FURTHER UPDATED: Florida Default (RICO) Judgments Held Enforceable by Ontario Court: Bank of Mongolia v. Taskin

In Bank of Mongolia v. Taskin, 2011 ONSC 6083 (CanLII), Hoy J. of the Ontario Superior Court of Justice granted the applicant bank’s motion to enforce two default judgments obtained against the Ontario respondent in Florida. However, the application judge stayed enforcement pending determination of the respondent’s motion under Rule 60(b) of the United States Federal Rules of Civil Procedure (FRCP) for relief from the Florida judgments.

The judgments found the respondent liable in damages for $67,639,921.62 under the Racketeer Influenced and Corrupt Organizations Act (RICO) 18 U.S.C. 1961 et seq., and for civil theft. The respondent’s motion in Florida for relief from the default judgments under Rule 60 of the FRCP is pending. Rule 60 reads:

(b) Grounds for Relief from a Final Judgment, Order, or Proceeding.

On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.

The applicant bank alleged that the respondent defrauded the bank with several other Florida defendants by unlawfully transacting documentary letters of credit issued by the bank to attract investors in an effort to raise $1 Billion for an affordable housing project in Mongolia’s capital.

Hoy, J. notes,

[19]      On the facts plead, Taskin operated in concert with the Florida-based defendants to effect the fraud, was an officer and shareholder of Florida companies involved in the fraud and was involved in extensive communications with the Florida based defendants in the course of executing the fraud. There is a significant connection between the causes of action under RICO and for civil theft in Florida.

On the application, the respondent raised the defences of fraud and denial of natural justice.  With respect to the “real and substantial connection” test following Beals v. Saldanha2003 SCC 72 (CanLII), [2003] 3 S.C.R. 416 (S.C.C.), the application judge held:

[11]      Counsel for Taskin argues that the critical determination of whether or not the real and substantial connection test is met should be based on the evidence before me on this application, and not the facts in the pleadings or the facts found by the District Court in the Jurisdiction Decision.

[12]      I am inclined to agree with the Bank’s position. Ultimately, however, I need not determine that issue. I have considered the facts plead by the Bank, the fact findings in the Jurisdiction Decision and the evidence filed on this Application. I have concluded that a real and substantial connection is made out, regardless of the fact set relied on.

In rejecting the respondent’s fraud defence, Hoy J. writes:

…  in challenging the jurisdiction of the District Court, Taskin alleged that his signature on a tax election by GTI is a forgery. If true, this could have been discovered had Taskin participated in the Florida action and therefore cannot be raised now as a fraud defence to enforcement.

The respondent’s natural justice defence also met the same judicial fate. Although service of originating process (Complaint) was served by registered mail, and thus not effected in accordance with the Hague Service Convention and the Ontario Rules of Civil Procedure, Justice Hoy adopts a “constructive notice” exception:

[45]      The Summons and Amended Complaint were served on Taskin on January 7, 2010 via registered mail to his last known address. In arguing a denial of natural justice, Taskin correctly submits that the Rules of Civil Procedure in Ontario require personal service of originating documents. The District Court found in the Jurisdiction Decision that Taskin had actual notice of the Summons and Amended Complaint by January 2010 but chose to wait until November 2010 to respond. As indicated above, I agree with that finding. Taskin admits he consulted an Ontario lawyer in January of 2010. Attachments to his Declaration, which triggered the Jurisdiction Motion, include excerpts from the Rules of Civil Procedure setting out the requirement for personal service, marked as exhibits to an affidavit sworn before the Ontario lawyer on January 25, 2010. It is apparent that Taskin was aware of this procedural issue as of that date. Taskin was given adequate notice of the claim made against him and an opportunity to defend. Assuming that conflicts laws required service in conformity with Ontario’s Rules of Civil Procedure, R.R.O. 1990, Reg. 194, this procedural irregularity does not result in the proceedings being contrary to natural justice.

[46]      Moreover, Taskin was given notice of all subsequent steps in the proceeding. The Bank served its motions for default judgment and to enter default judgment on Taskin by regular mail. Taskin did not respond to either. The District Court served Taskin by regular mail with an Order to Show Cause, requiring Taskin to respond to the Bank’s motion to enter the default judgment by April 16, 2010. Taskin did not respond. The District Court provided its recommendation regarding the quantum of damages to Taskin. Taskin did not respond.

[47]      In cross-examination, Taskin admitted that he maintained addresses in both Oakville, Ontario and Turkey, where the documents were served, and that in the normal course he received documents mailed to him during that period at both those addresses.

