United States District Court, S.D. New York.
THE SOCIETY OF LLOYDS, Plaintiff, v. Minna Jane EDELMAN, Kenneth Gross, Todd Gross and Judith P. Kenny, Defendants.
No. 03 Civ.4921(WHP).
March 21, 2005.
Philip J. Walsh, Jordon Burt LLP, Simsbury, CT, for plaintiff.
MEMORANDUM AND ORDER
JUDGE: PAULEY, J.
[*1] The Society of Lloyds (Lloyds or plaintiff), brings this action to recognize and enforce foreign judgments entered against the defendants in England. Lloyds now moves for summary judgment as to defendants Minna Jane Edelman and Kenneth Gross (collectively, defendants) pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons set forth below, plaintiffs motion is granted.
Plaintiff regulates an insurance market in England under the Parliamentary authority of a series of so-called Lloyds Acts. (Plaintiffs Statement Pursuant to Local Rule 56.1, dated Apr. 26, 2004 (Pl. 56.1 Stmt.) ¶¶ 1-2.) Lloyds itself is not an insurer. (Pl. 56.1 Stmt. ¶ 1.) Rather, the insurers in the Lloyds market are known as Names. (Pl. 56.1 Stmt. ¶ 3.) Pursuant to the Lloyds Acts, Names participate in the Lloyds market through an underwriting agent. (Pl. 56.1 Stmt. ¶ 9.) Names underwrite insurance policies through syndicates but personally assume the risks and liabilities of such claims. (Pl. 56.1 Stmt. ¶ 4.)
Defendants are Names and residents of New York. (Pl. 56.1 Stmt. ¶ 5; Defendants Statement Pursuant to Local Rule 56.1, dated May 20, 2004 (Defs. 56.1 Stmt.) ¶ 1.) [FN1] As Names, defendants signed a General Undertaking which governs their membership in the Lloyds market and obligates them to comply with the Lloyds Acts. (Complaint, dated June 27, 2003 (Compl.) Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 5-8.) The General Undertaking requires Names to litigate all claims in English courts under English law, and states that any final judgment can be enforced in other jurisdictions. (Compl. Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 7-8.)
FN1. Defendants submission pursuant to Local Civil Rule 56.1 does not respond paragraph-by-paragraph to plaintiffs 56.1 statement, as required by Local Civil Rule 56.1(b). As such, the facts in plaintiffs Rule 56.1 statement are deemed admitted by defendants. Local Civil Rule 56.1(c); see Gubitosi v. Kapica, 154 F.3d 30, 31 n.1 (2d Cir.1998); Gallimore-Wright v. Long Island R.R. Co., No. 02 Civ. 3968(LAK), 2005 WL 273023, at *2 (S.D.N.Y. Feb. 4, 2005).
Moreover, defendants Rule 56.1 counterstatement relies exclusively on the affidavit of defendants counsel, David B. Gordon. Mr. Gordon does not attest to personal knowledge of the relevant facts. (Affidavit of David B. Gordon, dated May 20, 2004 (Gordon Aff.).) Cf. Fed.R.Civ.P. 56(e) (personal knowledge required). Therefore, this Court will only consider assertions in Mr. Gordons affidavit that are based on documents appended as exhibits. See Omnipoint Communications, Inc. v. Common Council of the City of Peekskill, 202 F.Supp.2d 210, 213 (S.D.N.Y.2002). To the extent those portions of the Gordon affidavit support facts in defendants Rule 56.1 counterstatement and are not inconsistent with plaintiffs submission, this Court will consider those additional disputed facts. See Local Civil Rule 56.1(b).
