Damage award in a criminal case domesticated in NY

On April 1, 2014, a New York state appellate court found that a foreign criminal judgment ordering the payment of damage to victims could be domesticated under Article 53 of the N.Y. (Uniform Foreign Money Judgments Act). Harvardsky Prumyslovy Holding, A.S.,-V Likvidaci v. Kozeny, N.Y.S.2d —, 2014 WL 1281527, 2014 N.Y. Slip Op. 02250 (1st Dep’t Apr. 1, 2014).

This was a 2010 judgment of the Municipal Court in Prague that convicted a Czech citizen for gross fraud in connection with the privatization of formerly state-owned companies and sentenced him to incarceration. The judgment also directed him to pay compensation for over US$400 million to victims (a fund). The fund sued in the Supreme Court of the State of New York, New York County seeking recognition of the judgment to attach funds that the Czech citizen – via a company secretly owned – owned in New York. The Supreme Court denied the attachment because the judgment was penal. On appeal the Appellate Division reversed.

Noting that the case was of first impression, the Court stated that preliminary they had to decide whether the judgment could be considered a “foreign country judgment” under CPLR 5301(b), which defines a “foreign country judgment” as “any judgment of a foreign state granting or denying recovery of a sum of money, other than a judgment for taxes, a fine or other penalty, or a judgment for support in matrimonial or family matters.” The central question was whether the judgment for compensation to crime victims was a “penalty”, so that it was excluded from the possibility of domestication. The defendant’s position was the award of damages to victims was compensatory if rendered by a civil court while it was a penalty if rendered by a criminal court but the Court disagreed: which court issued the judgment is irrelevant under CPLR article 53 because, on one hand “there are any number of civil proceedings in which the compensation recoverable by the victim may constitute a penalty” on the other hand, “the statutory basis for denying enforcement is predicted on the classification and purpose of the judgment, not the court that issued it.”

The Court added that allowing the enforcement here was consistent with the purpose of the statute, which was “to promote reciprocal treatment for New York judgments in foreign courts by providing a statutory basis to reflect New York’s liberal treatment of foreign judgment” while the purpose would not be promoted “by the refusal to recognize a foreign judgment based on some contrived criterion, which may then prompt foreign courts to deny enforcement to similar New York judgments.”

The Court reversed the lower court’s granting of defendant’s motion to dismiss, and the denial of plaintiff’s motion for attachment and granted the motion for attachment.

For information: Francesca Giannoni-Crystal