Opinion ID: 789742
Heading Depth: 2
Heading Rank: 2

Heading: New Mexico Law

Text: 39 The New Mexico Name contends that the district court erred when it failed to consider the procedures the English courts actually employed, and instead relied on the general proposition that the English courts are fair and neutral. The New Mexico Name also asserts that the enforcement of the English judgments violates New Mexico public policy. Applying New Mexico law, we hold that the district court appropriately assessed the English judicial system and no violation of due process or New Mexico public policy occurred. 40
41 The New Mexico Name claims the district court failed to appreciate how its enforcement of the English judgment deprived him of his due process rights. While the Full Faith and Credit Clause applies to the recognition and enforcement of judgments among sister states, it does not apply to judgments rendered in foreign countries. Allstate Ins. Co. v. Hague, 449 U.S. 302, 322 n. 4, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981) (Stevens, J., concurring in the judgment) (The Full Faith and Credit Clause, of course, was inapplicable ... because the law of a foreign nation, rather than of a sister State, was at issue....). The parties cite no federal statute applicable to the enforcement of foreign court money judgments in U.S. courts, nor any applicable treaty. Instead, the recognition and enforcement of foreign judgments are governed by state law. See Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572, 582 (2d Cir.1993) (We note that ... the recognition of foreign judgments is governed by state law.); see Restatement (Third) of the Foreign Relations Law of the United States § 481 cmt. a (1987). 42 New Mexico has adopted the Uniform Foreign Money-Judgment Recognition Act. See N.M. STAT. ANN. §§ 39-4B-1 to 39-4B-9 (1978). Pursuant to the Act, [a] foreign judgment is not conclusive if 43 the judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law; 44 and it need not be recognized if: 45 (1) the defendant in the proceedings in the foreign court did not receive notice of the proceedings in sufficient time to enable him to defend; 46 (2) the judgment was obtained by fraud; 47 (3) the cause of action on which the judgment is based is repugnant to the public policy of this state.... 48 N.M. Stat. Ann. § 39-4B-5 (emphasis supplied). 49 The New Mexico Name contends that the New Mexico district court conflated the widely recognized general fairness of the English system, with this particular judgment, which, in his view, conflicts with his constitutional due process rights. Specifically, the New Mexico Name objects to (1) the English Courts' enforcement of the pay-now, sue-later clause, which prohibited him from raising certain defenses and counterclaims during the English action; (2) the conclusive evidence clause, because it renders the amount of the assessment determined by Lloyd's conclusive absent manifest error, and thereby fails to meet due process requirements; and (3) the fact that the cumulative effect of both these clauses is that the New Mexico Name could not receive a pre-deprivation hearing, could not obtain discovery as to the amount of Lloyd's claim, and could not challenge Lloyd's calculation of the amount due. 50 As to whether the contested clauses, taken separately or together, amounted to a forfeit of the Name's due process rights, [t]he question is not whether Lloyd's accorded due process to the names, but whether the English courts did.... Stated differently, the courts held that the names had waived their procedural rights in advance.... Ashenden, 233 F.3d at 479 (emphasis supplied). Waiver of procedural rights in advance is clearly permitted, see e.g., D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972) (The due process rights to notice and hearing prior to a civil judgment are subject to waiver.). Moreover, given the New Mexico Name's utter failure to participate in any stage of any of the English proceedings, `we not only look with skepticism, but we flatly reject the due process complaint of a party who was given, and ... waived, the opportunity of making the adequate presentation in the English Court.' Turner, 303 F.3d at 331 n. 20 (quoting British Midland Airways Ltd. v. Int'l Travel Inc., 497 F.2d 869, 871 (9th Cir.1974) (internal quotation marks omitted)). 