Letters Blogatory

The Blog of International Judicial Assistance
By Ted Folkman

Questions For The Lago Agrio Plaintiffs

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For reasons that are not entirely clear, partisans of both Chevron and the the Lago Agrio plaintiffs have devoted some time to arguing their case in the legal blogosphere. I say that the reasons are not entirely clear because nothing in the litigation turns on whether the parties can persuade legal bloggers and other dilettantes of the merits of their case. But be that as it may, they’ve made the effort. On Chevron’s side, we’ve had a series of posts from Professor Doug Cassel of Notre Dame Law School, one of the authors of a brief Chevron submitted to the Inter-American Commission on Human Rights. On the plaintiffs’ side, we’ve had some responses from Karen Hinton, the plaintiffs’ public relations representative, and Aaron Page, one of their lawyers, and a lengthy memorandum. Of particular note: A recent post, with comments, at Opinio Juris, in which Cassel, Hinton, and Page participated, Cassel’s open letter to the human rights community, and a response to the open letter prepared by the plaintiffs’ legal team, available from Opinio Juris. The plaintiffs have also recently published a briefing paper giving an overview of the case.

Some questions for the plaintiffs

Since I started writing about the case, my attitude has been that I didn’t want to take sides on the issue of supposed corruption in the Ecuadoran proceedings. The main reason was laziness a lack of the time needed to evaluate the whole record for myself. Recently, however, the parties themselves have provided lengthy statements of their own positions on the question. I’ve been reading them carefully, and I have to say that I have found Professor Cassel’s materials, most especially portions of his memorandum dated April 10, pretty persuasive relative to the material the Lago Agrio plaintiffs’ representatives have been offering up. I’ll give reasons for this below. And so I offer the following editorial opinion for what it is worth:

Lago Agrio plaintiffs, I think you need to provide a lawyerly response to the latest Cassel memorandum. Leave the irrelevancies at the door. I know Professor Cassel was paid by Chevron for his work on the brief. I am not interested, for the moment, in whether in fact Chevron/Texaco polluted the Amazon or caused the plaintiffs to suffer personal injuries. I am not interested in whether Chevron misbehaved in Ecuador, as it alleges you misbehaved.1Question: suppose the Lago Agrio plaintiffs obtained their Ecuadoran judgment by fraud, and Chevron were guilty of attempted fraud in Ecuador. Would the plaintiffs’ fraud be grounds for non-recognition? I am not interested in whether the BIT tribunal has overstepped its bounds. I am not even interested, for the moment, in my own favorite theory about the case, namely, that even if the Ecuadoran courts are not impartial, Chevron could still be bound by the judgment on account of the representations it (or Texaco) made to the court in New York (more on this below). I am interested in specific responses to the following points that Professor Cassel has made:

  • Who wrote the Cabrera report? The Cassel memorandum points to emails in which one of the plaintiffs’ lawyers seemingly admits that they wrote the report, unbeknownst to Chevron, and in which one seemingly admits that the report could constitute a fraud on the court because it was ghostwritten.
  • Who wrote the Calmbacher report? The Cassel memorandum points to testimony in which the supposed author of a report the plaintiffs submitted to the Ecuadoran court testified that he had not written the report or reached the conclusions in the report.
  • Are there record citations for some of the material in the judgment? The Cassel memorandum points to what seem to be some strong reasons to think that the judgment incorporates on information from the plaintiffs’ “private database”, which was not in the record, suggesting that the plaintiffs participated in some improper way in the preparation of the judgment. I have in mind the material following footnote 112 in the Cassel memorandum. Are there items in the record that the judge could have used as the source for this information?

I focus on these few points, rather than on some of the more complex points, because I think they should be simple to answer and seem much less contestable than, for example, the expert testimony of linguists about the authorship of the judgment or inferences about the plaintiffs’ supposed blackmail of the judge. I also think that these points, if unrebutted, call the legitimacy of the Ecuadoran proceedings into serious question, in my mind at least. And last, as far as I can tell these points are essentially unaddressed in the memorandum in which the plaintiffs make the case that the Ecuadoran proceedings were not marred by fraud (though at least the points about Cabrera and the judgment were raised in the Cassel open letter).

One totally appropriate response to these questions is: “We’ll make our case in court, not in the media or the blogosphere.” (This is similar to Aaron Marr Page’s response to Cassel in the comments to the OJ post). Fair enough. But given the amount of PR both sides have used in this case, I hope the plaintiffs will address these points.

