Obtaining Answers to Discovery from Foreign Sovereigns

While foreign sovereigns are generally immune from falling under the jurisdiction of US courts, the Foreign Sovereign Immunities Act (FSIA) provides that state sponsors of terrorism are no longer protected from being sued in US courts if certain conditions are met.

Once a court acquires jurisdiction over a foreign sovereign, it also has jurisdiction to compel compliance with its orders. In the case of Peterson v. Islamic Republic of Iran, the judgment creditors sought  post judgment discovery responses from Iran to aid in the collection of a $2.7 Billion  judgment.  Iran failed to respond to the discovery requests, and the court entered an order compelling discovery.

View the order here
Citation: 2008 WL 8216327

Judgment Debtor Won’t Pay? Seek an Assignment of Funds Held in Their Attorney’s Trust Account.

When faced with a judgment debtor who is a defendant in multiple cases, there is a high probability that they have turned over significant funds to their attorneys from which to pay out settlements in the various matters.

Such was the case with Asbestos Corporation Limited (ACL), a Canadian corporation that is frequently sued in the United States for personal injuries related to, you guessed it, asbestos.

Believing that ACL had deposited significant funds with the Pennsylvania law firm of Goldfein & Joseph, the judgment creditors obtained an assignment order which then allowed them to seek a turnover of funds held by the judgment debtor’s attorneys.

View the assignment order here

Civil Disentitlement as a Remedy in the Post Judgment Setting

In the case of Garza v. Asbestos Corporation Limited, the judgment creditors faced the uphill battle of collecting against a judgment debtor located in Canada.

When the judgment debtor (ACL) failed to respond to post-judgment discovery, the judgment creditors moved to have ACL disentitled from responding to any further motions in the case.

The basis of the disentitlement was the simple notion that if a party avails itself  to the courts they must play by the rules. A party who is in contempt cannot participate in further proceedings until they comply with the court’s orders.

View the disentitlement order here

Peterson v. Iran

On October 23, 1983, 241 U.S. Servicemen serving as civilian peace keepers in Beirut, Lebanon were killed when two converted water tankers loaded with explosives were detonated next two the barracks where the servicemen slept. This attack was the single deadliest terror attack on American citizens prior to 9/11.

The attack was perpetrated by the terrorist organization Hezbollah and funded by the Islamic Republic of Iran. The families of the victims of this attack eventually obtained a $2.6 billion judgment against Iran for its involvement in the attacks.

The families of the victims sought to collect their judgment by levying on the shipping companies which conducted business with Iran. In response to these levies, the shipping companies raised the sovereign immunity of Iran as a shield to not comply.

The trial court found that rather than being an affirmative defense which could only be raised by Iran, the issue of sovereign immunity could be raised sua sponte by the court.

In a 2-1 decision, The 9th Circuit upheld the decision of the trial court. Read the 9th Circuit Court of Appeals Decision Here

Garza v. Asbestos Corporation Limited

Garza v. Asbestos Corporation Limited

In the case of Garza v. Asbestos Corporation Limited the judgment creditors sought enforcement of their California judgment in Quebec, Canada. While Quebec law prohibits the enforcement of a foreign judgment based on an asbestos claim, the judgment creditors were never the less able to obtain an assignment of the debtors rights to payment from nearly every bank in Canada.  Furthermore, the judgment creditors where successful in compelling the judgment debtors to answer post-judgment discovery regarding the location of its assets.

The transcripts of the hearings in which these motions were heard offer a fascinating insight into the often uncharted territory of enforcement of U.S. judgments over international borders.

This case revolves around the ability of a judgment creditor to reach assets of the judgment debtor which are located off-shore. These facts unfortunately predominate in many mass tort or significant damage actions in which the perpetrator is domiciled off shore. typically these fact patterns reveal that the off shore manufacturer has put into commerce dangerous or defective goods which kill maim or injure.  As expected American consumers suffer greatly in that these products cause unbelievable losses. Lawsuits and big judgments follow.

The off-shore manufacturer routinely ignore legal process leading to multi-million dollar default judgments and thereby leading to a massive campaign initiated by the judgment creditors to collect these judgments.  This case provides for a linear stream of orders which illustrates the power of the court to issue orders for the assignment of rights and orders compelling discovery.

Transcripts:

1. Hearing re: assignment of rights – October 28, 2010

2. Hearing re: Motion to compel answers to discover requests, November 23, 2010

3. Hearing re: assignment of rights – December 1, 2010

Orders:

1. Order Compelling Discovery Responses – 11/23/2010

2. Assignment Order (Five Banks)

3. Assignment Order – All Banks