Case of the Day: CE Design v. HealthCraft Products

The case of the day is CE Design Ltd. v. HealthCraft Products, Inc. (Ill. App. Ct. 2017). CE Design, a now-defunct Illinois business, brought a class action in Chicago against HealthCraft, an Ontario business, alleging that HealthCraft had sent it and other class members unsolicited faxes. HealthCraft tendered the defense of the case to its liability insurer, ING, a Canadian insurer. ING reserved its rights while it investigated the claim. In the meanwhile, HealthCraft hired its own counsel and agreed to a settlement with CE Design for $543,000 and assignment to CE Design of all of HealthCraft’s claims against ING. The Illinois court approved the settlement without prior notice to ING and entered a consent judgment.

While the case was still pending in Illinois—well before the settlement—ING brought a declaratory judgment action in Ontario Superior Court seeking a declaration that it had no duty to defend or indemnify. After the Illinois settlement, CE Design sought to enforce the consent judgment against ING in Illinois. The Ontario Court, on ING’s motion, added CE Design as a party, and ING asserted, in the Ontario case, that it was not liable to CE Design.

CE Design sought to dismiss the Ontario case against it on forum non conveniens grounds, and ING sought to stay the Illinois case pending the Canadian decision on the coverage issues. The Illinois court granted the motion to stay.

The Ontario court held that there was no coverage, which meant, in effect, that ING had no liability to CE Design. The Canadian court also awarded more than $20,000 in costs to ING. ING sought recognition of the Ontario judgment in Illinois. The Illinois court recognized the judgment for the most part, dismissed CE Design’s efforts to enforce the Illinois judgment against ING, but refused to recognize the Canadian judgment to the extent it awarded costs to ING. Both parties appealed.

The main issue was personal jurisdiction in the Canadian proceeding—lack of jurisdiction is of course a defense to recognition of a foreign judgment. CE Design had argued, in Canada, that the court there lacked personal jurisdiction, and it made the same argument in opposition to ING’s effort to obtain recognition of the judgment in Illinois. The Ontario court had found that it had personal jurisdiction, and CE Design had not sought to litigate the issue further in Canada. The Illinois appellate court held that in those circumstances, the Canadian decision on jurisdiction was res judicata and could not be relitigated.

Having reached this conclusion, the court went on to hold that the lower court had erred by refusing to recognize the Canadian court’s award of costs. Since the Canadian court had jurisdiction and there were no other grounds for non-recognition argued, the Illinois court was required to recognize that part of the judgment as well.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. Folkman also serves as an arbitrator and is a member of the Commercial and Consumer Panels of the American Arbitration Association. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's treatise on International Aspects of US Litigation (J. Berger, ed. 2017), and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012 and 2014 - 2016.

3 thoughts on “Case of the Day: CE Design v. HealthCraft Products

    1. Aaron, the answer is “maybe.” I think it depends on factors including: (1) CE’s perception of the quality of the foreign court; (2) how close CE thought the issue was; (3) issues about cost and delay; etc. One important point is that the standard that the Canadian court used to decide that it had personal jurisdiction is not necessarily the standard the Illinois court would use to decide whether the Canadian judgment was void if CE had defaulted. Courts disagree about the standard to be applied (I don’t know about Illinois specifically).

      1. I often pose that scenario to litigators seeking to sue foreign companies here in the U.S. So what if you get good service and a default judgment… how are you going to collect on it if a foreign court doesn’t think the U.S. court has jurisdiction over their citizen?

        An issue pondered far too seldom by American litigators.

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