Enforcing Foreign Judgments in U.S. Admiralty Courts: Second Circuit Prefers Substance Over Form

by King, Krebs & Jurgens, PLLC
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After protracted and expensive litigation overseas, you obtain a judgment against the defendant. There remains one series of hurdles left to cross: the defendant refuses to pay that judgment and has no assets in the country where the litigation was conducted. However, the defendant (or possibly one or more of its numerous alter egos) has assets in the United States. What should you do to collect on the judgment? If the underlying claim would be considered a maritime claim under U.S. law, one option is filing an enforcement action in federal district court under its admiralty subject matter jurisdiction, 28 U.S.C. § 1333.

In D’Amico Dry Ltd. v. Primera Maritime (Hellas) Ltd., No. 11-3473-cv (2nd Cir. June 12, 2014), the Second Circuit concluded that U.S. district courts have admiralty subject matter jurisdiction over an action to enforce the judgment of a foreign tribunal where the underlying claim on which the judgment was rendered would be considered maritime under U.S. law. D’Amico and Primera executed a forward freight agreement (“FFA”), a futures contract (i.e., contractually enforceable wager) contingent upon the parties’ accurately predicting future market rates for the shipment of goods. Under the FFA, Primera was obligated to pay D’Amico and failed to do so. In accordance with the forum selection and choice of law provisions of the FFA, D’Amico filed suit in the Commercial Court of the Queen’s Bench Division of the English High Court of Justice, which rendered a substantial judgment against Primera.

When Primera failed to pay the English judgment, D’Amico filed suit to enforce that judgment in New York federal court under its admiralty jurisdiction. The district court granted Primera’s motion to dismiss for lack of subject matter jurisdiction because the English judgment was rendered by the Commercial Court and not the Admiralty Court and, additionally, English law would not consider D’Amico’s claim as being maritime.

On appeal, the Second Circuit concluded that the proper inquiry in an enforcement action brought under the district court’s admiralty jurisdiction was whether the underlying claim on which the judgment was based was a maritime claim under U.S. law. The Court recognized that many foreign tribunals do not have admiralty courts even though the foreign tribunals adjudicate maritime claims. Thus, whether a foreign judgment was rendered by a foreign admiralty court was of no moment. Additionally, after a review of various “theoretical and practical reasons”, the Second Circuit concluded that whether a claim is maritime should be determined under U.S. law and not the law of the foreign court that rendered the judgment that is the subject of the enforcement action.

PRACTICE NOTE:  The Second Circuit expressly distinguished its holding from the federal court’s subject matter jurisdiction over enforcement actions brought under the court’s “federal question” jurisdiction, 28 U.S.C. § 1331.  For enforcement suits based on “federal question” jurisdiction, the federal court must have a jurisdictional basis independent of the fact that the judgment was rendered by another federal court.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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