Citations
- 886 F. Supp. 2d 235
Full opinion text
OPINION ON PARTIAL SUMMARY JUDGMENT MOTION
LEWIS A. KAPLAN, District Judge.
Table of Contents
Facts..........................................................................241
I. Background.............................................................241
A. Texaco’s Activities in Ecuador (1964-1992) ..............................241
B. The Aguinda Litigation...............................................241
C. Important Developments During the Aguinda Litigation..................242
1. The Settlement and Final Release..................................242
2. The Environmental Management Act of 1999.........................242
3. Chevron Acquires Shares of Texaco.................................243
II. The Lago Agrio Litigation.................................................243
A. Filing the Lawsuit...................................................243
B. Summary of the Lago Agrio Proceedings................................244
C. Summary of the Lago Agrio Judgment..................................245
D. The Ecuadorian Appellate Court’s Treatment of Chevron’s Fraud Claim ............................................................246
E. Developments Since the Appellate Decision..............................248
III. Prior Proceedings in this Litigation.........................................248
A. The Pleadings.......................................................248
1. The Amended Complaint..........................................248
2. The Answers.......... 249
B. Prior Proceedings in this Court........................................250
C. Proceedings in the Court of Appeals.............................■.......251
D. The Present Motion..................................................252
IV. The Alleged Fraud in Ecuador.............................................252
A. The Alleged Ghost-Writing of Portions of the Court’s Judgment...........253
B. Allegedly Fraudulent Evidence, the Termination of Judicial Inspections, and the Appointment of Cabrera..........................255
1. Calmbacher Reports..............................................255
2. Ending of Judicial Inspections and Cabrera’s Appointment.............256
3. The Cabrera Report..............................................258
a. Defendants Secretly Were Involved in Defining the Scope of Cabrera’s Report...........................................258
b. The LAP Team Wrote Much of the Cabrera Report...............259
4. The “Cleansing” Reports..........................................260
Discussion......................................................................262
I. Summary Judgment Standard.............................................262
A. General.............................................................262
B. S.D.N.Y. Civil Rule 56.1...............................................263
II.The Res Judieata-Collateral Estoppel Defense Is Properly Before the Court and Is Not Moot.......................................................264
A. The Answers Are Sufficient to Assert the Judgment As Claim or Issue Preclusive and Were Intended to Do So...............................265
1. The Answers Sufficiently Assert These Defenses Based on the Judgment.....................................................265
2. The Defendants’ Intentions .......................................267
a. The S J Defendants’ Prior Communication With This Court.........267
b. The Argument to the Second Circuit............................268
c. The Lack of Any Other Arguable Basis for the Defenses...........268
d. The Finality Argument........................................270
B. The Disclaimer of Intention to Seek Enforcement of the Judgment in New York Neither Moots.the Defenses Nor Sufficed to Withdraw Them Without Prejudice............................................271
1. The Representation Would Be Ineffective Even on Its Own Terms.....271
a. The Donziger Defendants Are Not Foreclosed from Asserting the Judgment as Res Judicata or Collateral Estoppel on the Theory that They Are Not Judgment Creditors and Hold No Rule 24 “Interest” in the Judgment...........................272
b. The Representation Does Not Even Bind the LAP Representatives............................................273
2. The Representation Did Not Moot the Defenses......................274
3. The Representation Was an Ineffective Unilateral Amendment to the SJ Defendants’ Answers......................................275
C. Nothing in Naranjo Forecloses Consideration of the Defenses .............277
III.The Enforceability and Recognizability of the Judgment.......................278
A. Burdens of Proof With Respect to Recognizability and Enforceability of the Judgment .....................................................280
B. Lack of Personal Jurisdiction..........................................280
C. Penal Character of the Judgment......................................280
D. Fraud..............................................................281
1. The Extrinsic-Intrinsic Fraud Distinction...........................281
a. United States v. Throckmorton.................................281
b. The Questionable Vitality of Throckmorton.......................282
c. Does the Recognition Act Incorporate the Extrinsic-Intrinsic Distinction?................................................285
2. Other Requirements..............................................285
• 3. Does Chevron’s Evidence of Fraud Warrant Summary Judgment of Non-Recognition?..............................................286
a. The Alleged Ghosh-Writing of the Judgment.....................286
b. The Calmbacher Reports......................................288
c. The Termination of Judicial Inspections and Cabrera’s Appointment...............................................288
d. The Cabrera and “Cleansing” Reports...........................289
IV. Chevron’s Former Adjudication Arguments..................................290
Conclusion............................... ......................................292
An Ecuadorian court has entered an $18.2 billion judgment (the “Judgment”) against Chevron Corporation (“Chevron”) in an action brought by 47 individuals referred to as the Lago Agrio Plaintiffs (the “LAPs”), two of whom, Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje (the “LAP Representatives”), have appeared in this action. Chevron brought this action against the LAPs, their lead U.S. attorney, Steven Donziger and his law offices, and others involved in the Lago Agrio Litigation, claiming among other things that the Judgment is the product of fraud and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”).
The answers to the amended complaint of Donziger and his law offices and of the LAP Representatives (collectively, the “SJ Defendants”) assert affirmative defenses of res judicata and/or collateral estoppel. It is common ground among the parties that the Judgment may not be afforded res judicata or collateral estoppel effect unless it is entitled to recognition and enforcement here. So Chevron has moved for partial summary judgment dismissing these affirmative defenses to the extent that they are based on the Judgment on the theory that the Judgment is not entitied to recognition or enforcement and therefore would not be entitled to preclusive effect even if the other bases for preclusion were satisfied. And while Chevron’s objections to recognition and enforcement in this action are broader, it bases this motion on contentions that the Judgment is not entitled to recognition because it (1) was procured by fraud, (2) constitutes an unenforceable penalty, and (3) was rendered against Chevron despite the fact that the Ecuadorian courts lacked personal jurisdiction over it. In the alternative, Chevron argues that the res judicaia-collateral estoppel defense is without merit under the law of former adjudication without regard to the recognizability and enforceability of the Judgment.
The SJ Defendants respond that the res judicata-collateral estoppel defense does not raise the Judgment as preclusive of this action or any issue here, that they do not seek recognition or enforcement of the Judgment in New York, and that Chevron’s motion therefore is moot or without merit. They have not responded to Chevron’s motion on the merits.
