LEWIS A. KAPLAN, District Judge.
An Ecuadorian court in 2011 entered an $18.2 billion judgment (the "Lago Agrio Judgment")
This Court found Donziger liable on two independently sufficient legal theories: (1) fraud in the procurement of the Lago Agrio Judgment, and (2) violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). It found also that Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje (the "LAP Representatives"), the only other defendants who defended this action, were liable for the fraud because it was committed by their agents, including Donziger, within the scope of their employment.
Chevron sought and, mindful of the Circuit's ruling in Chevron Corporation v. Naranjo,
The relief this Court granted is substantially the relief the LAPs' attorney, in an appearance joined in by Donziger, conceded late last year before the Second Circuit "would not [pose] a problem" if Chevron prevailed on its bribery claims.
Movants' position is without merit. A principal focus of this motion necessarily is on the question whether movants will be harmed irreparably if the N.Y. Judgment remains in effect until this appeal is decided. But movants identify no credible threat of irreparable injury should that occur. Indeed, their claims of irreparable injury rest on a pastiche of unsupported assertions, contradictions of undisputed evidence, and fertile imagination. Nor have they shown any likelihood of appellate success on any legal issue that would alter the relief granted here. As a result, their motion is denied in almost all respects. It is granted only to the limited extent that the Court will modify pending appeal the requirement that Donziger transfer immediately to Chevron his right, title and interest in his Amazonia shares to ensure that Chevron does not succeed to ownership of those shares before the appeal is decided. In the interim, the Court orders that those shares—which represent Donziger's right, vis-à-vis his clients, to a 6.3 percent share of any money collected on the fraudulently procured judgment—and any proceeds of those shares will be held pending appeal by the Clerk of the Court
Four factors are relevant to a determination whether to issue a stay pending appeal: "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies."
Donziger claims that (1) the prohibition on his selling, assigning, pledging, transferring or encumbering any interest in the Lago Agrio Judgment and the requirement that he transfer his interest in that Judgment to Chevron would destroy his law practice and leave him no means of earning a living,
Donziger claims that the N.Y. Judgment "threatens to destroy . . . Donziger's law practice" by precluding him from "work[ing] on[] a case to which he has devoted the better part of the last two decades."
Nothing in the N.Y. Judgment prevents Donziger from continuing to work on the Lago Agrio case. Period. The pertinent question is whether and to what extent it affects his compensation during the pendency of the appeal and, if so, whether any such effect would cause irreparable injury before the appeal is decided.
Paragraph 1 of the N.Y. Judgment imposes a constructive trust on any property that Donziger has received, or hereafter may receive, that is "traceable to the [Lago Agrio] Judgment" or its enforcement. But it is quite unlikely to have any effect on Donziger's law practice or compensation during the pendency of the appeal.
Donziger's compensation is governed by a written retainer agreement.
To be sure, the N.Y. Judgment would change things in respect of the payment of any Contingent Fee to Donziger, as any such payment would be traceable to the Judgment and thus subject to paragraph 1. But there are two problems with any
First, Donziger has been litigating the case, making a living, and conducting his professional and business activities for years without receiving any contingent fees. The fact that the payment of any Contingent Fee, should any ever be due, would have to await (and would depend upon) the outcome of this appeal is not an immediate threat of irreparable injury.
Second, there is no evidence that the Lago Agrio Judgment is likely to be collected in any material part, if at all, during the pendency of the appeal in this case. Although the LAPs are seeking enforcement of the Lago Agrio Judgment in Argentina, Brazil, and Canada, enforcement has not been granted in any of them. Nor is there any evidence that anything likely would be collected in any of those countries during the pendency of this appeal even if any of them permitted enforcement of the Judgment before the appeal is decided.
In all the circumstances, there simply is no cognizable possibility that the effectiveness of paragraph 1 of the N.Y. Judgment during the pendency of the appeal would have any irreparable effect on Donziger, his activities, his representation of his clients, or his law practice.
No doubt recognizing this, Donziger seeks to attribute such effects to paragraph 5 of the N.Y. Judgment, which prohibits him from "monetiz[ing] or profit[ing] from the Judgment . . ., including without limitation by selling, assigning, pledging, transferring or encumbering any interest therein."
