Case of the Day: Cagan v. Gadman

The case of the day is Cagan v. Gadman (E.D.N.Y. 2012). Martin Cagan sued Broney Gadman and others for fraud and civil conspiracy, and he also sought recognition and enforcement of a judgment of an English court against Gadman for more than £ 282,000. The facts of the case are not really clear from the judge’s decision, but it may be that Cagan’s claim was that due to Gadman’s alleged fraud, Cagan had incurred a large UK tax liability. Gadman opposed recognition and enforcement on the grounds that the UK authorities had deemed Cagan’s tax liability to have been satisfied by payments that Gadman had made as required by the sentence of restitution that had been imposed on Gadman when he was criminally convicted.1 Gadman’s argument was that enforcement of the English judgment would be a windfall to Cagan, but the judge held that the proper step was to seek a declaration from the English court that the judgment had been satisfied: “the UK Judgment does not on its face condition Gadman’s obligation to pay on whether plaintiff’s tax liability remains outstanding, and thus there is no basis for this Court to do so.”

The opinion—at least the part of it devoted to the recognition and enforcement issue—is terse but interesting. Consider what the court would have done had the judgment been a sister-state judgment rather than a foreign country judgment. Under § 2 of the Revised Uniform Enforcement of Foreign Judgments Act, a sister-state judgment entitled to full faith and credit “has the same effect and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying as a judgment of a [court] of this state and may be enforced or satisfied in like manner.” Satisfaction of a judgment issued by a court of the enforcing state would, of course, be a defense to a claim on that judgment, so it can also be a defense to a claim on a sister-state judgment. As the Court of Appeals of Maryland put it, the registration of a sister state judgment does not bar the judgment debtor, “under any notion of res judicata, collateral estoppel, or finality of judgment from challenging its enforceability by reason of a post-judgment act that would have the effect of discharging or satisfying the judgment.” R&D 2001, LLC v. Rice, 938 A.2d 839 (Md. 2008).

Thus Cagan is another example of a phenomenon I noted at the recent symposium at Penn on “Recognition in a Corrupt World” and that we also saw in the case of the day for November 12, 2012: sometimes US courts give more deference to foreign country than they would to a comparable sister-state judgment, even though we regard full faith and credit as the model of comity. I proposed, as a possible explanation, the idea that when US courts evaluate foreign judgments, they use a model of comity more like the comity a US federal court shows toward a state court decision in a habeas corpus case than like the comity one US court shows to another in a full faith and credit case in a civil matter. The notion is that due to the particular comity concerns that exist when there are political tensions between sovereigns, greater deference may be appropriate than in a case involving two sister states, where, more than two hundred years after the adoption of the Constitution, there are no such tensions, at least in run of the mill civil actions for money damages.

  1. The decision doesn’t explain the nature of the criminal conviction.

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