LEWIS A. KAPLAN, District Judge.
An Ecuadorian court in 2011 entered an $18.2 billion judgment (the "Judgment") against Chevron Corporation ("Chevron")
This matter is now before the Court on a dispute over non-party discovery. Patton Boggs LLP ("PB") is a major U.S. law firm that has provided services to the LAPs since early 2010 with respect to the Ecuadorian litigation. It has represented the LAPs in much of the U.S. litigation relating to the Judgment, although not formally in the district court in this case. It has been involved in the Ecuadorian litigation behind the scenes. It is a named co-conspirator in this case. In addition, it has sued Chevron on its own behalf at least three times on claims relating to this controversy.
Chevron served PB with a subpoena duces tecum (the "Subpoena") in this case. PB seeks to avoid entirely any obligation to comply or, at least, to minimize the scope of any disclosure. Its position rests mainly on claims of work product protection and attorney-client privilege, and on a contention that the requested discovery would be unduly burdensome.
The Court begins with the proposition that depositions of opposing trial counsel are disfavored.
These considerations again have led this Court to engage in a painstaking, step-by-step process to deal appropriately with a subpoena addressed to a LAP lawyer, a process that in this instance has consumed months.
First, Chevron has established at least probable cause to believe there was fraud or other criminal activity in the procurement of the Judgment and in other respects relating to the Lago Agrio litigation in which that Judgment was rendered and in certain litigations in the United States relating to the Ecuadorian litigation. Without alluding here to the entirety of its showing, there is probable case to suspect, and often stronger evidence,
The Court's second conclusion is this. Although the scope of the Subpoena has been limited dramatically in prior proceedings, described below, it will be limited further to avoid any undue imposition on PB's position as counsel, to further reduce any burden of compliance, and to minimize any genuine work product protection and attorney-client privilege issues. It will be limited to documents pertaining to the subjects as to which Chevron has established probable cause to suspect fraud or criminal activity. This limitation will greatly reduce any legitimate claim of work product protection or attorney-client privilege because documents that relate to the crime or fraud and would be discoverable provided only that the documents were in furtherance of the crime or fraud.
Third, Chevron has established substantial need for the materials sought by the Subpoena as further narrowed here. It cannot obtain their substantial equivalent elsewhere without undue hardship, if at all. The qualified protection afforded to "ordinary" work product therefore has been overcome. Documents that fall within the Subpoena as further narrowed here and allegedly protected from disclosure only by an ordinary work product claim are discoverable without regard to whether they furthered a crime or fraud.
The sum of these three conclusions thus will be that PB must produce (1) all documents responsive to the Subpoena as finally narrowed — that is, documents relating to the subjects as to which there is a probable cause to suspect crime or fraud — as to which either (a) no claim of privilege or work product protection is made, or (b) the only claim of protection from disclosure is that the documents contain ordinary, i.e., non-opinion, work product, and (2) a privilege log as to responsive documents which PB claims did not further the suspected crimes or frauds.
One more preliminary comment is appropriate. It is important to recognize that the crimefraud exception to work product protection and the attorney-client privilege is established where there is "probable cause to believe that a fraud or crime has been committed [by someone] and that the communications in question were in furtherance of the fraud or crime."
The balance of this opinion proceeds as follows.
Part I of the Facts is a basic description of the general course of the Lago Agrio litigation, which is essential to providing the time line with respect to events in Ecuador and a framework for understanding the relevance of this and other litigation in the United States. Part II sets forth the essentials with respect to this lawsuit. Part III describes the evidence and makes the finding that Chevron has established probable cause to suspect fraud or criminal behavior in a number of respects and the scope of that probable cause finding. Part IV then addresses PB's role, to the extent it is known, with respect to both the Ecuadorian and U.S. litigation. This is relevant to understanding, among other things, the extent to which the policies that underlie courts' reluctance to subject lawyers to discovery actually apply here and the types, significance of, and need for, the documents that PB almost certainly has. With that factual predicate thus established, the Discussion section analyzes the applicable law and comes to the ultimate conclusions described above.
In 1993, a group of Ecuadorians brought a class action in the Southern District of New York against Texaco seeking billions of dollars in damages for harm a subsidiary caused during its oil explorations in Ecuador's Oriente region in the 1960s-1990s (the "Aguinda Action").
On October 9, 2001, while the Aguinda Action was pending, a wholly owned subsidiary of Chevron merged with and into Texaco. Texaco was the surviving entity. Chevron became the owner of all of Texaco's common stock. Chevron did not acquire or assume any of Texaco's assets or liabilities by merger.
The Lago Agrio Litigation began in 2003 when the LAPs, represented by defendant Steven Donziger (albeit not of record in the Ecuadorian courts) and other lawyers, sued Chevron in Ecuador under that country's Environmental Management Act of 1999.
It is unnecessary to detail every aspect of the long history of the Lago Agrio litigation. It suffices to highlight only the aspects critical to this dispute.
