Case of the Day: DeJoria v. Maghreb Petroleum Exploration

The case of the day is DeJoria v. Maghreb Petroleum Exploration S.A. (5th Cir. 2019). I covered a prior Fifth Circuit decision back in 2015, and an even earlier district court decision in 2014. John Paul DeJoria,the billionaire behind the Paul Mitchell hair care line, went into the oil exploration business, hoping to discover reserves in Morocco. The Moroccan government supported the project. But when his venture failed to find the hoped-for reserves, he had to flee the company. Eventually he was sued by the new management of the venture, Maghreb Petroleum Exploration, sued DeJoria in Morocco and obtained a judgment for more than $100 million. Maghreb came to Texas to seek recognition and enforcement.

The district court at first refused recognition on the grounds that the Moroccan judiciary “does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” That is pretty stiff medicine, and I criticized the holding in my 2014 post. The Fifth Circuit reversed and remanded. It noted that under Texas’s enactment of the UFMJRA, only systematic inadequacy of the foreign judiciary was a defense to recognition; a lack of impartial tribunals or due process in the particular proceeding was not enough.

After remand, DeJoria’s lawyers testified before the Texas legislature in favor of an amendment to the judgment recognition statute. Texas ended up adopting the UFCMJRA, the more modern statute, which does treat case-specific failures of due process as a basis for non-recognition. But the new Texas statute, unlike the uniform law itself, included language applying the new law to pending cases. “The only pending case the legislators were told about was this one.” The district court held that the Texas constitution did not forbid retroactive application of the new law. The Fifth Circuit, which affirmed that aspect of the district court decision, was right to note the irony:

We are mindful that the whiff of home cooking also pervades the Texas side of this case. There is a deep irony in allowing DeJoria to contend he was denied due process in Morocco when it was his lobbying efforts that changed the rules of the game midway through the proceedings in the United States. … But in the retroactivity context as in others, “unfair does not always equal unconstitutional.” And it cannot be said that a state’s desire to provide immediate protection to the due process rights of its citizens is not compelling. When balanced against the slight imposition on a right of dubious provenance, retroactive application of the updated Recognition Act does not violate the Texas Constitution.

Once it held that it could apply the new Texas law, the district court went on to find that the Moroccan proceeding had denied DeJoria due process. In particular, it found “that DeJoria was unable to attend the Moroccan proceedings, that he was unable to obtain counsel to represent him in those proceedings, and that, although the Moroccan court relied on an expert’s opinion to determine damages, that expert lacked independence.” The interesting point on appeal was that the Fifth Circuit held that it would only review the findings of fact for clear error, even though there had been no evidentiary hearing and the court had decided the issue on a “motion for nonrecognition” supported by affidavits. As the Fifth Circuit recognized, this procedure, while apparently permitted in Texas procedure, is an anomaly in federal court. An action for recognition and enforcement is like a common law action on a judgment, that is, a claim that must be pleaded and proved just like any other. Under the Federal Rules of Civil Procedure, if DeJoria wanted to avoid a trial, he should have brought a motion for summary judgment, and the court could not then have made findings of fact, at least if the facts were disputed. On the other hand, there’s at least one analogous law, the FAA, that does allow recognition of an arbitral award on a motion. But in any event, neither party objected to the procedure, and so the court did not have to decide whether it was proper. Applying the clear error standard, the Fifth Circuit affirmed the findings of fact. Its conclusion led easily to the conclusion that DeJoria had established a defense to recognition, given that the ability to present one’s case to a court is at the heart of due process.

2 thoughts on “Case of the Day: DeJoria v. Maghreb Petroleum Exploration”

  1. It is fascinating from a legal perspective to notice how the Federal Circuit Court distinguished between systematic failures of due process and case-specific ones. The systematic one is the one that should prevent enforcement. However, with enactment of the new statue, that important difference is thing of the past. This is an unfortunate change in the law.

    1. Thank you for the comment, Bashar. In the context of the Chevron/Ecuador case, I’ve previously written that as long as a foreign judiciary is not systematically inadequate, it does not make much sense to have case-specific fraud as one of the statutory exceptions to recognition. But that said, the uniform acts include both systematic and case-specific frauds and failures of due process as defenses. Texas was unusual, before the law was amended, in recognizing only one.

Leave a Comment

Your email address will not be published. Required fields are marked *