Update on Chevron’s Motion for Partial Summary Judgment

A petard

A petard
A petard
As I noted in a previous post, the Lago Agrio plaintiffs had pleaded—or at least it seemed they had pleaded—res judicata as an affirmative defense to Chevron’s RICO claims, arguing that the Ecuadoran judgment should have preclusive effect and should bar relitigation of Chevron’s claims of fraud. When Chevron sought partial summary judgment on the affirmative defense, marshaling all of its evidence of fraud in Ecuador, the Ecuadorans did not attempt to rebut Chevron’s evidence but instead argued that they were not, in fact, asking the court to give preclusive effect to the Ecuadoran judgment. As I pointed out in the prior post, even if the Ecuadorans’ assertion (which seemed to me implausible) were correct, another defendant, Stratus, had expressly pleaded that the Ecuadoran judgment should be given preclusive effect, and Chevron’s motion for partial summary judgment would proceed against Stratus even if the Ecuadorans were able to rely on the supposed ambiguity in their own pleading to wriggle out from their predicament.

Now Stratus has adopted the same strategy as the Ecuadorans. Rather than attempting to rebut Chevron’s evidence of fraud, it has filed an amended answer—as it had a right to do under FRCP 15(a)(1)(A)—that omits the affirmative defense of res judicata. Its response to Chevron’s motion for summary judgment says simply that the motion is moot in light of the amendment.

Chevron has filed a reply brief that accuses Stratus of improper gamesmanship. I think the key part of the brief is this footnote:

The withdrawal of claims in the face of adjudication is disfavored. See Jones v. SEC, 298 U.S. 1, 20 (1936) (“Having been put to the trouble of getting his counter case properly pleaded and ready, [a party] may insist that the cause proceed to a decree.” (internal quotation marks and citation omitted)); Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir. 1990) (identifying factors for withdrawing claim); D’Alto v. Dahon Calif., Inc., 100 F.3d 281, 284 (2d Cir. 1996) (denying motion to withdraw where “no reason was offered by plaintiffs, and none was sought by the court, as to why venue in the state court would be more favorable.”); Wakefield v. Northern Telecom Inc., 769 F.2d 109, 114 (2d Cir. 1985) (“Weight must also be given to the fact that [defendant] has had to defend this claim, and considerations of fairness require some showing as to the plaintiff’s need to pursue it a second time elsewhere.”); Kapoulas v. Williams Ins. Agency, Inc., 11 F.3d 1380, 1383 (7th Cir. 1993) (affirming denial of motion to withdraw claim where, “upon questioning by the district court, the plaintiffs responded that they intended to refile the case in state court, clearly evidencing an intent to avoid further adverse rulings by the district court”) (emphasis added).

If this footnote is basically right, then given what we know about Judge Kaplan’s view of the Ecuadoran proceedings, I think that Stratus and the Ecuadorans are in great danger of losing this motion. As I argued in the prior post, I think they really have no one but themselves to blame if that happens—if they had no intention of defending the Ecuadoran judgment they should not have pleaded the affirmative defenses they did.

If Judge Kaplan does grant the motion, then things get interesting. Will his decision have issue-preclusive effect in Canada or Brazil? In part, that depends on how quickly the RICO case will go to judgment relative to how quickly the Canadian and Brazilian courts will act. But the Ecuadorans could find themselves hoist with their own petard—having pleaded that the Ecuadoran judgment was entitled to preclusive effect on the question of fraud, they may instead find themselves facing arguments that Judge Kaplan’s judgment on the question of fraud is entitled to such effect. Stay tuned!

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5 responses to “Update on Chevron’s Motion for Partial Summary Judgment”

  1. John Moniker

    You’ve got it wrong, SJ on the claims would likely be immediately appealable putting Kaplan right back in front of the Circuit. He’s smarter than that, will wait for SJ on the main claims.

    1. John, that’s a very good point. You may well be right about the timing of Judge Kaplan’s decision. But my point stands—whether he decides the issue now or later in the case, I think that the way the Ecuadorans and Stratus pleaded their affirmative defenses puts them in danger of a judgment declaring that the Ecuadoran judgment is not entitled to recognition. They would not have faced that danger, now or later in the case, had they not pleaded res judicata.

      Also, I am not sure the policy of the Second Circuit’s decision suggests that the court would be likely to reverse Kaplan’s decision (assuming that he finds the judgment not entitled to recognition). The gist of the Second Circuit’s decision was that a judgment debtor can’t preemptively seek a declaration of unenforceability. Is that what’s going on here? I don’t think so, unless you credit the Lago Agrio Plaintiffs’ assertion that when they pleaded res judicata, they didn’t have the Ecuadoran judgment in mind.

  2. […] whether there is a deeper strategic purpose to bringing this claim now, in New York. I’ve expressed concern about the risk that Judge Kaplan will rule that the Ecuadoran judgment is not entitled to […]

  3. […] 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 […]

  4. […] decision denying Chevron’s motion for summary judgment, Judge Kaplan threw me for a loop by agreeing with me that the Lago Agrio plaintiffs, despite their protestations to the contrary, had pleaded that the […]

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