Lago Agrio: Chevron Wins Default Judgment Against Amazonia

In my post on Chevron’s settlements of its Gibraltar lawsuit against James Russell DeLeon and Torvia Ltd., I noted that Chevron still had a pending claim against Amazonia Recovery, Ltd. and its directors, including Pablo Fajardo. Amazonia, recall, was the entity designed to receive and then to distribute the proceeds of the Lago Agrio judgment.

Chevron had sued Amazonia, a Gibraltar company, for $28 million in the courts of Gibraltar. This sum is, apparently, the cost of pursuing the RICO claims in the United States during the time when Chevron says Amazonia was part of the conspiracy against it. Amazonia defaulted. The judge suggested it may have defaulted because it could not afford to be represented—more on this in a moment. In any event, Chevron sought entry of a default judgment against Amazonia. The judge obliged, finding that the amount claimed, while “large,” was not “excessive.” The judge also enjoined Amazonia from assisting the LAPs in the enforcement of the underlying Ecuadoran judgment.

As I noted, the judge suggested Amazonia might lack the funds to defend the case. That is surely a possible explanation for the default. There is, though, another interesting possibility. We have seen in the multiple pending proceedings attempts by both sides to direct one tribunal’s attention to findings of fact made by another, or evidence presented to another. Notably, Chevron asks the Canadian courts to give preclusive effect to Judge Kaplan’s findings of fact. I would not be surprised if the LAPs, if they did not think they had strong chances of success in Gibraltar, defaulted to avoid creating an opportunity for additional fact finding that could damage them if given preclusive effect. In general, there is no issue preclusion in a default judgment case, because the issues are not actually litigated. At least, that’s so in American law. This, by the way, is just speculation on my part.

But if Amazonia is now the legal owner of the Ecuadoran judgment, then a strategic default seems unlikely. If Amazonia does own the judgment, then an injunction against Amazonia would seem to have the potential to have major effects in the case. If Amazonia owns the judgment and it is enjoined “from assisting the Lago Agrio Plainitffs in the enforcement of the judgment for over US$9 billion obtained in Ecuador,” then can the LAPs continue to seek enforcement in Canada or anywhere else?

I’ve asked some folks in the know and not gotten a very clear answer about whether any of the LAPs have assigned their interests to Amazonia, but I have to assume that they haven’t—in general, it would be a strategic mistake for the Ecuadoran plaintiffs to assign their interests to any person or entity subject to the personal jurisdiction of a foreign court that might rule in Chevron’s favor on key issues.

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.

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