51 Although the New Mexico Name would prefer to have us focus on this particular judgment, rather than the English system, at this stage of these matters, we are not permitted to do so. See N.M. Stat. Ann. § 39-4B-5 (indicating that to determine conclusive[ness] of a foreign judgment, a court examines the foreign country's system and whether it maintains procedures compatible with the requirements of due process of law). The procedures the English courts afford need not be identical to ours, they must only be compatible in that they do not offend the notion of basic fairness. See Turner, 303 F.3d at 331 (the courts of England are fair and neutral forums) (footnoted citation omitted); Hilton v. Guyot, 159 U.S. 113, 205, 16 S.Ct. 139, 40 L.Ed. 95 (1895) ([W]e are not prepared to hold that the fact that the [foreign] procedure ... differed from that of our own courts is, of itself, a sufficient ground for impeaching the foreign judgment.); Uniform Foreign-Money Judgments Recognition Act § 4 cmt. ([A] mere difference in the procedural system is not a sufficient basis for non-recognition. A case of serious injustice must be involved.);1 Restatement (Third) of Foreign Relations § 482 cmt. b (1987) (A court asked to recognize or enforce the judgment of a foreign court must satisfy itself of the essential fairness of the judicial system under which the judgment was rendered.). 52 And when we look to the basic fairness of the system, the answer is clear: [O]ur courts have long recognized that the courts of England are fair and neutral forums. Riley, 969 F.2d at 958 (collecting cases); see also Haynsworth, 121 F.3d at 967 (This is particularly so in the case of England, a forum that American courts repeatedly have recognized to be fair and impartial.). The Seventh Circuit similarly lauded the English system's regard for due process in its highly persuasive opinion involving nearly identical claims: 53 Any suggestion that [the English] system of courts does not provide impartial tribunals or procedures compatible with the requirements of due process of law borders on the risible. [T]he courts of England are fair and neutral forums. The origins of our concept of due process of law are English .... and the English courts ... are highly regarded for impartiality, professionalism, and scrupulous regard for procedural rights. 54 Ashenden, 233 F.3d at 476 (internal citations and quotations omitted). 55 We agree with the Seventh Circuit's reasoning and hold that given the structure of the English system, which is substantially similar to our own, the New Mexico Name's suggestion that the English court system does not provide tribunals compatible with due process is untenable. See also Webb, 156 F.Supp.2d. at 640. 56
57 The New Mexico Name also challenges the enforcement of the English judgments as a violation of New Mexico's public policy. First, he argues that Lloyd's violated the New Mexico Securities Act through its solicitation of unregistered securities and by making fraudulent representations. Second, he asserts that the Equitas contract is both procedurally and substantively unconscionable. Third, the New Mexico Name contends that the Equitas contract amounts to a contract of adhesion. Fourth, he asserts the Equitas contract is a cognovit note, which both violates New Mexico public policy and New Mexico law. Fifth, he maintains that the Equitas contract is illusory. Finally, he contends the New Mexico Unfair Practices Act bars recognition of the Equitas contract. 58 Even if we assume the shaky premises of these assertions to be true (that Lloyd's made material misrepresentations and those misrepresentations would allow rescission under New Mexico law), we reject each of these claims for one overriding reason: English law as applied here does not violate New Mexico's public policy. As we iterate throughout the opinion, [t]he view that every foreign forum's remedies must duplicate those available under American law would render all forum selection clauses worthless.... Haynsworth, 121 F.3d at 969; see also Riley, 969 F.2d at 958. 59 Furthermore, we reiterate that we must focus on the cause of action and the claim for relief underlying the English Judgment, not the differences in the bodies of law, because slight differences between England's and New Mexico's laws do not trigger the public policy exception. N.M. Stat. Ann § 39-4B-5(b)(3); see Turner, 303 F.3d at 332-33. Neither a breach of contract action nor a claim for money damages is repugnant to New Mexico public policy. 60
61 The New Mexico Name emphasizes that the New Mexico Securities Act embodies a public policy to protect New Mexico, and New Mexicans, and that the contract on which Lloyd's sued violated the state securities act. He relies heavily upon the declaration of Michael J. Vargon, Deputy Director of the Securities Division in the New Mexico Department of Regulation and Licensing. In an affidavit, Mr. Vargon states that after receiving various complaints from New Mexicans regarding Lloyd's solicitations to become Names, the Division concluded that the interest in the Names program was an investment contract and therefore a security, subject to the New Mexico Securities Act. Lloyd's failed to register these securities, and furthermore, the information available to the Division strongly suggest[ed] fraud and misrepresentation in the inducement and continuing misrepresentation made to Names.... Case No. 02-2301, Aplts' App. vol. I, at 325. 