Estoppel

Now let me address the estoppel issue. I’ve been sympathetic to the notion that since Texaco, later purchased by Chevron, made representations to the New York court about the quality of Ecuadoran justice, Chevron should be estopped to assert now that Ecuadoran justice is crappy. This idea comes in a strong form and a weak form. In the strong form, Chevron would be estopped both to assert that “the judgment was rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law” (UFCMJRA § 4(b)(1)) and to assert that “the judgment was obtained by fraud that deprived the losing party of an adequate opportunity to present its case” (UFCMJRA § 4(c)(2)).2I cite the Uniform Foreign-Country Money Judgment Recognition Act for convenience; most of the action in the US has been in New York, whose enactment of the Uniform Foreign Money-Judgment Recognition Act provides similar but not identical language, see CPLR § 5304. In the weak form, Chevron would be estopped to assert problems with the Ecuadoran judicial system, but not to assert fraud in the proceedings. In the weakest form, Chevron would be estopped to assert problems with the Ecuadoran judicial system, but only if they existed at the time Texaco made its representations.

I think the strong form is likely not defensible.3In a post on a paper by Christopher A. Whytock and Cassandra Burke Robertson that addresses these issues, I pointed out that Whytock & Robertson had reached a conclusion that is counterintuitive to me, namely that a party should have a stronger, not a weaker, claim for estoppel arising out of systematic problems with the judiciary than out of fraud in the particular case. But I think the weak version may well be defensible, even as to judicial conditions that did not exist at the time of the representations. In part, I hold this view because I think comity requires it, particularly in cases where the action is heard in a foreign court because the complaining party wanted it there, and in part because I think that as a matter of policy US courts should not encourage expensive and time-consuming ancillary litigation about the adequacy of foreign proceedings at the behest of the parties who asked to have the case sent abroad. With regard to Ecuador in particular, I find it difficult to believe that Chevron really thought, before President Correa came to power in 2007, that the Ecuadoran judiciary was a model of impartiality. I’ve criticized the plaintiffs’ use of the Staats report (e.g., in my post of March 23, 2012 and in my response to a comment by Karen Hinton), but the data set on which the report relies seems to show that the Ecuadoran judiciary was not fully independent even before President Correa’s term began. It seems likely to me that Chevron thought that if the case was dismissed in New York, it would never be tried in Ecuador. But whatever Chevron/Texaco thought, I think it is fair to say that by declining the home-field advantage and asking to have the case tried in a developing country, the company more or less took the risk that the political winds would not blow its way.

Professor Cassel, in response to a comment I left at the most recent Opinio Juris post, asserts that the Second Circuit has rejected estoppel under US law, and that an arbitral tribunal has rejected estoppel as a matter of international law. I will leave the international law issue to the side and just consider where things stand in the US. It’s true that in Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), the Second Circuit held that Chevron was not estopped to raise claims against Ecuador in the BIT arbitration because of the stipulations Texaco made as a condition of obtaining a forum non conveniens dismissal in New York. But I don’t think the matter is as settled as Professor Cassel believes. For one thing, the Lago Agrio plaintiffs may seek recognition and enforcement in a US jurisdiction other than New York, and while I think the Second Circuit’s decision (or rather the underlying final judgment) would likely have issue-preclusive effect, it’s not clear to me that the Texaco stipulation, on its face, would apply in states whose law on recognition and enforcement differs in some respect from New York’s. For another thing, I think the Second Circuit’s decision rests on a sound basis (the lack of a true conflict between the BIT arbitration between Chevron and Ecuador and the Lago Agrio litigation between the plaintiffs and Chevron) that is entirely independent of the court’s broader conclusions about estoppel, so it’s possible to read the Second Circuit’s discussion of this point as an extended dictum. Third, the decision addresses only the stipulation itself and not the representations of fact concerning the Ecuadoran courts that Chevron/Texaco made to the New York courts. In my post of February 15, 2011, I quoted one such encomium (albeit from an appellate brief) at some length:

Ecuador’s Government is a constitutional democracy with executive, legislative, and judicial branches. Its judicial branch, headed by the Supreme Court, includes special purpose courts and lower courts, which use a Civil Code based on Roman law. Thus, Ecuadorian legal norms are similar to those in many European nations. Ecuador’s Constitution guarantees due process and equal protection, and its courts provide important procedural and substantive rights, as former Supreme Court Justices of Ecuador, jurists, and practicing lawyers informed the District Court in affidavits.

* * *

In response to the District Court’s January 31, 2000 Memorandum Order, the parties submitted evidence concerning the independence and impartiality of Ecuador’s judiciary following the short-lived coup in January 2000. That evidence further proves that Ecuador provides an adequate legal forum and that its judicial system is even stronger today than previously.

