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Bankruptcy, Restructuring & Commercial Litigation

Obtaining a Judgment in New York

The State Courts of New York State

In order to obtain a judgment in the state courts of New York State, a lawsuit, often referred to as an “action,” must be commenced. An action in New York is typically commenced by filing a summons and complaint with the applicable office of the county clerk. The party commencing the action is referred to as the “plaintiff” and the party to whom the action is directed is referred to as the “defendant.”

After the action has commenced, a copy of the summons and complaint must be served on the defendant within 120 days after the filing date (with a limited exception where the statute of limitation is four months or less). A defendant served with a summons and complaint must respond within 20 days if the defendant was personally served or within 30 days if the defendant was not personally served. The defendant’s responding papers are referred to as the “answer.” In addition to denying the essential allegations of the complaint, the answer may include affirmative defenses, counterclaims against the plaintiff, and cross-claims against any co-defendants.

If the defendant fails to serve an answer when it is due, or within additional extensions of time agreed to between the parties or ordered by the court, the plaintiff may seek a default judgment. If the plaintiff’s claim is for a “sum certain,” or a sum that can by computation be made certain, application for a default judgment may be made directly to the clerk of the court within one year after the default. Upon submission of the requisite proof (i.e., proof of service of the summons and complaint, and proof by affidavit of the facts constituting the claim, the default, and the amount due), the clerk will enter a default judgment for the amount demanded in the complaint, plus costs and interest. In cases where the claim is not for a sum certain, the plaintiff must apply to the court for default judgment. If the plaintiff fails to initiate proceedings for the entry of judgment within one year after the default, the court will dismiss the complaint as abandoned, without costs, upon either its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.

If the defendant does submit an answer that denies in whole or in part the allegations of the complaint, then the plaintiff must take additional steps to prove its entitlement to judgment. In cases where there are disputed issues of fact, the plaintiff and defendant would typically engage in discovery, which would entitle either side to obtain disclosure of information needed to prosecute or defend the action. The scope of discovery under New York law is broad and permits full disclosure of all matters material and necessary in the prosecution or defense of an action, regardless of the burden of proof. The discovery devices most commonly used are document requests, depositions, interrogatories, and requests for admission.  Following completion of the discovery phase of the action, either party may seek summary judgment by submitting summary judgment motion papers to the court. Summary judgment is appropriate and should be awarded to the moving party where there are no genuine issues of fact and application of the law to the undisputed relevant facts compels judgment in favor of one of the parties. If the court determines that summary judgment is not appropriate—in other words, by finding that genuine issues of fact do exist—then the action will proceed to trial. Trials in actions seeking recovery of a money judgment (among certain other actions) may be before a jury or before a judge. Either party to such an action may file a demand for a jury trial.

Once a judgment has been obtained, whether by default judgment, summary judgment, confession of judgment (a procedure whereby the defendant voluntarily consents to the entry of judgment without the commencement of an action), verdict following a jury trial, or decision by a trial judge following a bench trial, the enforceability of the resulting judgment is the same. After judgment is entered, the plaintiff is referred to as the “judgment creditor” and the defendant is referred to as the “judgment debtor.” With the exception of certain categories of exempt assets in the case of an individual judgment debtor, a judgment can be enforced against any real or personal property owned by the judgment debtor or against any debts due to the judgment debtor.

A filed judgment in New York automatically becomes a lien against any real property owned by the judgment debtor located in the counties where the judgment is filed. Priority of the real property judgment lien will depend on the timing of the filing of the judgment. In other words, the judgment will be subordinate to any previously recorded liens, mortgages, or judgments against the same property and will be superior in interest to any subsequently recorded liens, mortgages, or judgments against the same property.

At any time before a judgment is fully satisfied or vacated, the judgment creditor may compel disclosure of all matters relevant to the satisfaction of the judgment by serving a subpoena on any person requiring attendance for taking a deposition upon oral or written questions and/or requiring the production of books and papers for examination. A judgment creditor has 20 years running from the date of entry of the judgment, or the date of subsequent payments on the judgment, whichever is later, to enforce collection of the judgment. In the case of real property judgment liens, enforcement must be concluded within 10 years from the date of the judgment, unless extended for an additional 10-year period by order of the court prior to the expiration of the first 10-year period.

Special Provisions Applicable to Foreign Plaintiffs

A foreign-based plaintiff may be required to post security for costs in connection with commencing an action in a New York State court. An undertaking must be posted if none of the plaintiffs in an action is a domestic corporation, a foreign corporation licensed to do business in New York, or a resident of New York when the request for such security is made by the defendant. The amount of the undertaking is U.S. $500 in counties within the City of New York, and U.S. $250 in all other counties of New York (or, in either case, in greater amount if the court determines). The purpose of the undertaking is to protect the defendant’s ability to recover costs against the foreign corporation/non-resident plaintiff in the event judgment is awarded in favor of defendant.