The Court concludes that the SJ Defendants’ position is incorrect and proceeds to the merits of Chevron’s motion. It further concludes that Chevron’s motion must be denied insofar as it rests on the premise that the Judgment is not recognizable or enforceable and, regardless of recognizability or enforceability, insofar as it rests on the law of collateral estoppel. The motion, however, is granted to the extent that it seeks dismissal of the res judicata defense.
Facts
I. Background
A. Texaco’s Activities in Ecuador (1964-1992)
In 1964, a fourth-tier subsidiary of Texaco Inc. (“Texaco”), Texaco Petroleum Company (“TexPet”), began exploring and drilling for oil in the Oriente region of eastern Ecuador. The following year, TexPet started operating a petroleum concession with Gulf Oil Corporation (“the Consortium”) and, by 1976, the Republic of Ecuador (the “ROE”) — through Petroecuador, its state-owned oil company — had acquired Gulf Oil Corporation’s interest and held a controlling share of the Consortium. From 1976 until 1990, TexPet operated the Consortium’s drilling activities and the trans-Ecuadorian pipeline. In 1990, however, Petroecuador took control of the Consortium’s operations and, in 1992, TexPet ceased all operations in Ecuador. At this time, Petroecuador acquired its interest in the Consortium. From 1992 to present, neither Texaco nor any of its subsidiaries has operated in Ecuador.
B. The Aguinda Litigation
In 1993, a group of Ecuadorians brought a class action lawsuit against Texaco seeking billions of dollars in damages from Texaco to “redress contamination of the water supplies and environment” allegedly caused by TexPet during its operations in Ecuador from 1964 to 1992. In 1996, Judge Rakoff dismissed the case on grounds of forum non conveniens and international comity and because indispensable parties Petroecuador and the ROE had not been joined. The Second Circuit reversed, holding inter alia that the dismissal had been inappropriate without Texaco consenting to Ecuador’s jurisdiction. Texaco consented on remand, and the district court again dismissed the action on forum non conveniens grounds. The Second Circuit affirmed in 2002.
C. Important Developments During the Aguinda Litigation
Between 1993, when the Aguinda litigation began, and 2002, when the Second Circuit affirmed Judge Rakoffs dismissal of the action on forum non conveniens grounds, several relevant developments occurred.
1. The Settlement and Final Release
In 1995, after TexPet had relinquished its interest in the Consortium, TexPet entered into a settlement agreement with the ROE and Petroecuador (the “Settlement”). Under its terms, TexPet agreed to undertake environmental remediation work in Ecuador in exchange for the ROE and Petroecuador releasing any and all claims against it, Texaco, and all related companies. The Settlement released these entities from “all the [Ecuadorian] Government’s and Petroecuador’s claims against the Releases for Environmental Impact arising from the Operations of the Consortium, except for those related to the obligations contracted” under the Settlement. The release of these claims, however, was contingent upon TexPet performing “Environmental Remedial Work ... to the satisfaction of the [Ecuadorian] Government and Petroecuador.”
In 1998, after TexPet had performed the environmental remediation work, the ROE entered into a second agreement with it (the “Final Release”), wherein the ROE agreed that the TexPet had “fully performed” under the Settlement. In the Final Release, the ROE “proceed[ed] to release, absolve, and discharge” TexPet, Texaco, and all related companies “from any liability and claims ... related to the obligations assumed by TexPet” in the Settlement.
2. The Environmental Management Act of 1999
In 1999, the ROE enacted the Environmental Management Act of 1999 (the “EMA”), which created a private right of action for Ecuadorians who have been individually affected to seek damages related to environmental harms to the community. As will appear, the EMA became the basis for the litigation brought by the LAPs in Lago Agrio (the “Lago Agrio Litigation”), which began in 2003 shortly after Aguinda was dismissed.
3. Chevron Acquires Shares of Texaco
On October 9, 2001, while the Aguinda action still was pending in the Southern District of New York, a wholly owned subsidiary of Chevron, Keepep Inc., merged with and into Texaco. Texaco was the surviving entity of the merger. Under the terms of the Merger Agreement, Chevron became the owner of all of Texaco’s common stock but did not acquire any of Texaco’s assets or liabilities.
II. The Lago Agrio Litigation
A. Filing the Lawsuit
The Lago Agrio Litigation began in 2003 when the LAPs, represented by Steven Donziger and other lawyers who had been involved in the Aguinda action, sued Chevron in Ecuador under the EMA. Neither TexPet nor Texaco was named as a defendant.
Throughout the litigation, Chevron has argued that the Ecuadorian courts lacked personal jurisdiction over it because it never had operated nor was qualified to do business in Ecuador and had not merged with Texaco. Donziger indeed has acknowledged that in naming Chevron as the sole defendant in the Lago Agrio Litigation, the LAPs sued “the wrong party in the complaint.”
B. Summary of the Lago Agrio Proceedings
The Lago Agrio Litigation proceeded in what may be described as several stages.
In 2004, the Lago Agrio court ordered specific site inspections to assess “the approximately 122 wells and production installations in the former concession granted by the Ecuadorian government to what was called the PETROECUADOR-TEXACO Consortium.” Each party selected experts “to, be present during the judicial inspections and accompany the President of the Superior Court and the Attorneys for the parties in the examination of the site being inspected.” The experts then were to submit their findings to a panel of “settling experts” that would “provide decisive opinions ... [and] comment solely on the reports presented by the experts appointed by the parties.”
Some of these inspections were completed including two sites in respect of which the LAPs submitted reports over the signature of one of their experts, Dr. Charles W. Calmbacher. But by 2006, the LAPs sought to terminate the remaining judicial inspections and have a single expert appointed to prepare a “Peritaje Global” — a global expert examination report analyzing the alleged environmental harm in the relevant areas of Ecuador. In 2007, the Lago Agrio court selected Richard Stalin Cabrera Vega (“Cabrera”) to serve as the independent global expert and cancelled most of the remaining judicial inspections.
