Enforcing Canadian Judgments In A U.S. Jurisdiction – Practical Considerations Before Filing Suit.

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One common misperception of the litigation process is that the important legal work is complete once the court reaches its verdict.  In reality, one of the most important parts of any lawsuit might not occur until long after the courtroom proceedings have finished – enforcement of the judgment.  After all, a judgment – even a multi-million-dollar judgment – has very little real value if no money can be collected.  Moreover, every dollar that is spent on collection efforts directly reduces the value of the judgment to the plaintiff.  As such, an important part of pre-suit analysis of any claim should be to what extent a judgment, if obtained, can be enforced.  

This is especially true for businesses located in Canada that may become involved in a dispute with a business located in the United States or with significant assets located in the United States.  Attempting to enforce a Canadian judgment in the U.S. can be fraught with pitfalls.  The following is a discussion of some of the main considerations to take into account before becoming involved in litigation against a defendant with assets in the U.S.

Before filing suit against a U.S. company in Canada, it is important to keep in mind that a judgment rendered by a Canadian court will only be effective in the province where it was issued.  If the defendant has insufficient assets in that province to pay the judgment, you will have to ask a court in the jurisdiction where the defendant's assets are located to agree to enforce the judgment.   The process of asking a court to recognize a judgment issued by a foreign court is often referred to as "domesticating" the judgment.

However, domesticating a foreign judgment in the US is not necessarily automatic.  In most U.S. states, whether a foreign judgment will be domesticated is governed by the Uniform Foreign Money-Judgments Recognition Act (the "Act").  Although the Act generally provides that final judgments rendered by foreign courts should be enforced in the U.S., there are many important exceptions.  For instance, a judgment that provides an award of statutory penalties or fines or some form of injunctive relief would not be enforceable.  Therefore, before filing suit, it would be important to make sure that the relief you are requesting in your lawsuit would be enforceable in the U.S. under the Act.

In addition, a fundamental component of U.S. law is that a judgment taken against a defendant under circumstances where the defendant's right to due process of law has been violated cannot be enforced in the U.S.  In the U.S., a court's right to take jurisdiction over a defendant is proscribed by the defendant's right to due process.  The right to due process in the U.S. requires that a defendant can only be sued in a jurisdiction where the defendant has established certain "minimum contacts."  Conversely, a defendant in the U.S. cannot be sued in a jurisdiction where the defendant has not established such minimum contacts and any attempt to do so would be in violation of the defendant's right to due process of law.  

In Canada, no such requirements exist and Canadian courts may take jurisdiction over defendants regardless of whether the defendant has established "minimum contacts" with the Canadian jurisdiction.  Consequently, although it would be proper under Canadian law to sue a U.S. defendant in Canada even though the U.S. defendant has not established "minimum contacts" with the Canadian jurisdiction, a judgment rendered by the Canadian court might not be enforceable in the U.S. on the basis that judgment was taken in violation of the defendant's due process rights under U.S. law.  In that case, even though it would be valid in Canada, the judgment would not be enforceable in the United States.  Accordingly, before filing suit against a U.S. defendant, it would be wise to consider whether any judgment you might obtain could be subject to attack in the U.S. based on the defendant's due process rights.

Further, a judgment based on a cause of action that the U.S court would find repugnant to its public policy would not be enforceable.  Given that the U.S. system and the Canadian system are both generally based on the English common law (except for Quebec), it is not particularly likely that a U.S. court would declare a judgment based on a common law cause of action repugnant to its public policy.  However, a statutory claim or a unique twist on a common law claim has at least some potential to be contrary to the public policy of a U.S. state.  Accordingly, if there is some possibility that a judgment will be enforced in a U.S. jurisdiction, some thought should be given to whether the cause of action relied on could render the judgment subject to attack as against the public policy of the U.S. jurisdiction where enforcement will be sought.

Moreover, when it comes time to enforce the judgment, almost certainly you will have to hire a lawyer in the U.S. who can handle the enforcement proceedings. However, in choosing the right lawyer to retain, it is important to keep in mind just how diverse the practice of law can be from one county to the next.  When I practiced in Texas, because local practice in neighboring counties can be quite unique, we often retained local lawyers in other counties to assist with courtroom protocol, trial preparation, jury selection, and any other court-related matters.  A local lawyer who knows the court house staff and judges can provide insights that can make the difference between a favorable outcome and a disastrous one, even in a relatively simple proceeding.  Therefore, when deciding which local lawyer to retain to assist with domesticating and enforcing a judgment, care should be taken to select a lawyer who is familiar with the county where the judgment will be filed and enforced.

Stephen Maddex is an Associate at BrazeauSeller.LLP.  Stephen practices in the area of litigation.  Stephen can be reached at smaddex@brazeauseller.com or 613-237-4000 ext. 273. 

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