Separate and apart from the undertaking requirement described above, a foreign corporation doing business in New York without qualification authority is prohibited from maintaining an action in New York unless and until it has been qualified to do business in New York and has paid all applicable fees and taxes required for qualification. A foreign corporation not “doing business” in New York, but merely wishing to commence a lawsuit in New York, is not required to meet the qualification requirements.

The United States’ Federal Courts

In addition to New York’s State courts, a litigant may opt to proceed in one of New York’s federal courts if appropriate jurisdiction exists. The federal courts in the United States are divided into the district courts, which are the trial courts, the circuit courts, which are the appellate courts that hear appeals from the district courts, and the Supreme Court, which hears appeals from the circuit courts. The federal court system in the United States is divided into thirteen circuits, which include the first through eleventh circuits as well as the District of Columbia and federal circuits. The federal courts in New York State (along with the federal courts in Vermont and Connecticut) are part of the second circuit. New York is divided into four judicial districts known as the Northern, Southern, Eastern, and Western Districts of New York. Appeals from the district courts in New York (as well as from the district courts in Vermont and Connecticut) are heard by the Second Circuit Court of Appeals, which is located in New York City.

The district courts have original jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. This is often referred to as jurisdiction based on a “federal question.”  The district courts also have jurisdiction over all civil actions where the matters in controversy exceed the sum or value of $75,000 and are between (1) citizens of different states, (2) citizens of a state and citizens or subjects of a foreign state, (3) citizens of different states and in which citizens or subjects of a foreign state are additional parties; and (4) a foreign state as plaintiff and citizens of a state or of different states.

The procedure for commencing an action and prosecuting it to final judgment in the federal court system is governed by the Federal Rules of Civil Procedure. The procedural steps are similar to those outlined above with respect to the New York State courts. Once judgment is obtained in federal court, a certified copy of it may be filed in any of the New York State County Clerk’s offices so it becomes a New York judgment, subject to enforcement in New York, as described above.

Procedure for Enforcing a Foreign Country Judgment in New York State

A judgment obtained in Ontario (or any foreign country) against a party that has assets in the United States may be recognized and enforced in accordance with the “Uniform Foreign Country Money-Judgments Recognition Act” (the “Act”), which has been adopted in New York as well as a number of other states. The Act applies to any foreign country judgment that is final, conclusive, and enforceable where rendered, even though an appeal may be pending or subject to appeal. If a foreign country judgment meets the requirements of the Act, it is deemed conclusive between the parties to the extent it grants or denies recovery of a sum of money. It is enforceable in New York by an action on the judgment, a motion for summary judgment in lieu of complaint, or in a pending action in New York by counterclaim, cross-claim, or affirmative defense.

A foreign country judgment is not deemed conclusive under the Act, and thus will not be recognized in New York (or in other “Act” jurisdictions), if (1) the judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law and (2) the foreign court did not have personal jurisdiction over the defendant.

In addition, a foreign country judgment need not be recognized in New York under the Act if, (1) the foreign court did not have jurisdiction over the subject matter, (2) the defendant in the proceedings in the foreign court did not receive notice of the proceedings in sufficient time to enable him to defend, (3) the judgment was obtained by fraud, (4) the cause of action on which the judgment is based is repugnant to the public policy of New York State, (5) the judgment conflicts with another final and conclusive judgment, (6) the proceeding in the foreign court was contrary to an agreement between the parties under which the dispute in question was to be settled other than by proceedings in that court, or (7) in the case of jurisdiction based only on personal service, the foreign court was a seriously inconvenient forum for the trial of the action.

The Act sets forth a non-exclusive list of situations in which the personal jurisdiction requirement under the Act will be satisfied. It includes situations where, (1) the defendant was served personally in the foreign state, (2) the defendant voluntarily appeared in the proceedings, other than for the purpose of protecting property seized or threatened with seizure in the proceedings or of contesting the jurisdiction of the court over him, (3) prior to the commencement of the proceedings, the defendant had agreed to submit to the jurisdiction of the foreign court with respect to the subject matter involved, (4) the defendant was domiciled in the foreign state when the proceedings were instituted, or, being a corporate body, had its principal place of business, was incorporated, or had otherwise acquired corporate status, in the foreign state, (5) the defendant had a business office in the foreign state and the proceedings in the foreign court involved a cause of action arising out of business done by the defendant through that office in the foreign state, or (6) the defendant operated a motor vehicle or airplane in the foreign state and the proceedings involved a cause of action arising out of such operation. The Act authorizes the state courts to recognize other bases of
personal jurisdiction as well.

Finally, although the Act applies to judgments pending appeal or subject to appeal, the court may nonetheless stay enforcement proceedings brought under the Act until such appeal has been determined or the time to take the appeal has expired, upon the defendant satisfying the court that an appeal is pending, or that the defendant is entitled to and intends to appeal the foreign country judgment.