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Gotham goes Global: Benefits of litigating foreign disputes in US Courts

The English judicial system may be amongst the best in the world but, argues Gordon Dobie of Winston & Strawn, the US legal system has a number of advantages.

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The Financial Times reports that almost 60 percent  of the litigation in the London Commercial Court involves foreign litigants – most of which is now focused on Russian and former Commonwealth of Independent States legal matters. Even London’s Mayor has issued invitations to wealthy foreign divorcées, oligarchs, and companies suggesting that they file their disputes in the London courts.  Thus, many individuals and companies involved in the highest-stakes business disputes have come to view London as their legal forum of choice.  

Advantages of the US system

It is also fair to say that the American legal system offers a number of advantages to many who, depending on their circumstances, may strongly argue for litigating in the United States. For example, the English system – with its looser pay rules and limitations on pre-trial discovery – may make it extremely difficult for certain litigants to bring a case where the proof is principally in the hands of their adversaries. Relatedly, American style pre-trial “discovery” (including depositions of the parties and third-party witnesses, broad document productions, and the like) can drastically improve a litigant’s ability to uncover the truth and arrive at a just result. Such discovery is limited in the English system. And for many a dispute, it may be highly attractive to present the case to a jury of average citizens—an option not generally available in the English civil system.

Gliklad case

 In addition, New York (and other US courts) provides broad post-judgment collection opportunities and an expedited procedure for a global asset freeze, and obligations that the losing party turn over assets to satisfy a New York judgment. This was demonstrated in the author’s recent half-billion dollar judgment for client Alexander Gliklad against former Russian oligarch and Israeli billionaire Michael Cherney.  Following judgment, the court allowed Gliklad to serve a restraining notice freezing Cherney’s assets around the world to satisfy the judgment  in the highly publicized case that involved a one-page Russian-language promissory note signed in Vienna more than 10 years ago.   In sum, New York’s status as one of the world’s key business centres is paired with an equally sophisticated legal system that makes it a highly favorable forum for international litigants.  

Case initiation

It is important to recognize that not every dispute involving a wealthy divorcée or Russian oligarch belongs in the New York courts. The courts have a long history of dismissing claims having no connection with the United States, and they have not hesitated to send many such litigants packing.  Thus, a potential litigant must demonstrate that the disputes brought before US courts involve a significant connection to the United States.  Where the facts meet this standard, US courts such as New York are extremely experienced with such disputes and well versed in all matter involving foreign litigants, making routine use of translators, foreign law, and more.  Indeed, as a world financial centre, New York’s public policy is to embrace jurisdiction in all disputes involving certain types of commercial transactions even where the parties otherwise have no connection with New York. 

Less is more

The old adage “less is more” is also the standard for initiating most lawsuits in US courts.  By court rule, a case may generally be filed with a “short and plain” statement of claim.  Thus, while a smart litigant will put considerable effort into ensuring that they have a strong factual case and that their legal claims that are strategically correct, a party need not necessarily bear the cost of expensive pleading and re-pleading.  

Similarly, while certain countries require the payment of court costs at a significant percentage of the amount in dispute to initiate suit, court costs in the United States are quite reasonable.   To illustrate, the court filing fees in New York for the multi-million dollar dispute cited above were just $210, compared to more than $8.5 million in court costs to file the claim in Israel.  Thus, the author initiated suit on his client’s nine-figure claim with nothing more than a translated copy of the document at issue together with a short affidavit, four-page memo, and small filing fee.

American Discovery allows a search for the truth

The American legal system is well known for the broad scope of pretrial discovery. Certain clients may find the English system lacking in this respect, with its more limited pretrial “disclosure” of various documents and other key evidence. Other cases also are better suited for American-style pretrial discovery, in which a litigant’s attorney may initiate depositions of the parties to the case, subpoena third party witnesses to testify and require broad document productions of information. Indeed, the American pretrial discovery system allows depositions, not only of the parties and third parties that present witness statements, but also from persons who are reluctant to participate if they have relevant information. In addition, the overall scope of American discovery is broad, and sanctions are enforced for hiding and destroying evidence.  All of these factors may provide a tremendous advantage to litigants in those situations where, without this pretrial discovery, they would simply lack the evidence to support their claims or refute the arguments and misstatements of their opponent.  

