Vergiette v. Samara CV-93-529-B 02/15/95 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Francois Vergiette

v. Civil No. 93-529-B

Rijk Pieter Schoonheim Samara

O R D E R

Francois Vergiette obtained a default judgment on a breach

of contract claim against Rijk Samara from the District Court of

the Hague, Netherlands. The judgment obligated Samara to pay

Vergiette 90,000 Dutch guilders, plus interest and costs, and

supply Vergiette with information concerning certain assets

within eight days of being served with the judgment. The

judgment also specified that Samara would be liable for a 5,000

guilder per day penalty for each day he failed to produce the

information reguired by the judgment. Prior to filing suit in

this court, Vergiette recovered the 90,000 guilders Samara owed

pursuant to the judgment. Samara, however, never produced the

information reguired by the judgment. Nor did he pay the

interest and costs due pursuant to the judgment.

Vergiette commenced the present action to recover the unpaid

interests and costs and the 5,000 guilder per day penalty Samara became obligated to pay by failing to produce the information

reguired by the judgment. Vergiette later amended his complaint

to add a claim for further damages he contends are due as a

result of Samara's breach of contract. After Samara defaulted,

the magistrate judge held a damages hearing and issued a report

recommending that I award Vergiette interest and costs on the

prior judgment, but deny his reguests to recover the 5,000

guilders per day penalty and additional breach of contract

damages. The matter is before me on Vergiette's objection to the

magistrate judge's report and recommendation.

_____________________________ I. FACTS

The parties collaborated on several business transactions

from 1980 through 1991. On July 22, 1991, they entered into an

agreement to terminate their business relationship and allocate

compensation for past and pending ventures. In pertinent part,

the agreement reguired Samara to pay Vergiette (1) 100,000 Dutch

guilders; (2) an unspecified fee that the agreement describes as

"the investment manager's ten percent"; (3) another unspecified

fee that the agreement refers to as "ten percent of the dividend

earned by the exploration of a sailing vessel known as 'Te

Vega1"; and (4) 25% of the net profit generated by any sale of Te

2 Vega. The agreement also contained a clause that allowed Samara

to fulfill his obligations under the agreement by paying

Vergiette 25% of the profits generated by the sale of a residence

referred to in the agreement as "De Bloemert." Samara

subseguently paid Vergiette 10,000 guilders, but otherwise failed

to perform his obligations under the agreement. In January 1992,

Samara, under court order, arranged for a bank guarantee to cover

the 90,000 guilder balance due under the agreement.

In February 1992, Samara filed suit in the District Court of

the Hague seeking to set aside the agreement. Vergiette filed a

cross-action for the 90,000 balance, plus interest. After Samara

defaulted, the court ordered judgment in Vergiette's favor in the

amount of 90,000 guilders, plus interest and costs. The court

also ordered Samara to produce information regarding the sale of

Te Vega and De Bloemert within eight days of receiving notice of

the judgment. A 5,000 guilder per day penalty was imposed for

every day he remained in default beyond the eight day period.1

Samara was served with the judgment on April 13, 1993. He did

not provide the information ordered by the court within the eight

1 Vergiette states in his affidavit that he believes that the penalty would expire after six months. However, he cites no Dutch authority for this proposition.

3 days or anytime thereafter. The 90,000 balance was,however,

paid out of the bank guaranty.

Thereafter, Vergiette filed suit in this court to enforce

the judgment of the Hague court. He later amended the complaint

to assert a claim for additional damages arising from the breach

of the July 1991 agreement. Samara was served with the amended

complaint on November 9, 1993. The clerk entered a default

pursuant to Fed. R. Civ. P. 55(a) on December 16, 1993, due to

Samara's failure to file a timely pleading or otherwise defend.

The magistrate judge held a hearing on damages on January 25,

1994 .

Subseguently, the magistrate judge issued a report and

recommendation. With respect to the first count, he recommended

that the penalty provision of the Hague court's judgment not be

enforced on the grounds that its punitive nature ran afoulof New

Hampshire's strong public policy against punitive damages. In

addition, he recommended that the second count be dismissed on

grounds that there was insufficient evidence of the damages

suffered by Vergiette in the record and that, in the alternative,

Vergiette's claim was barred by res judicata. The plaintiff

filed a timely objection to the magistrate judge's report and

recommendation which is now before me.

