Breaking News: Second Circuit Vacates Chevron Preliminary Injunction

On Monday, the Second Circuit vacated Judge Kaplan’s preliminary injunction enjoining the Lago Agrio plaintiffs from seeking recognition and enforcement of the Ecuadoran court’s judgment against Chevron. An opinion is to issue in due course. The court’s reasoning is not clear from its brief, two-page order.

We have covered the injunction extensively. I initially reported on the injunction on March 8, 2011. Since then, I’ve editorialized a bit, arguing that the injunction did not sufficiently respect the principle of comity due to the other foreign courts that the Ecuadoran plaintiffs might ask to recognize and enforce the judgment. I’ve also pointed out that another Second Circuit panel seemed uncomfortable with the obvious tension between Chevron’s arguments today and its arguments when it sought to dismiss a prior US litigation on forum non conveniens grounds in favor of litigation in Ecuador. I reviewed the amicus briefs filed by law professors on both sides of the question. And I’ve reviewed some law review articles that address what one author calls the “transnational access to justice gap” illustrated by the Lago Agrio case.

Judge Kaplan, perhaps already aware of the Second Circuit’s decision and perhaps not, issued a memorandum on Monday that, to my way of thinking, is strangely defensive:

As this Court has noted from the very outset, a more extended schedule has been available to the LAP Representatives essentially for the asking, provided only that they and the other Ecuadorian plaintiffs (who have defaulted here) give sufficient assurance that nothing will be done to attempt to enforce the Ecuadorian judgment anywhere outside Ecuador pending the outcome of this case. They consistently have refused to give any such assurance. The urgency that has required the expedited schedule in this case is a product of those refusals. Nevertheless, on Friday, September 16, 2011, after the completion of fact discovery in preparation for the November 14 trial, the LAPs for the first time represented that:

“[T]he Ecuadorian Plaintiffs will stipulate not to commence pre-judgment attachment or enforcement proceedings anywhere in the world prior to entry of a ruling by the Provincial Court of Sucumbíos on the de novo appeal currently pending before that court in Ecuador.”

As the stipulation does not define the term “Ecuadorian Plaintiffs,” it is unclear whether it is offered on behalf of all the plaintiffs in the Ecuadorian litigation. Assuming that it is, however, this stipulation may put the trial setting in a new light and may warrant a continuance pending the resolution of the appeals pending in Ecuador by the Provincial Court of Sucumbios.

In light of the Second Circuit’s order, which continued the trial, it’s unclear whether the judge’s position makes much sense anymore, but we must await the Second Circuit’s opinion before making a judgment on that point. What’s noteworthy is that the stipulation treats the decision of the Ecuadoran appellate courts about the Ecuadoran judgment, rather than the decision of the American courts, as the decision that matters.

Michael D. Goldhaber has a nice summary of the oral argument at the Second Circuit at Am Law Daily. Two points of interest: first, the oral argument took place just days before the Second Circuit’s order. Second, the panel apparently devoted a substantial amount of argument time to the Ecuadorans’ petition for a writ of mandamus requiring Judge Kaplan to recuse himself. While the panel ultimately denied the petition, it seems they didn’t dismiss it out of hand in light of some of Judge Kaplan’s comments.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012.

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