The case of the day is Desiano v. Envision Foods, Inc. (Mass. Super. Ct. 2017). I love this one. Ralph Desiano had a Florida money judgment for nearly $200,000 against Envision. Desiano’s case against Envision had nothing to do with Massachusetts, and Envision was not subject to general personal jurisdiction here, either. But Envision was a creditor of Cosi, Inc., a Massachusetts corporation. The Cosi debt was, in fact, Envision’s only asset. Cosi owed Desiano $500,000. Desiano sued Envision in Boston on the Florida judgment, and it named Cosi as a reach-and-apply defendant (i.e., he asked the court to order Cosi to pay part of the money it owed to Envison to Desiano instead, in satisfaction of the judgment debt). Envision moved to dismiss on the grounds that the court lacked personal jurisdiction, and Desiano moved for summary judgment.
The judge agreed that the court lacked personal jurisdiction over Envision, but it held that it had quasi in rem jurisdiction over the asset Desiano sought to reach, namely the debt Cosi owed to Envision. Under Shaffer v. Heitner, 433 U.S. 186 (1977):
The primary rationale for treating the presence of property as a sufficient basis for jurisdiction to adjudicate claims over which the State would not have jurisdiction if International Shoe applied is that a wrongdoer should not be able to avoid payment of his obligations by the expedient of removing his assets to a place where he is not subject to an in personam suit. This justification, however, does not explain why jurisdiction should be recognized without regard to whether the property is present in the State because of an effort to avoid the owner’s obligations. Nor does it support jurisdiction to adjudicate the underlying claim. At most, it suggests that a State in which property is located should have jurisdiction to attach that property, by use of proper procedures, as security for a judgment being sought in a forum where the litigation can be maintained consistently with International Shoe. Moreover, we know of nothing to justify the assumption that a debtor can avoid paying his obligations by removing his property to a State in which his creditor cannot obtain personal jurisdiction over him. The Full Faith and Credit Clause, after all, makes the valid in personam judgment of one State enforceable in all other States. (citations omitted)
The key sentence: “At most, it suggests that a State in which property is located should have jurisdiction to attach that property, by use of proper procedures, as security for a judgment being sought in a forum where the litigation can be maintained consistently with International Shoe.” While the Court was announcing its disapproval of quasi in rem jurisdiction as a basis for adjudicating claims on their merits, it was at the same time acknowledging the importance of quasi in rem jurisdiction at the enforcement stage, so that judgment debtors cannot shield assets simply by placing them in places where they are not subject to personal jurisdiction.
Massachusetts (well, a judge of the Superior Court, anyway) has now joined New York, see Lenchyshyn v. Pelko Electric, Inc., 723 N.Y.S.2d 285 (App. Div. 2001), in accepting Shaffer’s invitation to retain quasi in rem jurisdiction in the enforcement context. “The logic of [Shaffer’s] dictum,” the judge wrote, “is inescapable.
What is fundamentally fair, and thus consistent with constitutional due process, in post-judgment circumstances … necessarily differs from what is fair and consistent with due process in the pre-judgment context. After all, the burden on a non-resident defendant reflected in “the practical problems resulting from litigating in [an unfamiliar] forum” and “the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question,” is significantly reduced after a judgment against such a defendant has already been rendered. Stated differently, a post-judgment quasi in rem enforcement action against a non-resident debtor is constitutional, because such debtor has already had a full, fair and adequate proceeding during which it had the opportunity to contest the creditor’s underlying claim. The constitutionality of the judgment-producing action effectively carries over to the enforcement proceeding, even where the non-resident debtor’s sole connection to the forum state is the presence of an asset therein.
To my mind, this is clearly the right result, but it has not always been self-evidently correct to everyone, so we should welcome the new Massachusetts decision and hope that it is followed at some point by an appellate decision.
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