On April 1, 2008, Cabrera submitted what purported to be his report to the Lago Agrio court. It found $16.3 billion in damages. Chevron and the LAPs both filed objections. A supplement to the original report then increased the damage assessment to $27.3 billion.
As part of a LAP public relations campaign surrounding the Lago Agrio proceedings, Donziger arranged for the making and release in 2009 of a documentary film called Crude. The film purported to “ ‘eapture[ ] the evidentiary phase of the Lago Agrio trial, including field inspections and the appointment of independent expert Richard Cabrera to assess the region.’ ” There were two versions of Crude — one released on DVD and one that streamed on Netflix.
The Netflix version included certain scenes not in the DVD version. One showed Dr. Carlos Beristain, who supposedly was an impartial contributor to Cabrera’s report, working directly with the LAPs’ counsel. Following the discovery of this scene, among other things, Chevron sought discovery in the United States under 28 U.S.C. § 1782 relating to the Lago Agrio Litigation and the Cabrera report.
Based on evidence gained through the Section 1782 proceedings, Chevron began to argue, inter alia, that the Calmbacher reports, Cabrera’s appointment, and the Cabrera report all were fraudulent. These arguments created concern among the LAPs’ lawyers. New experts were hired to “address Cabrera’s findings in such a subtle way that someone reading the new expert report ... might feel comfortable concluding that certain parts of Cabrera are a valid basis for damages.” Eventually, seven such reports were submitted to the Lago Agrio court on September 10, 2010.
On February 14, 2011, the Lago Agrio court issued the Judgment against Chevron in the aggregate amount of $18.2 billion.
C. Summary of the Lago Agrio Judgment
The Judgment held, inter alia, that: (1) Texaco’s and TexPet’s operations in Ecuador from 1964 to 1992 had caused damage to the environment and the Ecuadorian people in violation of the EMA, (2) Chevron was a proper defendant and liable for these damages and any remediation owed by Texaco because of its supposed “merger” with Texaco as well as under a corporate-veil-piercing theory, (3) the Settlement and Final Release between the ROE and Texpet did not bind the LAPs or preclude the Lago Agrio Litigation, (4) the EMA had retroactive effect and could serve as a basis for relief, and (5) the prior Aguinda litigation did not have res judicata effect on the Lago Agrio Litigation.
The Judgment addressed some of Chevron’s arguments about the propriety of the Calmbacher reports, Cabrera’s appointment, the Cabrera report, and the reports of the additional experts the LAPs hired after the Cabrera report had come under attack. It disclaimed any reliance on the Calmbacher and Cabrera reports but noted that it had considered other expert assessments to which Chevron had objected, including some of the reports submitted by the newly hired experts. The Lago Agrio court stated also that there were “no defects in the appointment of expert Cabrera, or in the delivery of his report and that it could not conduct a proceeding to investigate Chevron’s evidence of fraud “due to a lack of time ... for submitting the evidence which would allow the defendant to prove its accusations.”
The Judgment awarded $8.646 billion in remediation damages and another $8.646 billion to be paid unless Chevron issued a “public apology” within 15 days of the issuance of the Judgment. Chevron issued no such apology within the 15-day period and, as far as this Court is aware, has issued no apology to date.
D. The Ecuadorian Appellate Court’s Treatment of Chevron’s Fraud Claim
After the Lago Agrio court issued the Judgment and denied Chevron’s subsequent motion for clarification and amplification, both the LAPs and Chevron appealed to the Sole Division of the Provincial Court of Justice of Sucumbios. The LAPs sought additional damages, and Chevron sought to have the Judgment reversed or declared a nullity on multiple grounds, including fraud and lack of jurisdiction. While it is not clear exactly what Chevron argued and the evidence it presented, it appears that it contended at least that the Lago Agrio court was provided with and considered evidence outside of the trial court record.
The appellate court affirmed the Judgment in all material respects on January 3, 2012. It declined, however, to address many of Chevron’s allegations of fraud, stating that:
“[m]ention is also made of fraud and corruption of plaintiffs, counsel and representatives, a matter to which this Division should not refer at all, except to ... emphasize[] that the same accusations are pending resolution before authorities of the United States of America ... and [that] this Division has no competence to rule on the conduct of counsel, experts or other officials or administrators and auxiliaries of justice, if that were the case.”
The only discrepancy in the Judgment addressed by the appellate court was the fact that certain data referred to in the Judgment included some minor errors. Although the appellate court acknowledged these errors, it held that they “do[ ] not affect the merits of the judgment being examined.”
In affirming the damage award, the appellate court specified that two trusts were to be set up and managed by defendant Amazon Defense Front (“ADF”) — one for the $8,646 billion in remediation damages and the other for the $8,646 billion in “punitive damages.” Both trusts are to be overseen by the same board.
Following the appellate court ruling, Chevron sought clarification on several aspects of that decision, including whether the appellate court had considered what was described as Chevron’s “accusations” that “the [J]udgment ha[d] been based on information foreign to the record” and that the Lago Agrio court “had received ‘secret assistance’ in drafting” it. The court stated that Chevron’s contention was rejected because it was unsupported by “legal evidence that is in the record” and that
“[t]he texts indicated by Chevron ... are not considered or put forth as legal evidence, not even by the defendant itself in its claim, for which reason the Division understands that it is not alleging that the judgment has been sustained on evidence foreign to the record. Therefore, by starting by considering that the only evidence legally produced is deemed authentic in the trial about the facts in dispute, and that which must be in the record, it is concluded that the appealed judgment is based on legally presented evidence ....”
The court then wrote that Chevron had announced on the day following entry of the Judgment by the Lago Agrio court that it “suspected” that the trial judge “had received ‘secret assistance’ in drafting the judgment and that it “therefore now ... is untimely to try to say this— before the Division — and not before who ruled on the cause in the first instance so that he clarify them.” It proceeded to “make an observation” that it was “difficult to conceive” that any secret assistance “would have allowed for the introduction of arguments that were decisive.” It noted, moreover, that “all the valid evidence that has been considered ... all of the samples, documents, reports, testimonies, interview, transcripts and minutes ... are found in the record without the defendant identifying any that is not .
