State of the Netherlands v. MD Helicopters Inc.

• Decision Date: 19 March 2020
• Docket Number: No. 1 CA-CV 19-0019,1 CA-CV 19-0019
• Citation: 248 Ariz. 533,462 P.3d 1038
• Parties: The STATE OF the NETHERLANDS, Plaintiff/Appellee, v. MD HELICOPTERS INC., Defendant/Appellant.
• Court: Arizona Court of Appeals

248 Ariz. 533

462 P.3d 1038

The STATE OF the NETHERLANDS, Plaintiff/Appellee,

v.MD HELICOPTERS INC., Defendant/Appellant.

No. 1 CA-CV 19-0019

Court of Appeals of Arizona, Division 1.

FILED March 19, 2020

Davis Miles McGuire Gardner, PLLC, Tempe, By Bradley D. Weech (argued), Robert N. Sewell, and Marshall R. Hunt, Counsel for Plaintiff/Appellee

Williams & Connolly LLP, Washington, D.C., By Ana C. Reyes, Co-Counsel for Defendant/Appellant

Dentons US LLP, Phoenix, By Karl M. Tilleman, Erin Bradham, and Douglas D. Janicik (argued), Co-Counsel for Defendant/Appellant

Presiding Judge Paul J. McMurdie delivered the Opinion of the Court, in which Judge Jennifer B. Campbell and Vice Chief Judge Kent E. Cattani joined.

McMURDIE, Judge:

¶1 MD Helicopters, Inc., ("MD Helicopters") appeals from the superior court's order granting summary judgment in favor of the State of the Netherlands, denying MD Helicopters’ cross-motion for summary judgment, and entering a judgment domesticating and recognizing two money judgments obtained by the Netherlands in the Dutch courts. We affirm and hold: (1) a final judgment obtained in a Dutch court is recognizable under Arizona's version of the Uniform Foreign-Country Money Judgments Recognition Act, Ariz. Rev. Stat. ("A.R.S.") §§ 12-3251 to -3254 (the "Act"), because the Netherlands has a reciprocal law related to foreign-country money judgments that is similar to the Act; and (2) the money judgments obtained by the Netherlands can be recognized because they are not a fine or other penalty prohibited under the Act.

FACTS AND PROCEDURAL BACKGROUND

The Netherlands Proceedings

¶2 The facts are generally undisputed. Around March 2001, the Netherlands’ Korps landelijke politiediensten , or National Police Services Agency (the "National Police"), entered a contract with Helifly, nv. ("Helifly"), a subsidiary of MD Helicopters, for the sale of eight twin-engine helicopters (the "supply contract"). Under the terms of the supply contract, Helifly was required to deliver the helicopters according to an agreed-upon schedule, notify the National Police immediately if there was any threat of delay or divergence from the schedule, and propose measures to remedy any delay. If the contractual delivery schedule was not met and the National Police did not accept the delay, or if Helifly breached the supply contract in some other manner, the National Police were entitled to a "penalty" of 0.1% of the total amount of the contract per day for the breach, up to a maximum of 10% of the contract (the "penalty clause"). The penalty clause also provided that the National Police reserved the right to seek a determination of actual damages "in so far as the loss exceeds the amount of the penalty." The contract also contained forum-selection and choice-of-law clauses designating the Netherlands as the agreed-upon forum and Dutch law as the governing law.

¶3 After the supply contract was executed, a dispute arose between the parties concerning Helifly's ability to meet the contractual delivery schedule. MD Helicopters intervened and, to remedy any delay, entered a contract with the National Police to loan it two helicopters. Although MD Helicopters and the National Police originally intended the loan to last only six months, after Helifly continued to struggle to meet its delivery obligations under the supply contract, the parties extended the loan contract through June 30, 2004. As Helifly's failure to meet its commitments continued, MD Helicopters, Helifly, and the National Police agreed to set March 1, 2005, as the date for delivery of the first two helicopters contemplated by the supply contract. According to that agreement, MD Helicopters and Helifly were required to loan the National Police two more helicopters. MD Helicopters was also required to enter a second loan contract for one of the two helicopters initially loaned to the National Police. By March 1, 2005, however, Helifly still had not delivered the helicopters to the National Police.

¶4 Ultimately, these disputes triggered two Dutch court proceedings. First, in August 2006, MD Helicopters filed suit against the National Police in the District Court of The Hague¹ for allegedly breaching the first loan contract by failing to return one of the loaned helicopters. The National Police counterclaimed, alleging MD Helicopters breached the second loan contract by failing to deliver the two additional helicopters contemplated by that contract. In December 2008, the court issued a judgment rejecting MD Helicopters’ breach-of-contract claim, granting the National Police's counterclaim in part, and ordering MD Helicopters to pay: (1) €1,097,654 in damages incurred by the National Police as a result of MD Helicopters breach of the second loan contract plus interest; (2) €440 in costs; and (3) €1356 in attorney's fees.