Beginning in 2004, the Lago Agrio court ordered judicial 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."
While all of this was going on, Steven Donziger, then the key lawyer on the LAP side, approached film maker Joe Berlinger to create a documentary depicting the Lago Agrio case from the perspective of his clients. For the next three years, Berlinger and his crew shadowed the plaintiffs' lawyers and filmed "the events and people surrounding the trial," compiling six hundred hours of raw footage.
On April 1, 2008, Cabrera submitted what purported to be his independent report which attributed $16.3 billion in damages to Chevron.
In 2009, Berlinger released two versions of his purported documentary, which is called Crude, one on DVD and the other on Netflix. The Netflix version contained a scene or scenes not included on the DVD version. As has been discussed in prior opinions, it revealed or at least suggested that the LAPs and Donziger had collaborated with Cabrera. It suggested also that his report had been prepared by the LAPs and was not Cabrera's independent work product.
This led to the filing by Chevron and others in April 2010 of a Section 1782 action against Berlinger that sought the video that Berlinger had shot that did not appear in the released films, which is referred to as outtakes.
Following the release of Crude and, in some cases, the outtakes, Chevron sought other discovery in the United States under 28 U.S.C. § 1782 relating to the Lago Agrio litigation and the Cabrera report.
The Lago Agrio court issued the Judgment on February 14, 2011.
Both the LAPs and Chevron appealed. The LAPs sought additional damages, and Chevron sought to have the Judgment reversed or declared a nullity on multiple grounds, including fraud.
Chevron sought clarification on several aspects of the appellate decision, including whether the appellate court had considered Chevron's claims that the Judgment "had been based on information foreign to the record" and that the Lago Agrio court "ha[d] received `secret assistance' in drafting it."
Chevron brought this action on February 1, 2011 against the LAPs, the Donziger Defendants,
Several counts of Chevron's complaint have been dismissed by this Court on motions by the defendants.
Chevron has contended since the inception of this lawsuit that the Cabrera report was not written by Cabrera but by the LAPs, who then foisted it upon the world and a perhaps unsuspecting Ecuadorian judge as the work of an independent, neutral expert. Soon after the Judgment came down, Chevron pointed to evidence that, it argued, suggested that portions of the Cabrera report were copied from the LAPs' internal documents. Most recently, Chevron has come forward with evidence that, if credited, would establish that the Judgment was written by the LAPs, who bribed the Lago Agrio judge to submit it under his name.
On January 28, 2013, Chevron submitted a declaration of Alberto Guerra Bastidas, a former judge of the Provincial Court of Sucumbios, Ecuador,
Turning to the details, Guerra's declaration, which is corroborated in some particulars by other publicly filed declarations,
This arrangement is said to have continued until Judge Zambrano was replaced on the Chevron case by a Judge Ordoñez.
At that point, Judge Zambrano, according to Guerra, "suggested and authorized [Guerra] to seek an agreement with the Plaintiffs' representatives so that they could obtain a verdict in their favor, in exchange for a payment of at least USD $500,000 to Mr. Zambrano; and whatever amount [Guerra] could negotiate or agree to for [himself]. The proposal entailed Plaintiffs writing a draft of the judgment and Judge Zambrano signing it and issuing it as his own."
Guerra then resumed his role as Judge Zambrano's ghostwriter. When it came to the final judgment, however, Guerra relates that his role changed somewhat. About two weeks before the Judgment was issued, "Zambrano gave [Guerra] a draft of the judgment [that had been written by the attorneys for the plaintiffs and delivered to Zambrano] so that [Guerra] could revise it." Zambrano asked Guerra "to work on the document to fine-tune and polish it so it would have a more legal framework."
When Guerra was through, he returned the document to Zambrano, which "was not too different from the one the Plaintiffs had given him."
As noted, Guerra's account is corroborated in a number of respects by other declarations that recently were filed, some publicly and two under seal. And Chevron has submitted further corroborating evidence, including drafts of nine of the twelve court orders that Judge Zambrano
The Guerra affidavit, if it ultimately is credited, establishes that the Judgment was fraudulently obtained by the LAPs. Even before the Guerra affidavit was filed, however, Chevron had presented substantial evidence of fraud in the procurement of the Judgment. More recently, it has submitted still more.
On July 31, 2012, the Court granted in part and denied in part Chevron's motion for partial summary judgment seeking dismissal of the defenses of collateral estoppel and res judicata.
In its motion for partial summary judgment, Chevron's "ghostwriting" allegations related principally to three internal LAP documents — that is, documents that were not part of the court record but parts of which wound up in the Judgment:
Chevron submitted analyses by experts that established that portions of each of these documents appeared verbatim in the Judgment.
There was no evidence disputing the fact that parts of the Judgment were virtually identical to the Unfiled Fusion Memo. This Court therefore held that this virtual identity "demonstrate[d] as a matter of law that whoever wrote the Judgment had access to and copied portions of the [Unfiled Fusion] Memo."