Despite these “observation[s],” the court stated unequivocally that “it stay[ed] out of these accusations, preserving the parties’ rights to present [a] formal complaint to the Ecuadorian criminal authorities or to continue the course of the actions that have been filed in the United States of America.” It made clear also that “it was not its responsibility to hear and resolve proceedings that correspond to another jurisdiction” or to “make a pronouncement on the interminable and reciprocal accusations over misconduct of some of the parties’ attorneys, experts, or contractors ... [because these allegations of fraud] could not affect the final result of the lawsuit.”
E. Developments Since the Appellate Decision
After the Ecuadorian appellate court’s decision and clarification, Chevron filed a cassation petition on January 20, 2012, seeking review of the Judgment in Ecuador’s National Court of Justice. On February 17, 2012, the Ecuadorian appellate court accepted Chevron’s cassation petition and referred the matter to the National Court of Justice.
Since 2009, an international arbitration panel has been considering Chevron’s claims against the ROE under a bilateral investment treaty (the “BIT”) between the United States and the Ecuador. During recent months, the BIT tribunal issued two interim awards that ordered the ROE “to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador” of any judgment against Chevron in the Lago Agrio case and to inform the tribunal of its efforts to implement the order.
The Ecuadorian appellate court responded to the First Interim Award by stating in a February 17, 2012 order that it had no authority to suspend enforcement of the Judgment because Chevron had not requested that a bond be fixed. It responded to the Second Interim Award with a March 1, 2012 order noting that no determination by the BIT tribunal could overcome the court’s obligation to enforce international human rights laws and stating also that the Judgment was final and enforceable under Ecuadorian law.
III. Prior Proceedings in this Litigation
A. The Pleadings
1. The Amended Complaint
This action was filed on February 1, 2011 against the LAPs, the Donziger Defendants, the Stratus Defendants, and a number of other individuals and entities. The amended complaint contains nine causes of action.
Counts 1 and 2 assert substantive and conspiracy claims under RICO and are described extensively in the recent decision ruling on the Donziger Defendants’ motion to dismiss. Broadly speaking, however, they allege that the Donziger Defendants, the Stratus Defendants, some of the other defendants (but not the LAPs), and a number of non-parties conducted and conspired to conduct the affairs of an enterprise through a pattern of racketeering activity in order, among other things, “to coerce Chevron into paying billions of dollars” to “stop [an allegedly extortionate] campaign against it.” The alleged predicate acts include extortion, mail and wire fraud, money laundering, witness tampering, and obstruction of justice.
Counts 3 through 5 assert claims against all defendants for fraud, tortious interference with contract, and trespass to chattels relating to the allegedly unlawful scheme described above.
Count 6 asserts claims against all defendants for unjust enrichment on the ground that defendants have been and will be enriched as a result of the Judgment.
Count 7 asserts a state law claim for civil conspiracy against all defendants, alleging that they conspired to commit the substantive state law violations.
Count 8 asserts that the Donziger Defendants violated Section 487 of the New York Judiciary Law.
Count 9 sought a declaration that the Judgment was unenforceable and unrecognizable “on, among others, grounds of fraud, failure [by Ecuador] to afford procedures compatible with due process, lack of impartial [Ecuadorian] tribunals, lack of personal jurisdiction, [and] contravention of public policy.”
Part of Count 3 and Counts 4 through 6 have been dismissed as to the Donziger and Stratus Defendants. As discussed below, Count 9 has been disposed of as well.
2. The Answers
The SJ Defendants filed answers to Chevron’s amended complaint. Two aspects of those answers are relevant here.
First, the Donziger Defendants’ seventh affirmative defense asserts that “Chevron’s claims are barred, in whole or in part, by the doctrines of collateral estoppel and/or res judicata.” Likewise, the LAP Representatives’ thirty-third affirmative defense asserts that “[t]he claims asserted in the Complaint and any relief sought thereunder are barred, in whole or in part, under the doctrines of res judicata and/or collateral estoppel.”
Second, both assert unclean hands and in pan delicto affirmative defenses. Moreover, the LAP Representatives’ pleading explicitly and significantly relies, in this respect, on findings by the Lago Agrio court of misconduct by Chevron in the defense of the Lago Agrio case. Indeed, they allege that:
“As observed by the Ecuadorian Court in its final judgment, Chevron also engaged in the following procedural misconduct: raising at the eleventh hour ‘unresolved issues’ previously abandoned by Chevron in an effort to delay resolution of the case; obstructing the evidence gathering process by launching frivolous attacks upon each and every expert report not submitted by a Chevron-affiliate, which the Court found to be designed to ‘impede the normal advance of the evidence gathering process, or even prolong it indefinitely;’ and frontally attacking the court in a display of shocking disrespect for the judicial process. Further, In [sic] summation of Chevron’s behavior throughout the course of the litigation, the Court observed that ‘the following constitutes a display of procedural bad faith on the defendant’s part: failure to ... [produce] ... documents ordered coupled with a failure to submit an excuse on the date indicated; attempting to abuse the merger between Chevron Corp. and Texaco Inc. as a mechanism to evade liability; abuse of the rights granted under procedural law, such as the right to submit the motions that the law allows for [...]; repeated motions on issues already ruled upon, and motions that by operation of law are inadmissible within summary verbal proceedings, and that have all warranted admonishments and fines against defense counsel defendant from the various Judges who have presided over this Court; [and] delays provoked through conduct that in principle is legitimate, but ... [which have] ... unfair consequences for the proceedings ... such as refusing and creating obstacles for payment of the experts who took office, thus preventing them from being able to commence their work ¡ »
B. Prior Proceedings in this Court
This Court issued a preliminary injunction barring enforcement of the Judgment pendente lite in early March 2011. In April 2011, the Court bifurcated, and later severed, Chevron’s declaratory judgment claim (Count 9) and stayed proceedings in the first eight counts pending its resolution. It then issued a scheduling order that required completion of all discovery on the Count 9 action by September 15, 2011, and set the trial of that Count for November 14, 2011.