[48]      Taskin has not satisfied me that the procedure of the Florida court leading up to the Florida judgments which the Bank seeks to enforce was contrary to Canadian notions of fundamental justice.

Finally, with respect to finality (pun intended), the application judge notes that:

  “…I raised with counsel my inclination, in the interests of judicial efficiency, to adjourn this application until the Rule 60 Motion was determined by the District Court. All counsel, having incurred the cost of preparing for the hearing, wished me to proceed to hear the application, notwithstanding the pending Rule 60 Motion and I therefore did so. (at para. 60)

Citing Pro Swing Inc. v. Elta Golf Inc.2006 SCC 52 (CanLII), 2006 SCC 52, [2006] 2 S.C.R. 612 (SCC), Hoy J. stayed the enforcement on the ground of lack of finality:

[59]      The Rule 60 Motion is pending.  It is more than a “possible step”. My understanding is that it will be determined relatively promptly. While I am dubious that Taskin will prevail on the Rule 60 Motion, until it is determined there remains the risk that this Court could find itself enforcing something that is no longer a Florida obligation. In the result, I conclude that this Court, having utilized judicial resources to hear and consider the application, should, in the interests of judicial efficiency, recognize the Florida judgments, but stay their enforcement in Ontario, pending the dismissal, withdrawal or abandonment of the Rule 60 Motion.

(2) Effect on Finality.

The motion does not affect the judgment’s finality or suspend its operation.

It is dubious whether the Rule 60 motion is available to the respondent, in any event. In Stokors S.A. v. Morrison, 147 F.3d 759 (8th Cir.1998) (Stokors), the Eight Circuit Court of Appeals considered the interpretation of Federal Rule of Civil Procedure 60(b)(5). In Stokors, the defendant owed a money judgment of over $4 million.  The federal district court granted the defendant’s motion for satisfaction of the judgment under Rule 60(b).  The court held under Rule 60(b)(5) that it was no longer equitable that the money judgment should have prospective application.   The Eighth Circuit Court of Appeals reversed.   The appeal court noted that most courts have agreed that “a money judgment does not have prospective application, and that relief from a final money judgment is therefore not available under the equitable leg of Rule 60(b)(5).”  147 F.3d at 762.   The court quoted Maraziti v. Thorpe, 52 F.3d 252, 254 (9th Cir. 1995), stating:

“ ‘Virtually, every court order causes at least some reverberations into the future, and has, in that literal sense, some prospective effect.   That a court’s action has continuing consequences, however, does not necessarily mean that it has prospective application for the purposes of Rule 60(b)(5).   The standard used in determining whether a judgment has prospective application is whether it is executory or involves the supervision of changing conduct or conditions․ The construction of the Rule sought by [the movant], which apparently is to the effect that a judgment has prospective effect so long as the parties are bound by it, would read the word ‘prospective’ out of the rule.’ ”  147 F.3d at 762.

The Eight Circuit panel also cited numerous federal cases that have held that money judgments do not have prospective application and do not come within Rule 60(b)(5): DeWeerth v. Baldinger, 38 F.3d 1266, 1275 (2d Cir.1994) (interpreting United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999 [1932], and stating that “ ‘[i]n practical terms, these standards mean that judgments involving injunctions have “prospective application,” while money judgments do not’ ”);  Gibbs v. Maxwell House, 738 F.2d 1153, 1155-56 (11th Cir.1984) (“ ‘The judgment of dismissal in this case was not prospective within the meaning of 60[b][5].   It was final and permanent.   That plaintiff remains bound by the dismissal is not a “prospective effect” within the meaning of rule 60[b][5] any more than if plaintiff were continuing to feel the effects of a money judgment against him.’ ”);   Marshall v. Board of Ed., 575 F.2d 417, 425 (3d Cir.1978) (agreeing that “ ‘Rule 60[b][5] “does not cover the case of a judgment for money damages” ’ ”).

The court in Stokors held that although the judgment against the defendant “may be ‘prospective’ to the extent that he has failed to pay it in a timely manner, it is nevertheless a final order and is not ‘prospective’ for purposes of Rule 60(b)(5).”  147 F.3d at 762.   The court concluded that Rule 60(b)(5)’s equitable leg cannot be used to relieve a party from a money judgment.   As a result, the court determined that the trial court abused its discretion in granting relief to the defendant under Rule 60(b)(5).  147 F.3d at 762.

