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The author is a partner with Baker & McKenzie LLP, Chicago
Practitioners who find themselves before the courts and tribunals of other nations need to be aware of the potential effect that first-in-time foreign judgments may have on claims and defenses in U.S. proceedings. Many U.S. litigators, to the extent they know of this risk, reflexively evaluate it by reference to generalized principles of issue preclusion under U.S. federal or state law. But Judge Richard A. Posner’s opinion for the Seventh Circuit Court of Appeals in United States v. Kashamu, No. 10-2782 656 F.3d 679 (7th Cir. Sept. 1, 2011) surprisingly suggests that the law of the rendering court’s foreign jurisdiction may presumptively control the preclusive scope of foreign judgments in U.S. litigation.
In determining the preclusive effect, if any, of foreign judgments on U.S. proceedings, reviewing U.S. courts generally engage in a two-stage analysis. First, the court decides whether to recognize the judgment of the rendering foreign court. Second, if the court recognizes the foreign judgment, it then ascertains the scope of the judgment’s preclusive effect. Both stages may be fraught with choice of law issues. This column focuses on the second inquiry.
As a matter of logic, a court must first recognize a judgment (domestic or foreign) before according it collateral estoppel effect. U.S. litigators are likely more familiar with recognition of judgments entered by another domestic court, which is governed by the U.S. Constitution’s Full Faith and Credit Clause. In contrast, judgments of the courts and tribunals of foreign nations may be recognized under federal law by resort to the doctrine of comity—something commonly envisioned as more than courtesy but less than compulsion. Commentators have criticized the doctrine of comity for its elusive definition, though Judge Posner in Kashamu summarized comity in a single phrase as “a doctrine of deference based on respect for the judicial decisions of foreign sovereigns (or of U.S. states, which are quasi-sovereigns).”
The U.S. Supreme Court in Hilton v. Guyot, 159 U.S. 113 (1895), explained that, under the doctrine of comity, foreign judgments are entitled to recognition provided the proceedings giving rise to that judgment: (i) are upon appropriate notice; (ii) present the opportunity for a full and fair presentation of evidence; (iii) are before a foreign court of competent jurisdiction, which operates in a legal system likely to provide for the impartial administration of justice in disputes between the citizens of that foreign nation and other nations; and (iv) do not prejudice the litigants’ rights as U.S. citizens or otherwise contravene U.S. public policy. Accordingly, U.S. courts have refused to recognize foreign judgments when a party has shown that the rendering foreign court lacked jurisdiction or that its judgment offended U.S. public policy, was tainted by fraud, or prejudiced the rights of U.S. citizen-
litigants by failing to accord them due process or to adhere to generally accepted notions of jurisprudence.
Having recognized the foreign judgment, a court confronts a difficult conflict
of laws issue: whether the scope of the preclusive effect of a judgment by a court of a foreign state is governed by the laws of that rendering foreign state or by the laws of the United States or one of its states. Commentators
and the Restatement of Foreign Relations Law of the United States are
largely divided on the answer to this question. Unsurprisingly, so is the relevant case law. Kashamu only adds to that confusion.
Because the U.S. Constitution’s Full Faith and Credit Clause does not apply, the decision about which jurisdiction’s collateral estoppel rules apply to a foreign judgment is complicated. No constitutional mandate compels a U.S. court to apply the collateral estoppel rules of the rendering court’s foreign state. Of course, this does not resolve which jurisdiction’s law does or should apply.
Some courts avoid answering this difficult conflict of law question altogether, either by finding a false conflict or by adopting the parties’ choice of law, if it is undisputed.
Other U.S. courts have adopted the rules of issue preclusion of the rendering court. There are several reasons for doing so, including, among others, to prevent unfair surprises to litigants who formed their expectations based on litigation in a particular legal regime and to treat the foreign court no differently than another domestic court.
However, a majority of U.S. courts apply U.S. rules of collateral estoppel to foreign judgments. This selection of domestic preclusion rules, while not free from criticism, offers several benefits. First, the application of U.S. issue preclusion rules is administratively easier for U.S. courts and less costly for parties. Second, to the extent that U.S. rules are broader than foreign rules of issue preclusion, they better promote the underlying rationales favoring claim and issue preclusion (e.g., efficiency and an end to litigation). Third, the application of domestic preclusion rules protects the interests of U.S. citizens who might have been involuntarily haled into a foreign court and successfully defended against a case filed in that court.
The application of U.S. issue preclusion rules to foreign judgments comports with the underlying doctrines of comity and issue preclusion, as thoroughly explained by the court in Alfadda v. Fenn, 966 F. Supp. 1317 (S.D.N.Y. 1997). In that case, the court noted that the recognition of foreign judgments implicated unique concerns because the usual restrictions imposed by the Constitution and principles of federalism did not apply, and the policy considerations of the foreign jurisdiction, as well as the procedures and methods used to achieve such ends (such as discovery and evidentiary rules) might differ from those of U.S. courts. The Alfadda court concluded that a federal court “should normally apply” domestic law to decide the scope of the preclusive effect of a foreign judgment. At present, the majority of U.S. courts apply U.S. federal or state rules of issue preclusion. See Hurst v. Socialist People’s Libyan Arab Jamahiriya, 474 F. Supp. 2d 19, 32–33 (D.D.C. 2007).
