Lago Agrio: Second Circuit Affirms Costs Order Against Donziger, But Reverses Part Of The Contempt Judgment
Posted on March 5, 2021
Lago Agrio aficionados, it’s been a while! Nothing much has happened in a long time. Yesterday, the Second Circuit decided several of the appeals that Steven Donziger had taken from Judge Kaplan’s decisions. Here is the latest.
The biggest news is the Court’s reversal of the portion of the contempt findings against Donziger that was based on his sale of interests in the Ecuadoran judgment to finance further litigation. I’ve written about this before. I criticized this aspect of the contempt finding in May 2019, and in September 2020 I predicted Donziger would win this aspect of his appeal. Although the text of the injunction itself arguably is clear enough to forbid sales of interests in the judgment, Judge Kaplan, in comments on the record, gave Donziger good reason to think that the injunction did not forbid the activity. Since you can’t be punished for violating an injunction unless it is sufficiently clear, the court correctly held that Donziger should not have been held in contempt for sales of interests in the judgment. Nevertheless, the court held that now that Judge Kaplan had made it clear that such activity was not permitted by the injunction, any further sales would be forbidden. The court found this consistent with the injunction’s express permission for Donziger to continue prosecuting actions for recognition and enforcement of the Ecuadoran judgment: “That the Injunction allows Donziger to continue pursuing enforcement of the Ecuadorian Judgment abroad, which undoubtedly requires funding, does not mean that Donziger could himself monetize or profit from the judgment in the process of funding those efforts.” The practical implication for Donziger is that the Court reversed a $660,000 award that Judge Kaplan had granted to Chevron on account of Donziger’s sales, and it remanded the question whether the lower court’s award of $3.4 million in attorney’s fees needs to be modified, since it covered both aspects of the contempt decision that the court reversed and aspects that it affirmed.
The court rejected Donziger’s appeal from the Judge Kaplan’s order requiring him to pay the heavy costs of the RICO case, which included hundreds of thousands of dollars of fees paid to the special masters Judge Kaplan had appointed. The court held that Donziger had waived any appeal except with respect to the amount of the costs by failing to raise any issues in his order from the judgment, which had included a judgment for costs which were later taxed and ascertained. The court also affirmed Judge Kaplan’s contempt findings in all other respects, as Donziger had made no argument except with regard to the sale of interests in the Ecuadoran judgment.
What is the practical implication of all this for the proceedings that are still pending? There are two, I think. First, several months ago, Donziger sought leave to appeal his disbarment to New York’s highest court. As far as I know the Court of Appeal has not ruled on his request. But I do not see any implication for Donziger’s disbarment here, as the disbarment rested on the misconduct in the Lago Agrio litigation, not the later contempt of court.
Donziger’s criminal case is also pending, and that raises an interesting issue. Donziger is charged with six acts of contempt: failure to comply with the court’s order regarding electronic discovery (2 counts); failure to surrender his passport; failure to transfer his contingent fee interest to Chevron; failure to transfer to Chevron a right that the Amazon Defense Front had transferred to him; and sales of his interest in the Ecuadoran judgment. I assume that in light of yesterday’s decision, that last count will not proceed to trial.
There was a partial dissent from the court’s decision: Judge Sullivan thought that the injunction was clear and that the court was wrong to reverse the portion of the contempt finding resting on the sale of interests in the judgment.