UPDATE

On October 24th, the Magistrate Judge in Florida issued her Report and Recommendation that Taskin’s motion be denied [pdf]. On November 16th, the District Judge, after hearing further submissions from Taskin, adopted the Recommendation in part and denied the motion. [pdf]

The District Judge rejected the Recommendation only on the issue of timeliness, finding that a jurisdictional challenge was not subject to the “reasonable time” requirement; in other respects he agreed with the Magistrate Judge that Taskin’s motion was without merit, and refused to grant relief from final judgment. Taskin has also filed a notice of appeal in Ontario on November 18th.

FURTHER UPDATE: (April 5, 2012)

The Court of Appeal for Ontario today dismissed Takin’s appeal in Bank of Mongolia v. Taskin, 2012 ONCA 220. The appeal book endorsement reads:

[1]          The appellant chose not to defend the proceedings in Florida.  The respondent obtained judgment in Florida and then sought an order enforcing the judgement in Ontario.  The application judge granted the order.

[2]          The application judge asked herself the proper question – was there a real and substantial connection between Florida, the claim and the appellant?  The application judge reviewed the pleadings (paras. 13-19).  She was entitled to accept the factual allegations in those pleadings as true given the decision not to defend.  On the pleadings, there was ample basis for a finding of real and substantial connection.

[3]          We see no basis to interfere with the application judge’s finding that the appellant did not make out either the “fraud” or the “denial of natural justice” defence.

[4]          The application judge was correct in holding that despite the outstanding motion in Florida, the judgment was final for the purposes of the enforcement of the judgment in Ontario.  We also note that the Florida motion was dismissed subsequent to the application judge’s reasons.  She had stayed her ordered pending that determination.

[5]          The appeal is dismissed.  Costs to the respondent in the amount of $22,000 “all in”.

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8 Responses to “FURTHER UPDATED: Florida Default (RICO) Judgments Held Enforceable by Ontario Court: Bank of Mongolia v. Taskin”

  1. Ted Folkman Says:

    Antonin, I wonder what you make of the following language from the decision:

    Assuming that conflicts laws required service in conformity with Ontario’s Rules of Civil Procedure, R.R.O. 1990, Reg. 194, this procedural irregularity does not result in the proceedings being contrary to natural justice.

    It seems to me that you maybe overread the decision: the court assumes, without deciding, that the service of process was improper. This hearkens back to our discussion in July.

  2. Antonin I. Pribetic Says:

    Thanks Ted. It’s not an overread. I alluded in my post to the motion judge failing to address validity of service under the Hague Service Convention and the Ontario Rules of Civil Procedure as a basis for lack of personal jurisdiction. It’s likely defendant’s counsel did not raise the argument on the defence of denial of natural justice. The issue of proper service is a corollary to lack of notice under the rubric of the impeachment defence as set forth by the Supreme Court of Canada in Beals v. Saldanha. BTW, I also linked to your post and our previous debate in this post.

    Best,

    Antonin

  3. Ted Folkman Says:

    Also, while you’re right, I think, about Rule 60(b)(5), I think Taksin’s real argument, at least with regard to the service of process issue, arose under Rule 60(b)(4), which provides for relief from void judgments. A judgment is void if the service of process was improper. Just by way of example:

    If a judgment is void, the party attacking it need show no meritorious claim or defense or other equities on his behalf; he is entitled to have the judgment treated for what it is, a legal nullity. It is uniformly held that a judgment is void for invalid or insufficient service of process because, in such a case, the court lacks jurisdiction over the parties and therefore has no power to enter a judgment.

    Mobern Elec. Co. v. Walsh, 197 F.R.D. 196, 197-98 (D.D.C. 2000) (citations and internal quotation marks omitted).

  4. Ted Folkman Says:

    Yes, I saw that, and thanks for the link! I’ll be covering the case next week and will refer copiously to your discussion, which I think is right on the money, with the exception of the point about Rule 60(b)(5) that I discuss in the comment below.

    This extended discussion is a good example of what hyperlinking and the WWW are good for!

  5. Antonin I. Pribetic Says:

    Thanks again for the Rule 60(b)(4) commentary. You can safely assume that I have a hidden agenda in focusing on Rule 60(b)(5)🙂

  6. Ted Folkman Says:

    Ooh! Mysterious!

  7. Antonin I. Pribetic Says:

    Quite! Confidential and privileged.

  8. Case of the Day: Bank of Mongolia v. Taskin | Letters Blogatory Says:

    […] Hague Service Convention, Service by emailH/T to Antonin Pribetic of the Trial Warrior Blog for the reference to the case of the day, Bank of Mongolia v. Taskin (Ontario Super. Ct. 2011). The Bank of Mongolia […]

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