Some Initial Thoughts On The Role of Materiality In Recognition and Enforcement Cases

In his recent 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 Ecuadoran judgment had preclusive effect; finding that the judgment was “tainted” in various apparently significant respects by fraud; and yet still denying the motion. Judge Kaplan’s decision rested mostly on Chevron’s failure to prove that there were no genuine issues of material fact regarding the materiality, or lack of materiality, of the frauds it had cited.

The idea that a fraud must be material to have an effect on the recognition or enforcement of a foreign judgment is an issue we haven’t considered before at Letters Blogatory. I see the point of a materiality requirement if the claim is that the judgment was obtained by fraud. So, for example, if the claim is that a judgment creditor submitted a fraudulent expert report to the foreign court, it’s sensible to ask whether the report had any bearing on the foreign court’s decision.

But Chevron isn’t just asserting that the Ecuadoran court itself was defrauded. It’s also claiming that the Ecuadoran court was not impartial, and it indicts not just Judge Zambrano, but the Ecuadoran judiciary as a whole:

The endemic corruption in the Ecuadorian judiciary has reached shocking levels, as the fraud here and in the El Universo case demonstrate. At least in politicized cases like this one, where President Correa, who controls the Ecuadorian judiciary, has made his interest in the outcome clear, Ecuadorian judgments do not merit recognition in U.S. courts. Defendants have offered no contrary evidence, instead relying on the false assertion that Chevron may not present this argument—which Chevron has already refuted and this Court already rejected. But it is Defendants’ burden to prove the essential elements of their affirmative defense, and this Court should not recognize Defendants’ judgment absent a showing that the Ecuadorian judiciary provides impartial tribunals and due process. Defendants cannot make this showing.

Does it make much sense to ask about the materiality of a fraud when the claim is not just fraud but that the courts of the foreign country are not impartial and do not provide due process? Suppose that in a foreign country cases were decided by wager of battle or wager of law instead. It seems obvious to me that the judgment of such a court would not be entitled to recognition and enforcement in the United States on the grounds that the foreign tribunals did not provide due process of law. But in such a case, does it make sense to imagine the losing party in the foreign case has to prove that the case would have come out the other way had only the foreign judiciary accorded him due process? That seems perverse. Isn’t it better to say that if the foreign tribunals failed to provide due process, as Chevron has alleged happened in Ecuador, the right thing to do is simply to give the foreign proceedings no effect rather than to force the judgment debtor seeking to avoid recognition and enforcement to litigate the case again?

I don’t claim to have a strong sense of just how right or wrong Judge Kaplan’s decision on the issue of materiality was, but I’ll be thinking about it and I encourage readers to do the same.

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.

One thought on “Some Initial Thoughts On The Role of Materiality In Recognition and Enforcement Cases

  1. Correct begging of the question. Is materiality really the only issue? Nonsense. Now even Judge Kaplan is looking askance at the sustainability of Chev’s claims. Wake-up call.

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