Beginning in the late 1980s, Names in the Lloyds market incurred aggregate underwriting losses of over $12 billion, which spawned substantial litigation. (Pl. 56.1 Stmt. ¶ 10; Defs. 56.1 Stmt. ¶¶ 36-37.) In order to address these issues and sustain the viability of the Lloyds market, Lloyds implemented a Reconstruction and Renewal (R & R) Plan that applied to every Name. (Pl. 56.1 Stmt. ¶ 10.) The R & R Plan had two components. First, a newly formed company, Equitas Reinsurance Ltd. (Equitas), would reinsure each Names underwriting obligations for 1992 and prior underwriting years. (Pl. 56.1 Stmt. ¶ 11.) The cost of reinsurance (the Equitas Premium) was individually calculated and charged to each Name. (Pl. 56.1 Stmt. ¶ 11.) Second, Lloyds made an offer of settlement to protect each Name from unlimited personal liability and discount his Equitas Premium. (Pl. 56.1 Stmt. ¶ 11.) The Names were not required to accept the settlement offer, but even non-settling Names were required to pay their Equitas Premiums. (Pl. 56.1 Stmt. ¶ 11.) Although most Names accepted the settlement offer, defendants did not. (Pl. 56.1 Stmt. ¶ 13.)
All Names signed a mandatory reinsurance agreement (the Equitas Contract). (Defs. 56.1 Stmt. ¶ 41.) The Equitas Contract contains two key clauses. The first, the pay now, sue later provision, requires Names to pay their Equitas Premium free and clear from any setoff, counterclaim or other deduction. (Defs. 56.1 Stmt. ¶ 7.) The other provision states that the calculation by Lloyds of each Names Equitas Premium would be conclusive evidence of the amount owed, in the absence of manifest error. (Defs. 56.1 Stmt. ¶ 7.) Pursuant to the Lloyds Acts, a Lloyds-appointed underwriting agent signed the Equitas Contract on behalf of the Names. (Defs. 56.1 Stmt. ¶¶ 8, 41; Supplemental Declaration of Nicholas P. Demery, dated June 4, 2004 (Supp. Demery Decl.) ¶ 6.)
[*2] The R & R Plan became effective September 3, 1996, and each Name was required to pay the one-time Equitas Premium by September 30, 1996. (Pl. 56.1 Stmt. ¶ 13.) Defendants failed to make their payments. (Pl. 56.1 Stmt. ¶ 13.) Lloyds paid the unpaid Equitas Premiums, and Equitas assigned Lloyds the right to recover from defendants. (Pl. 56.1 Stmt. ¶ 14.) Starting in 1996, Lloyds commenced separate proceedings in the High Court of Justice, Queens Bench Division (the English Court) to collect these amounts from Names, including defendants. (Pl. 56.1 Stmt. ¶ 15.) Lloyds notified defendants of the actions by serving a writ of summons, and defendants acknowledged service through their solicitors, stating that they intended to contest the claims. (Compl. Exs. 11, 12; Declaration of Nicholas P. Demery, dated Apr. 20, 2004 (Demery Decl.) Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 15-17.)
Lloyds moved for an Order 14 final judgmentthe equivalent of summary judgmentagainst each of the defendants. (Pl. 56.1 Stmt. ¶ 18.) The English Court conducted more than 25 days of hearings, at which the Names raised several defenses to payment of the Equitas Premium. (Pl. 56.1 Stmt. ¶ 20.) Specifically, the Names argued that: the Names membership in Lloyds was induced by fraud and could be rescinded; Lloyds could not require the Names to purchase reinsurance from Equitas; and the so-called pay now, sue later and conclusive evidence provisions of the Equitas contract did not bar the Names from raising these defenses. (Pl. 56.1 Stmt. ¶ 20.) These arguments were rejected by the English Court. (Pl. 56.1 Stmt. ¶ 20; Defs. 56.1 Stmt. ¶¶ 44- 46.) The English Court held that regardless of whether the Names could prove fraud, the pay now, sue later clause precluded them from raising those arguments in the action to collect the Equitas Premiums. (Gordon Aff. Ex. 1-B: Socy of Lloyds v. Wilkinson, slip op. at 35-47 (Q.B. Apr. 23, 1997).) Pursuant to the conclusive evidence clause of the Equitas Contract, the English Court fixed damages against the defendants based on the calculations submitted by Lloyds. (Gordon Aff. Ex. 1-D: Socy of Lloyds v. Fraser, slip op. at 5-9 (Q.B. Mar. 4, 1998); Supp. Demery Decl. Ex. 3: Transcript in Socy of Lloyds v. Fraser (Q.B.), dated Mar. 11, 1998, at 91.) These holdings were affirmed by the English Court of Appeal. Socy of Lloyds v. Fraser, 1999 Lloyds Rep. 156 (C.A. July 31, 1998); Socy of Lloyds v. Lyon (C.A. July 31, 1997) (attached as an exhibit to plaintiffs brief).