Ecuador reaffirmed its commitment to democracy following the failure of the January 21, 2000 military coup. Its democratic, constitutional government continues today, and its judiciary remains independent. Ecuador’s military is not interfering with the judiciary’s or government’s activities. The current Government of Ecuador has taken and continues to take “vigorous steps to further the independence and impartiality of the judiciary.”

* * *

Plaintiffs’ next argument is that Ecuador’s courts are corrupt, but “the argument that the alternative forum is too corrupt to be adequate ‘does not enjoy a particularly impressive track record.’” The most persuasive evidence that Ecuador can and does dispense independent and impartial justice in these cases is the record of corruption-free litigation against Texaco’s subsidiary and other companies. This record provides practical proof that litigants can and do obtain fair treatment and relief in Ecuador’s courts, including in cases relating to Consortium activities. The circumstances in Ecuador are not remotely like those that prevailed in Liberia when this Court decided Bridgeway Corp., which involved a “dysfunctional foreign legal system[].” The opposite is true in Ecuador.

These cases also have received substantial attention from the Ecuadorian government and media, environmental groups, human rights groups, indigenous organizations and other non-governmental organizations. This attention will continue regardless of forum. The public scrutiny these cases will receive in Ecuador and/or Peru will further assure a fair adjudication of plaintiffs’ claims.

I have not gone back through the SDNY docket to see whether, for example, Chevron submitted expert reports, testimony, or whatever, along those same lines. But it seems to me that it is still open to the plaintiffs to argue that such representations to the court have some sort of estoppel effect, even if Texaco’s stipulations themselves do not.

And one last point: even if the issue of estoppel were closed in this case, as Professor Cassel suggests, I think it’s important to think about what the law should be on this important question.

Photo credit: Daderot/Hohum

  • 1
    Question: suppose the Lago Agrio plaintiffs obtained their Ecuadoran judgment by fraud, and Chevron were guilty of attempted fraud in Ecuador. Would the plaintiffs’ fraud be grounds for non-recognition?
  • 2
    I cite the Uniform Foreign-Country Money Judgment Recognition Act for convenience; most of the action in the US has been in New York, whose enactment of the Uniform Foreign Money-Judgment Recognition Act provides similar but not identical language, see CPLR § 5304.
  • 3
    In a post on a paper by Christopher A. Whytock and Cassandra Burke Robertson that addresses these issues, I pointed out that Whytock & Robertson had reached a conclusion that is counterintuitive to me, namely that a party should have a stronger, not a weaker, claim for estoppel arising out of systematic problems with the judiciary than out of fraud in the particular case.
Ted Folkman
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8 responses to “Questions For The Lago Agrio Plaintiffs”

  1. Update on Chevron Corp. v. The Weinberg Group | Letters Blogatory

    […] with the Cabrera report, one of the expert reports whose authorship was one of the subjects of my recent post on Doug Cassel’s latest memorandum, and the authorship of the Ecuadoran judgment itself, which my post also addressed. According to […]

    Reply
  2. Doug Cassel

    Dear Ted,

    Please accept my apologies for not commenting sooner on your post; my time has been consumed by the end-of-semester crunch.

    You suggest three forms of estoppel: strong, weak and weakest. You think the strong form is “likely not defensible;” I agree. You think the weak form “may well be defensible,” and you ask what the law “should be on this important question.”

    I will save a broader analysis of what the law should be for a future post. But whatever one’s view of the strong form, the Chevron case satisfies even the “weak” form, because the Lago Agrio judgment was obtained by fraud. The three questions you pose to plaintiffs – Who wrote the Cabrera and Calmbacher reports?, and, Are there record citations for certain materials in the judgment? – all go to the fraud question. (If plaintiffs have replied to your questions, they have not done so (unless I missed it) on Letters Blogatory.)

    Whatever the broad outlines of the estoppel doctrine in forum non conveniens cases (again, I will try to address them in a future post), estoppel — as you pointed out in your March 23 post — is an equitable doctrine. In deciding whether to apply the strong, weak or weakest form of estoppel in this specific case, it is fair to ask what Texaco (and later Chevron) could reasonably be held to foresee, and, what risks they should reasonably be asked to assume. Some light is shed by the facts relating to the recent history of Ecuador’s judiciary.

    First, granted, as an overall system, the Ecuadorian judiciary has never been a model of justice. Since at least 1995, the annual State Department Human Rights Country Reports consistently state that Ecuador’s judiciary is “constitutionally independent, but in practice is inefficient and susceptible to outside pressure” (or words to that effect). Annual Freedom House reports on Ecuador since at least 1994-95 consistently note problems of corruption in the judiciary.