The point of paragraph 5—which is narrower than language that was proposed by
The N.Y. Judgment, including paragraph 5, in fact would deprive Donziger of the ability to profit from the Lago Agrio Judgment that he obtained by fraud. The practical effect of that, however, as we have seen, is not to prevent him from working on the case nor to prevent him from being paid his monthly retainer for his labors. It is to prevent him from benefitting personally, at Chevron's expense, from property traceable to that fraudulent Judgment. But leaving those provisions of the N.Y. Judgment in place pending disposition of this appeal would threaten no irreparable injury. There is no reason to suppose that the Lago Agrio Judgment will be collected in any material part during the pendency of the appeal. Even if there were, Donziger could realize the contingent fee benefits of such collections once the appeal is decided—if he prevails.
The LAP Representatives claim that the Judgment's prohibition on monetizing the Lago Agrio Judgment would prevent them from "financ[ing] any appeal of this action."
First. There is not a shred of evidence that the LAP Representatives or any of the other LAPs ever paid or contributed anything toward the legal fees or legal expenses incurred in this case, the Lago Agrio case, or any of the other litigation involving Chevron, or that there is or ever was any intention that they would do so in the future. The litigation against Chevron has been funded by investors in exchange for shares of any eventual recovery. In fact, the LAPs have raised at least $15.99 million and perhaps $21 million or more
Second. There is no reason to suppose that the Amazon Defense Front ("ADF") and the LAPs lack funds, even at this moment, to pay for the appeal by the LAP Representatives, whom they obviously decided to have defend this case in the interests of all in order to give them a voice in the courtroom. The LAPs are litigating actively against Chevron in Argentina, Brazil, Canada, Ecuador and even elsewhere in the United States
Third. This conclusion is supported not only by the LAPs' apparently well funded litigation efforts in other jurisdictions, but by another statement of Fajardo. In May 2013, he stated that the LAPs would "scal[e] back in New York to focus on the main issue: enforcing the $19 billion judgment around the world. . . . The New York case is a distraction, a sideshow aimed at exhausting our resources."
Finally. Even if one were to ignore all of the above, the suggestion that the LAP Representatives need the freedom to monetize their interests in the Lago Agrio Judgment in order to finance their appeal ignores the fact that they have retained little if any economic interest in that Judgment, assuming they ever had such an interest in the first place. As noted previously, the Lago Agrio Judgment provides for the payment of the entire award to the ADF. This appears to include the 10 percent that Ecuador's Environmental Management Act contemplates be awarded to individual plaintiffs, essentially as a bounty for bringing such a suit.
In sum, the LAP Representatives have not shown that the provision of the N.Y. Judgment preventing them from monetizing any interest they may have in the Lago Agrio Judgment threatens them with irreparable injury, either by preventing them from appealing here or in any other way. This case always has been financed on the movants' side by outside investors, not the individual defendants. There has been no showing that the money to pay for the appeal is not on hand already or, in any case, could not be raised just as millions have been raised before. And the LAP Representatives have failed to demonstrate that they have retained whatever economic interest they ever had in the Lago Agrio Judgment, if they ever had any, that they could sell or borrow upon to pay any appellate fees but for the intervention of the N.Y. Judgment.
The N.Y. Judgment requires that Donziger "execute in favor of Chevron a stock power transferring to Chevron all of his right, title and interest in his shares of Amazonia."
First. For reasons explained in this Court's opinion, allowing Donziger to benefit from the Lago Agrio Judgment would be to hand him, at Chevron's expense, proceeds of the fraud he committed. The Amazonia shares are the proxy through which Donziger and others with equity interests in any collections on the Lago Agrio Judgment will receive any benefits it may yield. Thus, Donziger's Amazonia shares in equity belong to Chevron. Any other conclusion would allow Donziger to be enriched unjustly if any of the Lago Agrio Judgment were collected. Allowing the shares to remain in Donziger's hands pending appeal would enable him to benefit from his fraud prior to any collections by selling the shares and by hiding or dissipating the sale proceeds. Taking the shares out of his hands now would prevent such a result and cause no injury to Donziger that could not be undone. If Donziger prevailed on appeal, the shares and whatever economic benefit they may have yielded in the interim would be restored to him. If he did not prevail, that fact would reflect the Second Circuit's determination that Chevron, not Donziger, is entitled to the shares and any proceeds of the shares. Putting the shares in Chevron's hands in the interim—the relief awarded by this Court—would cause no irreparable injury to Donziger.
Second. Donziger's interest in Amazonia corresponds to his equity interest in any proceeds of the Lago Agrio Judgment, which is only 6.3 percent.
