Friday, 14. June 2024

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Being Sued in New York

Let’s assume the following:

You were in New York on your last vacation. That is, back when it was still possible to do so without any problems. And there a small mishap happened to you. As a result of a momentary inattention, you lightly hit someone with your e-scooter that you borrowed from your Airbnb rental. Actually, nothing much happened to the other person. You exchanged cell phone numbers and email addresses and finished your stay without a care in the world.

Three months later, to your great surprise, you receive a statement of claim from an American law firm, in which hospital costs in the 5-digit range are claimed by or for the “victim” of your behavior, and then also so-called “punitive damages” in the amount of several hundred thousand dollars.

Because you allegedly drove extremely recklessly. You also allegedly shouted something that discriminated against the plaintiff because of his skin color (black) and/or his sexual orientation (gay). That is why he now suffers from an anxiety disorder and does not dare to go out on the street anymore. And only because of you he also lost his job and his marriage went down the drain. In short: You and your e-scooter (banned in Manhattan) have destroyed the life of a blameless family father of three (illegitimate) children. – American plaintiff lawyers can be so “pathetic”.

The whole thing, i.e. the complaint plus Demand for a Jury Trial, just came by e-mail, along with the judge’s order that you reply to the complaint in writing within 3 weeks. All in English, of course. …

What do you do? Can you simply ignore such a lawsuit and say to yourself: America is far away and I don’t want to go there in the near future anyway?

Your first internet search revealed what you had already suspected, that lawyers are very very expensive, especially in New York. They quickly demand an advance of several thousand dollars before they even look at the documents and talk to you about the matter.

Your German legal protection insurance, if you have one, will also wave you off: Such a case is not covered by your insurance, and unfortunately “Anwalt’s Liebling” (insurance company) cannot find you a lawyer in New York either.

So it’s a really “stupid” situation you’re in.

Let’s go through it together what considerations might help you now:

1. Are US judgments enforceable in Germany?

Let’s assume that you have no assets in the USA. If the plaintiff wants to get your money, he would have to be able to enforce an American judgment against you in Germany.

In this respect, the following applies: US judgments are not automatically enforceable in Germany, but must first be recognized and declared enforceable by a German court in a special proceeding. The American plaintiff, if he wins the case against you in New York, cannot simply send the American judgment to a German bailiff (Gerichtsvollzieher) so that he can then enforce it against you in Germany, but would first have to have the American judgment recognized and declared enforceable in Germany.

This is already reassuring to a certain extent. You and your money in Germany are therefore not directly and automatically accessible to the New York courts.

2. Under which conditions can US judgments be enforced in Germany?

a) The recognition of foreign judgments, including those from the USA, is governed in Germany by Section 328 of the German Code of Civil Procedure (ZPO). Accordingly, recognition of a foreign judgment is excluded in the following cases, among others:

aa) If the courts of the foreign state do not have jurisdiction under German law.

bb) If the defendant, who has not entered an appearance in the court proceedings, was not properly served with the statement of claim or was not served with it in due time.

cc) If the recognition of the foreign judgment leads to a result that is obviously incompatible with essential principles of German law.

dd) If reciprocity is not guaranteed.

b) Let’s go through these grounds for exclusion one by one to see if one or the other point might help you.

aa) Lack of jurisdiction of the foreign court

In our example case, a New York court would decide on a (traffic) accident in New York. Would that be permissible under German law?

Well, the general place of jurisdiction over a person is where his or her domicile is. In your case, that is not New York, but Germany. Sounds pretty good.

However, German law also provides for the so-called place of jurisdiction for tortious acts or torts (§ 32 ZPO). According to this, the court in whose district the tortious act was committed has jurisdiction over actions arising from tortious acts, for example traffic accidents. In the case of an accident in New York, this would be the courts of New York.

A lack of jurisdiction on the part of the New York courts therefore does not stand in the way of recognition of the American judgment in our example case.

bb) No proper service of process

(1) Germany generally recognizes foreign judgments only if the defendant was properly served with the statement of claim (summons and complaint) in due time. Service of the papers by e-mail, as in the example case, would be insufficient under German law. Moreover, under German procedural law, the papers would not be served by the plaintiff’s attorney, but by the court, i.e. “von Amts wegen“.

Does this already help you? No, unfortunately not. According to the prevailing legal understanding, the legal system of the country in which the court proceedings take place is decisive for the proper service of process. In the recognition proceedings, the German judge would therefore examine whether you were properly served with the summons and complaint under American law. And in America it is customary that service of process is not effected by the court, but by the plaintiff’s attorney.

(2) In addition, and this also surprised me because I only recently had it in a case of my own: The procedural law of New York knows a provision which basically says the following: If the usual methods of service prove to be impracticable, then service can also be effected in another way which the court orders and permits on application. This is stated in Section 308(5) of the CPLR (Civil Practice Law and Rules) for New York.

If the plaintiff only knows your e-mail address, but not your postal address in Germany, then it is quite possible that the American judge will allow the lawsuit to be served by e-mail. In this case, you must then assume that there has been proper service of process under American law.

(3) In addition, if you have actually received the e-mail with the summons and complaint, it is generally assumed under German law that any defect in service has been “cured”. To put it simply: If you have actually received the statement of claim, you cannot legitimately argue that you did not receive it. If you do so anyway, namely in the recognition proceedings before the German court, then this could constitute procedural fraud.

