As promised last week, here are some comments on Steven Donziger’s Second Circuit brief, which his lawyer filed before the holiday.
I was struck by the lack of connection between the fact section of the brief and the argument section. The brief gives a long and pretty compelling narration of the history of the case, including Donziger’s take on Chevron’s supposed litigation misdeeds in Ecuador and in the United States. I’ll discuss the narrative in a bit. But the grounds for reversal have little to do with the facts (though they do have to do with some of Chevron’s more arcane maneuvers, such as its decision to drop its claims for damages). According to Donziger, the District Court lacked subject-matter jurisdiction because Chevron lacked standing; the RICO statute does not create a private right of action for equitable relief; The judgment offends comity; and Chevron should have been estopped to impugn the Ecuadoran judiciary in light of its representations to the US courts in the original Aguinda case.
I have commented on the standing argument before. The beauty of this argument, for Donziger, is that the Second Circuit reviews the judge’s holding as to jurisdiction de novo, though as the new brief acknowledges, whether Judge Kaplan’s findings of fact simply vanish in a puff of smoke in the event the Second Circuit agrees that he lacked jurisdiction is a separate question. Given our appellate courts’ reluctance to revisit findings of fact, particularly when based on determinations about credibility, it seems to me that if the Second Circuit wants to rule in Donziger’s favor, it is much more likely to do it on a point such as lack of jurisdiction than on a point that would require it to say that the judge decided the facts wrongly.
The gist of the argument is this: by the time of the judgment, Chevron had dropped all its clams for damages (thus ensuring that Judge Kaplan rather than a jury would be the finder of fact) and had dropped all its claims for an injunction forbidding the LAPs to seek recognition and enforcement of the Lago Agrio judgment in foreign courts (a wise concession in light of the Second Circuit’s decision in Naranjo). The LAPs have not sought recognition and enforcement in the United States. 1 So on the one hand, in order to give the injunction they sought some bite, Chevron had to seek relief that would apply to efforts to seek recognition and enforcement abroad. But on the other hand, in light of the comity concerns expressed in Naranjo, Chevron had to seek relief that wouldn’t preclude foreign courts for deciding for themselves whether to give effect to the judgment. And so, Donziger argues, Chevron really isn’t seeking meaningful relief at all. Pretty elegant argument. On the other hand, the seizure of Chevron’s trademarks in Ecuador does provide a hook for arguing that Chevron has suffered harm that could be redressed by the injunction. Even there, though, Donziger’s brief works to show that this is implausible in fact.
Donziger advances another standing argument that I haven’t focused attention on before: causation. As I noted in the post on the LAPs’ brief, the intermediate appellate court in Ecuador had the power to make findings of fact and conclusions of law de novo, as is usual in civil law jurisdictions. Because there is no allegation of corruption on the part of the appellate judges, Donziger says that Chevron’s asserted injury cannot be causally linked to the wrongdoing it claims in the Ecuadoran proceedings, all of which occurred in the trial court. Gupta illustrates the point with a nice analogy:
Chevron’s position is akin to that of a criminal defendant who complains of procedural irregularities in a trial and is retried and convicted once again, but continues to complain about the first trial in his habeas petition. In that situation, no sensible reviewing court would reach out to overturn the second trial.
I think this is a good argument, though we have to make sure it doesn’t prove too much: not every inability to prove causation amounts to a lack of standing, after all. Is this really a constitutional argument, or is it just an argument that Chevron failed to prove one of the elements of its RICO case?
The brief spends a fair amount of time rebutting Judge Kaplan’s conclusion that the intermediate appellate court had not truly applied de novo review, arguing mainly that the question whether the court applied the correct standard of review is one of law, not fact. The Ecuadoran Supreme Court held that the intermediate court had applied the correct standard, and that should be the end of it as a matter of comity and rational allocation of functions. Surely, Donziger argues, Judge Kaplan was not in a better position to decide whether the intermediate appellate court had applied the correct standard of review than the Ecuadoran Supreme Court was—that is, unless you think, as Judge Kaplan did, that the Ecuadoran judiciary was rotten root and branch.
Donziger attacks the underpinnings of Chevron’s RICO case head-on. I’m not going to review all of the facets of this argument. A few seemed particularly interesting. Donziger argues that Chevron failed to show an injury caused by a violation of the RICO statute. Judge Kaplan seemed to acknowledge this problem but held that the requirement of loss causation was relevant only in an action for damages. According to Donziger, there is no authority for this proposition, and he cites dicta from the Supreme Court to the contrary.
