The case of the day is Diaz v. Galopy Corp. International, N.V. (N.Y. Sup. Ct. 2018). In 2014, Anibal Montenegro Diaz, a Venezuelan lawyer, sued Galopy in a Venezuelan court for unpaid legal fees. In 2015, the court found in her favor on liability, and in 2016, it awarded Diaz the fees and sent the matter to a revaluation court for assessment, i.e., an adjustment in light of the hyperinflation afflicting the Venezuelan currency, the Bolivar. In June 2016, the court awarded fees in the adjusted amount of approximately 169 million Bolivars. In August 2016, the court adjusted the amount to more than one billion Bolivars. Diaz then sued in New York seeking recognition and enforcement.
There was no real question about recognition. The real question was the rate at which the New York court should convert Bolivars to dollars, assuming that the New York judgment would be denominated in dollars. Should it use the government’s official rate, which severely overvalues the Bolivar? Or should it use the market rate? New York’s statute requires conversion “at the rate of exchange prevailing on the date of entry of the judgment or decree.”
The plaintiff sought summary judgment, but the judge denied the motion. She cited New York precedent refusing to apply official exchange rates in cases where, due to the political situation, the foreign currency could not be converted into dollars in the market at that rate, and she held that the defendant, through its expert witnesses’ presentation, had created an issue of fact about the true exchange rate that precluded summary judgment.
The case is particularly interesting because of the New York rule that personal jurisdiction is not required in cases for recognition of foreign judgments. In fact, the defendant’s motion to dismiss on that basis was easily denied. The case is an example, I think, of judgment arbitrage: the canny plaintiff is seeking to convert a judgment in devalued currency that is likely decreasing in value all the time into a judgment in dollars, notwithstanding the possible lack of a connection between the defendant and New York. I noted another case involving judgment arbitrage and currency exchange rates, AVR Communications v. American Hearing Systems, back in 2015.