Lago Agrio: The Canadian Supreme Court’s Decision in Yaiguaje v. Chevron

Update (10:25 a.m.): The Lago Agrio plaintiffs prevailed on their jurisdictional arguments. Both Chevron and its indirect Canadian subsidiary are subject to the jurisdiction of the Ontario courts. The court did not decide whether the corporate veil between the subsidiary (the entity with the assets in Canada) and Chevron (the judgment debtor) could be pierced, leaving the question for further proceedings. Alex Manevich and I have made some initial comments on the decision, which you can read below, and in the next several days I expect to have a few posts from guest-posters commenting on the case, too.

Readers, at 9:45 this morning the Canadian Supreme Court will deliver its judgment in Yaiguaje v. Chevron Corp., the Lago Agrio plaintiffs’ attempt to seek recognition of the Ecuadoran judgment in Canada and the second most important legal story of the day. I’m happy to be joined on this liveblog by Alejandro Manevich of Ricketts Harris in Toronto. Alex is a long-time friend of Letters Blogatory and observer of the Chevron case.

The liveblog will appear below this post. To keep things simpler for me from a tech point of view, I haven’t set things up to allow you to liveblog your questions and comments directly. But I invite you to participate! If you send me a comment or question via the contact page, or send a tweet to @tedfolkman, Alex and I will try to get your comment or question onto the liveblog and to respond. Also, you can always post a comment at the foot of the post.

I expect we’ll start liveblogging at about 9:40. If you’re following along with the liveblog, please do not keep pressing the reload button! The liveblog should update itself about once every ten seconds.

After today’s liveblog is done, I will have several posts on the case from informed guest authors. I’m not entirely sure when these will be published, so please check back. In the meantime, enjoy the liveblog: the live entries will appear below this post, beginning at about 9:40. They should update themselves every ten seconds: please don’t reload the page!

Ted Folkman September 4, 20159:37 am

Welcome, everyone, to the liveblog of the Yaiguaje v. Chevron decision! Alex Manevich and I will be bringing you the decision and some comments as soon as the decision is released.

Ted Folkman September 4, 20159:39 am

Alex is a litigator in Toronto who has been following the case pretty closely. <a href=””>Here</a> is his post on the case in the Ontario appellate courts.

Ted Folkman September 4, 20159:39 am

And if you’re looking for all posts on <em>Yiaguaje</em>, click <a href=””>here</a>.

Ted Folkman September 4, 20159:40 am

Sorry, those links didn’t work. Here is Alex’s prior post, and here is the prior coverage.

Ted Folkman September 4, 20159:41 am

Alex, the Canadian Bar Association waded in to this case and then waded out. What happened?

Ted Folkman September 4, 20159:42 am

Sorry, those links didn’t work. Here is Alex’s prior post, and here is the prior coverage.

Alejandro Manevich September 4, 20159:42 am

Good question. There was an enormous fuss kicked up by the “social justice” branches, which certainly took me by surprise. I think it took the business law branches of the CBA by surprise as well. Perhaps we were naive.

Ted Folkman September 4, 20159:43 am

Do you have a guess about whether this is going to be a corporate law decision, or something broader?

Alejandro Manevich September 4, 20159:44 am

From a US perspective it may not be surprising, but recall that it’s more unusual for legal issues to blow up like that here. And for it to happen within the profession itself, well, I can’t recall another.

Ted Folkman September 4, 20159:44 am

How does “decision day” in the Canadian Supreme Court differ from the US Supreme Court? Do the justices read decisions and dissents from the bench?

Alejandro Manevich September 4, 20159:44 am

There were some issues of whether process was followed for the intervention, but I think it was rather clearly a proxy for the fact that many people saw the CBA as supporting Big Oil.

Alejandro Manevich September 4, 20159:46 am

As to the breadth of the decision – hard to say. Justice Le Bel, who I’m sure would have had a lot to say about this – he was a dissenting judge in Beals v Saldanha, the leading case – retured shortly before this appeal was heard. (Note to US readers: Canadian courts have mandatory retirement at age 75.)

Ted Folkman September 4, 20159:46 am

Readers, remember–you can participate by tweeting to @tedfolkman or by sending me a comment at the contact page.

Ted Folkman September 4, 20159:46 am

The decision is here!

Alejandro Manevich September 4, 20159:46 am

As for decisions being released – no, they are just posted on the website, which I believe just happened seconds ago.

Ted Folkman September 4, 20159:46 am

Appeal dismissed with costs.