62 In response, Lloyd's points to the July 1996 State Agreement between Lloyd's and participating state securities regulators, including the Acting Director of the New Mexico Securities Division. The State Agreement recognizes that certain State Securities Regulators have asserted the activities of Lloyd's... fall within the scope of their regulatory jurisdiction and that the activities of Lloyd's may have violated laws subject to their enforcement authority. Id. vol. II, at 747. The State Agreement also indicates that Lloyd's denies it has violated any U.S. laws and denies it is subject to the jurisdiction of the States Securities Regulators with regard to the issues raised. Id. 63 The State Agreement appears to have been a necessary precursor to the enactment of the Reconstruction and Renewal plan. Under the State Agreement, Lloyd's promised to allocate credits to qualified State Names, in exchange for which the State Securities Regulators agreed to take steps necessary to terminate all proceedings and investigations pending against Lloyd's. In addition, the State Securities Regulators agreed not to assist any private person or entity who seeks to pursue any action against Lloyd's.... Id. vol. II, at 757. Because the Acting Director of the New Mexico Securities Division is a signatory to the State Agreement, and Mr. Vargon's declaration conflicts with the State Agreement, we reject the New Mexico Name's assertions based upon it. Furthermore, the New Mexico Name offers no explanation for this anomaly. 64 Moreover, as explained above, the New Mexico Name agreed in the General Undertaking Agreement that English law, not New Mexico law, would govern any disputes between Lloyd's and him. The choice of law and choice of forum clause are not at issue in this litigation, and to enforce the New Mexico securities laws in this context would be inappropriate. See Riley, 969 F.2d at 958 (approving forum selection clause of General Undertaking Agreement); Richards, 135 F.3d at 1292 (holding the same as to the majority of the defendant Names in this case). 65
66 Next, the New Mexico Name invites us to examine the underlying contractual dispute through his contention that the Equitas contract is both procedurally and substantively unconscionable under New Mexico law. Procedural unconscionability is determined by examining the circumstances surrounding the contract formation, including the particular party's ability to understand the terms of the contact and the relative bargaining power of the parties. Guthmann v. LaVida Llena, 103 N.M. 506, 709 P.2d 675, 679 (1985). Factors to be considered include the use of sharp practices or high pressure tactics and the relative education, sophistication or wealth of the parties, as well as the relative scarcity of the subject matter of the contract. Id. 67 The New Mexico Name is a highly sophisticated investor who had to pass a means test and was required to post large sums of money as security for the unlimited liability that he knowingly undertook. Unquestionably Lloyd's presented no high pressure tactics: each Name was afforded the opportunity to read the General Undertaking Agreement in its entirety, and to fully understand the implications of its terms. See id. at 680. The Equitas contract was not a new investment decision; it was the implementation of specific provisions to address the unlimited liability undertaken by all Names, pursuant to the General Undertaking Agreement's broad powers. There is no basis for concluding that there was any procedural unconscionability in the contracts on which the judgments were based. 68 The New Mexico Name's arguments regarding substantive unconscionability are equally unavailing. Substantive unconscionability is concerned with contract terms that are illegal, contrary to public policy, or grossly unfair. Id. at 679. When terms are unreasonably favorable to one party a contract may be held to be substantively unconscionable. Id. at 680. The terms are to be considered in the light of the general commercial background and the commercial needs of the particular trade or case. Id. (internal quotation marks omitted). Here, despite the apparently massive losses Lloyd's was absorbing, the terms of the General Undertaking Agreement were not so grossly unfair to the Names when the Agreement was formed. Approximately ninety-five percent of the Names accepted the subsequent Equitas contract, and forty-seven U.S. states signed the State Agreement to facilitate the Reconstruction and Renewal plan. Under these circumstances, we cannot say these were terms that no man in his senses and not under delusion would make on the one hand, and ... no honest and fair man would accept on the other. Id. (internal quotation marks omitted). 69