4 II. DISCUSSION2

Vergiette objects to the magistrate judge's report and

recommendation on two grounds. First, he argues that the

magistrate judge mischaracterized the nature of the penalty

provision, stating that the provision is not punitive but rather

necessary to vindicate the authority of the court. Furthermore,

he argues that comity is the guiding principle in deciding

whether to recognize and enforce foreign judgments, and because

there is no public policy in New Hampshire against vindicating

the authority of its courts, this court should not follow the

magistrate judge's recommendation. Second, Vergiette argues that

his breach of agreement claim should not be dismissed because he

has produced sufficient evidence to determine damages and because

res judicata should not apply. Specifically, he contends that he

asserted the claim in the prior proceeding, but was not given a

full and fair opportunity to litigate because the defendant

failed to appear and produce the reguisite information to

determine damages. He has also supplemented the record with

certified copies of documents purporting to establish the

2 I review de novo those issues specifically objected to by a party in a magistrate judge's report and recommendation.

(b)(1) (West 1993).

5 purchase and sale of the properties at issue.

A. Enforcement of the penalty

While courts are not mandated by the Constitution's Full

Faith and Credit Clause to recognize and enforce judgments of

foreign countries, principles of comity counsel in favor of

recognizing such judgments to the same extent as judgments of

sister states. Restatement of Conflict of Laws (Second) § 98.

It is well-settled, however, that while "a final judgment

obtained through sound procedures in a foreign country is

generally conclusive as to the merits," where enforcement would

offend the public policy of the enforcing state, the judgment may

not be recognized or enforced. Ackermann v. Levine,

(2d Cir. 1986) .3 "A judgment is unenforceable as

against public policy to the extent that it is 'repugnant to

fundamental notions of what is decent and just in the State where

enforcement is sought.'"

(citations omitted); see

also In re Breau,

,

(1989)

(comity consistent with nonrecognition of foreign judgment that

3 In addition, a foreign judgment will not be recognized where the rendering court lacks either subject matter jurisdiction or personal jurisdiction, or where the judgment was obtained through fraud. Ackermann,

.

6 contravenes forum's strong public policy); MacDonald v. Railway,

,

(1902) (foreign law not given effect

when contravenes important, established policy of forum). Where

a federal court rests jurisdiction on diversity of citizenship,

it will look to the law of the state in which it sits to

determine whether enforcement offends an established public

policy. Sangiovanni Hernandez v. Dominicana de Aviacion, 556

F .2d 611, 614 (1st Cir. 1977).

Vergiette seeks enforcement of a provision of the Hague

court's judgment which imposed a penalty on Samara for his

failure to comply with that court's order. The imposition of

monetary penalties for the failure to comply with a court's order

does not conflict with the public policy of New Hampshire. See

Kidder v. Kidder,

,

(1992)

(court imposed monthly fine payable by husband to wife until

husband complied with court order to produce mortgage document).

"[T]he trial court ... has the power to impose a monetary fine

for a continued noncompliance with its orders ... and has broad

remedial power to impose penalties for contempt."

Thus,

while this state has long expressed its aversion to punitive

damages, see, e.g., Vratsenes v. N.H. Auto Inc.,

,

(1972), it has recognized that punishment for

7 civil contempt that is remedial, coercive, for the benefit of the

complainant, and which continues until compliance by the

contemptor, is a valid means of enforcing a court's order. Town

of Nottingham v. Cedar Waters, Inc.,

,

(1978); see also Kidder,

.4

While I disagree with the magistrate judge's

characterization of the penalty provision, I still find that

Vergiette's claim to enforce the judgment is fatally flawed. A

party seeking to enforce a foreign judgment must show that it is

a final judgment "'determining entitlement to money, status or

property interests.'" In re Breau,

(emphasis

4 Although neither Vergiette nor the magistrate judge raised the issue of constitutional limits on such civil contempt sanctions, I note that under United Mine Workers v. Bagwell, 114 S. C t . 2552 (1994), the penalty imposed in this case does not traverse our constitutional protections. In that case, the Court stated: " [C]ivil contempt sanctions, or those penalties designed to compel future compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary proceeding upon notice and opportunity to be heard. Neither jury trial nor proof beyond a reasonable doubt is reguired." United Mine Workers, 114 S. C t . at 2557. Samara received notice of the Hague court judgment and order reguiring him to produce certain documents within eight days. Had he produced those documents within that period, he could have avoided the imposition of the penalty. Thus, the penalty imposed by the Hague court was civil in nature and complied with our constitutional reguirements by providing notice and an opportunity to be heard to Samara. added) (citations omitted); see also Restatement of Conflict of