As I have noted before, Donziger also argues that there is no private right of action under RICO when the only relief sought is equitable. The statute itself seems to distinguish claims for equitable relief, which may be brought by the Attorney General, from claims for damages, which may be brought by private persons. The issue is unclear enough that Gibson Dunn has argued both sides of it in the last year. Certainly the weight of authority seems to favor Donziger on this point.
According to Chevron, Naranjo did no more than interpret New York’s statute governing recognition of foreign judgments. Donziger disagrees and claims that Naranjo stands for much broader propositions about comity. But Donziger has an argument that even if Naranjo should be read narrowly to permit an injunction such as the injunction Judge Kaplan entered, the judge’s decision lacked a solid basis. As Donziger reads Judge Kaplan’s decision, the judge thought that “the common law authorizes the very thing this Court rejected in Naranjo—a ’cause of action by which disappointed litigants in foreign cases can ask a New York court to restrain efforts to enforce those foreign judgments against them.'” Donziger argues that this cause of action cannot arise under federal law on account of Erie. This seems right: I think that the Erie doctrine (“there is no general federal common law”) applies to equity cases as well as common law cases. So the source of law must be the law of New York. But, Donziger argues, New York’s recognition statute “displaces and preempts the common law.” I haven’t studied New York law on this point, but Donziger’s point is true in Massachusetts, see Chase Manhattan Bank, N.A. v. Hoffman, 665 F. Supp. 73, 76-77 (D. Mass. 1987). If this is right, then there is no non-statutory cause of action to enjoin enforcement of a foreign money judgment, as Judge Kaplan thought.
Donziger makes an estoppel argument similar to the argument I noted in the LAPs’ brief, and I have nothing really to add to my comments there.
Most of my criticisms of the brief focus on the narrative section. Donziger’s team spends a lot of space—sixty-five pages!—telling the story of the case from his perspective. The narrative makes a very good read, and it focuses particularly on Chevron’s more over-the-top tactics: the surveillance of Donziger, the successful motion to compel production of Donziger’s entire case file (even the attorney-client privileged material), the pressure on witnesses, lawyers, and others. Part of the point is to explain how it is that Chevron was able to get much of the evidence that it has used against Donziger. It seems to me, though, that this is all water under the bridge in the current posture of the case. Chevron has done some things that raise interesting questions of professional responsibility (e.g., paying witnesses significant sums of money), and I have no doubt those questions will be litigated before New York’s equivalent of our Board of Bar Overseers. But I don’t see that they are particularly relevant to the actual issues in the case. (Some of Chevron’s arguably objectionable conduct is relevant, e.g., its last-minute decision to drop its jury claims). Similarly, Donziger spends time explaining what he sees as Chevron’s shenanigans in the judicial inspection process. Again, what is the relevance? Chevron lost in Ecuador—it’s not as though Donziger is claiming that the Ecuadoran court awarded too little on account of Chevron wrongdoing in the litigation.
Another way of putting this is that Chevron has a built-in advantage in the litigation. Any misdeeds by Donziger are relevant because whether a judgment was obtained by fraud is one of the key issues in a recognition and enforcement case. But any misdeeds by Chevron are not really relevant, because Chevron lost the case in Ecuador. Perhaps Donziger and the LAPs might have tried an in pari delicto defense and argued that both parties sought to corrupt the Ecuadoran proceedings, but that’s not how the case panned out.
Donziger makes a valiant but undetailed attempt to justify his dealings with Cabrera, the supposedly independent expert whose opinion Donziger’s team basically wrote. Donziger argues that there was nothing untoward about his dealings with Cabrera, but if that were so, then Donziger would not have fought the issue so strenuously for so long. In prior posts, I’ve given reasons for thinking that Donziger acted wrongly here. The circumstances surrounding the Calmbacher report are similarly bad for Donziger. It seems to me that if Donziger and the LAPs are saved here, it’s by the law, not the facts. The fact that the intermediate appellate court simply discarded the Cabrera report is highly important, since otherwise I would conclude that the judgment was highly vulnerable to Chevron’s fraud challenge.
We won’t have Chevron’s brief for some time. In the other case I’ve written extensively about, the Belfast Project case, the outcome was clear enough to me that I made predictions after the briefing was in. I don’t know if I’ll be willing to do that here!
Update: One other point I forgot to mention. The brief notes, without citation, that the Inter-American Court of Human Rights recognizes a public apology as a “symbolic measure of moral redress.” I hadn’t ever read that before. If right, it puts a different spin on the Lago Agrio court’s original judgment, which called on Chevron to apologize in order to avoid punitive damages. All of us, US judges included, need to become better comparativists, I think.