Because the Canadian and U.S. legal systems are very different, attempting to enforce a Canadian judgment in the U.S. can be fraught with pitfalls. Using Texas as a typical example, the following is a discussion of the main considerations to take into account before attempting to enforce a judgment in the U.S.
1. The judgment must be final and for monetary damages.
The procedure for "domesticating" a judgment from a Canadian court is governed by the Uniform Foreign Money-Judgments Recognition Act (the "Act") (approximately 30 other U.S. states have similar statutes). Only judgments that are final, conclusive, and enforceable where rendered may be domesticated under the Act. As long as the judgment rendered by the court in Canada is final and enforceable in Canada, it would qualify for domestication under the Act.
The judgment must grant or deny a sum of money. A judgment that is interlocutory or for injunctive relief or a judgment for taxes, a fine, or criminal penalty, or a judgment for support in a family matter are not enforceable under the Act.
2. The judgment debtor has 30 days to object to the judgment.
The process of domesticating a judgment is simple - you merely file an authenticated copy of the judgment in the proper court. This is typically done in the court in the county where the debtor lives. The judgment debtor then has 30 days to object to recognition of the judgment. However, the grounds for objecting are limited. The court cannot delve into the merits of the claims and determine whether the judgment was properly granted. Rather, the court may deny recognition of the judgment only on grounds such as:
- The foreign court did not have jurisdiction over the defendant or the subject matter of the dispute;
- The defendant did not receive notice in sufficient time to defend the lawsuit;
- The judgment was obtained by fraud; or
- The underlying cause of action is repugnant to Texas public policy.
3. Begin enforcement proceedings.
Efforts to enforce the judgment can begin once the judgment has been filed with the court. Texas law permits an array of enforcement mechanisms similar to what is available in Canada, such as judicial sale, garnishment, etc. Judgment creditors also have the right to conduct discovery in aid of enforcement, including examining the defendant under oath, collecting documents from the debtor regarding his assets, and issuing subpoenas for documents to third-parties concerning the debtor's assets. Because the scope of discovery in the U.S. is generally quite broad, the right to post-judgment discovery is a valuable tool in collection efforts.
However, Texas law provides broad protections for judgment debtors. For instance, Texas law provides an exemption for an individual's homestead, exempts an individual's wages from garnishment, and exempts up to US$60,000 in personal property. Accordingly, judgments against individuals in relatively small amounts can be difficult to enforce in Texas.
4. Some Practice Tips Before You Begin.
When representing a plaintiff in a claim against a U.S. defendant, it is important to keep in mind just how different the U.S. system is from the Canadian system. Putting some thought into how you will enforce the judgment in the U.S. before you draft your statement of claim could go a long way to assuring the plaintiff will obtain full recovery.
Determine what assets are available and whether they might be exempt.
Because of the broad exemptions provided by Texas law, very valuable property can be unreachable by a judgment creditor. Therefore, in addition to conducting an asset search, attention should be paid to what exemptions might exist in the jurisdiction where the defendant's assets are located. Although a defendant with a valuable home may seem solvent, if the home is exempt, your judgment could be unenforceable.
If possible, avoid relying on novel causes of action.
Given that the U.S. system is also based on the English common law, it is highly unlikely a Texas court would declare a judgment based on a common law claim repugnant to Texas public policy. However, a statutory claim or a unique twist on a common law claim has at least some potential to be contrary to Texas public policy. Accordingly, before drafting your statement of claim, some thought should be given to whether the cause of action relied upon could render a judgment unenforceable as against the public policy of the U.S. jurisdiction.
Make clear the basis for personal jurisdiction.
Under U.S. law, courts cannot take jurisdiction over a claim unless the court has jurisdiction over the defendant. Whether a court has jurisdiction over the defendant is determined based on the defendant's contacts with the state where the court is located. This requirement is a fundamental component of a person's constitutional right to due process.
Accordingly, a key exception to the Act provides that, if the judgment debtor can show the court in Canada lacked personal jurisdiction over the defendant under U.S. principles, the Texas court would not be obligated to enforce the judgment. Whether a court has personal jurisdiction over a defendant can be a very complicated question. However, in any case where a plaintiff in Canada intends to bring suit against a U.S. defendant, to ensure the judgment will not be subject to attack in the U.S., the question of whether the court in Canada has personal jurisdiction over the defendant should be analyzed from the perspective of U.S. law. Moreover, to make your case for recognition stronger, you should consider making clear in the statement of claim and during the proceedings the basis for asserting jurisdiction over the defendant.