    That does not mean, of course, that justice could not be had in individual cases, such as those mentioned in the quotation included in your post above.

    Moreover, at the time of the forum non conveniens litigation in the late 1990s and through the district court’s ruling in 2001 and the final appellate ruling in 2002, there was good reason to believe that the Ecuadorian judiciary was markedly improving. As noted by Freedom House (1997-98 annual report), Ecuador’s Supreme Court until 1997 “was appointed by the legislature and thus subject to political influence.” But constitutional amendments adopted in 1997 (and a new Constitution adopted in 1998) gave Supreme Court justices – for the first time — indefinite tenure, as well as the power to fill future vacancies on their court by a two thirds vote of the sitting justices. New justices, with no limit on their tenure, were recommended by a screening committee and appointed by the Congress in 1997.

    According to the 1999 State Department Country Report,

    “The Supreme Court that took office in 1997 publicly recognized the shortcomings of the judicial system and pledged to improve the quality and training of judges. In May 1998, the Supreme Court supervised the selection by open competition of all appellate judges. A new Judicial Council, charged with administering the court system and disciplining judges, took office in the fall of 1998. In November the council’s disciplinary committee fired two judges …”

    It was during this reform period that Texaco told the US courts that the company believed a fair trial could be had in Ecuador. While the reforms did not eliminate serious problems in the Ecuadorian judiciary, they did amount to a meaningful effort to improve. For the next several years – until well after the forum non conveniens litigation concluded – the State Department, even while annually reporting that “in practice the judiciary is susceptible to outside pressure and corruption,” also noted efforts to “depoliticize and modernize the system.”

    But three years after the district court ruling (and two years after the appellate ruling) on forum non conveniens, Ecuador’s judiciary took a dramatic turn for the worse. It was decapitated: In late 2004 and early 2005 (well before President Correa took office in 2007), President Lino Gutierrez and the Congress, in quick succession, fired and replaced the entire Constitutional Court; fired and replaced the entire Supreme Electoral Tribunal; and fired and replaced 27 of the 31 justices of the Supreme Court.

    For the coup de grace, in April 2005 President Gutierrez fired the entire Supreme Court (including the 27 new justices, who had been appointed only months earlier to replace those appointed in 1997). For the next seven months, Ecuador was left without a Supreme Court.

    Meanwhile the newly subservient Constitutional Court effectively ruled out any judicial challenges by the former justices to their dismissals. Worse, it did so at the express request of President Gutierrez “to prevent trial judges from admitting for processing” constitutional challenges against the dismissals.

    The facts are detailed in the report of the Inter-American Commission on Human Rights, which last August sent the case of the 27 fired justices to the Inter-American Court of Human Rights, where it is now pending. The Commission concluded that under the constitutional amendments by which the 27 justices were appointed with life tenure in 1997, Ecuador’s Congress “did not have the legal power to terminate the functions of the Supreme Court justices.” The Commission further found that Ecuador had thereby violated the rights of the fired judges, under the American Convention on Human Rights, to fair trials, judicial protection and freedom from ex post facto laws.

    You suggest, Ted, that by asking to have the case tried in Ecuador, “the company more or less took the risk that the political winds would not blow its way.” So stipulated. But did the company take the further risk that the life-tenured justices of a reformed Supreme Court – along with the judges of every other high court in the country – would unconstitutionally be dismissed en masse? And that Ecuador would be left without a Supreme Court for seven months? With the concomitant blow to any shred of judicial independence in the country?

    Some risks, it seems to me, exceed those a company should be held reasonably to assume. The 2004-05 institutional massacre of the Ecuadorian judiciary was not merely a systemic deficiency of the sort dogging the courts in many developing countries. It was an extraordinary, radical – and fatal – assault on the independence of the judiciary.

    So as not to belabor this already lengthy comment, I will not detail here the further assaults on the tattered remnants of Ecuadorian judicial independence perpetrated by President Correa. They are summarized in my April 10 reply to the Lago Agrio plaintiffs, to which your post links. That reply, for example, quotes the president of one Superior Court as stating in 2011 that in her 26-year career, “I have never seen the independence of the Judiciary reduced to such truly alarming levels as now.” She added that there is “no judge who is not afraid.”

    This is the factual background against which the “weak estoppel” case should be assessed. As you note, Texaco took the precaution of reserving the right to challenge an Ecuadorian judgment, not only for fraud in the case (as occurred here), but also on the systemic grounds that “the judgment was rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” If ever that clause in the Uniform Act found facts to match, the case of Ecuador since late 2004 fits the bill. In my view it would not be equitable to hold Texaco (and now Chevron) estopped by statements made by company lawyers during Ecuador’s judicial reform period from later challenging a judgment rendered after the radical collapse of judicial independence in the country, a collapse so extreme as not to be reasonably foreseeable or fairly assumed as a risk.

