## Facts

- In 1965, Michael Lombardi obtained an exclusive franchise from Success Motivation Institute, Inc. (SMI) to distribute SMI motivational materials in Japan and formed Success Motivation Institute of Japan, Ltd. (SMIJ) to run the franchise.
- After Michael Lombardi died in 1983, Iris Lombardi assumed control of SMIJ.
- Lombardi alleged SMI’s principal owner, Paul J. Meyer, pressured her to invest in a real-estate project, demanded increased royalties, threatened to open a competing business, and sought territorial transfers.
- Lombardi also alleged Meyer threatened not to renew or to cancel the franchise, to recruit SMIJ’s agents and distributors, and to put her out of business.
- Lombardi entered a buy-sell transaction to sell her stock interests in SMIJ and a related entity to Meyer, memorialized in a Buy–Sell Agreement.
- The agreement set a $2,250,000 purchase price, including a $250,000 cash down payment and a $2,000,000 promissory note at 10% interest with monthly payments over 15 years.
- Litigation occurred in Japan involving aspects of the parties’ business relationship and resulted in a final Japanese judgment.
- SMIJ and Lombardi later sued SMI and Meyer in federal court in the Western District of Texas, asserting claims arising from the stock sale and related conduct.
- Defendants sought summary judgment, arguing the Japanese judgment barred the Texas action on claim-preclusion grounds; the district court agreed and entered summary judgment for defendants.

## Issues

1. What law governs the claim-preclusive (res judicata) effect of a foreign-country judgment in a federal case.
2. Whether the district court erred by applying Fifth Circuit domestic res judicata doctrine to a Japanese judgment without evaluating Japanese preclusion rules and comity considerations.
3. Whether, under the proper framework, the Japanese judgment precluded the Texas claims as the same cause of action (or as claims that could have been brought) in the Japanese proceeding.

## Decision

- The Fifth Circuit reversed the summary judgment and remanded.
- The court held the district court erred by applying Fifth Circuit res judicata rules to determine the preclusive effect of the Japanese judgment.
- The court concluded the record and analysis did not justify treating the Japanese judgment as broadly claim-preclusive against the Texas action without assessing Japanese preclusion law and related comity factors.
- Because the summary judgment rested on an incorrect legal framework and unresolved questions about the foreign judgment’s scope, summary judgment for defendants was improper.

## Legal Principles

- The preclusive effect of a foreign-country judgment is not determined by mechanically applying domestic federal res judicata doctrine; courts must account for the foreign legal system’s preclusion rules and limits.
- Recognition and preclusive effect of foreign judgments turn on comity-based considerations, including competent jurisdiction, procedural fairness, and the foreign system’s definition of claim identity and merger/bar.
- On summary judgment, where the asserted preclusion depends on foreign law and the scope of the foreign judgment, the moving party must show entitlement to judgment under the correct legal framework; legal errors in the preclusion analysis require reversal on de novo review.

## Conclusion

The Fifth Circuit held that claim preclusion based on a Japanese judgment required a comity-sensitive analysis grounded in Japanese preclusion law, not Fifth Circuit domestic res judicata rules, and it therefore reversed the district court’s summary judgment and remanded for further proceedings.


Success Motivation Inst. of Japan, Ltd. v. Success Motivation Inst., Inc., 966 F.2d 1007 (5th Cir. 1992)