¶5 Second, the National Police instituted legal proceedings in 2008 against MD Helicopters in the District Court of The Hague to enforce an alleged guarantee by MD Helicopters of Helifly's obligations under the supply contract. The National Police sought judgment for the amount owed under the penalty clause of the supply contract and for damages "incurred and to be incurred ... as a result of Helifly's breach and the following termination of the agreement, all to the extent that the damage exceeds the penalties incurred." In February 2009, the court issued a judgment in favor of the National Police and ordered MD Helicopters to pay: (1) €4,931,640 plus interest, under the penalty clause of the supply contract; (2) €4884 in costs; and (3) €6422 in attorney's fees. The court also found that the National Police had met its burden under Dutch law to show it was "sufficiently plausible ... that the damages incurred ... exceed the amount of the decision regarding the ... penalty" and that further proceedings for the determination of damages were warranted.

¶6 Both parties appealed the judgments to The Hague Court of Appeal. In May 2012, the court issued a consolidated judgment upholding the 2008 judgment in full and the 2009 judgment on all but the amount owed by MD Helicopters under the penalty clause, which it increased to €5,868,653 plus interest. The court also ordered MD Helicopters to pay €6774 in costs and €48,090 in attorney's fees. Neither party sought review of the court's judgment (the "Hague Judgment"), and it is considered final and enforceable in the Netherlands.

The Arizona Proceedings

¶7 In August 2015, the Netherlands, as assignee of the Hague Judgment, brought an action in the superior court seeking recognition of the judgment in Arizona under both the Act and common-law principles governing the recognition of foreign-country judgments. MD Helicopters moved to dismiss arguing that the Netherlands had failed to satisfy the requirements of the Act by failing to show that the judgment had originated from a foreign country that had adopted or enacted a reciprocal law related to foreign-country money judgments similar to the Act. A.R.S. § 12-3252(B)(2) ; see also A.R.S. § 12-3252(C) ("The party seeking recognition of a foreign-country judgment has the burden of establishing that this chapter applies to the foreign-country judgment."). MD Helicopters also argued that the Act displaced Arizona common law concerning the recognition of foreign-country judgments, thus precluding any avenue for recognition of the Hague Judgment except through the Act. The Netherlands responded that Dutch courts recognized foreign judgments under a test with similar requirements to the Act, and the Arizona legislature did not intend for the Act to abrogate Arizona common law.

¶8 The superior court denied MD Helicopters’ motion to dismiss and entered an order recognizing the Hague Judgment. The court found that the Netherlands had shown that Dutch law allows the recognition of foreign judgments and uses requirements like those in the Act. MD Helicopters moved to vacate the portion of the order recognizing the Hague Judgment because it had not been allowed to assert any relevant defenses against recognition under the Act. MD Helicopters also filed its answer to the amended complaint, raising, inter alia , the following affirmative defenses: (1) the Act could not apply to the Hague Judgment because the judgment constituted a "fine or other penalty," which cannot be recognized under the Act, A.R.S. § 12-3252(B)(1)(b) ; and (2) the Hague Judgment and the causes of action on which it was based should not be recognized because they were repugnant to the public policy of Arizona and the United States, A.R.S. § 12-3253(C)(3). The court granted MD Helicopters’ motion to vacate its order and transferred the case to a different judicial officer.²

¶9 The Netherlands ultimately moved for summary judgment arguing: (1) the previous judicial officer's ruling on the applicability of the Act and common law related to the recognition action was the law of the case; (2) the Hague Judgment was not a "penalty" as defined by the Act; and (3) MD Helicopters had failed to show the Hague Judgment was repugnant to the public policy of either Arizona or the United States. MD Helicopters responded and cross-moved for summary judgment on all issues other than the prior ruling. On that point, MD Helicopters agreed that the issues decided in the prior order applied to the cross-motions for summary judgment but reserved its right to challenge those issues on appeal, if necessary.

¶10 In June 2018, the superior court granted the Netherlands’ motion and denied MD Helicopters’ cross-motion. In its ruling, the court held that the Hague Judgment, though originating mostly from the penalty clause of the supply contract, did not constitute a penalty within the context of the Act. The court also held that, in the exercise of its discretion, it would not refuse to recognize the Hague Judgment on public policy grounds under the Act. The court then issued a judgment: (1) domesticating and recognizing the Hague Judgment; (...