Lago Agrio: Summary Judgment Hearing In Canada (With a Reader Poll!)

Amazon Watch issued a press release yesterday that said that we were “less than a week before a trial is scheduled to begin in Toronto to seize Chevron’s assets in Canada to force the company to comply with its liability to remediate what many call the ‘Amazon Chernobyl’ in Ecuador.” Exciting! Unfortunately, though, not quite accurate. There is a hearing next week in Toronto on Chevron’s motion for summary judgment on the corporate law issues, and on the LAPs’ motion to strike Chevron’s statement of defense. Here is Chevron’s brief on the corporate law issue. The LAPs’ brief on that issue is not yet publicly available, but based on Chevron’s brief we can at least preview the issues. Here also is the LAPs’ brief and their reply on the motion to strike. I don’t have Chevron’s brief on that issue.

Corporate Separateness

From the brief, it seems the issue is as follows. Chevron Corp. is the judgment debtor in the Ecuadoran case. It has no assets in Canada. Chevron Canada Ltd. is an indirect subsidiary of Chevron Corp. It has assets in Canada, but it was not a party to the Ecuadoran case and is not liable on the Ecuadoran judgment. The LAPs want to enforce the Ecuadoran judgment against Chevron Canada Ltd. once they obtain recognition.

This is the kind of issue that makes people hate lawyers. Chevron is saying to the court, “Look, even if Chevron Corp. is liable in Ecuador for polluting the Oriente, and even if all of Chevron Corp.’s defenses to recognition and enforcement of the Ecuadoran judgment in Canada should fail, the LAPs still lose, because you can’t look to the assets of Chevron Canada Ltd. to satisfy the judgment against Chevron Corp.” You might think, “that’s ridiculous! All these companies are really just part of Chevron!” But the judge won’t be thinking about the issue that way. He or she will start from the premise that one corporation is not liable for another’s debts and then ask whether the LAPs have offered any evidence that could overcome that very basic ground rule of the law. As I noted, the LAPs’ brief on this issue is not yet available, but judging from Chevron’s brief, the LAPs have a steep hill to climb. It appears that there is no overlap between the executive officers or directors of Chevron Corp. or Chevron Canada Ltd. or even between Chevron Corp. or Chevron Canada Ltd.’s parent company (recall that it is an indirect subsidiary of Chevron Corp.). Yes, Chevron’s financial statements are prepared on a consolidated basis, and yes, Chevron Canada Ltd. has a reporting relationship with Chevron Corp. But these facts would apply to many if not all public companies, and hardly seem like the stuff that will support a theory of veil-piercing. And the idea of veil-piercing is made more difficult here by the presence of six entities between Chevron Corp., the ultimate parent company, and Chevron Canada Ltd., the seventh-level subsidiary. Veil-piercing is really quite rare. Given just how basic and important the principle of limited liability is, I do not think the court is going to do anything radical here, no matter what the judge may think about the underlying merits of the case against Chevron Corp. Are you worried that the court will reach an unjust result on such a technicality? Remember that as Holmes once said, the court is a court of law, not a court of justice.

The LAPs’ Motion

This is probably a good thing for Chevron, because I think the LAPs’ motion has a lot going for it. The gist of the motion is that Chevron previously (in Ecuador) raised and lost most of the arguments it’s now pressing in the Canadian court, or at least could have raised them, and that they can’t be relitigated on the merits in Canada. Long-time readers will know that I am basically sympathetic with this approach, at least where there is no showing that the foreign court is what I have called “systematically inadequate.” In other words, if the Ecuadoran courts meet minimum standards of fairness and due process, any errors in the Ecuadoran first-instance proceedings could be corrected in Ecuadoran appellate proceedings. This is why I have placed so much emphasis, in prior posts, on distinguishing the Cabrera fraud from the issue of the supposedly ghostwritten judgment. In the case of Cabrera, it seems to me that Chevron proved that Donziger and the LAPs engaged in fraudulent conduct that may have been aimed at defrauding or deceiving the Ecuadoran court. But in the case of the ghostwriting, the claim was that Donziger and the LAPs had corrupted the Ecuadoran court itself. I’ve given reasons for thinking that Chevron hasn’t really proved the ghostwriting, even though it clearly has proved the Cabrera fraud. So I think a court could conclude that whatever frauds infected the Ecuadoran first-instance proceedings could have been corrected in the Ecuadoran appellate process. This is also why I am so interested in whether the Canadian court will give preclusive effect to Judge Kaplan’s findings of fact regarding the ghostwriting. But I’ll add that I haven’t really dug into the substance of the Canadian law of recognition and enforcemnet, so I don’t really know how closely my preferred way of looking at this is reflected in Canadian law.

Again, you might think, “that’s ridiculous! How can the Canadian court even consider recognizing the judgment when it’s clear that the report of the damage expert that formed the basis of the decision on damages in the court of first instance was clearly a fraud?” My answer is the same as before: the court is a court of law, not justice. On a motion to strike—a motion directed to the pleadings—the judge will be concerned with the larger questions about what kind of defenses should be available in recognition and enforcement cases, and not as much on what he thinks of Steven Donziger’s tactics in Ecuador.

Take a SWAG

Okay, readers, here’s your chance to take a SWAG (a “scientific wild-assed guess”) about the outcome. One lucky winner will receive some Letters Blogatory SWAG:

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6 responses to “Lago Agrio: Summary Judgment Hearing In Canada (With a Reader Poll!)”

  1. I should add that as Roger Parloff pointed out recently, even if the corporate law motion is successful, that won’t necessarily end the case, as the LAPs could seek recognition of the judgment against Checron Corp. even though they could not obtain enforcement of that judgment in Canada. Why might they do this? It’s unclear, although I suppose Chevron Corp., as a corporate citizen, may be unwilling to refuse to pay a Canadian judgment, or maybe the LAPs think they could bring an action somewhere else to recognize the Canadian judgment, cleansing the Ecuadoran judgment as they sought to cleanse the Cabrera report. I am dubious about both, but we’ll see.

  2. […] in any depth—Crystallex, the Canadian corporation, is making the same argument here that the Lago Agrio plaintiffs are making to the Canadian court. But I digress. Although the court was basically sympathetic to CITGO’s view, it held that in […]

  3. […] I suggested yesterday, I think that the LAPs’ view is that even if Chevron succeeds in showing that the Canadian […]

  4. […] As expected, the Ontario Superior Court has rejected the Lago Agrio plaintiffs’ attempt to seize the assets of an indirect Chevron subsidiary, Chevron Canada Ltd., to satisfy the multi-billion dollar judgment they obtained against the ultimate parent, Chevron Corp., in Ecuador. The court found no basis on which the assets of the indirect subsidiary could be reached on execution (the only tricky part here, in my view, is whether the shares of an indirect subsidiary can be reached, but really that’s not so tricky), and it found no basis for corporate veil-piercing. The practical implication is that barring a successful appeal, the Lago Ario plaintiffs will not be able to collect on their judgment in Canada. (The decision left over the possibility that another Chevron entity could be added to the case, but it is difficult to see why the outcome would be different for that entity than it was for Chevron Canada Ltd.). […]

  5. […] my September 2016 post and in my comments responding to a comment by LAP advocate Aaron Marr Page, I suggested that […]

  6. […] question of corporate personhood itself. By the way, when I have written about the Canadian case (here, for example), my views have been basically predictive rather than prescriptive: “You are […]

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