Case Number

LCA 3973/10

Date Decided

4-2-2015

Decision Type

Appellate

Document Type

Full Opinion

Abstract

[This abstract is not part of the Court's opinion and is provided for the reader's convenience. It has been translated from a Hebrew version prepared by Nevo Press Ltd. and is used with its kind permission.]

Facts: A U.S. court approved a settlement in a class action that was filed against the Respondent, a U.S. company, and which concerned trade in securities. According to the terms of the settlement, it applies to the members of the represented class who are located both in and outside of the U.S. The Petitioner filed a motion for class certification against the Respondent in a District Court in Israel. The proceedings revolved around the question of whether approval of the settlement in the U.S. establishes a res judicata vis-à-vis the Petitioner and vis-à-vis the class that he purports to represent in Israel, so as to bar the proceeding that he initiated.

Held: The Supreme Court (per President (ret.) A. Grunis, Justices U. Vogelman and N. Sohlberg concurring) granted leave to appeal. The appeal was denied.

In order for the Respondent to establish a claim of res judicata due to a judgment that was issued in a foreign country, the judgment must undergo a process of “acceptance” in Israel, pursuant to Israeli law. The acceptance of foreign judgments in Israel is mainly regulated in the Foreign Judgment Enforcement Law (the “Law”), which includes several “tracks”. When a party in a proceeding in Israel claims the existence of a res judicata due to a foreign judgment, the appropriate track is that of indirect recognition of the judgment, pursuant to Section 11(b) of the Law.

A foreign judgment in a class action may be recognized incidentally pursuant to Section 11(b) of the Law. A first consideration that must be taken into account is whether the judgment in the foreign country was issued by a court holding jurisdiction to hear the proceeding. In this context, it is also necessary to examine whether the foreign court has a substantial link to the subject of the class action. The participation of the lead plaintiff or the party seeking class certification in the proceeding conducted in the foreign court may be deemed as consent to the jurisdiction of the foreign court.

A further consideration is whether the right of the members of the represented class to a fair proceeding was prejudiced. In the context of this consideration, three main elements must be contemplated: giving proper notice to the class members of the fact of the conduct of the class proceeding in the foreign court, and giving the class members an opportunity to participate therein; giving the class members an opportunity to withdraw from the proceeding; and adequate representation of the class members by the lead plaintiff (and his counsel) in the foreign court throughout the conduct of the proceeding.

Examination of the outcome of the class action in the foreign court on the merits (or examination of a settlement that was approved in a foreign country on the merits) will only be performed in cases in which the outcome is clearly and patently unreasonable. Non-recognition of a foreign judgment for repugnance to public policy will occur only in exceptional cases.

Weight should also be afforded to the fact that the claims being raised against recognition of the foreign judgment were already heard and decided by the foreign court. In addition, decisive weight should be afforded to the fact that the party raising the claims against recognition of the foreign judgment in Israel raised these claims himself in the foreign court, and his claims there were rejected.

If the court finds that the foreign judgment should be recognized, how is it applicable to the proceeding being held in Israel? The applicability of the foreign judgment pursuant to the foreign law is a fact that must be proven, and insofar as necessary, recourse may be made to the parity of laws presumption. According to Israeli law, if the proceeding in Israel is a class proceeding which is at the stage of class certification, denial of the class certification motion does not establish a res judicata vis-à-vis the class. In such a case, recognition of the foreign judgment is applicable only to the party filing the motion for class certification. In a case in which the foreign judgment is recognized without hearing the claims in connection with the right of the class to a fair proceeding on the merits, because the party seeking class certification (or the lead plaintiff) are barred from raising the same, recognition of the foreign judgment is applicable only to the party seeking class certification (or the lead plaintiff).

In the case at bar, the foreign judgment that was issued in the class proceeding in the U.S. should be recognized. The Petitioner did not deny the jurisdiction of the U.S court and should be deemed as having agreed thereto. In addition, the class proceeding has a material link to the U.S. in view of the fact that we are concerned with trade in securities of a U.S. company which was mainly performed in the U.S. The Petitioner’s claims of a violation of the right of the class members in Israel to a fair proceeding were already heard by the U.S. court and rejected, and the Petitioner should not be permitted to raise his claims for a second time in the Israeli court. The Petitioner has no serious, arguable claim with regards to the body of the terms and conditions of the agreement, which claim will only be heard in exceptional cases.

In view of the aforesaid, there is no impediment to recognizing the foreign judgment approving the settlement in the class proceeding in the U.S. pursuant to Section 11(b) of the Law. Moreover, in view of the provisions of the settlement and the definition of the represented class according to the settlement, the foreign judgment establishes a res judicata pursuant to U.S. law with respect to the class proceeding in Israel, and therefore the motion for class certification should be denied.

Keywords

Courts -- Recognition of foreign judgments, Torts -- Class action, International Law -- International Jurisdiction

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