A significant part of my law firm’s international litigation practice is helping domestic and foreign clients enforce judgments they’ve successfully obtained. For foreign clients, the American process of judgment enforcement and collection law can be complex and confusing because the process is governed by specific statutory law.
1. The Relevant Vocabulary
To begin, here is a breakdown of some of the key terms:
- Judgment: a “judgment” is a final determination of the parties’ rights in an action or proceeding. A “money judgment” is the part of a judgment requiring payment of money. Generally, money judgments must be stated with certainty and specificity.
- A “judgment debtor” is the person or entity against whom the judgment is rendered.
- A “judgment creditor” is the person or entity in whose favor the judgment is rendered.
Most courts have inherent power to enforce their own judgments. Jurisdiction over the subject matter and the parties will continue post-judgment and throughout subsequent proceedings in the action. In other words, if a court rendered the original judgment, it will have continuing jurisdiction to enforce its own judgment.
What if the judgment originated from elsewhere? In California, for example, that would be designated as a foreign or “sister-state judgment.” A California court does not enforce a sister-state judgment until it has been registered or authenticated as a California judgment. So, for clients with a judgment from a different state, or a different country, there is typically a registering/authenticating process that must be completed before seeking enforcement of that judgment in a California court.
3. Timing Considerations
Under most statutory schemes, judgments are enforceable upon “entry.” Judgments are usually deemed to have been entered when they have been filed with the court clerk (meaning, there is no second step of recording in the county’s judgment book, etc.). Upon entry, that judgment then creates a new debt. A California case put it this way:
When a final judgment is entered, all causes of action arising from the same obligation are merged into the judgment and all alternative remedies to enforce that obligation extinguished by the judgment granting one of those remedies. The creditor cannot thereafter enforce the original obligation, because the judgment creates a new debt or liability, distinct from the original claim or demand, and this new liability is not merely evidence of the creditor’s claim, but is thereafter the substance of the claim itself. . . . In other words, the judgment extinguishes the contractual rights and remedies previously extant, substituting in their place only such rights as attach to a judgment.
Diamond Heights Village Ass’n v. Financial Freedom Senior Funding Corp., 196 Cal.App.4th 290, 301-302 (2011).
Money judgments typically expire after a certain number of years. In California, that period is ten years from the date on which the judgment was entered. There are usually methods for “renewing” a judgment, but if they are not timely employed, all enforcement procedures must stop after that ten year period. The same is true of most U.S. states.
4. How to Enforce a Foreign Judgment in a United States Court
A key consideration in any lawsuit to recover money — foreign or domestic — is whether it’s “worth the paper it’s printed on.” A judgment against a judgment debtor that doesn’t have the assets to pay it is not worth much, if anything. This is why our lawyers almost always want to discuss this aspect of litigation with our clients from the beginning – because practically speaking, unless someone is litigating based on principle, a cost-benefit analysis should be carefully considered and revisited throughout the litigation process.
Below I discuss what amounts can be recovered, and how. This is a general overview on foreign judgment enforcement in the United States and, as with all judgment enforcement law, the relevant statutes are specific both in their content and by state and there are plenty of exceptions to any rule.
a. Judgment Amount
The amount required to satisfy a money judgment is typically:
- The total amount of the judgment, as entered or renewed,
- Plus costs added after judgment,
- Plus accrued interest on the judgment that remains unsatisfied,
- Minus any payments, partial satisfactions, or amounts that are no longer enforceable.
The costs of suit before judgment is entered is also usually recoverable as part of the judgment. A judgment creditor may also be entitled to the “reasonable and necessary costs” of enforcing the judgment. This usually includes costs incurred issuing and levying a writ of execution or filing a notice of judgment lien on personal property. This does not typically include attorneys’ fees, unless that was provided for in a contract.
b. Enforcement/Collection Options
Once the amount of judgment is calculated, against what can judgments be enforced? Here’s a breakdown of the most common options available to judgment creditors:
- Judgment liens on real property: this establishes and preserves the judgment creditor’s priority over later claimants. In California, this is a general lien – it will attach to ALL of the judgment debtor’s real property interests in the county where the judgment is recorded. Accordingly, this can be a very successful method if the judgment debtor holds real property. It also attaches to future interests in real property, to ensure the creditor remains secured. A judgment lien on real property is one of the quickest and most cost-efficient ways to enforce a judgment.
- Judgment liens on personal property: a lien can be issued against certain types of business personal property by filing with the Secretary of State – things like accounts receivable, equipment, inventory, etc. This is another relatively quick and inexpensive way to enforce a judgment.
- Writ of execution: this procedure allows a levying officer to “execute” a writ by taking available property into custody and creating a lien on the property. Thereafter, the property may be sold at an execution sale and the proceeds applied to satisfy the judgment. Or in other cases, like if the property is uncashed checks or accounts receivable, the levying officer will collect them and apply them to satisfy the judgment. Though this method can be very effective, there are usually numerous exceptions on what can be seized, and this process can get expensive given that a levying officer is involved.
- Wage garnishment: a judgment creditor may have a judgment debtor’s employer actively withhold the nonexempt portion of his/her disposable earnings to satisfy the judgment.