Laws (Second) § 101 ("a valid judgment for the payment of money

will be enforced in other states only in the amount for which it

is enforceable in the state where it is rendered"). Vergiette

has not shown that he, rather than the Dutch court, is entitled

to the accrued penalty under Dutch law. Thus, I overrule

Vergiette's objection to this portion of the magistrate judge's

report and recommendation.

B. The Claim for Additional Damages

Vergiette also objects to the magistrate judge's

recommendation that his breach of contract claim is barred by res

judicata.5 Specifically, he contends that while the present

claim is for breach of the agreement, the prior claim asserted in

the Hague court was merely to recover a liguidated damages

amount. Any claim that he had for breach of the agreement,

Vergiette argues, did not proceed to judgment in the Hague

proceeding evidenced by that court's order for Samara to produce

certain documents to determine the actual value of the damages

suffered by Vergiette. In support of this claim, Vergiette also

5 Vergiette also produced additional evidence to show damages. I do not address this issue because I find that it may be moot if res judicata is applicable. provides a letter from a colleague of his Dutch attorney stating

in pertinent part that his attorney "made an explicit reservation

to demand other damages later in the procedure...[and] [d]ue to

the non-pleading from the plaintiff [Samaha] the demand wasn't

extended to other damages."

Vergiette's objection to the magistrate judge's recommended

disposition of his breach of agreement claim hinges on his

assertion that res judicata principles are inapplicable here

because the Dutch court allowed him to split his claim for the

90,000 guilders from any potential claim for additional damages

that might have resulted from Samara's breach of the agreement.

In other words, Vergiette argues that this court should not

construe the Dutch court's 90,000 guilders judgment to preclude a

subseguent breach of contract claim for additional damages

because the Dutch court itself would not preclude him from

bringing such a claim. I agree that res judicata would not bar

his breach of contract claim if the Dutch court itself would

allow him to bring such a claim. See Restatement of Conflict of

Law (Second) § 95 ("what issues are determined by a valid

judgment is determined, subject to constitutional limitations, by

the local law of the state where the judgment was rendered"); see

also General Foods Corp. v. Dept, of Public Health,

,

10 786 (1st Cir. 1981) (law of state where judgment is rendered

determines persons bound by prior judgment); MacDonald,

. However, I cannot determine from the pleadings that a

Dutch court would treat Vergiette's breach of agreement claim in

the manner he describes. Thus, I overrule Vergiette's objection

to the magistrate judge's recommendation that judgment be entered

for the defendant on Vergiette's breach of contract claim.

C . Proof of Foreign Law

Federal Rule of Civil Procedure 44.1 provides the procedure

for determining foreign law in federal court. Pursuant to that

rule, I may reguire that the party seeking to rely on foreign law

give a complete presentation of that law to the court. Fed. R.

Civ. P. 44.1 notes of advisory committee on rules. Thus,

Vergiette may renew his claim for the penalty amount and his

breach of agreement claim within thirty (30) days if properly

supported by treatises, statutes, cases, and/or expert testimony

as to Dutch law regarding these issues. See Fed. R. Civ. P. 44.1

notes of advisory committee on rules ("[T]he court is free to

insist on a complete presentation by counsel [of the foreign law

relied on by the parties].").

11 III. CONCLUSION

For the foregoing reasons, I reject Vergiette's objections

to the magistrate judge's report and recommendation (document

nos. 10 and 12) without prejudice. The plaintiff may renew his

objections within thirty (30) days with sufficient proof of the

Dutch law on the issues discussed above. If Vergiette fails to

make a timely submission, the clerk shall enter judgment for

Vergiette in accordance with this order and the magistrate

judge's report and recommendation.

SO ORDERED.

Paul Barbadoro United States District Judge

February 15, 1995

cc: Warren C. Nighswander, Esg.

12