Depending on the situation, these broad rights may dramatically improve a litigant’s ability to uncover the truth and arrive at a just result. Thus, in the Gliklad v. Cherney dispute, New York-style discovery proved instrumental to undermining the defendant’s story and defenses. Specifically, the opponent claimed to have signed a one-page promissory note in the “wrong place” because he was intoxicated, and instead contended that our client owed him hundreds of millions of dollars.  In support of his story, he submitted a dozen affidavits purportedly corroborating his story, but the “evidence” was undermined through  pretrial depositions of the witnesses, of the defendant himself -  through broad document discovery -  and because the New York court demanded that the opponent appear in depositions and comply with broad American-style discovery  to test the veracity of his broad but unsubstantiated defense.    

The American system requires each side to bear its own legal fees

An added benefit of the U.S. legal system for foreign litigants to consider is the requirement that each side in a dispute bear its own legal expenses.  Thus, for litigants who are lacking the detailed evidence supporting their claims, the English system can be chilling to the prosecution of claims in which supporting information is in the hands of the other side or with third parties. Further, in the English system, a loss on an application or petition can result in an adverse fee award  and the immediate need to compensate the other side for their attorney’s fees even on an interim basis.  Indeed, in certain situations, the opposing party can even seek that the plaintiff post costs in order to ensure that there are sufficient funds on hand to pay any adverse cost award. In a complex English case, each side must also bear the expense of having a Barrister for in-court appearances, and separate Solicitors who are involved in the litigation behind the scenes.     

Thus, for many claimants, the American rule that requires each party in litigation to bear its own legal costs – together with broader discovery – will present distinct advantages to litigants in American courts. This cannot be stated without also recognizing the many well-documented fraudulent and frivolous legal claims filed every year, in response to which the courts are becoming much more willing to grant sanctions and award costs and fees to penalize truly outrageous and unusual misconduct. 

The American system provides the option of a jury trial

Certainly for plaintiffs, the possibility of a jury trial in all types of civil cases may also present certain advantages. While there are certainly examples of the “runaway” American jury, the fact is that most research indicates that juries in the United States typically reach results that closely match what the judge would have done in the case.   Speaking to the critical safeguards trial by jury plays in the U.S. judicial system, the late Chief Justice Rehnquist wrote: “The founders of our nation considered the right of trial by jury in civil cases an important bulwark against tyranny and corruption, a safeguard too precious to be left to the whim of the sovereign.” Even so, it is also common for parties not to make a jury demand, and instead to present the case to an experienced judge. 

New York law has a number of critical post-judgment procedures

New York also has a well-developed post-judgment collection process and a judiciary that is extremely experienced with the nuances of collection after a judgment. Attorneys in New York can undertake post-judgment collection procedures that would be unavailable to them without significant judicial intervention in many other legal systems. 

For example, New York litigants may seek a freeze over a defendant’s assets throughout the world. Holders of the debtor’s property are notified of the risk of transferring assets in violation of a worldwide freeze by the attorney for the Creditor. Indeed, release of such assets by holders of the debtor’s property presents the risk of paying twice in instances where the court has jurisdiction.  

Second, a New York Judgment Creditor may require the debtor to bring assets to New York to satisfy the judgment. If the defendant fails to do so, they may be held in civil or criminal contempt of court, which in turn can have serious monetary and penal consequences.  

Third, judgment and such collection rulings from New York courts will typically be enforced in virtually every other country, reflecting the high level of respect New York courts are accorded across the world. 

 Fourth, New York has procedures for the turnover of debts owed to the judgment debtor. Thus, in Gliklad v. Cherney, the defendant had litigated for seven years in order to obtain a confidential litigation settlement in London against a third party, a Russian oligarch.  Similarly, he had obtained a settlement from another Russian oligarch that was owed to him. New York law, however, provided a benefit to our client, the $505 million judgment creditor, to essentially turn over all the debts that were owed to the judgment debtor Cherney, to Gliklad.  Thus,  in the end, the defendant Cherney litigated a matter for seven years in London, publicly reported to have cost millions of dollars in legal fees, only to have it all disappear on a post-judgment collection action in New York with all such money due and owing instead payable to Gliklad. 

In conclusion, while the English judicial system is inarguably among the best in the world, clients and potential litigants would be well served to consider the many advantages the US legal system offers in their particular situation. 

Gordon Dobie is a partner in the law firm of Winston & Strawn and serves as lead counsel in trial court and appellate cases with a focus on business torts and fraud, including contract, antitrust, unfair competition, RICO, and securities litigation matters. He represents leading corporations and corporate executives worldwide, including Alexander Gliklad. 

Posted by:

Gordon
Dobie

28 November 2014

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