On March 11, 1998, the English Court issued a judgment in favor of Lloyds against Kenneth Gross in the amount of £614,208.60. (Compl. Ex. 22; Pl. 56.1 Stmt. ¶ 19.) On December 4, 1998, the English Court issued a judgment in favor of Lloyds against Minna Jane Edelman in the amount of £673,340.83. (Compl. Ex. 21; Pl. 56.1 Stmt. ¶ 19.) (collectively, the English Judgments). The U .S. dollar equivalents of these judgments when this civil action was filed were $1,018,912.30 and $1,117,261.29, respectively. All appeals are exhausted, and defendants have not paid the English Judgments. (Pl. 56.1 Stmt. ¶¶ 21, 24.)
[*3] Plaintiff commenced this action against defendants to recognize and enforce the English Judgments under New Yorks Uniform Foreign Money-Judgments Recognition Act, N.Y. C.P.L.R. § 5301 et seq. Plaintiff seeks the full amount of the respective English Judgments, less certain credits to which defendants are entitled. Plaintiff now moves for summary judgment.
I. Summary Judgment Standard
Rule 56(c) provides that summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden of demonstrating the absence of any genuine dispute as to a material fact rests with the moving party. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Grady v. Affiliated Cent., Inc., 130 F.3d 553, 559 (2d Cir.1997). In evaluating the record to determine whether there is a genuine issue as to any material fact, [t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor. Liberty Lobby, 477 U.S. at 255.
II. Uniform Foreign Money-Judgments Recognition Act
New York adopted the Uniform Foreign Money-Judgments Recognition Act (the Recognition Act) in 1970. The Recognition Act provides, in relevant part, that foreign country judgments that are final, conclusive and enforceable where rendered are enforceable in New York. N.Y. C.P.L.R. §§ 5302-03; see CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 100 N.Y.2d 215, 221 (2003). However, a foreign country judgment is not conclusive if [it] was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law. N.Y. C.P.L.R. § 5304(a)(1). Additionally, the Act provides that a court has discretion not to recognize a foreign country judgment if, inter alia, the judgment was obtained by fraud or the cause of action on which the judgment is based is repugnant to the public policy of [New York]. N.Y. C.P.L.R. § 5304(b)(3)-(4). Defendants argue that the English Judgments should not be enforced because the English Court proceedings against them failed to comport with due process, and because Lloyds acted fraudulently in contravention of New Yorks public policy.
A. Due Process
It is incontrovertible that the English judicial system provides impartial tribunals and procedures compatible with the requirements of due process of law. See, e.g., Roby v. Corp. of Lloyds, 996 F.2d 1353, 1363 (2d Cir.1993) (noting that United States courts consistently have found [English courts] to be neutral and just forums); Colonial Bank v. Worms, 550 F.Supp. 55, 58 (S.D.N.Y.1982); see also Socy of Lloyds v. Ashenden, 233 F.3d 473, 476 (7th Cir.2000) (Any suggestion that [the English] system of courts does not provide impartial tribunals or procedures compatible with the requirements of due process of law borders on the risible.). New York courts, in particular, have consistently upheld English judgments under the Recognition Act. See, e.g., CIBC, 100 N.Y.2d at 222 (stating that it is beyond dispute that the English judicial system affords litigants due process); Socy of Lloyds v. Grace, 278 A.D.2d 169, 718 N.Y.S.2d 327, 328 (1st Dept 2000); Porisini v. Petricca, 90 A.D.2d 949, 456 N.Y.S.2d 888, 890 (4th Dept 1982).