After months of discovery, on the eve of the discovery deadline, and just before the Second Circuit heard oral argument on the SJ Defendants’ appeal from the preliminary injunction, the LAP Representatives filed a so-called stipulation with this Court (the “Representation”) in which the two LAP Representatives, through counsel, stated that they:
“do not intend and specifically disclaim any intent to enforce ... the Lago Agrio Judgment in the State of New York. The Ecuadorian Plaintiffs [a term defined in the document to mean Messrs. Naranjo and Payaguaje alone] further agree and stipulate never to seek recognition of the Lago Agrio Judgment under New York law. [They] agree and stipulate never to seek recognition of the Lago Agrio Judgment in the State of New York by any means or under any law. [They] agree and stipulate never to seek to domesticate the Lago Agrio Judgment in the State of New York. [They] agree and stipulate never to seek to enforce the Lago Agrio Judgment against assets held by Chevron Corporation in the State of New York. The Lago Agrio Plaintiffs [not defined] do not hereby waive, and expressly reserve, their right to seek enforcement of the judgment in any jurisdiction other than New York under any applicable law.”
C. Proceedings in the Court of Appeals
In September 2011, the Second Circuit vacated the preliminary injunction and stated that an opinion would follow. The subsequent opinion did not pass, one way or the other, on this Court’s findings with respect to the nature of the Ecuadorian tribunals or the evidence of fraud in the procurement of the Judgment. Rather, it explained that the panel had vacated the preliminary injunction on the ground that:
“the procedural device [Chevron] has chosen to present those claims [in Count 9] is simply unavailable: The [New York Recognition of Foreign Country Money Judgments Act (“Recognition Act”) ] nowhere authorizes a court to declare a foreign judgment unenforceable on the preemptive suit of a putative judgment-debtor.”
The prayer for declaratory relief, the Circuit held, was of no avail because, in its view, a declaration with respect to the alleged the unenforceability or non-recognizability of the Judgment could not be had because the Recognition Act (1) “does not authorize a court to declare a foreign judgment null and void for all purposes in all countries,” and (2) could not justify a declaration with respect to recognizability and enforcement in New York alone because there was no indication that the LAPs ever would seek to enforce the Judgment here. The Circuit remanded Count 9 to this Court with instructions to dismiss it in its entirety.
Chevron’s petition for certiorari is pending in the Supreme Court.
D. The Present Motion
Chevron now moves for partial summary judgment dismissing the SJ Defendants’ affirmative defenses of res judicata and collateral estoppel on the grounds that (1) the Judgment may not be afforded any preclusive effect unless it may be recognized and enforced here, and (2) recognition and enforcement would be impermissible or inappropriate because (a) the Ecuadorian courts lacked personal jurisdiction over it, (b) the Judgment is penal in whole or in part, and (c) there was fraud in the procurement of the Judgment. It argues also, on the basis of the law of former adjudication without regard to issues as to the recognizability of the Judgment, that the Judgment is not preclusive of any claim or defense here.
In response, the SJ Defendants argue principally that the motion is moot because they “are not asserting in this lawsuit the affirmative defenses of res judicata and/or collateral estoppel with respect to the Ecuadorian Judgment.” Specifically, the LAP Representatives assert that they no longer are pursuing those defenses in this action because, in the Representation filed in September 2011, they said that they would “not ... seek recognition of the Ecuadorian Judgment ... in any New York court.” While the Donziger Defendants have made no such representation, they assert that they are not judgment creditors of the Judgment and therefore never could seek its enforcement in New York.
IV. The Alleged Fraud in Ecuador
The Court turns to the factual underpinnings of Chevron’s motion. It here summarizes the evidence advanced in support of the fraud claim, reserving discussion of any evidence pertinent to the other grounds of the motion for the discussion below.
While Chevron has made broader arguments in support of its fraud contention in other proceedings in this case, it relies in this motion principally on the following contentions:
First, material parts of the Judgment were ghost-written by the LAPs rather than written by the judge over whose name the Judgment was issued. Specifically, portions of at least three internal LAP documents that are not in the Lago Agrio court record and that dealt with allegedly material matters appear in haec verba in the Judgment, leading to the conclusion either that the judge improperly was given the LAP internal documents ex parte and simply copied portions of them or that the LAP team wrote at least parts of the Judgment itself.
Second, the two site inspection reports submitted over the signatures of Dr. Charles Calmbacher were bogus. While the signatures were genuine, the conclusions of the reports did not reflect his views and were not written by him.
Third, the judicial site inspections were stopped, the LAPs’ suggestion for use of a global assessment was adopted, and Cabrera was selected to make that assessment in consequence of improper coercion and pressure exerted on behalf of the LAPs on the Lago Agrio court.
Fourth, the LAP team secretly planned the Cabrera report, wrote most of it, and provided it to Cabrera, who signed and filed it under the false pretense that it was independent, fair, and impartial.
Fifth, the LAP team participated in an elaborate charade to bolster the Cabrera report. It first purported to object to the report, though it in fact had written at least most of it, thereby creating a false appearance of independence on the part of Cabrera. Then, after discovery proceedings in the United States had produced evidence showing that the LAP team secretly had written the Cabrera report, the LAPs submitted seven additional reports designed to “cleanse” any perceived improprieties in the Cabrera report.
The following facts, alleged by Chevron, all are supported by admissible evidence. The SJ Defendants have not objected to its admissibility, controverted it with admissible evidence, or responded to the corresponding paragraphs of Chevron’s 56.1 Statement. Hence, all are undisputed and deemed admitted for the purposes of this motion except to the extent otherwise stated, which is limited to certain evidence pertaining to the Calmbacher reports.
A. The Alleged GhostAWriting of Portions of the Court’s Judgment
The contention that at least parts of the Lago Agrio court’s Judgment improperly were written by the LAP team relates principally to three internal LAP documents, none of which is in the Lago Agrio court record.
• A document entitled The Merger of Chevron Inc. and Texaco Inc. (the “Unfiled Fusion Memo”) was written by one or more members of the LAP team and addresses (1) the relationship among Texpet, Texaco Inc., and the Consortium, (2) the structure of Chevron’s acquisition of the shares of Texaco, and (3) legal arguments relating to whether Chevron could be held liable for obligations of Texaco.
• The Index Summaries are spreadsheets prepared by the LAP team that list and summarize documents filed in the Lago Agrio court.
• The Selva Viva Data Compilation consists of spreadsheets containing environmental sampling data.
