and in the interests of the public well-being." Olympus Corp. Keymed (Medical Industrial Equipment) Ltd. v. Canady, 962 A.2d 671, 677 (Pa.Sup.Ct. 2008). Furthermore, "[t]he standard for deciding a case on strict public policy grounds is unquestionably high." Id., 676.
Moreover, as noted by the plaintiff, under the § 50a-34 exception, it is the "cause of action on which the judgment is based" that must be repugnant to the public policy of this state, not the result. General Statutes § 50a-34. See Southwest Livestock Trucking Co., Inc. v. Hargrove, 169 F.3d 317, 321 (5th Cir. 1999) (finding Mexican judgment was based on cause of action for collection of promissory note which was not repugnant to Texas public policy). The underlying cause of action in the present case is a breach of contract. A breach of contract claim is not repugnant to Connecticut public policy.
Based on the foregoing, the court finds that the Canadian judgment in the present case is not based on a cause of action that is repugnant to this state's public policy, and as a result, its enforcement in this court pursuant to the UFMJRA is not precluded by the § 50a-34(b)(3) exception. Therefore, the Canadian judgment should not be opened on this ground.
II
The defendants also argue that the Canadian judgment should not be enforced in this court on the ground that the claims asserted by the plaintiff in the Canadian action constitute compulsory counterclaims to the federal action. The plaintiff counters that the claims it asserted in the Canadian action do not arise from the same transaction or occurrence as those brought in the federal action.
A compulsory counterclaim must "[arise] out of the transaction or occurrence that is the subject matter of the opposing party's claim." (Internal quotation marks omitted.) Gattoni v. Zaccaro, 52 Conn.App. 274, 280, 727 A.2d 706 (1999). Furthermore, "[the] essential facts of the claims [must be] so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit." (Internal quotation marks omitted.) Jones v. Ford Motor Credit Co., 358 F.2d 205, 209 (2nd Cir. 2004).
In the Canadian action, the plaintiff brought a claim against both defendants for an alleged breach of the 2005 Agreement. The 2005 Agreement addressed the payment of Aliki's existing debt and an arrangement for future payments, and the alleged breach is based upon the defendants' failure to pay the debt owed to the plaintiff, including Pappas in his capacity as guarantor for Aliki. In the federal action, Aliki alone brought a claim against the plaintiff for an alleged breach of the 2003 Agreement. The 2003 Agreement addressed the manufacturing of the products, and the alleged breach is based upon the set of events surrounding the recall of Aliki's products. Based on the foregoing, the court finds that the claims in the two actions are not "so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit." Jones v. Ford Motor Credit Co., supra, 358 F.3d 209. As a result, the court finds that the claims asserted by the plaintiff in the Canadian action do not constitute compulsory counterclaims to the federal action, and therefore, the Canadian judgment should not be opened on this ground.
III
The defendants further argue that execution of the Canadian judgment should be stayed because Aliki possesses set-off rights. According to the defendants, any judgment awarded in favor of Aliki in the federal action will serve to setoff the debt evidenced in the Canadian action, and therefore, the court should stay the execution of the Canadian judgment until resolution of the federal action. The plaintiff counters that the defendants are unable to make out a proper defense of setoff pursuant to Connecticut law.
General Statutes § 50a-36(b) provides in relevant part: "If the judgment debtor shows the court any ground upon which enforcement of a judgment of a court of this state would be stayed, the court shall stay enforcement of the judgment for an appropriate period . . ." "Setoff is the right to cancel or offset mutual debts or cross demands . . . The concept of setoff allows [parties] that owe each other money to apply their mutual debts against each other . . ." Mariculture Products Ltd. v. Certain Underwriters Lloyd's of London, 84 Conn.App. 688, 703, cert. denied, 272 Conn. 905 (2004). "It is the defendant's burden to demonstrate its right of setoff by affirmatively and adequately alleging such a claim in the pleadings." Id., 704.
"A debt is defined as an `unconditional and legally enforceable obligation for the payment of money.'" Id., 703. "Mutual debts . . . are cross debts in the same capacity and right and of the same kind and quality." (Internal quotation marks omitted.) Id., 704. "[T]hey must exist between the parties in their own right, and be of the same kind and quality, clearly ascertained and liquidated." (Emphasis added.) General Consolidated, Ltd. v. Rudnick Sons, Inc., 4 Conn. Cir.Ct. 581, 586, 237 A.2d 386 (1967).
In the present case, the defendants have merely asserted the existence of Aliki's claim for damages from the federal action, which has not been fully resolved. As a result, the defendants have failed to demonstrate their right of setoff by affirmatively alleging a clearly ascertainable and liquidated debt. Therefore, the court will not stay execution of the Canadian judgment pursuant to the defendants' claim of setoff.
CONCLUSION
Based on the foregoing, the court hereby denies the defendants' motion to open foreign judgment.