Third. Donziger's suggestion that the transfer of his shares to Chevron would give Chevron "control" of its adversary, Amazonia,
Fourth. Donziger's suggestion that a transfer of his shares to Chevron, to speak colloquially, would put the fox in the hen house—in the sense that Chevron thereby would gain access to confidential information in the hands of the company charged
Accordingly, an immediate transfer of Donziger's Amazonia shares to Chevron would threaten Donziger with no irreparable injury. On the other hand, the overriding concern in ordering the transfer was immediately to prevent Donziger from benefitting from the fraud he committed through the vehicle of his Amazonia shares. That objective may be achieved during the pendency of the appeal by taking the shares out of Donziger's hands without now placing them into Chevron's. Accordingly, the Court will grant Donziger's motion to the extent of modifying paragraph 3 of the N.Y. Judgment, solely pending the determination of this appeal, to require that the shares be conveyed to the Clerk of this Court, who shall hold them for the benefit of Donziger and Chevron, as their respective interests appear upon disposition of this appeal.
Donziger and the LAP Representatives protest as well the N.Y. Judgment's requirement that they transfer and assign to Chevron "all property whether personal or real, tangible or intangible, vested or contingent. . . traceable to the Judgment or the enforcement of the Judgment anywhere in the world."
The LAP Representatives have not shown that they own any real property at all. There is no evidence of real property ownership by Donziger except for some property that he acquired by virtue of family probate litigation. Thus, movants have failed to show that any of them owns real property that is traceable to the Lago Agrio Judgment. Property that is not traceable to the Lago Agrio Judgment is unaffected.
Paragraph 8 of the N.Y. Judgment provides:
As paragraph 8 states, it is a function of FRCP 65(d)(2). It is intended to "give[] force to injunctions" by "prevent[ing] parties from violating them by proxy."
His complaint about the impact of paragraph 8 on funding is nearly as far fetched. As discussed, Donziger's side of the Lago Agrio litigation has been funded by investments in exchange for shares of any collections that may be obtained. The N.Y. Judgment does not limit efforts to enforce the Lago Agrio Judgment outside the United States, even by Donziger and the LAP Representatives.
In sum, Donziger and the LAP Representatives have failed to demonstrate that they face a cognizable threat of irreparable harm, or even the possibility of such a threat, absent a stay pending appeal.
The movants' failure to demonstrate any real prospect of irreparable injury is fatal to their motion. In any case, however, their prospects of a reversal of any material part of the judgment would be insufficient to warrant a stay pending appeal.
Movants place heaviest reliance on their argument, first conceived well after the trial, that Chevron's decision prior to trial to withdraw its damages claim and request for a worldwide injunction deprived the company of standing. That argument is unlikely to fare better on appeal than it did in this Court.
As Supreme Court and Second Circuit precedent makes absolutely plain, "standing is to be determined as of the commencement of suit"
Two Second Circuit cases not previously cited underscore this principle. In Comer v. Cisneros,
In Azim v. Vance,
The proper analysis here thus is mootness, not standing. Chevron's determination, subsequent to the filing of its complaint, to seek relief narrower than it demanded in its complaint did not impact its standing. Instead, that decision bears on the question whether the company retains a "tangible interest" in the litigation's outcome. As the Court explained in its Opinion,
Movants' new challenge to Chevron's standing as of the time the complaint was filed—not raised before this motion—is not likely to fare any better on appeal. As the Court set forth in its opinion, Chevron pleaded at the case's outset, and then proved at trial, facts sufficient to satisfy the requirements of Article III standing: that it had been injured by movants' conduct, that movants threatened further injury through the then imminent entry of a large judgment (which issued not two weeks later as a result of their fraud), and that damages and global injunctive relief would redress those injuries.
Movants would not have a greater chance of success even if one were to
The Court recognizes that the question whether injunctive relief is available to private plaintiffs is open in this Circuit. Courts that have addressed the issue are divided.
The relief granted here against Donziger rests not only on RICO, but on the independent and sufficient state law ground that the Lago Agrio Judgment was procured by fraud. Thus, even were equitable relief unavailable under RICO, the Court would have granted the same relief on the basis that Donziger procured the Lago Agrio Judgment through fraud. Any uncertainty concerning the availability of private injunctive relief under RICO provides no basis for staying Chevron's relief against Donziger.
Moreover, the LAP Representatives were not even sued under RICO. The relief granted against them does not depend upon that statute. Donziger's RICO argument thus has no bearing on them at all.
Movants assert that the N.Y. Judgment "exacerbates the very comity concerns raised in [Chevron Corporation v.] Naranjo."