In each instance, Chevron’s motion is supported by analyses by one or more experts that establish that one or more passages in these documents — and in the case of the Unfiled Fusion Memo, at least one quite extended passage — appears verbatim in the Judgment. (Attached as the Appendix is a side-by-side comparison of (1) the text of the Spanish language Judgment highlighting the word strings that are character-by-character duplications of corresponding text in the Unfiled Fusion Memo with (2) a certified English translation, which permits comprehension by English speakers of the meaning of the duplicate text.) The experts opine — based on “matching or similar word strings,” “numerous data points,” other “irregularities,” and the like — that whoever wrote the Judgment had and used these LAP documents in doing so.
Two other experts discuss the authorship of the Judgment more broadly. They compared documents known to have been written by Judge Zambrano, who issued the Judgment, with the Judgment itself. The Turell report concluded that the “[w]ritten style of Judgment ... is quite different from the written style identified in four of the texts headed by Judge Zambrano ... so that these two text sets cannot have been written by the same author.” Similarly, McMenamin stated that “[t]here is substantial linguistic evidence that the [Judgment] was written by multiple authors ... [and] that Judge Zambrano is not the author of significant amounts of the [Judgment].”
B. Allegedly Fraudulent Evidence, the Termination of Judicial Inspections, and the Appointment of Cabrera
1. Calmbacher Reports
The LAPs selected Dr. Charles Calmbacher to serve as their expert for some of the judicial inspections ordered by the Lago Agrio court early in that litigation. On February 14, and March 8, 2005, respectively, “[t]he LAPs submitted reports for the judicial inspections of well sites Shushufindi 48 and Sacha 94 to the Ecuadorian court ... purporting to have been authored by ... Calmbacher and finding that ‘highly toxic chemicals’ contaminated the area, that TexPet’s remediation was ‘inadequate or insufficient,’ and opining that Shushufindi 48 and Sacha 94 required ‘US$26,033,400’ and ’15,520,000 dollars’ of further remediation respectively.”
Although the signature pages bear Dr. Calmbacher’s signature, he testified at a deposition in a Section 1782 proceeding that he had not reached the conclusions the reports contained. He never concluded that TexPet had failed to remediate any site or that any site posed a health or environmental risk.
According to Dr. Calmbacher, Donziger knew that at least some of the conclusions listed in the Sacha 94 report were not Dr. Calmbacher’s because Calmbacher previously had discussed his findings with Donziger. Moreover, when Calmbacher was served with the deposition subpoena in the Section 1782 proceeding in which his testimony was taken, Donziger and one of his associates each telephoned Dr. Calmbacher. Donziger told Calmbacher that “it could be a potential law case against” Calmbacher if he did not “go in with [Donziger] on quashing the subpoena” and that they were “going to go after Calmbacher for unprofessional behavior.” When Calmbacher said that he saw no reason to “go in with [Donziger] on quashing the subpoena,” Donziger “hung up.”
For the sake of completeness, the Court notes that Chevron on a prior motion submitted a copy of an email from Donziger to another LAP lawyer, the relevant portion of which read:
“I want you to know that I am focusing on two main things:
“1) Get the reports done and and [sic ] done well.”
“Frankly, we have had problems with Chuck [Calmbacher] that are even more serious than I realized. His reports appear to lack much substance, and he still has refused to send me copies. I based this on what Monica told me — there are no analysis results in his drafts. He is also trying to undermine Edison’s authority and is coming back to the United States today. He will still sign the perito reports, but we might have to unite them in Quito.”
* * s=
“The official line if anybody asks is NOT that Chuck was fired, but that he is coming back home for rest and health reasons. If people ask if he is coming back to Ecuador, say that depends on his health and our needs. I do not want Texaco thinking we have internal problems.”
2. Ending of Judicial Inspections and Cabrera’s Appointment
In January and July of 2006, Pablo Fajardo, an Ecuadorian lawyer for the LAPs, filed motions with the Lago Agrio court to “waive” and “relinquish” the LAPs’ right to conduct most of the further judicial inspections at specified sites. While those petitions were pending, the judge presiding over the case at that time, Germán Yáñez Ricardo Ruiz, in the words of Donziger, was “on his heels from ... charges of trading jobs for sex in the court.”
During this period, Donziger and others drafted a complaint against Judge Yáñez. Fajardo met with the judge ex parte and told him that “if he d[id] not adhere to the law and [do] what [the LAPs] need[ed],” they “might file it [against him].” Shortly thereafter, on September 7, 2006, Judge Yáñez permitted the LAPs to withdraw from 64 remaining judicial inspections.
In December 2006, Fajardo requested that the Lago Agrio court appoint a global expert “to conduct the entire examination.” Before and after he filed that motion, Fajardo and other agents of the LAPs had additional ex parte meetings with Judge Yáñez. During at least some of those meetings, the LAPs’ attorneys and agents entreated him to appoint a global expert. On January 29, 2007, Judge Yáñez ordered the global assessment that the LAPs wanted.
Ex parte meetings with Judge Yáñez continued with the object of persuading him to appoint Cabrera as the global ex-pert, which ultimately occurred on March 19, 2007. Donziger acknowledged that Judge Yáñez “never would have done [so] had we not really pushed him.” Moreover, the outcome had not been in doubt, at least for some time. The LAPs were confident at least as of late February 2007 that Judge Yáñez would appoint Cabrera. Cabrera was sworn in officially on June 13, 2007.
3. The Cabrera Report
At the June 13, 2007 ceremony at which he was installed, Cabrera swore to execute his duties “faithfully and in accordance with science, technology and the law and with complete impartiality and independence vis-a-vis the parties.” The Lago Agrio court ordered also that he “perform his work in an impartial manner and independently with respect to the parties.” It ordered, moreover, that Cabrera be “responsible for the entire report, the methodology used ... [and] the work done by his assistants” and that he “cite all of his scientific sources, and analytical and legal documents that he use[d] to perform his work.” But Cabrera had been working with the LAPs for some time, and he continued to do so.
a. Defendants Secretly Were Involved in Defining the Scope of Cabrera’s Report
On March 3, 2007, shortly before his selection and more than three months before he was sworn in, Cabrera met ex parte with the LAPs and their agents, including Ann Maest of Stratus. The primary purpose of that meeting was for the LAPs to “lay out the entire case and legal theory for Mr. Cabrera and the other participants in the meeting.” During that meeting, Fajardo made a presentation concerning the global assessment in which he discussed what eventually would become the Cabrera report and stated that “[t]he work isn’t going to be the expert[]s. All of us bear the burden.” Someone at the meeting then asked whether the final report would be prepared only by the ex-pert. Fajardo responded that the expert would “sign ... the report and review it.... But all of us, all together, have to contribute to that report.” Ann Maest of Stratus commented, “But ... not Chevron,” which caused others to laugh.