70 The New Mexico Supreme Court's Guthmann holding also undergirds our rejection of the New Mexico Name's contention that the Equitas contract is an adhesion contract that violates New Mexico's public policy. 71 Three elements must be satisfied before an adhesion contract may be found. First, the agreement must occur in the form of a standardized contract prepared or adopted by one party for the acceptance of the other. Second, the party proffering the standardized contract must enjoy a superior bargaining position because the weaker party virtually cannot avoid doing business under the particular contract terms. Finally, the contract must be offered to the weaker party on a take-it-or-leave-it basis, without opportunity for bargaining. 72 Id. at 678 (internal citations omitted). Here, the second and third elements are not met: the New Mexico Name was not in a weaker bargaining position nor did Lloyd's compel his investment. 73
74 Next, the New Mexico Name contends that the General Undertaking Agreement and Equitas contract amount to a cognovit note, which is an ancient legal device signed by a defendant in an action actually commenced confessing the plaintiff's demand to be just, and empowering the plaintiff to sign judgment against him in default of his paying the plaintiff the sum due to him within the time mentioned in the cognovit. BLACK'S LAW DICTIONARY (8th ed.2004); see Overmyer, 405 U.S. at 176, 92 S.Ct. 775. Thus the debtor agrees in advance to the entry of a judgment against him without notice or hearing. New Mexico public policy and New Mexico law prohibit cognovits and condemn judgments obtained through cognovits, enforcing them only where a defendant voluntarily, knowingly and intelligently waives his or her rights. As established above, the New Mexico Name did voluntarily, knowingly and intelligently waive his rights, in addition to receiving notice and being provided an opportunity to defend prior to the entry of the judgments. We have rejected the perceived lack of due process argument above, and consequently, this argument is foreclosed. 75
76 Next, the New Mexico Name maintains that Lloyd's judgments are repugnant to New Mexico's public policy because they are based on illusory contracts. Specifically, he contends that the General Undertaking Agreement and the Equitas contract lack consideration. The General Undertaking Agreement was part of the overall investment agreement between the Names and Lloyd's. The Agreement certainly placed obligations upon Lloyd's: when underwriting or investment profits were made, Lloyd's had to distribute to each Name his or her proper share. Likewise, the Equitas contract was supported by consideration: this reinsurance contract helped Lloyd's survive and protected the Names from unlimited personal liability. The complaints about how Lloyd's may have met, or failed to meet, its obligations are another matter, which have also been considered by the English courts and in the Jaffray litigation. 77
78 Finally, the New Mexico Name contends that the enforcement of the English judgment violates New Mexico's public policy because the contracts violated the New Mexico Unfair Practice Act, N.M. Stat. Ann. § 57-12-1 et seq. The Unfair Practice Act defines an unconscionable trade practice as any act or practice in connection with the sale for offering for sale of any goods or services that takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree or results in a gross disparity between the value received by a person and the price paid. See id. § 57-12-2(E). Neither party addresses whether the New Mexico Unfair Practice Act encompasses an action involving the interests of the New Mexico Name in underwriting insurance. See, e.g., Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 510 A.2d 972, 977-78 (1986) ([Connecticut Unfair Trade Practice Act] does not apply to deceptive practices in the purchase and sale of securities because Connecticut has long separated regulation of the purchase and sale of securities from the regulation of unfair trade practices in other industries.); Simpson v. Grimes, 849 So.2d 740, 745-746 (La.Ct.App.2003) (Although the plaintiffs allege unfair trade practices pursuant to [the Louisiana Unfair Trade Practices Act], this type of action under the ... Unfair Trade Practices Act has been found inapplicable to cases involving securities.). 79 To the extent the New Mexico Name asserts that Lloyd's took unreasonable advantage of him through its misrepresentation regarding asbestos claims, the English courts have considered and rejected such claims. As above, we cannot allow the New Mexico Name to relitigate the underlying cause of action under New Mexico law, despite his attempt to frame the action as violating New Mexico public policy.