Ted Folkman September 4, 20159:47 am

Pretty big win for the plaintiffs!

Alejandro Manevich September 4, 20159:47 am

For those who treat this as a sports score: Chevron lost. The merits of the recognition hearing can now proceed.

Alejandro Manevich September 4, 20159:48 am

Recall that this is a jurisdictional hearing. The issue here was whether a Canadian court could even hear a proceeding to recognize the Ecuador judgment. That is not the same as saying that the Ecuador judgment meets the criteria for recognition. That second part is yet to come.

Ted Folkman September 4, 20159:48 am

Here is a PDF of the decision.

Ted Folkman September 4, 20159:50 am

There is no requirement of a “real and substantial connection” with Canada when bringing an action to recognize and enforce a foreign judgment.

Ted Folkman September 4, 20159:51 am

“Real and substantial connection” is the Canadian version of what we in the US think of the due process analysis in personal jurisdiction.

Ted Folkman September 4, 20159:52 am

One of the big issues in the case was whether the court should pierce the corporate veil between Chevron itself and its indirect Canadian subsidiary. The court has left that question for another day:

” The establishment of jurisdiction does not mean that the plaintiffs will necessarily succeed in having the Ecuadorian judgment recognized and enforced. A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement of the Ecuadorian judgment. Once past the jurisdictional stage, Chevron and Chevron Canada can use the available procedural tools to try to dispose of the plaintiffs’ allegations. This possibility is foreign to and remote from the questions that must be resolved on this appeal. Further, the conclusion that the Ontario courts have jurisdiction in this case should not be understood to prejudice future arguments with respect to the distinct corporate personalities of Chevron and Chevron Canada or whether Chevron Canada’s shares or assets will be available to satisfy Chevron’s debt.”

Alejandro Manevich September 4, 20159:52 am

I need a few minutes to read the decision. Interesting that Gascon J. – the newest justice at the time – held the pen on such a high profile and controversial case.

Ted Folkman September 4, 20159:53 am

(That quote is from the headnote, by the way, not the decision).

Ted Folkman September 4, 20159:54 am

A lot of readers are joining us now. Welcome, and please feel free to make comments or questions on Twitter @tedfolkman or at my contact page!

Ted Folkman September 4, 20159:54 am

There was no joy in San Ramon …

Alejandro Manevich September 4, 20159:54 am

I am partway through, but it’s pretty clear that the court made an effort to keep the decision narrow and practical.

Ted Folkman September 4, 20159:55 am

How surprising is the overall outcome to you, Alex?

Alejandro Manevich September 4, 20159:55 am

Not very much at all.

Ted Folkman September 4, 20159:56 am

And is it a surprise that the decision is unanimous? Are dissents rarer in Canada?

Alejandro Manevich September 4, 20159:57 am

Dissents are rarer at the SCC than at SCOTUS. It’s possible that dissents are rarer in Canadian society more generally – we are an agreeable bunch.

Alejandro Manevich September 4, 20159:58 am

We were as you recall the ones who stayed loyal to the British Crown around the time of that revolutionary unpleasantness two centuries or so ago…

Ted Folkman September 4, 20159:58 am

The man of the hour, Alan Lenczner, Q.C., who argued the appeal on behalf of the Lago Agrio Plaintiffs.

Ted Folkman September 4, 20159:59 am

Well, dissents are pretty rare in many US courts, our Supreme Judicial Court in Massachusetts for example. I’m sure there’s a political scientist out there with an explanation.

Alejandro Manevich September 4, 20159:59 am

I am not sure I would call this an unqualified win for the plaintiffs. Lenczner, understandably, wanted to broaden the issues to address the corporate veil between Chevron Canada and its affiliates.

Alejandro Manevich September 4, 201510:00 am

This was the issue that particularly concerned the business law wing of the CBA, by the way.

Ted Folkman September 4, 201510:01 am

Good point. I do think, though, that the broad principle of the decision is interesting and important. I’ve said in various posts that I can’t dig up now that I believe that US courts should not require a showing of personal jurisdiction in these cases, but that’s not the uniform rule.

Alejandro Manevich September 4, 201510:02 am

The Court, quite rightly, said no dice. Jurisdiction for recognition and enforcement purposes does not require establishing that kind of link. As long as you can serve the defendant, those corporate identity issues can be worked out later.

Ted Folkman September 4, 201510:02 am

Many US cases get this “wrong” (from my perspective). Perhaps the Canadian decision will have some influence here.

