More Thoughts On The Second Circuit Decision In Chevron Corp. v. Naranjo

In my last post on Chevron v. Naranjo, I disagreed with the notion that some peculiarity of the Uniform Foreign Money Judgment Recognition Act implied that a party facing recognition and enforcement proceedings could not seek a declaration that the foreign judgment was not entitled to recognition. But a comment by Roger Alford at the Kluwer Arbitration Blog prompted some more thought. Roger writes:

It appears that the Ecuador plaintiffs will not seek to have the judgment enforced within the United States. Ecuador Plaintiffs’ lawyer James Tyrrell stated yesterday that “The Ecuadorean plaintiffs are not coming to New York to enforce this judgment.” Given the locus of Chevron’s assets, it is not obvious why the plaintiffs have adopted this strategy, unless they have reason to believe that there is a high probability that the judgment would not be enforced.

Why would the plaintiffs disclaim any intention to seek recognition and enforcement in the United States? Well, in the RICO case pending in New York, the Ecuadorans—who there are defendants rather than plaintiffs—have raised lack of personal jurisdiction as a defense. Suing for recognition and enforcement in New York would have waived the personal jurisdiction argument and allowed Chevron to bring its RICO claim as a counterclaim in the recognition and enforcement case.

Moreover, if the Ecuadorans intended to seek recognition and enforcement in New York, then surely they would already have done so by asserting a counterclaim in the RICO case. Under Rule 13(a)(1), maybe they would have had to assert their claim as a counterclaim, because the counterclaim “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim,” i.e., Chevron’s claim for a declaratory judgment.

So there are pretty strong reasons to take Tyrrell at his word and believe that the Ecuadorans really do not intend to seek recognition and enforcement in New York or elsewhere in the United States. If that’s right, then even if, in principle, a declaratory judgment action is available to a party in Chevron’s situation under the UFMJRA, Chevron wouldn’t be able to make the necessary showing of an actual case or controversy that is sufficiently concrete to permit the court to hear its claim for declaratory relief.

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 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is 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, 2014, and 2015.

9 thoughts on “More Thoughts On The Second Circuit Decision In Chevron Corp. v. Naranjo

    1. Kent, thanks very much for commenting!

      On Letters Blogatory, I haven’t really commented on my impressions of the strength of Chevron’s allegations of fraud in the Ecuadorian proceedings. That’s partly because I don’t feel qualified to comment, not having read all the evidence submitted, and partly because I want to ensure that readers can have confidence that I am commenting impartially on this case—I have been critical of both sides at various junctures and I have no dog in the fight, so to speak. (I haven’t always been successful in avoiding criticisms of partiality, despite my best efforts, as the comments to one of my posts on the Belfast Project subpoena case show!)

      My own personal view is that the outcome of a recognition and enforcement case in the US should not turn on whether or not Chevron is right in alleging that the Ecuadorian proceedings were corrupt. I think there are three reasonable positions one could take:

      (1) Chevron is estopped to assert corruption in Ecuador, because it successfully persuaded the court in New York to dismiss the case in favor of litigation in Ecuador by touting the quality of the Ecuadorian judiciary.
      (2) Chevron is estopped unless it can prove that the Ecuadorian judiciary changed in relevant ways between the forum non conveniens dismissal and the Ecuadorian judgment.
      (3) Chevron is not estopped, because it expressly reserved the right to assert the grounds permitted by the UFMJRA.

      There’s no clear answer on this yet, but I think that option (1) is the best view, because I think that, having obtained the forum of its choice, Chevron (I refer to Chevron even though we’re really talking about the predecessor in interest, Texaco) essentially assumed the risk that the Ecuadorian courts would not prove to be as fair or impartial as Chevron claimed they would be. I expressed this view in my comments on the Whytlock & Robertson paper on the “Access to Justice Gap” in transnational litigation. I would add to the rationale I’ve previously given that a categorical rule of estoppel has an additional advantage of simplicity. Where a party has chosen a forum, a categorical rule of estoppel does not permit ancillary litigations that require US courts to sit in judgment on foreign judiciaries (a task which comity concerns should make them reluctant to undertake except when truly necessary). If either view (1) or view (2) is right, then it may not matter whether Chevron’s assertions about corruption are true or not.

      I’ll be happy to know your response to this!

    2. I should add a fourth possibility:

      (4) Chevron is estopped to assert that “the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law” (UFMJRA § 4(a)(1)), but not that “the judgment was obtained by fraud” (UFMJRA § 4(b)(2)). This seems like a live possibility to me. It would prevent Chevron from arguing that the judiciary it had previously touted as excellent was in fact terrible, but it would allow Chevron to argue that fraud occurred in the particular case. The comity considerations here are less fierce than in option (2), because the US court would not be sitting in judgment on the foreign judiciary as a whole but rather on the facts of a particular case. If option (4) is correct, then whether Chevron can prove fraud may well be relevant to the outcome of a New York recognition and enforcement case.

  1. Ted, Kent Robertson misleads your readers.

    Chevron continues to say that eight courts found fraud in the Ecuador trial. This is not correct. Eight courts issued crime-fraud exceptions, which is very different, and Chevron knows this. It clearly does not stop Kent from repeating a lie. For example, he said the same thing to Courthouse News on December 7th, and the legal publication ran this correction:

    EDITOR’S NOTE: An earlier version of this article quoted a Chevron spokesman as saying that eight federal courts had found the Ecuadorean plaintiffs had committed fraud. In fact, the courts issued crime-fraud exception findings during discovery. Chevron’s fraud allegations against the Ecuadorean plaintiffs remain unproven.

    1. Karen, thanks for the comment! I do not want to get in the middle of the dispute between you (the plaintiffs’ PR rep) and Kent (Chevron’s PR rep) on the facts of what happened, particularly because it is my view, as explained in my response to Kent’s comment, that it may not matter whether Chevron is right or wrong about its allegations of corruption in Ecuador.

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