The Fifth Circuit Court of Appeals has determined that the German heirs of a defendant voluntarily dismissed with prejudice from a property dispute litigated in a Mississippi chancery court filed redundant litigation in Germany to establish their non-liability, and because the German court refused to consider the preclusive effect of the dismissal with prejudice, its ruling awarding $300,000 in attorney’s fees and costs to the German litigants was not entitled to enforcement in the United States under comity principles. Derr v. Swarek, No. 13-60904 (5th Cir., decided September 9, 2014). So ruling, the court affirmed a lower court determination but on different grounds.
The Fifth Circuit disagreed with the lower court that the mere initiation of a foreign parallel proceeding is a ground on which a court may refuse to enforce the resulting foreign judgment. According to the court, the parallel-proceeding rule “‘applies only until a judgment is reached in one of the actions.’ Even if the [German heirs] instituted their declaratory suit in Germany for the purpose of obtaining a judgment before one could be reached in the Mississippi litigation, this ‘interference,’ in the absence of a final judgment in the Chancery Court, does not fit within one of the narrow exceptions permitting a court to refuse comity to a valid foreign judgment.”
Still, the court ruled that the unilateral dismissal with prejudice of the Mississippi litigation “was a final judgment on the merits invoking a res judicata bar to reasserting the dismissed claims against the [German heirs].” The court found that the German heirs were in privity with the defendant who remained in the Mississippi litigation despite his passing in 2006; the chancery court had not acted on his initial motion to dismiss or the plaintiffs’ motions to substitute his estate or his heirs, so these claims were still pending when the voluntary dismissal occurred. In the court’s view, “It is clear that the Heirs are in privity with Derr. The alleged purpose of the Heirs’ German action was to protect them from the claims filed against Derr in the Mississippi litigation, which would affect them only as successors-in-interest to his property.”
The court concluded that the German court’s “failure to respect [the plaintiffs’] dismissal with prejudice of their claims against Derr—and by the rule of privity, the Derr Heirs—violated Mississippi public policy and rendered meaningless the right of the [plaintiffs] to put an end to litigation of their claims. . . . The defect in the German appellate proceedings was not the Higher Regional Court’s application of German law and procedure to rule on the Heirs’ claim for a declaratory judgment, but its disregard of the binding dismissal with prejudice in the Mississippi litigation that obviated the need to entertain the duplicative action at all.” The German court’s refusal to accord comity to the outcome of the chancery court proceedings violated “the Mississippi public policy of res judicata and the [plaintiffs] right to permanently terminate their claims. Comity must be a two-way street,” the court said.