Derr v. Swarek, No. 13-60904, 2014 U.S. App. LEXIS 17421 (5th Cir. 2014) [click for opinion]

Thomas L. Swarek and Thomas Anthony Swarek (“the Swareks”) sued Herman Derr (“Derr”) and Derr Plantation, Inc. in the Chancery Court of Mississippi, alleging that Derr and his corporation breached a contract for the sale of Mississippi farmland.  Derr died while the action was pending and, after years of stagnation in the Chancery Court, Derr’s wife and children sued the Swareks in the German Regional Court in Düsseldorf, Germany, seeking a declaratory judgment that they were not liable for any claims arising from the putative land contract.

Before the German court ruled on the matter, the Swareks voluntarily dismissed all of their claims against Derr with prejudice in the Mississippi case, and withdrew a pending motion to substitute the Derr heirs as defendants in the Mississippi action.  The German Regional Court then dismissed the Derr heirs’ claim, finding that because of the Mississippi dismissal, the Derr heirs lacked the required legitimate interest in a declaratory judgment, and lacked the need for legal protection.  On appeal, the German Higher Regional Court reversed and granted Derr’s heirs a declaratory judgment of non-liability and awarded them $300,000 in court costs as the prevailing party.  The heirs then sued in federal district court to enforce the German court’s judgment for costs. 

The Fifth Circuit, affirming the district court’s judgment, refused to recognize the German court’s judgment.  The German court issued the judgment, the Fifth Circuit noted, only by ignoring the res judicata effect of the Swareks’ dismissal with prejudice in the Mississippi court.  The Swareks’ dismissal in the Mississippi litigation was a final judgment on the merits, which should have ended the litigation between the parties, since it prevented the Swareks from reasserting the claims against the Derr heirs. Had the German court properly given the dismissal preclusive effect, it would not have issued its declaratory judgment or awarded costs to the heirs. 

The Fifth Circuit therefore declined to recognize the German judgment, since it resulted from the German court’s own refusal to extend comity and give preclusive effect to the Mississippi judgment.  The Fifth Circuit also noted that the German judgment violated Mississippi’s public policy against superfluous litigation and rendered meaningless the Swareks’ right to put an end to litigation of their claims.

Meghan Hausler of the Dallas office contributed to this summary.