[*4] Moreover, a New York court, analyzing a nearly identical English judgment in favor of Lloyds and against other Names, found that due process was satisfied. Grace, 718 N.Y.S.2d at 328. At least fourteen federal and state courts have reviewed judgments for Lloyds against other Names and have enforced them under state laws substantially similar to New Yorks Recognition Act. See, e.g., Socy of Lloyds v. Turner, 303 F.3d 325 (5th Cir.2002); Ashenden, 233 F.3d at 476-81; Socy of Lloyds v. Mullin, 255 F.Supp.2d 468 (E.D.Pa.2003), affd, 96 Fed. Appx. 100 (3d Cir.2004); Socy of Lloyds v. Hudson, 276 F.Supp.2d 1110 (D.Nev.2003); Socy of Lloyds v. Shields, No. 03-0032 (M.D.Tenn. Oct. 1, 2003), affd, 118 Fed. Appx. 12 (6th Cir.2004); Socy of Lloyds v. Blackwell, No. 02CV448-J (AJB) (S.D.Cal. Feb. 24, 2003); Socy of Lloyds v. Byrens, No. 02CV449-J (AJB) (S.D.Cal. May 29, 2003); Socy of Lloyds v. Davies, No. 02-CV-1602-GET (N.D.Ga. Apr. 23, 2003); Socy of Lloyds v. Borgers, No. CV-02-0423-PHX-FJM (D.Az. Mar. 26, 2003), affd, 107 Fed. Appx. 887 (11th Cir.2004); Socy of Lloyds v. Bennett, No. 02-CV-204TC (D.Utah Nov. 12, 2003)[, aff'd 402 F.3d 932 (10th Cir. 2005)]; Socy of Lloyds v. Reinhart, No. 02-264-LFG/WWD-ACE (D.N.M. Sept. 30, 2002); Socy of Lloyds v. Webb, 156 F.Supp.2d 632 (N.D.Tex.2001); Socy of Lloyds v. Rosenberg, No. 02-1195 (E.D.Pa. Aug. 12, 2002); Socy of Lloyds v. Collins, No. 00-713-CA-22 (Fla. Cir. Ct. June 4, 2003)[ aff'd, 874 So.2d 672 (4th Dist. 2004)].
Defendants argue that this Court cannot enforce the English Judgments because the English Court failed to afford defendants due process. Rather than focusing on the English judicial system, defendants urge this Court to examine the particular proceedings. (Defendants Memorandum in Opposition to Summary Judgment, dated May 20, 2004 (Defs.Mem.) at 10-18.) However, the Recognition Act directs this Court to examine the fairness of the English system, rather than evaluate the individual action. CIBC, 100 N.Y.2d at 222 ([T]he relevant inquiry under C.P.L.R. 5304(a) is the overall fairness of Englands legal system. ); see Ashenden, 233 F.3d at 477 (construing Illinois Recognition Act and holding that assessing due process on a case-by-case basis would be inconsistent with providing a streamlined, expeditious method for collecting money judgments rendered by courts in other jurisdictions).
Even considering defendants specific challenges to the English proceedings, defendants have not demonstrated that the English courts failed to provide them due process. The undisputed evidence shows that defendants were provided sufficient notice of the claims against them as well as an opportunity to present their arguments in defense. (Compl. Exs. 11, 12; Demery Decl. Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 15-17, 20.) See Grace, 718 N.Y.S.2d at 328 (enforcing English judgments obtained by Lloyds against Names because they were afforded notice an opportunity to be heard in the underlying English action and, accordingly the basic requisites of due process were met). Indeed, the defendants contested the claims against them in the English Court through counsel but were unsuccessful. (Pl. 56.1 Stmt. ¶ 20; Defs. 56.1 Stmt. ¶¶ 44- 46).
[*5] Accordingly, this Court agrees with the other courts to consider this issue and holds that the English judicial system comports with the principles of due process and that the English Judgments for Lloyds are conclusive and final. As such, they are enforceable under New Yorks Recognition Act. See N.Y. C.P.L.R. § 5302-03.