(4) The same applies to the language. According to international law (HZÜ/Hague Convention, see below), the document to be served should be accompanied by a translation into the language of the country of the defendant. If this is missing, then the service is also not proper. But here, too, the following applies: If you understand English sufficiently well, you will not be able to successfully object that you could not infer from the complaint that you are being sued and why.

(5) It is therefore at least a considerable risk not to get involved in the proceedings in New York in the hope that it will later be established in the course of the German recognition proceedings that the service of the statement of claim was not proper. You may then raise this objection, but whether you will get away with it is uncertain.

(6) Possible argument: The Hague Convention on the Service of Documents Abroad also applies to New York courts for service abroad, and the Hague Convention provides for a rather cumbersome, highly formalized service procedure, in any case not simply an e-mail from the plaintiff’s attorney to the defendant. However, there is also legal opinion that a defective service is to be considered cured if the document is actually received in time (disputed).

(7) It is therefore a difficult question of consideration which path to take here. For one thing is certain: once one has agreed to the proceedings in New York, one can no longer assert later in the recognition proceedings in Germany that the service of the statement of claim was not proper.

cc) Incompatibility of the Foreign Judgment with Essential Principles of German Law

(1) American judgments are not recognized in Germany if they violate German fundamental rights in particular. Here, there is an important decision of the BGH (Federal Court of Justice in Germany) on so-called “punitive damages”, which are quite popular in America.

The BGH (German court) has ruled that punitive damages are incompatible with essential principles of German law. Reason: Our law on damages (only) seeks to compensate for the actual damage incurred and no more. Punishing the defendant/perpetrator, on the other hand, is not the purpose of civil proceedings; in Germany, this is the responsibility of the criminal courts.

(2) The sometimes exorbitant punitive damages that are readily awarded by a jury in the U.S. are therefore generally not enforceable in Germany, as they conflict with essential principles of German law. In my opinion, the same could apply with regard to the very high sums that are paid in America for emotional distress and pain and suffering. You would have to lose at least an arm or a leg in Germany to get as much compensation for pain and suffering as you get in the U.S. for burning your fingers on a hot cup of coffee.

That should at least reassure you to a certain extent. This does not mean that the plaintiff’s high hospital costs in the U.S. are off the table, but it is very likely that if the U.S. court awards additional punitive damages, those will not be enforced in Germany.

dd) Lack of reciprocity

Germany does not recognize foreign judgments from countries that do not recognize German judgments.

However, this objection does not apply to most American states. In particular, the courts in New York and California have a recognition procedure according to which German judgments can also be recognized and enforced in the USA.

Therefore, you will not be able to raise the objection of lack of reciprocity in proceedings in New York.

c) Incidentally, there is no other review of the US judgment by the German judge. Thus, in the course of the recognition proceedings, the witnesses will not be heard again and the evidence will not be re-evaluated. That would hardly be possible for a jury trial anyway, since the jurors do not lay down their reasoning in written form. And, of course, the German courts do not re-examine whether the court in NYC correctly applied American substantive civil law or whether the result might have been different under German law.
No, the recognition proceedings are not a repetition or revision of the foreign lawsuit. If you want to defend yourself against the complaint on substantive grounds, then you must generally do so in the U.S. before the court there.

3. Conclusion

So, which conclusions can we draw from the above?

a) You cannot safely assume that an American judgment cannot be enforced in Germany under any circumstances. True, judgments of New York courts are not automatically enforceable in Germany, but they can be recognized by a German court in a recognition proceeding and then enforced.

b) What are the chances that a New York judgment would (or would not) be recognized and enforced in Germany?

(1) Those chances are good for the defendant, as far as the recognition of punitive damages is concerned. Punitive damages are generally not enforced in Germany.

(2) Otherwise, the plaintiff´s chances to succeed are rather good.

(a) If the defendant does not get involved in proceedings before a New York court, he can later try to object in the recognition proceedings that the statement of claim (summons and complaint) was not properly served. This is especially true if the service does not comply with the rules of the Hague Convention. However, the defendant must be aware that the question of whether a summons and complaint was properly served does not depend on the German rules of service, but on the rules that apply in the country in which the proceedings were conducted.

In our example case, this means the service rules of New York. And if an American judge has expressly permitted service by e-mail in his order, it is certainly a considerable risk to argue later in Germany that this type of service was (also) inadmissible in America.

(b) In addition, according to at least some expert opinions, a defect in service is cured if the defendant actually received the statement of claim in time so that he could defend himself against the complaint. You would then have to have the “guts” to argue in the recognition proceedings in Germany that you did not receive the complaint. If you have, however, actually received (and understood) the statement of claim, no lawyer can recommend to you to outright deny it. This is because you would then be making a false statement in court, and that can be punishable in Germany as fraud (§ 263 StGB).

c) The safest, albeit most cost-intensive, option is therefore to get involved in the lawsuit in New York, i.e. to hire a lawyer there to defend you against the complaint. To ensure that you do not end up with the wrong colleague in New York, it can be useful to have a German lawyer mediate the contact. This is especially true if your language skills in the legal terminology are perhaps not good enough to confidently correspond with a New York lawyer yourself.

Dr. Wolfgang Gottwald
Rechtsanwalt/Attorney at Law (New York)

Attorney at Law

Leopoldstraße 51
80802 München

Tel.: 089/383 293-10
Fax: 089/383 293-13