Alejandro Manevich September 4, 201510:02 am

Yes. There are some good quotes in that regard. It now seems that Canadian law on recognition and enforcement of foreign judgments is clearly more favourable than US law, at least on this issue.

Ted Folkman September 4, 201510:06 am

So what happens next? It seems to me that Chevron will not be content to go back to the lower court and win on the veil piercing alone. Both sides will want a decision from the Canadian court about the main question, namely whether the underlying Ecuadoran judgment is entitled to recognition in Canada notwithstanding the claims of fraud.

Ted Folkman September 4, 201510:06 am

And it seems difficult to see how that gets resolved through a summary proceeding. Are we looking, then, at a trial?

Alejandro Manevich September 4, 201510:07 am

Here is one (at para 36 of the judgment):

“[J]urisdiction must, of course, always be established regardless of the type of action being brought. Otherwise, the court will lack the power to hear and determine the case. Where Chevron’s submission fails, however, is in assuming that the only way to establish jurisdiction is by proving the existence of a real and substantial connection between the foreign judgment debtor and the Canadian forum. In my view, jurisdiction in an action limited to recognition and enforcement of a foreign judgment within the province of Ontario is established when service is effected on a defendant against whom a foreign judgment debt is alleged to exist. There is no requirement, nor need, to resort to the real and substantial connection test.”

Alejandro Manevich September 4, 201510:08 am

“Real and substantial connection”, in Canadian law, is roughly equivalent to the due process analysis for personal jurisdiction in US law (from International Shoe, if memory serves).

Alejandro Manevich September 4, 201510:09 am

Para 42:

” Two considerations of principle support the view that the real and substantial connection test should not be extended to an enforcing court in an action for recognition and enforcement. First, the crucial difference between an action at first instance and an action for recognition and enforcement is that, in the latter case, the only purpose of the action is to allow a pre-existing obligation to be fulfilled. Second, the notion of comity, which has consistently underlain actions for recognition and enforcement, militates in favour of generous enforcement rules. “

Ted Folkman September 4, 201510:09 am

What will the Canadian court do with Judge Kaplan’s findings of fact? I’ve said before that I thought Chevron’s purpose in the RICO case was to get findings of fact that would have preclusive effect abroad.

Alejandro Manevich September 4, 201510:10 am

That is the million dollar question. Sorry, billion dollar.

Ted Folkman September 4, 201510:11 am

I guess we will all be learning more about the Canadian law of issue preclusion.

Alejandro Manevich September 4, 201510:12 am

Let me add some observations on the “jurisdiction to recognize” issue. The court has specifically rejected the US line of cases that say that the dispute must have a connection to the recognizing jurisdiction. Ie no need to prove there are assets to seize.

Alejandro Manevich September 4, 201510:13 am

That’s important, since one would typically not want to wait before recognizing the judgment: one may not have sure evidence of assets, or it may be a tactical recognition, to prevent assets from moving there.

Alejandro Manevich September 4, 201510:13 am

So in that sense, this is actually quite a pro-business decision.

Ted Folkman September 4, 201510:14 am

Yeah. I think US courts tend sometimes to underestimate the ability or willingness of judgment debtors to move assets around.

Alejandro Manevich September 4, 201510:14 am

On the corporate veil issue, the Court did not want to go down the path suggested by the plaintiffs. But it also rejected Chevron Canada’s argument that the case against it should be dismissed since it was not the judgment debtor.

Ted Folkman September 4, 201510:15 am

There was another Lago Agrio-related development yesterday. Chevron settled with yet another of the investors in the Lago Agrio case. I’ll have something about this next week.

Alejandro Manevich September 4, 201510:15 am

The Court said: Chevron Canada has a presence in Ontario, the case was brought in Ontario, end of discussion. Whether the corporate veil can be pierced, and any of Chevron Canada’s assets susceptible to seizure – that is a question for another day.

Alejandro Manevich September 4, 201510:16 am

That of course assumes that the decision can be enforced given all the fraud issues raised in the US RICO proceedings against Mr. Donziger. I frankly have no idea how that will be addressed when this goes back to the court at first instance. It is unprecedented.

Ted Folkman September 4, 201510:17 am

And on that note … thanks, everyone, for following along! I expect to have some guest posts in the next few days with some more considered commentary on this interesting new decision.

Alejandro Manevich September 4, 201510:17 am

There are some interesting corollaries for this decision around limitation periods, among other things, which I think may cause problems down the line in our caselaw. But we’ll see what happens.

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 2012), 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.

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