After the meeting, one of the LAPs’ consulting experts stated that meeting with Cabrera was “bizarre.” Donziger replied “[d]on’t talk about it,” and he immediately told a camera crew that had been filming the meeting for the making of Crude that the discussion was “off the record.”
Subsequently, lawyers and agents of the LAPs were involved in “putting together Cabrera’s work team,” “in his site selection,” and “in [Cabrera’s] sampling protocols.” Indeed, Cabrera’s work plan was drafted by the LAP team and given to Cabrera for his adoption. When the work plan was filed with the Lago Agrio court, it was not disclosed that the LAP team had provided Cabrera with a draft of the work plan.
b. The LAP Team Wrote Much of the Cabrera Report
In January 2008, the Stratus Defendants and others met with Cabrera and discussed that “Stratus individuals would draft materials that would be given to Mr. Cabrera for his hoped-for adoption in his report.” The following month, Douglas Beltman of Stratus stated that “[w]e have to write ... probably the single most important technical document for the case. The document will pull together all of the work over the last 15 or so years on the case and make recommendations for the court to consider in making its judgment. We (the case attorneys, the case team in Quito, and Stratus) have put together a very ambitious outline for this report.”
Over the next several weeks, the Stratus Defendants and others drafted the “Summary Report of Expert Examination” and the majority of the annexes that soon were filed as the Cabrera report. They had the report translated into Spanish before submitting it to Cabrera. And there is no genuine dispute as to exactly what happened. As Donziger has admitted, “Stratus wrote the bulk of the report adopted by Cabrera and submitted to the court.”
The Cabrera report was filed with the Lago Agrio court on April 1, 2008. It falsely or, at least, deceptively stated that it had been “prepared by the Expert Richard Stalin Cabrera Vega” with the help of “my technical team, which consists of impartial professionals.” It estimated roughly $8 billion in total damages and $8.3 billion in unjust profits by Texpet. But that was not the end.
Both parties objected to the report. The LAP team — despite having drafted the vast majority of the report — publicly asserted that it was “unjustly favorable to [Chevron]” and “too conservative” in its damage calculations.
On November 17, 2008, Cabrera filed answers to these comments and objections and increased his damage assessment to more than $27 billion. The responses stated that they had been written “by the Expert Richard Cabrera, with the Support of His Technical Team.” In fact, however, the Stratus Defendants and other members of the LAP team had drafted those responses and given them to Cabrera to adopt. Indeed, they had attempted to word them so that they would read as if Cabrera had written them.
A The “Cleansing” Reports
After the Cabrera report and the subsequent responses had been submitted — and after some of the evidence described above had been discovered through Section 1782 actions in the United States — members of the LAP team acknowledged problems associated with Cabrera’s lack of independence. Two U.S. law firms representing the LAPs in Section 1782 proceedings withdrew after discovering the LAP team’s involvement with Cabrera. Another of the LAP attorneys wrote that if the relationship with Cabrera were disclosed, it would “destroy” the Lago Agrio Litigation and “all of us, your attorneys, might go to jail.”
The LAP team responded by considering the hiring of a new expert to “address Cabrera’s findings in such a subtle way that someone reading the new expert report ... might feel comfortable concluding that certain parts of Cabrera are a valid basis for damages.” The initial plan was to submit an additional expert report to the Lago Agrio court that would appear to be independent of but, in fact, would rely on the data and conclusions reached in the Cabrera report.
In the end, seven new reports were filed with the Lago Agrio court on September 16, 2010. Six of the seven were by U.S. experts; one was anonymous. But the known experts that submitted reports later admitted that they never had traveled to Ecuador for the purpose of gathering data to support their reports. At least four relied on the data and conclusions in the Cabrera report. For example, the Allen report stated that it “relied on parts of the Cabrera report” and “made no efforts to independently verify the underlying data.” The Shefftz report also expressly relied on “data and cost figures from the Cabrera report” without “knowing] one way or the other whether they’re correct or not.”
Discussion
I. Summary Judgment Standard
A. General
Summary judgment appropriately is granted where there is no genuine issue of material fact and where, based on those facts, the moving party is entitled to judgment as a matter of law. A material fact is one that could “affect the outcome of the suit under the governing law.” A dispute of a material fact exists where the evidence is such that a reasonable fact finder “could return a verdict for the non-moving party.” It is not enough, however, for a party against which an adversary seeks summary judgment to show that “there is some metaphysical doubt as to the material facts.”
Generally speaking, the moving party bears the burden of demonstrating that it is entitled to summary judgment. Where, however, the non-moving party would have the burden of proof at trial with respect to a given issue, the movant is entitled to summary judgment on the issue if the non-moving party has not shown that its evidence could justify a finding in its favor. Indeed, the Supreme Court has said that the moving party’s burden is only to “inform [ ] the district court of the basis for its motion” and that “regardless of whether the moving party accompanies its summary judgment motion with affidavits, the motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment ... is satisfied.”
Finally, evidence in support of or in opposition to a motion for summary judgment ordinarily must be, or be capable of presentation, in a form that would be admissible into evidence at trial.
B. S.D.N.Y. Civil Rule 56.1
Local Civil Rule 56.1 is relevant also to this motion. It provides as follows:
“(a) Upon any motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, there shall be annexed to the motion a separate, short and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried. Failure to submit such a statement may constitute grounds for denial of the motion.”
“(b) The papers opposing a motion for summary judgment shall include a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party, and if necessary, additional paragraphs containing a separate, short and concise statement of additional material facts as to which it is contended that there exists a genuine issue to be tried.”
