Lago Agrio: Chevron Seeks Default Judgments

In the Lago Agrio RICO case in New York, you’ll recall that the court entered a final judgment against Steven Donziger and against the two Lago Agrio plaintiffs who appeared and defended in the action, Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje. But there were many other LAPs who were named as defendants but who defaulted. A few days ago Chevron moved for entry of default judgment against those LAPs. It intends at least to seek to hold them liable for the costs Chevron has already been awarded against Donziger. It may have other purposes in mind, too, though they are less immediately apparent. (Perhaps Chevron is thinking ahead to a trial on the merits in Canada,[efn_note]See my comment below the post—this phrase may have confused you![/efn_note] and perhaps the entry of judgment is technically necessary to invocation of collateral estoppel in that action?)

Chevron’s counsel are usually very sophisticated on procedural matters. For the most part they have played three-dimensional chess to Donziger’s checkers—I have written about several examples of this, which I won’t recount here. But I find Chevron’s latest move puzzling and problematic. The ordinary rule in federal practice is that the Court enters a single final judgment rather than piecemeal judgments. And a court of appeals lacks jurisdiction to hear an appeal from a judgment that disposes but some but not all of the claims. There is an exception to the rule, of course. FRCP 54(b) provides:

When an action presents more than one claim for relief—whether as a claim, counterclaim, crossclaim, or third-party claim—or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay. Otherwise, any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.

If the rule applies, then a party can immediately appeal from the partial judgment.

Now, I have looked through the docket. It’s very large, so I may have missed something, but I don’t see any motion for entry of a separate and final judgment under FRCP 54(b). So Chevron’s latest motion seems to highlight, to me, the possible non-final status of its judgment against Donziger and the two LAP representatives, and thus the possibility of a jurisdictional issue with the Second Circuit’s decision. On the other hand, the judgment itself includes language from FRCP 54(b) that suggests that Judge Kaplan had the rule in mind when he entered the judgment.

The case doesn’t seem like a good candidate for a separate and final judgment that separates the claims against the LAPs generally from the claims against the two LAP representatives, because the claims all stand on the same footing. So I have the following questions: (1) is it proper for a court to issue a separate and final judgment sua sponte rather than on the motion of a party? (2) assuming that such a judgment is permissible, would a decision to enter such a judgment here be a sound exercise of the court’s discretion, given the close relationship between the claims against all the LAPs? and (3) should the judgment be read as a separate and final judgment?

If after answering these questions we conclude that a separate and final judgment either didn’t enter or shouldn’t have entered, the question then is: what is the procedural consequence, if any? Certainly if Donziger or the LAP representatives wanted to raise an issue like this, the time to do it would have been in the Second Circuit appeal.

7 thoughts on “Lago Agrio: Chevron Seeks Default Judgments”

  1. Alessandro Spinillo

    Dear Ted,

    Very interesting the possibility of a trial on the merits in Canada. On what basis would Canadian courts assume jurisdiction over it?

    Let me recap and please correct me if I am wrong:

    At first, Chevron argued that US courts did not have jurisdiction to hear the Lago Agrio plaintiffs’ environmental claim. The US courts agreed with Chevron’s argument. Subsequently, plaintiffs filed the claim in a competent Ecuadorian court and obtained monetary damages for USD 9.5 billion against Chevron. Chevron then moved to US courts and pursued a massive (and quite intimidating) RICO litigation to frame the Ecuadorian ruling as fraudulent, rendering it unenforceable in the United States. Chevron also availed itself of a more than controversial ICSID arbitration award upholding that the Ecuadorian ruling amounted to denial of justice under the Ecuador-US BIT. Plaintiffs nonetheless moved to Argentine, Brazilian and Canadian courts seeking to seize assets of Chevron’s subsidiaries domiciled in those countries (and not involved in the underlying dispute). All these courts found no basis for corporate veil-piercing and left the Lago Agrio plaintiffs empty-handed. The Brazilian judge in addition cited the above-mentioned RICO action where it was established the existence of fraud in the Ecuadorian proceedings. The Argentine Supreme Court, by its part, added that the seizure of Chevron’s subsidiaries assets in that country could affect national interests by jeopardizing Argentine energy policy. Indeed, prospects for plaintiffs for enforcing the Ecuadorian ruling in countries other than Ecuador seem very slim.

