Nippon Emo-Trans Co., Ltd. v. Emo-Trans, Inc.

• Decision Date: 14 September 1990
• Docket Number: No. CV-90-416 (RJD).,CV-90-416 (RJD).
• Citation: 744 F. Supp. 1215
• Parties: NIPPON EMO-TRANS CO., LTD., Plaintiff, v. EMO-TRANS, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

744 F. Supp. 1215

NIPPON EMO-TRANS CO., LTD., Plaintiff, v. EMO-TRANS, INC., Defendant.

No. CV-90-416 (RJD).

United States District Court, E.D. New York.

September 14, 1990.

COPYRIGHT MATERIAL OMITTED

George J. Grumbach, Jr., John Palenberg, Daniel J.H. Greenwood, Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiff.

James V. Ryan, Jonathan A. Schorr, Rogers & Wells, New York City, for defendant.

MEMORANDUM AND ORDER

DEARIE, District Judge.

In this action, plaintiff, Nippon Emo-Trans Co., Ltd. ("NET"), seeks recognition of a judgment it obtained against defendant, Emo-Trans, Inc. ("ETI"), in the Tokyo District Court of Japan. Currently before the Court are (i) NET's motion to confirm an attachment pursuant to Sections 6211 and 6212 of the New York Civil Practice Law and Rules, N.Y.Civ.Prac.Law & R. §§ 6211, 6212 (McKinney 1980) and (ii) ETI's cross-motion to vacate or modify the attachment and to stay this action pursuant to Section 5306 of the New York Civil Practice Law and Rules, N.Y.Civ.Prac.Law & R. § 5306 (McKinney 1978).

BACKGROUND

NET is a Japanese corporation with its principal operations in Japan; ETI is a New York corporation with its principal place of business in New York City. Since the Court's jurisdiction is based on diversity of citizenship, this action is governed by New York law, including New York principles of conflict of laws. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).

NET and ETI are freight forwarders; their business involves assembling goods from various sources for shipment, arranging shipment, and arranging to have the shipments broken down and delivered to the ultimate recipient. Between August 1982 and February 1986, NET and ETI had a contractual relationship pursuant to which each would act as the receiving end for shipments assembled by the other. At some point in 1985, a dispute arose as to the allocation of profits between the two companies in connection with freight charges collected from consignees. NET claimed that ETI had failed to remit approximately $354,000 due to NET. ETI claimed that NET's calculation was based on a misinterpretation of the contract.

In June 1986, NET filed an action (the "Japanese Action") in the District Court of Tokyo (the "Tokyo Court"), seeking to recover the money it claimed was owing from ETI. In April 1988, ETI filed a parallel action in this court entitled Emo Trans, Inc. v. Nippon Emo-Trans Co., Ltd., CV-88-1332 (RJD); that action was stayed pending the outcome of the Japanese Action. In the Japanese Action, ETI initially contested the Tokyo Court's jurisdiction over it; that Court ruled on December 8, 1988, that it had personal jurisdiction over ETI. Thereafter, ETI appeared and defended in Japan. A trial was conducted, and on November 14, 1989, the Tokyo Court issued a decision awarding NET $51,331,204 (approximately $354,000) plus interest and costs (the "Japanese Judgment"). On November 28, 1989, ETI filed an appeal with the Tokyo High Court; that appeal is pending.

On February 1, 1990, NET commenced the present action by filing an application for an ex parte order of attachment which would permit it to attach any property of ETI found in New York, up to a limit of $400,000. The application was granted and the order of attachment was signed on February 2, 1990.¹ In accordance with New York law, NET was required to make a motion to confirm the attachment within five days after levy was first made.² Notices of levy were served on various banks and on the Queens County Clerk on February 5, 1990; NET timely moved to confirm the attachment on February 9, 1990.

In order to prevail on the motion to confirm, NET must show (i) that there is a cause of action, (ii) that it is probable that NET will succeed on the merits, (iii) that one or more grounds for attachment exist, (iv) that the amount demanded from ETI exceeds all counterclaims known to NET, and (v) the need for continuing the levy.³

In this case, the question whether to confirm the attachment turns on two issues. The first is whether the Tokyo Court had in personam jurisdiction over ETI. If so, then a cause of action arises under New York's version of the Uniform Foreign Money-Judgments Recognition Act, N.Y. Civ.Prac.Law & R. §§ 5301-5309 ("Article 53"), NET will probably succeed on the merits (barring a reversal on appeal in Japan), and the Japanese Judgment would provide a basis for the attachment. The second issue is whether there is a need to continue the attachment. ETI argues that because it is a substantial company with unencumbered assets far in excess of the judgment, no such need can be established; NET responds that the fact that the Japanese Judgment remains unsatisfied is sufficient to establish a need to continue the attachment. With regard to the sole remaining criterion on the motion to confirm, NET asserts that the amount claimed exceeds any known counterclaims; other than pointing out that its appeal of the Tokyo Court's decision has not yet been decided, ETI does not seriously contest this assertion.