B. Discretionary Non-Enforcement of the English Judgments
Defendants also argue that this Court should exercise its discretion under C.P.L.R. § 5304(b) not to enforce the English Judgments. Specifically, defendants argue that Lloyds fraudulently induced them to enter the General Undertaking, that their entire relationship with Lloyds was steeped in fraud, and that the English Courts failure to consider defendants fraud defenses is repugnant to New Yorks public policy. (Defs. Mem. at 1524.) See N.Y. C.P.L.R. § 5304(b)(3)-(4).
With these arguments, defendants attempt to stretch this Courts discretion under § 5304(b) beyond its narrow limits. The proper inquiry is not whether the underlying relationship that gives rise to the plaintiffs claims is tinged with fraud, but whether the foreign judgment itself was obtained by fraud. N.Y. C.P.L.R. § 5304(b)(3); see Ackermann v. Levine, 788 F.2d 830, 841 (2d Cir.1986); Koehler v. Bank of Bermuda Ltd., No. M18-302 (CSH), 2004 WL 444101, at *15-16 (S.D.N.Y. Mar. 10, 2004); Fairchild, Arabatzis & Smith, Inc. v. Prometco (Produce & Metals) Co., 470 F.Supp. 610, 615 (S.D.N.Y.1979); see also Mullin, 255 F.Supp.2d at 473 (Mullin presents no evidence that the English Judgment (as opposed to Mullins assent to the General Undertaking) was fraudulently obtained, and thus the Court rejects his contention to the contrary.). Defendants have presented no evidence that Lloyds worked a fraud on the English Court.
Echoing their due process arguments, defendants further contend that the manner in which the English Judgments was rendered flies in the face of New York public policy because the English Courts declined to consider defendants fraud defenses. (Defs. Mem. at 21-24.) However, the English Court acknowledged the Names defenses but held that the pay now, sue later clause required them to be shelved until another proceeding. (Defs. 56.1 Stmt. ¶ 44.) The English Court interpreted the pay now, sue later clause to not exclude or limit [Lloyds] liability for fraud or on any other basis. Its effect is and only is to insulate, as a matter of procedure, claims for the premium from counterclaims or set-offs asserted by the reinsured. It neither excludes nor necessarily postpones such cross-claims. Wilkinson, slip op. at 40. The English Court of Appeal affirmed that ruling, holding that the clause only precluded the Names fraud claims from being raised in Lloyds action to collect the Equitas Premiums. Fraser, 1999 Lloyds Rep. 156; Socy of Lloyds v. Lyon (C.A. July 31, 1997) (attached as an exhibit to plaintiffs brief). As such, the Names were free to assert these claims in other proceedings.
[*6] Thus, just as the New York Appellate Division held in a similar case, the English Judgments are enforceable and consistent with public policy because defendants have effective and viable remedies in the English courts. Grace, 718 N.Y.S.2d at 328; see also, e.g., Turner, 303 F.3d at 333 (holding that Lloyds action to collect the Equitas Premiums is not contrary to Texas public policy); Ashenden, 233 F.3d at 478-79 (Illinois public policy); Mullin, 255 F.Supp.2d at 474-78 (Pennsylvania public policy), affd, 96 Fed. Appx. at 103. The fact that the English Court issued judgments against defendants despite their fraud defenses does not render Lloyds fundamental breach of contract cause of action one repugnant to the public policy of New York. See Flisfeder v. Jardine, 300 A.D.2d 1132, 751 N.Y.S.2d 890, 891 (4th Dept 2002) (CPLR 5304(b)(4) may not be invoked unless enforcement of such judgment would result in the recognition of a transaction which is inherently vicious, wicked or immoral, and shocking to the prevailing moral sense. (internal quotations and alterations omitted)). Therefore, this Court lacks discretion under C.P.L.R. § 5304(b) to bar enforcement of the English Judgments.
Accordingly, for the foregoing reasons, plaintiffs motion for summary judgment against defendants Minna Jane Edelman and Kenneth Gross is granted. The parties are directed to submit a proposed money judgment to the Court by April 4, 2005.