Circuit Blocks Double Recovery Setoff Under Foreign Judgment

Lawsuits, like bicycles and skydiving harnesses, occasionally occur in tandem. Like tandem sporting activities, tandem litigation requires considerable coordination and communication between the courts to ensure a fair outcome for foreign judgment holders.

Otos Tech originally brought suit in New Jersey in 2003, asserting claims for breach of contract, conversion, and embezzlement arising out of defendant Yale Kim's retention of three checks worth $587,775.05. Kim answered and asserted counterclaims for breach of contract, breach of a settlement agreement, and breach of the covenant of good faith and fair dealing. Kim said that Otos wrongfully terminated his employment contract and that he retained the checks under a wrongful termination settlement.

While the New Jersey lawsuit was still pending, Otos brought an action against Kim in South Korea and asserted essentially identical claims pertaining to the same three checks. In 2005, a South Korean court entered judgment in favor of Otos for 544,920,318 South Korean Won, an amount equivalent to $587,755.05.

Meanwhile, the district court in New Jersey proceeded to trial and entered a judgment in favor of Otos in the amount of $587,755.05 on Otos's conversion claim and in favor of Kim in the amount of $910,000 on Kim's counterclaim for breach of the covenant of good faith and fair dealing.

Judgment in hand, Otos set about seizing Kim's assets in Korea to satisfy the Korean judgment in South Korean Won; records indicate he was successful in this venture. Back in the United States, Kim filed a motion in 2008 requesting that the district court order the turnover of funds from the accounts of one of Otos's customers to pay Kim in satisfaction of his judgment.

Otos objected, and also argued that any turnover should be subject to a "setoff" in the amount of its American judgment, $587,755.05. The District Court granted Kim's motion and denied Otos's request for a setoff, holding that it could result in a double recovery for Otos.

While the U.S. dollar may not enjoy the status it once held in the global currency market, it still fared better during this litigation than the South Korean Won. Otos claimed that, due to the declining value of South Korean currency, he had only received the South Korean Won equivalent of $382,215, not the $587,755 awarded.

The Third Circuit Court of Appeals rejected Otos's argument, and upheld the decision to grant full faith and credit to the foreign judgment. Regardless of currency fluctuation, the Korean court verified that Otos's Korean judgment was satisfied, therefore Otos could not collect on the same judgment in the U.S.

Advice for future parties in foreign judgment tandem litigation? Take time to learn about currency valuation before executing your judgment in a foreign land, and try to find a way to collect your judgment in Euros.

Related Resources:

• Otos Tech v. Kim (Third Circuit Court of Appeals)
• FindLaw's Third Circuit blog (FindLaw)
• Havana Club Rum Label Not False Advertisement (FindLaw's Third Circuit blog)