As the Court explained in its Opinion,
This Court's Judgment does not interfere with any foreign court's enforcement of the Lago Agrio Judgment, places no restrictions upon the LAPs' attempt to enforce the Lago Agrio Judgment in foreign courts, and does not preclude parties not before the Court from profiting from any such enforcement. Movants make no attempt to explain their claims to the contrary. This Court's carefully cabined relief tailored to prevent these three individuals—all subject to its personal jurisdiction—from profiting from the egregious fraud for which they are responsible is entirely consistent with Naranjo.
For the reasons already set forth in the Opinion, Donziger and the LAP Representatives' reassertion of their argument that Chevron is judicially estopped from obtaining relief is unlikely to prevail on appeal at least because (a) Texaco's assertions many years ago as to the adequacy of Ecuador's courts concerned a different time period, wholly different circumstances, and thus do not obtain here, (b) Chevron did not "merge" with Texaco in any relevant sense, and (c) it mischaracterizes the record to suggest, as movants have, that Texaco promised it would satisfy any judgment for plaintiffs subject to certain conditions.
As the Court already has explained, even accepting—contrary to the facts and the law—movants' erroneous arguments that (a) Chevron stands in Texaco's shoes, and (b) movants accepted and Judge Rakoff relied upon Texaco's very conditional offer to satisfy any judgment entered in plaintiffs' favor, their judicial estoppel argument still would fail. A promise to satisfy a judgment subject to the defenses available under New York's Recognition of Foreign Country Money Judgments Act would not affect Chevron here. As the Second Circuit explained, "Chevron has. . . reserved its right to challenge any judgment issued in Lago Agrio on the grounds that the Ecuadorian judicial system `does not provide impartial tribunals or procedures compatible with the requirements of due process of law,' that the judgment itself `was obtained by fraud,' or that `the proceeding in [Lago Agrio] was contrary to an agreement between the parties.' Nothing in that reservation of rights purports to restrict the kind of forum or type of proceeding in which Chevron can raise those defenses."
The LAP Representatives contend that they are likely to prevail on their argument that this Court lacks personal jurisdiction over them. They are wrong.
First, as the Court already has explained, it struck the LAP Representatives' personal jurisdiction defense as a sanction for their failure to produce documents relevant to that defense.
Second, Chevron proved personal jurisdiction independent of the sanction ruling. Donziger and the LAP Representatives do not here dispute this Court's findings of fact, which independently supported the exercise of jurisdiction over the LAP Representatives under New York's long-arm statute.
Movants' invocation of the adverse inference exception to the principles of agency does not change the analysis, as the exception plainly does not apply to this case. It is a "narrow" one, "and applies only when the agent has totally abandoned the principal's interests."
Among the four factors a court must consider in weighing whether to grant a stay pending appeal, "the first two factors"—the movant's likelihood of success on appeal and prospect of suffering irreparable harm—"are the most critical."
Movants' claims that a stay will not harm Chevron are unpersuasive. First, as this Court already has recognized, in the event movants were permitted to benefit from the Lago Agrio Judgment pending appeal, "there is no assurance that Chevron could recoup [that] property," which— if it prevails on appeal—rightly belongs to it.
Nor is the stay movants seek in the public interest. The concept that Donziger and the LAP Representatives should be permitted to profit pending appeal from the fraud for which they are responsible— with Chevron having no real prospect of recouping the loss if this Court's decision is affirmed—is not in the interests of anyone but the wrongdoers.
The motion for a stay pending appeal [DI 1888] is granted to the extent that
It is denied in all other respects. This opinion includes the Court's findings of fact and conclusions of law.
SO ORDERED.
Doubtless due to the discovery cut-off date, the record does not reveal how much was paid to Smyser Kaplan & Veselka LLP, a firm that represented the LAP Representatives earlier in this action. Likewise, the identity of the payer(s) is unknown, as a lawyer with the firm reportedly told another lawyer that "he did not know who was paying the bills" in this case. See Supp. Decl. of Judith Kimerling in Support of Consolidated Reply to Mot. to Intervene [DI 710] ¶ 32 ("When I asked who would be paying me if I agreed to be an expert, [Ty Doyle of Smyser Kaplan] explained that his firm had become involved in the case through a `series of referrals;' that they had been interviewed by Pablo Fajardo and a `community representative' from Ecuador; and that the firm was getting paid and was not working on a contingency fee basis, but that he did not know who was paying the bills.").
Movants advocate that this Court require only a "substantial possibility" of success on appeal. See Mohammed, 309 F.3d at 101 (noting that the Circuit has "also used `possibility' rather than `probability'"). The Court need not determine which articulation of the standard applies here because it finds that movants do not meet the standard under either formulation.
