Case of the Day: Hyundai Securities Co. v. Lee
Posted on April 23, 2013
The case of the day is Hyundai Securities Co. v. Lee (Cal. Ct. App. 2013). Shareholders of Hyundai brought a derivative action on behalf of the corporation against Hyundai’s former CEO, Ik Chi Lee, in the Seoul Southern District Court. The claim was for securities fraud. The Korean court entered judgment in favor of Hyundai for nearly $19 million, with post-judgment interest at 20%. Lee appealed to the Seoul Court of Appeals and then to the Korean Supreme Court, but both courts dismissed the appeal on the grounds that it lacked merit. After the Korean judgment became final, Hyundai brought an action for recognition and enforcement in the Los Angeles Superior Court.1 The plaintiffs filed a “petition” seeking summary recognition and enforcement of the judgment, similar to the summary proceedings available for recognition and enforcement of arbitral awards. The Superior Court recognized the judgment, and Lee appealed.
On appeal, the court reversed. It held that under California’s statute on recognition and enforcement of foreign court judgments, Hyundai was required to proceed by an ordinary civil action. If it wanted a summary decision, it could seek judgment on the pleadings or a summary judgment, but it could not proceed by petition, as though prosecuting a special proceeding such as a petition to confirm an arbitral award.
This seems to be a purely formal decision, since as the court recognized, there are methods for summary adjudication built into ordinary civil actions. If, on the face of the pleadings, Hyundai turned out to be entitled to judgment, it could seek judgment on the pleadings. If on the undisputed material facts Hyundai turned out to be entitled to judgment, it could seek a summary judgment. However, these technicalities matter to courts, so pay attention, California lawyers!
- Why was the action in the California state court instead of the federal courts? Presumably because both the plaintiff and the defendant were aliens, and thus the federal courts lacked jurisdiction on the basis of diversity of citizenship. Because the law governing recognition and enforcement of foreign judgments is state, not federal, law, the federal courts also lacked jurisdiction on the basis of a federal question.