Court Rejects Shortcut to Enforcement of Foreign Judgment

Monday, April 22, 2013

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Court Rejects Shortcut to Enforcement of Foreign Judgment

By KENNETH OFGANG, Staff Writer

A money judgment issued by a foreign court cannot be enforced in this state absent a full-fledged trial or a summary judgment or judgment on the pleadings pursuant to the same procedures as more common civil actions, the Court of Appeal for this district has ruled.

Div. Five Thursday reversed a judgment awarding Hyundai Securities Co. Ltd. of South Korea a judgment for more than $40 million against its former chief executive, Ik Chi Lee. Lee headed the company from 1996 to 2000, and was subsequently incarcerated, according to pleadings in the case, for securities fraud, which was also the subject of the Korean civil suit.

The Seoul Southern District Court entered judgment for the corporation in an amount that was close to $19 million, according to conversion rates at the time of the judgment. The judgment provided for 20 percent annual interest, and was upheld by higher courts in South Korea.

Hyundai then filed suit in Los Angeles Superior Court seeking judgment under the Uniform Foreign-Country Money Judgment Recognition Act. The complaint alleged that the Korean judgment was final, conclusive, and enforceable in Korea and that Hyundai had executed on the judgment in Korea, but that more than $40.785 million remained outstanding.

Affirmative Defenses

Lee answered with a general denial and affirmative defenses, including that a conflicting judgment was awarded in a Korean action to which he was not a party; that the damages constituted a fine or penalty not collectible under the act; and that the postjudgment interest award was unenforceable in California.

He also contended that Hyundai lacked standing to enforce the Korean judgment because it was entered in a shareholder derivative action.

Hyundai filed what it styled a “Notice of Petition and Petition For Entry Of The California Judgment pursuant to the Uniform Foreign Country Money Judgments Recognition Act,” accompanied by declarations from its Korean and U.S. lawyers. In response, Lee reiterated his defenses, and also argued that the foreign judgment could not be enforced via a petition.

Trial Court Ruling

Judge Alan S. Rosenfield, following oral argument, ordered judgment entered in favor of Hyundai. He rejected Lee’s request for a statement of decision, saying that the court was ruling “without a summary judgment, without a trial,” and that the defendant “has no entitlement to a Statement of Decision.”

But Justice Richard Mosk, writing for the Court of Appeal, said the trial judge erred because the usual rules governing civil actions apply to proceedings under the act.

Nothing in the statute, he said, indicates that the Legislature intended to allow foreign money judgments to be enforced through summary proceedings similar to those by which arbitration awards or sister-state money judgments are enforceable.

Requiring the more cumbersome procedures associated with typical litigation, he explained, “makes sense” because the issues that may arise from the act are more complicated. The statute, for example, permits a defendant to challenge the underlying judgment on public-policy grounds or by attacking the fairness of the foreign court proceedings, whereas the grounds for attacking a sister-state judgment or an arbitration award are more limited, Mosk noted.

“If Hyundai wishes to have its contentions dealt with summarily, it must do so by way of a motion for summary judgment or judgment on the pleadings,” the jurist wrote. “If it does not succeed in a summary judgment motion or a judgment on the pleadings, the issues will require a trial.”

The case is Hyundai Securities Co. Ltd. v. Lee, 13 S.O.S. 1962.