    Reply
    1. Ted Folkman

      Thanks for the lengthy comment, Doug! You are needlessly apologetic about taking so long to reply—you weren’t obliged to reply, and for good or ill, posts on the internet last forever, so it’s never too late to comment.

      I’m just going to comment very briefly, as I don’t want to steal too much thunder from Letters Blogatory’s upcoming mini-symposium on these issues, in which I’m delighted to say that you’ll be participating (readers, save the date! May 30. I’ll have an announcement about this soon). Here are two points for you to consider. I want to focus on the Cabrera and Calmbacher report allegations, which are to me the clearest and easiest to understand.

      First, as I understand it Chevron made its case about the problems with these reports to the Ecuadoran trial court, and that court stated that it was not going to rely on them in making its factual findings. So if the court nevertheless relied on them, or if the court knowingly relied on reports derived from them—what Chevron has, I think, referred to as the “cleansed” reports—then it seems to me that the claim is really not that the judgment was obtained by fraud (i.e., that the Lago Agrio plaintiffs committed a fraud on the Ecuadoran court), but instead that the Ecuadoran court was not impartial or did not accord Chevron due process of law. In other words, because Chevron’s assertions about the reports were made known to the Ecuadoran court, it may be that Chevron is estopped even under the weak form of estoppel.

      Second, I do not want to resort to crude generalizations about the quality of Latin American justice, and Ecuadoran justice in particular, in the 1990s, but it strains credulity to think that Chevron really expected the high quality of justice it represented to the US courts. As I’ve said elsewhere, without having any firsthand knowledge to back it up, my best guess is that Chevron thought the case would never be tried once it was dismissed in New York. I think the Lago Agrio plaintiffs’ ability to find a way to fund their litigation in Ecuador probably threw Chevron for a loop. Maybe you will agree with me that Chevron’s representations, in hindsight, were overly rosy.

      One of the interesting things about this discussion, to me, is that people seem to have strong but opposing intuitions about the fair outcome. Your intuition, I think, is that no one agrees to be the victim of a massive fraud, and no one should be held to such an agreement, because enforcing an obviously fraudulent judgment is an affront to justice. My intuition is that the United States courts, no matter how slow and expensive, are one of the greatest mechanisms for arriving at just outcomes in today’s world, and that a highly sophisticated business that rolls the dice by getting a lawsuit against it dismissed in the US court in favor of a hearing in a country with a troubled judiciary and a history of political instability, and that achieves this by making somewhat over-the-top tributes to the quality of justice in the other country, shouldn’t be heard to complain when, predictably, things don’t go its way. A thought experiment: If the Lago Agrio plaintiffs had sued Texaco in Ecuador in the first instance, what’s your honest best guess about what Chevron’s response would have been?

      Reply
  3. Judge Kaplan Dismisses Some Claims Against Donziger | Letters Blogatory

    […] the claim focuses on the disputed Calmbacher and Cabrera expert reports, which I discussed in the questions I posed to the Lago Agrio plaintiffs. This claim was partly faulty because Chevron had not adequately alleged that it relied on […]

    Reply
  4. Forum Non Conveniens, Enforcement of Foreign Judgments, and the Chevron Litigation | Letters Blogatory

    […] Ecuador’s judiciary suffered radical and not reasonably foreseeable changes. As I noted in a prior posted comment, in 2004 Ecuador’s new President and Congress fired and replaced the entire Constitutional Court, […]

    Reply
  5. Reply to Doug Cassel | Letters Blogatory

    […] reserved the defenses available under New York law. I addressed this point at some length in a previous exchange with Doug, but I agree that the wording of the stipulation is a factor that favors […]

    Reply
  6. Breaking: A Close Call For The Lago Agrio Plaintiffs As Judge Kaplan Denies Chevron’s Motion for Partial Summary Judgment | Letters Blogatory

    […] evidence of fraud in detail. I am not going to review it in depth here; the judge reviewed the points I raised in my post of April 16, 2012, among others—the authorship of the Cabrera report, the authorship of the Calmbacher report, […]

    Reply
  7. <em>Forum Non Conveniens,</em> Enforcement of Foreign Judgments, and the Chevron Litigation | Letters Blogatory | Letters Blogatory

    […] Ecuador’s judiciary suffered radical and not reasonably foreseeable changes. As I noted in a prior posted comment, in 2004 Ecuador’s new President and Congress fired and replaced the entire Constitutional Court, […]

    Reply

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