JURISDICTION OF THE TOKYO COURT

ETI asserts that the Tokyo Court did not have in personam jurisdiction over it, and that as a result, Section 5304(a)(2) precludes recognition of the Japanese Judgment. ETI argues that (i) because it has preserved its jurisdictional objection in Japan, it did not "voluntarily appear" in Japan within the meaning of Section 5305(a)(2); (ii) none of the other bases of jurisdiction described in Article 53 is applicable in this case; and (iii) the Tokyo Court found that it had jurisdiction on the basis of principles which do not warrant recognition under Article 53. NET responds that ETI has misinterpreted Japanese law; it argues further that by defending on the merits, ETI has, under Article 53, foregone any right to claim that the Tokyo Court did not have jurisdiction. In addition, it asserts that New York courts will recognize the jurisdiction of foreign courts on any basis under which they themselves would be permitted to take jurisdiction. Finally, NET claims that even under more conservative standards, the Tokyo Court could properly have taken jurisdiction.

A. Background of Article 53

New York had a long-standing liberal tradition regarding recognition of foreign country judgments prior to the passage of Article 53. In the late 1960's, the Judicial Conference of the State of New York commissioned Professor Barbara Kulzer to conduct a study on the desirability of enacting the Uniform Foreign Money-Judgments Recognition Act (the "Uniform Act"); Professor Kulzer generally supported passage of the Uniform Act, while recommending minor changes to bring the statute closer to New York caselaw.⁴

In 1970, when the Uniform Act was enacted as Article 53, a brief commentary on the bill was included in the New York State Legislative Annual—1970. The commentary indicated that its primary purpose was "to procure for New York judgments in foreign countries much better reciprocal treatment at the hands of foreign courts than they now receive." Id. at 10. It indicated further that the legislation was intended to "incorporate the Uniform Act in New York law." The commentary explicitly recognized that the Uniform Act mandated recognition of foreign judgments "at a level below that presently accorded to them by New York courts," but indicated that "New York courts will be free to exceed Article 53 in liberality if they so choose." Id. The commentary did not discuss particulars of the legislation. It did, however, specifically reference Professor Kulzer's report; thus in cases where fine points of interpretation are called for, it is appropriate to look to Professor Kulzer's work as well as any clarifications which can be drawn from the history of the Uniform Act itself. Since its passage, Article 53 "has received `scant judicial attention.'" D. Siegel, Practice Commentaries C5301:1, N.Y.Civ.Prac.Law & R. § 5301 (McKinney's 1978) at 486.

B. "Voluntary Appearance"

Although ETI lost its jurisdictional challenge in the Tokyo Court and was ordered to proceed on the merits, it has preserved its jurisdictional objection on appeal in Japan. ETI contends that under Japanese Law it is not deemed to have voluntarily appeared, and thus cannot be precluded from raising the jurisdictional issue here under Section 5305(a)(2). NET argues that it is error under Japanese law to equate the notion of preserving an objection on appeal with that of involuntary appearance. The parties support their arguments with affidavits from Japanese attorneys and impressive citations to Japanese legal authorities.

The Court is of the view that it need not decide which of these arguments is correct as a matter of Japanese law, for there is no indication in Section 5305 that the question whether a party has "voluntarily" appeared was intended to turn on the law of another jurisdiction.⁵ If anything, Article 53 was meant to simplify the task of a court in determining what effect to give to the judgments of foreign courts, often based on legal principles vastly different from the common-law and constitutional traditions familiar to New York judges and attorneys. To introduce, even potentially, a difficult legal issue requiring the pleading and proof of the law of another jurisdiction would magnify the cost and effort required beyond reasonable bounds. While Japanese law is relevant to the jurisdictional inquiry in other ways, without some firm indication in the statute pointing the Court to the law of the foreign country, it appears eminently more reasonable to view this as a question of New York law.⁶

Of course, New York law also provides that a party who, after losing on a jurisdictional objection, proceeds to defend the merits, will not be deemed to have submitted to the court's jurisdiction by virtue of appearance, unless the jurisdictional objection "is not ultimately sustained". N.Y.Civ.Prac.Law...