Any comfort taken by clients and their counsel from this state of the law was diminished by the decision in Kashamu, in which the Seventh Circuit Court of Appeals suggested that the collateral estoppel effect of foreign judgments may be controlled by foreign, as opposed to domestic, preclusion rules. Because of the practical ramifications of this unsettled inquiry, Kashamu merits careful attention.
Characterizing the facts of Kashamu as unique is an understatement. The case involved the U.S. criminal trial of a Nigerian citizen, Buruji Kashamu. In earlier extradition proceedings, an English court declined to extradite Kashamu after he had been indicted in Chicago and arrested in England at the behest of the U.S. government. Kashamu moved to dismiss the federal grand jury indictment in the district court in Chicago, arguing that collateral estoppel effect should be given to the English district judge’s finding (per Kashamu) that Kashamu was not “Alaji,” the man sought by the U.S. government. The U.S. district court denied Kashamu’s motion to dismiss, giving rise to the appeal.
The Seventh Circuit Court of Appeals in Kashamu began its analysis, like the district court in Alfadda, with the doctrine of comity, under which judgments are recognized. But the Kashamu court held that comity “suggests that the district court should have applied the United Kingdom’s concept of collateral estoppel in deciding what weight to give the ruling of the English magistrate, provided that concept does not offend U.S. policy.” Thus, as opposed to a default use of U.S. collateral estoppel rules (as supported by Alfadda), Kashamu suggests a presumption in favor of applying foreign issue preclusion rules. Judge Posner explained that English issue preclusion rules are both broader and narrower than their U.S. counterparts. In a different case, those material differences, and the initial decision to apply foreign law, could determine the outcome.
The Court of Appeals’ uncertainty about the “suggestion” that the rendering foreign jurisdiction’s law determines collateral estoppel was based not on further legal reasoning, but “the peculiarity of [the] case.” The Court of Appeals repeatedly recognized the “peculiarity” of this “unusual” case with “unique” facts and, pointing out that the recognition of foreign judgments is rooted in principles of comity, noted that it was unclear what interest, if any, the courts of England had regarding extradition to the United States of a Nigerian citizen who was perceived to have no right to live in England.
Perhaps most important, both government and defense counsel presented their arguments under U.S. federal common law, and the court noted that it “might” have applied English law in the absence of such a “tacit agreement.” Judge Posner’s choice of law analysis thus is arguably dictum; nevertheless, such reasoning from a prominent jurist should not be lightly disregarded.
The Kashamu decision, and others like it, highlight the continuing, lively debate regarding what nation’s law governs the scope of issue preclusion accorded to foreign judgments. Practitioners may take away from this discussion several practical lessons.
Avoid surprises. Counsel should be aware of the full spectrum of risks arising from foreign litigation. Litigators should advise their clients about the extent to which stakes in foreign litigation may be higher than initially perceived, especially if a reviewing U.S. court applies the generally broader issue preclusion rules of U.S. federal or state law. In other words, a negative outcome in foreign proceedings might not be readily limited to litigation in that distant forum.
Beware of forum shopping. Counsel should also be alert to strategies by parties that choose to litigate in foreign forums. Experienced opposing counsel may appreciate the collateral estoppel effects discussed above and be tempted to engage in a certain amount of foreign forum shopping to enjoy the proverbial two bites at the apple. A party may strategically commence litigation in a jurisdiction that has narrower or no preclusion rules, with the plan to export victories to jurisdictions with broader preclusion rules if initially successful, but to continue in the first forum and avoid an end to the litigation if initially unsuccessful. See Arthur T. von Mehren and Donald T. Trautman, “Recognition of Foreign Adjudications: A Survey and a Suggested Approach,” 81 Harv. L. Rev. 1601, 1678 (1968).
Anticipate the burdens of applying foreign law. Counsel should be aware of the practical consequences of asking the court to apply foreign issue preclusion rules, a request that engenders its own administrative headaches and expenses. For instance, such a request can significantly increase the costs for a litigant that, under Federal Rule of Civil Procedure 44.1 (Determining Foreign Law), bears the burden of establishing, often through expensive expert testimony, the collateral estoppel effect of a foreign judgment.
Practitioners litigating in multiple U.S. and foreign jurisdictions are well advised to understand the complex and intricate collateral estoppel principles of the rendering foreign state; evaluate, at the time litigation commences, the possible follow-on impact of foreign litigation and any potentially applicable collateral estoppel rules; and prepare to explain to a U.S. court how adopting or declining to follow the collateral estoppel principles of a rendering foreign jurisdiction advances the underlying rationales of collateral estoppel, res judicata, comity, and U.S. public policy. If they do so, practitioners in such suits will be able to foresee and respond better to complex international legal issues that are more and more frequently encountered in our increasingly interconnected world.
The author thanks William Lynch Schaller and Shima S. Roy for their thoughts. The views and opinions expressed in this column are solely those of the author.