    Bottom line: Chevron, by means of costly legal proceedings, is buying immunity from jurisdiction and impunity. In effect, according to Chevron US courts have no jurisdiction to pass judgment on the merits of the claim whilst Ecuadorian courts (and the whole Ecuadorian judicial system) are unfit for that purpose. Meantime the merits of the plaintiff´s claim remain unheard and Chevron is (so far) getting away with it. The situation is one of notorious injustice. It is true that the Ecuadorian proceeding was marked by irregularities but the US RICO action was no less so, particularly in what concerns payments to a key witness. I am now pleased to learn of that possibility of a trial on the merits in Canada.

    Best

    A.

    1. Alessandro, I was a little loose with my language. I mean trial on the merits of Chevron’s defense to recognition and enforcement, namely that the Ecuadoran judgment is fraudulent. This would happen if the LAPs win the pending appeal and the Canadian courts hold that Chevron’s indirect Canadian subsidiary may be liable. I don’t mean trial on the merits of the environmental claims themselves. Apologies for confusing you!

        1. I hope I didn’t lead you too far astray! And I take your broader point about the seeming unfairness of first seeking to have the case litigated in Ecuador and then asserting that the Ecuadoran judgment was fraudulent. You might be interested in discussions we had several years ago on the topic. My view is that the law should provide some sort of notion of “accepting the risk.” Perhaps Chevron thought it was getting a corrupt right-wing court, but because of the political change in Ecuador at the relevant time, it ended up with a corrupt left-wing court (assuming you accept the basic findings of fact in the New York case, from which Donziger did not appeal). Or perhaps politics didn’t play a role and the corruption was driven purely by money (remember that Guerra approached Chevron for a bribe first!) But Chevron accepted these kinds of risk.

          But this doesn’t seem to be the law. And in any case there were two kinds of corruption in the Ecuadoran case: the supposed Guerra corruption (I have cast doubt on Guerra’s testimony more than once); and the Cabrera fraud. It’s one thing to say that Chevron assumed the risk that the Ecuadoran courts were no good. It’s another thing to say that it assume the risk that its opponents would submit a fraudulent expert report in the Ecuadoran case.

          1. The Cabrera report wasn’t fraudulent. It was truthful and accurate. Ted, how many times have you been to Ecuador to see the pits that Texaco built and contaminated and the pits that Texaco lied about remediating? I saw them eight times from 2008 until 2017. Texaco did not remediate any pits. They just threw dirt on topic of the toxins to hide them. Chevron knows this. How do we know Chevron knows? Because one of Chevron’s consultants sent us recorded video showing Chevron employees laughing about finding contamination in pits that Texaco lied about cleaning. Chevron assume risk? Hell, no. Chevron thought it would win in Ecuador so the oil bully never released information about Guerra asking them for a bribe. When Chevron lost, then Chevron returned to Guerra and, guess what, Guerra tells Chevron about our “bribe”. There was no bribe. The real bribe was Chevron $2 million plus payment to Guerra for various benefits, including a move to the US, compared to the minimum wage he made as a former Ecuador judge, charged with corruption years before Chevron lost the case. I will be 60 in July, and I have been around US politics and US litigation since I was 25. US corporations lie and commit crimes all the time. Sometimes US courts let them get away with it. Chevron and Kaplan are no different.

          2. Karen, thanks for writing. I’ve only been there once to see the pits, in 2014—I wrote about my experience here and here.

            The reason I say the Cabrera report was fraudulent is that it was presented as the report of a neutral expert when in fact it was written by consultants hired by the LAPs and that fact was not disclosed to the Ecuadoran court. I have written about the Cabrera report several times, including here. I am aware of the argument that it was perfectly proper under Ecuadoran law to act as the LAPs acted. I find that claim not credible in light of the Ecuadoran lawyers’ candid expression of concern that they could go to jail on account of what the LAPs had done.

            Nothing I have said in this post is meant to take a position one way or the other on what pollution existed at the time of the Lago Agrio litigation or on who should have been liable under Ecuadoran law to the LAPs.

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