“(c) Each numbered paragraph in the statement of material facts set forth in the statement required to be served by the moving party will be deemed to be admitted for purposes of the motion unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.”
“(d) Each statement by the movant or opponent pursuant to Rule 56.1(a) and (b) including each statement controverting any statement of material fact, must be followed by citation to evidence which would be admissible, set forth as required by Fed.R.Civ.P. 56(c).”
As this Court previously has noted, “[t]he purpose of the rule ‘is to assist the Court in understanding the scope of the summary judgment motion by highlighting those facts which the parties contend are in dispute.’ ”
Chevron filed a statement of undisputed facts in support of its motion and in accordance with Local Civil Rule 56.1(a) (“56.1 Statement”). Its 56.1 Statement contains more than 100 pages of factual statements — -245 individually numbered paragraphs — the contents of which are described as necessary.
The SJ Defendants did not submit a Rule 56.1(d) statement. Their memorandum instead states that:
“[b]y filing this opposition to Chevron’s motion for summary judgment and notifying the Court that Chevron’s motion is moot, Defendants do not concede or agree with any of the factual allegations presented therein. Defendants contest all of Chevron’s factual allegations and intend to disprove them at the appropriate time, when they are germane to an issue actually before the Court for resolution.”
“[T]he appropriate time” for the SJ Defendants to “contest all of Chevron’s factual allegations” on this motion was when they filed their response to it. As the Second Circuit has said, failing to respond on the merits to a motion for summary judgment is a “risky and imprudent path” — a party that fails to meet a summary judgment motion with evidence contesting the movant’s factual allegations “rel[ies] solely on [any] failure [of the movant] to meet its burden of production” or, as is the case here, the correctness of the SJ Defendants’ mootness argument. Thus, the effect of their failure to file the statement required by Local Civil Rule 56.1 in response to Chevron’s 56.1 Statement, according to the plain terms of the rule, is that they are “deemed to [have] admitted for purposes of th[is] motion” all of the facts detailed in the 245 paragraphs of the 56.1 Statement, at least to the extent they are supported by admissible evidence.
II. The Res Judieata-Collateral Estoppel Defense Is Properly Before the Court and Is Not Moot
The SJ Defendants and Chevron agree that “New York law would require Defendants to show that the [Ecuadorian] Judgment is entitled to recognition under the New York Recognition Act in order [for them] to invoke res judicata or collateral estoppel.” The SJ Defendants contend, however, that “[n]o issue concerning recognition of that Judgment can be before this Court” for three reasons.
First, all of the SJ Defendants claim that their affirmative defenses of res judicata and collateral estoppel do not and were not intended to rely upon the Judgment.
Second, all contend that their affirmative defenses of res judicata and collateral estoppel, to any extent that they rested on the Judgment when they were interposed, were mooted by the LAP Representatives’ Representation.
Finally, the Donziger Defendants argue that they in any case have no “interest” in the Judgment and therefore could not seek its recognition in New York, at least independent of the LAP Representatives.
A. The Answers Are Sufficient to Assert the Judgment As Claim or Issue Preclusive and Were Intended to Do So
The SJ Defendants’ principal tactic in opposing Chevron’s motion is to deny that the res judicata-collateral estoppel defense they pleaded “refer[s] to the Ecuadorian Judgment” at all. It allegedly refers instead to “a host of judicial decisions and findings” made in “prior rulings by the U.S. Court of Appeals for the Second Circuit and/or other U.S. federal district and appellate courts in related proceedings under 28 U.S.C. § 1782.” Therefore, the SJ Defendants argue, Chevron’s motion “presents nothing for this Court to decide.” This argument is without merit.
1. The Answers Sufficiently Assert These Defenses Based on the Judgment
The SJ Defendants’ answers plead that the complaint is barred in whole or in part by res judicata, and the LAP Representatives’ answer goes farther by relying explicitly on findings by the Lago Agrio court in pleading its unclean hands defense just two pages away. Nothing more is required to invoke the Judgment for preclusive purposes. The SJ Defendants’ argument to the contrary is not persuasive.
To begin with, the SJ Defendants contend that the general allegation that the claim is barred by res judicata and collateral estoppel was not sufficient to invoke the Ecuadorian Judgment. They assert also, however, that their res judicata-collateral estoppel defense actually invoked only “prior rulings by the U.S. Court of Appeals for the Second Circuit and/or other U.S. federal district courts in related proceedings under 28 U.S.C. § 1782” none of which is even mentioned in their answers. But that is internally inconsistent. If, as they argue, their answers sufficiently raised res judicata and collateral estoppel defenses based on Second Circuit and/or Section 1782 rulings that they did not even mention, they were good enough also to invoke also the Ecuadorian Judgment. And, in fact, Rule 8(c), which governs the pleading of affirmative defenses- — these included — requires no more with respect to the pleading of any of these orders and judgments. The rule requires only that an answer “affirmatively state any avoidance or affirmative defense.” Motions to strike bare-bones or conclusory affirmative defenses are discouraged, and courts regularly deny such attempts. In any case, the SJ Defendants certainly cannot avoid the merits of Chevron’s motion for partial summary judgment on this issue by claiming that their own answers are insufficient. That is particularly so given the fact that then-own words and actions clearly demonstrate that their answers — -contrary to what they say now — were intended to plead that the Ecuadorian Judgment as res judicata and collateral estoppel. Indeed, their present denial of such an intention is an unworthy pretense.
2. The Defendants’ Intentions
The SJ Defendants’ repeated and explicit statements and actions in this and other courts demonstrate that it always was there intention to rely in this case on the Judgment as having preclusive effect until it suddenly seemed more attractive to change course in a tactical effort to avoid litigating the recognizability of the Judgment in this action while saving that issue for use in other fora.
a. The SJ Defendants’ Prior Communication With This Court
First, the SJ Defendants’ current claim be squared with their other actions and statements before this Court.
Shortly after Chevron filed this motion for summary judgment dismissing the res judicata-collater&l estoppel defense to the extent it is based on the Judgment, the SJ Defendants requested (and later received) an extension of the time within which to file opposing papers. They argued that:
“The extension of time [that they sought to respond to the summary judgment motion] would not come close to giving the defendants an amount of time to prepare their response equal to that