As commercial litigators, we frequently field calls from counsel in other states seeking to enforce judgments entered in a state other than Pennsylvania against assets of the judgment debtor which may be identified within the Commonwealth.  Under Pennsylvania Law, a judgement creditor may effectively transfer a judgment in two ways; the traditional approach of a civil action to enforce judgment at common law or pursuant to the terms of the Uniform Enforcement of Judgments Act.  The Uniform Act prescribes the mechanism for transfer of the judgment and the procedures which follow thereafter. 

The effectiveness of a foreign judgment is based upon the full faith and credit clause of the United States Constitution and grounded in principles of comity among the several states.  Pennsylvania, like many other states, has adopted the Uniform Enforcement of Judgment Act in an effort to streamline the process of transferring a judgment from a “foreign” – meaning a different state – court.  The Act merely requires that a certified copy of the judgment and relevant docket entries be filed with the Prothonotary together with an affidavit of last known address of the judgment debtor.   That transferred judgment then becomes a lien against the debtor’s real property within the county.  Of course, not all arguments are resolved by the simple process outlined by the Act; frequently, the transfer signifies the beginning of a new litigation cycle.

While the full faith and credit clause as implicated by the Act is a very powerful vehicle available to a judgment creditor, the application is not unlimited.  Review by a Pennsylvania trial court is for the most part limited to issues of jurisdiction and due process in the issuing court; if the issuing court did not have jurisdiction, or if due process has not been served therein, then Pennsylvania may decline to enforce the foreign judgment.  The judgment debtor bears the burden to establish the absence of jurisdiction and due process.   A judgment debtor should be expected to file a Motion to Strike the transferred judgment arguing the inapplicability of the full faith and credit clause.   

Significantly, the application of the full faith and credit clause extends to the determination of jurisdiction and due process.  In other words, if the parties “fully litigated” the issue of jurisdiction in issuing court and the issuing court, even incorrectly, concludes jurisdictional requirements are satisfied, that decision in and of itself is subject to full faith and credit regardless of whether that decision was correct by application of fact and law.   A judgment debtor that has not appeared in the foreign action certainly retains the right to challenge jurisdiction and due process if the creditor subsequently transfers the judgment to Pennsylvania, but certainly runs the risk of the entry of judgment by default in the foreign court.  Conversely, a judgment debtor that appears in a foreign court where jurisdiction and due process are in any way addressed by such court runs a substantial risk of deference to that court upon transfer to Pennsylvania. 

Thousands of businesses across the United States fall within the definition of what is commonly referred to as “small business”.   Many of these small business are formed by two “friends” with compatible skill sets and both possessing knowledge of a particular industry.  Business owners commonly refer to their co-owners as “partners”.  As the business and its’ complexity grows, deficiencies in performance or capacity on the part of one partner may be exposed. Alternatively, the absence of immediate success can cause a less patient partner to seek other opportunities and abandon the work that is necessary for the collective good.  What starts as a promising partnership can quickly turn sour.  Here are a few tips on moving forward:

1. Agree on material issues ahead of time.  It goes without saying that a written agreement which contemplates and addresses material issues benefits everyone.   Terms frequently addressed in such agreements include the relative duties of the parties, corporate officers, duties of directors and financial matters. If shareholders/partners/members are required to devote substantially all of their time to the venture, the agreement must so state.   Similarly, if shareholders/partners/members can be required to contribute capital to the business, the prevailing agreement must so state.  Agreed upon rights and remedies upon abandonment of functions within the business by a shareholder/partner/member can provide the road map for resolution and expedite transition.         

2. Change terms of employment.  An option which may be available to a shareholder/partner/member is the exercise of corporate power to change terms of employment with respect to the non-performing shareholder/partner/member.  While a founding  shareholder/partner/member may arguably have certain rights to continued employment, such guarantees are limited and may not preclude a change in terms when faced with non-performance or abandonment. Exercise of corporate power does not come without risk and any change in employment terms is almost always alleged as part of a minority shareholder oppression claim.

3. Offer a buy-out.  Certainly the cleanest and most efficient means to end an unproductive arrangement quickly is to acquire the non-performing shareholder/partner/member’s interest in the business by the payment of money.  Of course, such an agreement is not always financially available.  Moreover, a voluntary transfer necessarily implicates that that non-performing  shareholder/partner/member agree.  Issues of valuation, income streams, indemnification and restrictions against competition can complicate any potential buy-out.

4. Sell the business.  Often the solution to a disagreement on partner performance is a sale of the business with a corresponding post sale employment agreement for the performing shareholder/partner/member.  Money is a powerful motivator.  A sale generates money in a lump sum which can induce a shareholder/partner/member to forego the ongoing income stream that results from future operations.  Certainly, control over the sale process, including the legal right to effectuate a sale by virtue of agreement or corporate control, are essential factors for evaluation.  

5. Dissolve and start something new.  As a matter of last resort, dissolution of the entity may be the only way to gain freedom from a non-performing shareholder/partner/member.  The Business Corporations Law provides a mechanism for dissolution.  Provided the requirements can be met, a shareholders/partners/member may seek judicial dissolution of the entity essentially forcing a judicial sale.  An important aspect of dissolution is relief from fiduciary duties owed to the business and minority owners.  Dissolution can be a complicated and expensive proposition and very disruptive to ongoing business operations but remains a viable strategy when business owners can no longer work together but also cannot agree on separation.

Reprinted with permission from the June 21st edition of The Legal Intelligencer. (c) 2019 ALM Media Properties. Further duplication without permission is prohibited.

In Fort Bend County v. Davis, 587 U.S. ___ (2019), the Court held that the requirement that a plaintiff in an employment discrimination case brought under Title VII, 42 U.S.C. § 2000e, et seq, file a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) prior to filing a complaint in court is a procedural and not a jurisdiction requirement.  Therefore, an employer’s failure to assert the absence of an appropriate charge of discrimination in a motion to dismiss results in a waiver of the defense.  The Supreme Court’s decision resolves a split in the circuits regarding whether the requirement is jurisdictional, and highlighted the importance of the charge of discrimination and the motion to dismiss in employment discrimination cases.

Legal Services Related to Commercial General Liability Coverage:

Key factors:

• Whether an Insurer has a duty to defend its insured;
• Whether an Insurer has a duty to indemnify, or pay a judgment entered against its insured;
• The Insurer’s right to audit its insured and assess an additional premium;
• Analysis of tenders for defense and/or indemnity by contractors and subcontractors on an additional insured and insured contract basis;
• What policy limits apply and whether they are excess or pro rata;
• Whether a loss falls within the:
• Expected or Intended Injury Exclusion;
• Contractual Liability Exclusion
• Liquor Liability Exclusion
• Employer’s Liability Exclusion
• Pollution Exclusion
• Aircraft, Auto or Watercraft Exclusion
• Damage to Property Exclusion
• Damage to Your Work Exclusion
• Whether a loss is covered under the Products-Completed Operations Hazard
• Whether a loss is covered under the Personal and Advertising Injury coverage.