Pirito v. Penn Engineering World Holdings, No. 09-2396 (E.D. Pa. May 16, 2013) [click for opinion]

This case arose from a complex Stock Purchase Agreement between Pirito and Penn Engineering World Holdings ("Penn World"), under which Penn World purchased the capital stock of a Luxembourg corporation that owned all the capital stock of an Italian manufacturer and merchant.  Pirito filed suit in the Pennsylvania district court for breach of the agreement and Penn World counterclaimed for, among other things, fraud and breach of contract.  Both parties moved for summary judgment.

Penn World contended that the district court's determination of Pirito's breach of agreement claim was governed by a 2009 arbitration award in favor of Penn World, which required Pirito to pay it in excess of one million euros.  The district court disagreed, and denied Penn World's motion due to concerns over whether the arbitration panel had jurisdiction, whether the arbitral decision could be considered a foreign court judgment, and whether the judgment was final. 

Pirito appealed the arbitration award and on January 16, 2013, the Court of Appeals of Milan rejected his appeal and "entirely confirmed" the arbitral award.  Thereafter, Penn World renewed its motion for summary judgment contending that the Court of Appeals decision addressed each of the district court's concerns and therefore, the arbitral award and the Court of Appeals decision should be given preclusive effect in the district court. 

The district court noted that the preclusive effect of a foreign judgment is governed by the Supreme Court case of Hilton v. Guyot and the collateral estoppel requirements under Pennsylvania law.  Under Hilton, U.S. courts are to hold foreign money judgments "conclusive upon the merits tried in the foreign court" so long as the judgment was "rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due diligence and proofs, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record." 

Since the Court of Appeals of Milan held that it had jurisdiction, the district court's prior concern on this issue was satisfied.  The Court of Appeals of Milan decision also removed the district court's concern as to whether Hilton applied to arbitration proceedings.  The district court then addressed its final and most important concern, whether the foreign decision was final.  The district court observed that Pennsylvania law, under Shaffer v. Smith, holds that a foreign judgment is final for collateral estoppel purposes unless and until it is overturned on appeal.  The district court found that, since the Court of Appeals decision met the Hilton test, there was no reason not to apply the Shaffer principle, and recognize the Court of Appeals decision as final.  The district court reasoned that its finding was consistent with the interests collateral estoppel protects: "reliev[ing] parties of the cost and vexation of multiple lawsuits, conserve[ing] judicial resources, and, by preventing inconsistent decisions, encourage[ing] reliance on adjudication." 

Therefore the district court found that the judgment of the Court of Appeals of Milan was entitled to collateral estoppel effect and granted summary judgment in Penn World's favor.