The Motions to Dismiss in Yaiguaje

As promised, I have dragooned Letters Blogatory’s Canadian correspondent, Antonin Pribetić, into posting a quick comment on the recent developments in the Yaiguaje case. Thanks, Antonin! Stay tuned tomorrow for a first look at Donziger’s new proposed counterclaims in the RICO case.

The affidavits filed by the Chevron defendants each address the issues of inter-corporate governance and lack of privity between Chevron Corp. and the Canadian subsidiaries. Chevron Canada states that it is a “seventh level indirect subsidiary” (Wasko Affidavit filed on behalf of Chevron Canada, para. 7) with an independent board of directors (Wasko Affidavit filed on behalf of Chevron Canada, para. 10) and “Chevron Corp. does not guarantee Chevron Canada’s debts.” (Wasko Affidavit filed on behalf of Chevron Canada, para. 17).

Chevron Standard Limited owns 100% of the shares of Chevron Canada Finance Limited, an inactive investment company and sixth level indirect subsidiary of Chevron Corp. (Wasko Affidavit filed on behalf of Chevron Canada Finance Limited).

Chevron Corp. does not own the shares of Chevron Canada or Chevron Canada Finance Limited (Soler Affidavit filed on behalf of Chevron Corp., para. 8). None of Chevron Corp’s officers or directors serve on the boards of Chevron Canada or Chevron Canada Finance Limited (Soler Affidavit filed on behalf of Chevron Corp., paras. 11-14).

The key jurisdictional issue as it applies to Chevron Corp. as a parent company actually is quite simple: Is there an impeachment defence (other than fraud (going to jurisdiction), natural justice (due process) or public policy), to enforcement of a foreign judgment?

The answer is yes.

The Court of Appeal for Ontario in Lloyd’s v. Meinzer, 2001 CanLII 8586 (ON CA), notes a “non-party” impeachment defence:

The decision of Henry J. in Four Embarcadero Center Venture v. Kalen Reflex, (1988), 65 O.R. (2d) 551 (H.C.J.), involving a California default judgment, is the oft-cited authority on the tests for enforcement of a foreign judgment by an action on the judgment in Ontario. The judgment sought to be enforced must be both final and unimpeachable. Henry J. set out five grounds upon which a foreign judgment could be impeached:

(a) the judgment is a nullity because the court did not have jurisdiction over the subject matter and the parties;
(b) the defendant was not a party to the foreign action;
(c) the judgment was procured by fraud on the court;
(d) there was a failure of procedural natural justice; and,
(e) to enforce the judgment would be contrary to public policy in Ontario.

In my view, with the exception of Chevron Corp., the other named defendants will likely rely on the impeachment defence that each was not a party to the original suit. With respect to Chevron Corp., while it is a judgment debtor to the Ecuadorean judgment, it has no corporate presence in Canada, such that there is no basis for asserting personal jurisdiction over it. Also, it is difficult to discern a “real and substantial connection” between the subject-matter of the dispute leading to the Ecuadorean judgment and Chevron Corp. to Ontario, or Canada for that matter.

However, since we have not yet seen any responding affidavits from the plaintiffs regarding reverse veil-piercing, alter ego or related allegations, it is too early to tell whether the plaintiffs will be able to resist the defendants’ jurisdictional motions at this early stage of the Ontario enforcement proceedings.

3 thoughts on “The Motions to Dismiss in Yaiguaje

  1. Thanks, Antonin, for the informative guest-post. One question: are the claims against the two Canadian affiliates wholly derivative of the claim on the judgment against Chevron itself? If the plaintiffs don’t need to prove that the Ecuadoran judgment is entitled to recognition and enforcement against Chevron in order to assert a claim against the two affiliates, then I understand your point about the affiliates defending on the grounds that they were not parties to the Ecuadoran proceedings. But if the plaintiffs have no claim against the two affiliates unless they first obtain recognition of the judgment against Chevron itself, then your point is less clear to me. In that case, wouldn’t the plaintiffs be able to recover if they could show, under Canadian law, that the two affiliates are liable for the debts of Chevron (e.g., on a reverse veil-piercing theory), regardless whether the affiliates were parties to the Ecuadoran litigation?

    1. Ted,

      In my view, the claims against the two Canadian affiliates are wholly derivative of the claim on the judgment against Chevron itself. The issue is whether the Ecuador judgment is final and conclusive vis-a-vis the named defendants, in order for res judicata and cause of action and issue estoppel to operate. In order for the plaintiffs to recover against the two affiliates as liable for the debts of Chevron (e.g., on a reverse veil-piercing theory), the plaintiffs must establish that the two affiliates were under the complete control of Chevron Corp and/or that the two affiliates were set up to fraudulently avoid the debts and obligations of Chevron Corp.

      Antonin

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