There was little question that Judge Kaplan’s decision on Chevron’s motion for partial summary judgment would have unhappy things to say about the Lago Agrio plaintiffs. Judge Kaplan’s decision lives up to expectations, taking the Lago Agrio plaintiffs to task in just about every way. But somewhat to my surprise, Judge Kaplan denied Chevron’s motion, which sought a determination that the Lago Agrio judgment is not entitled to recognition, and even suggested grounds on which the Lago Agrio plaintiffs could ultimately prevail notwithstanding the fraud the judge found took place.¹ I would say that the Lago Agrio plaintiffs did more than dodge a bullet—they may have turned a corner on the allegations of fraud that have dogged them for some time now.

To recap my earlier post, Chevron marshaled its evidence of fraud in the Ecuadoran proceedings and sought summary judgment on the Lago Agrio plaintiffs’ affirmative defense of res judicata, which in effect had sought recognition of the Ecuadoran judgment. But rather than attempting to controvert Chevron’s evidence, the Lago Agrio plaintiffs claimed that despite appearances, they had not intended to plead that the Ecuadoran judgment should be given preclusive effect. That seemed to me a seriously high-risk strategy, since if the judge didn’t buy their claim—as, in fact, he didn’t—he was likely to find that they had conceded the facts Chevron had asserted—as, in fact, he did. The Lago Agrio plaintiffs said that they “did not concede or agree with” Chevron’s statement of the undisputed facts and that they would “disprove them at the appropriate time”, but Judge Kaplan rejoined that the “appropriate time” was now. Thus he held, correctly, that the facts Chevron had presented were undisputed for purposes of the motion.

The judge reviewed Chevron’s evidence of fraud in detail. I am not going to review it in depth here; the judge reviewed the points I raised in my post of April 16, 2012, among others—the authorship of the Cabrera report, the authorship of the Calmbacher report, and the authorship of the judgment itself. The judge held that on the undisputed facts:

The LAPs’ procurement of the termination of judicial inspections, the adoption of the global assessment, and the appointment of Cabrera all unquestionably were tainted. The secret participation of the LAP team in Cabrera’s activities and its secret drafting of the bulk of Cabrera’s report were tainted as well. Moreover, there are serious questions concerning the preparation of the Judgment itself in view of the identity between some portions of the Judgment and the Unfiled Fusion Memo, especially in light of the undisputed pattern of ex parte advocacy in the Lago Agrio Litigation and the undisputed instance of the LAP team’s coercion of and duress on one of the judges to obtain a desired result.

The judge easily dismissed the Lago Agrio plaintiffs’ claim that their affirmative defense didn’t mean what it seemed to mean, calling it an “unworthy pretense [ellipsis] a recently conceived argument intended to avoid meeting Chevron’s motion on its merits without moving to discontinue the defense without prejudice and risking an adverse ruling.”² Interestingly, he found that the stipulation that the Lago Agrio plaintiffs had filed just before the Second Circuit was to rule on the propriety of Judge Kaplan’s preliminary injunction, disclaiming any intention to seek recognition and enforcement of the judgment in New York, had no effect. The stipulation was merely a unilateral declaration of intent, not enforceable by any other party as a contract and nothing that could judicially estop the Lago Agrio Plaintiffs. Does this open the door for the Lago Agrio plaintiffs to seek recognition in New York? Maybe, but given that any such effort would likely land before Judge Kaplan, it seems unlikely.

So if the facts showing fraud are undisputed for purposes of the motion, and if the Lago Agrio plaintiffs could not escape a ruling by disclaiming any attempt to give the Ecuadoran judgment preclusive effect, why did Judge Kaplan deny the motion? In short, he held that Chevron had not sufficiently proved the materiality of the fraud. For instance, in light of the Ecuadoran court’s assertion that it did not consider the Calmbacher or Cabrera reports, Chevron had not satisfied its high burden to show the materiality of the authorship issues Judge Kaplan had identified. Judge Kaplan found on the undisputed record that the LAPs had improperly coerced the Ecuadoran judge to appoint Cabrera, but Chevron had not satisfied its burden to show that the decisions the judge made were incorrect on the merits and thus had not shown they were indisputably material.

With regard to the Calmbacher report, the judge also made a point that I was happily surprised to see. He pointed to evidence that Chevron had put in the record suggesting that Calmbacher was unhappy with the Lago Agrio plaintiffs. From this, the judge found that Calmbacher’s credibility was in issue and thus that Chevron was not entitled to summary judgment on the basis of Calmbacher’s testimony asserting that he was not the author of the report that the Lago Agrio plaintiffs ascribed to him. What’s remarkable about this is that neither party affirmatively challenged Calmbacher’s credibility. Judge Kaplan’s approach is in the tradition of the great Judge Frank, who was strict with summary judgments and who generally could find a question of credibility to prevent a summary judgment.³ I think this approach has much to recommend it, particularly given the overuse of summary judgment in the federal courts today, but I’ve always understood it to be a minority view, so I am glad to see Judge Kaplan apparently adopt it. But as I say, since neither party had raised the point about Calmbacher’s credibility, I am not sure this was the right case for applying Judge Frank’s approach.

Who comes out on top? I think this is a split decision. It seems pretty clear to me that there were shenanigans in the Ecuadoran proceedings. The Lago Agrio plaintiffs have denied it, but at every opportunity so far known to me, they have failed to put their money where their mouth is and rebut the evidence Chevron has adduced. On the other hand, Judge Kaplan has interjected the notion of materiality into the case. Assuming a fraud, did it matter materially to the outcome in Ecuador? On that point, the decision is a win for the Lago Agrio plaintiffs. I suspect that following this decision, issues of the materiality of the fraud will continue to play a role, not just in Judge Kaplan’s court, but in the Canadian and Brazilian proceedings for recognition and enforcement of the Ecuadoran judgment.

1. The judge did, however, grant Chevron’s motion to the extent he held the Lago Agrio plaintiffs’ affirmative defense of res judicata should be dismissed.
2. The judge’s conclusion rested mostly on an analysis of what the Lago Agrio plaintiffs had said at other moments in the litigation; I don’t review this history here.
3. There is a good discussion of Judge Frank’s approach in 10A Wright & Miller [section] 2726.