Chevron now has submitted additional evidence that, it claims, shows that at least three other portions of the Judgment are identical to other internal LAP documents that never were part of the Ecuadorian court record:
Chevron supports its contention with respect to each document by expert analyses that conclude that (1) the language or analysis in the relevant LAP internal document and the Judgment is nearly identical, and (2) the analysis or language is found nowhere else in the court record.
As indicated above, Dr. Charles Calmbacher was the LAPs' expert for some of the early judicial inspections. Indeed, two reports were filed with the Lago Agrio court under his name and with his signature. Those two reports, however, contained conclusions and findings that he later testified he did not reach.
As noted, the LAPs applied to the Lago Agrio court to terminate the judicial inspections that it had ordered. While that application was pending, Donziger drafted a misconduct complaint against the judge to whom the case then was assigned. The complaint accused the judge of "trading jobs for sex in the court."
The Court held in its summary judgment opinion that there was no genuine issue of material fact that "the decisions to terminate judicial inspections, to pursue the global assessment, and to select Cabrera as the global expert were tainted by the duress and coercion applied to [the judge] by Donziger, Fajardo, and perhaps other."
Subsequent to the partial summary judgment decision, Chevron submitted a declaration of Ramiro Fernando Reyes Cisneros ("Reyes"),
Reyes' declaration states that he was asked by the LAPs' attorneys, before the termination of the judicial inspections and the appointment of Cabrera as the global expert, to serve as an independent expert to "monitor" the settling experts in the Lago Agrio case. Donziger explained to Reyes at the time that he was unhappy with the reports plaintiffs' then-experts had submitted and wanted Reyes to submit to the Lago Agrio court another report that established "that the findings of the settling experts' report . . . were wrong."
In 2006, after the Lago Agrio court halted the judicial inspections, Donziger and the other LAP lawyers informed Reyes that they wanted him to serve as the global "court-appointed" expert
As the evidence of infirmities in and affecting the Cabrera fraud were coming to light, the LAP team privately began to "acknowledge[] problems associated with Cabrera's lack of independence."
Ultimately, the LAPs petitioned the Lago Agrio court to allow the parties to submit "supplementary information to aid th[e] Court in the process of assessing the global damages."
In the Judgment, the Lago Agrio court disclaimed reliance on the Cabrera report. The Judgment, however, appears to reveal that the court in fact relied upon it by its reliance on the cleansing reports. For example, in assessing damages, the Lago Agrio court cited a cleansing report that "contain[ed] no damage assessment independent of that in the Cabrera report."
Although this Court concluded that summary judgment was not warranted with respect to certain of the incidents described above — e.g., the Calmbacher report and the preparation of the Judgment — i.e., that the standard relevant to the crime-fraud exception to the work product doctrine and the attorney client privilege is less demanding. The privilege is overcome, in relevant part, by a showing of probable cause — "a prudent person ha[s] a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud."
This record establishes probable cause to suspect, taking the matters essentially in chronological order, that (1) the LAPs wrote the Calmbacher reports that were filed with the Lago Agrio court and attached Calmbacher's signatures to them, knowing that the reports did not reflect his views, (2) the judicial inspection process was terminated, the global expert proposal adopted, and Cabrera selected as the global expert as a result of the LAPs' threat that they would file a misconduct complaint against the judge if he did not accede to their wishes that he take these actions, (3) the LAPs secretly planned and wrote all or at least the great majority of Cabrera's report, were complicit in its presentation to the Lago Agrio court as Cabrera's independent work, and took other steps to bolster the false pretense that the report had been independent, (5) the LAPs entered into an improper relationship with Judge Zambrano during his first tenure as the presiding judge pursuant to which Judge Zambrano agreed "to quickly move the case along in their favor," (6) and the LAPs then entered into a supplementary and equally improper relationship with Guerra pursuant to which Guerra agreed to move the case quickly and limit Chevron's procedural options "by not granting their motions on alleged essential errors in rulings [Guerra] was to write, in exchange for payment by the LAPs' representatives of "approximately USD $1,000 per month for writing the court rulings Mr. Zambrano was supposed to write." In addition, there is probable cause also to suspect that LAP lawyers and other representatives later bribed Judge Zambrano to obtain the result they wanted and, pursuant to the arrangement they struck with him, actually wrote the decision to which he signed his named after some cosmetic and inconsequential editing by Guerra.
PB argues that requiring it to produce documents would be inappropriate because, among other things, it was not retained until February 2010 and it neither participated in nor has much if any direct knowledge of the preceding events. But that is too facile and misleading a contention. Careful consideration of PB's role with respect to the Lago Agrio litigation, the Judgment, and certain other events, shows that PB participated heavily in certain critical activities that make it likely that it is an important and, in many respects, unique source of evidence of the alleged fraud that is available nowhere else and that at least some of the materials in its possession or control were in furtherance of crimes or frauds regardless of whether PB was aware of them.
The period from PB's initial involvement, which apparently began in February 2010, through the filing of the Lago Agrio court's Judgment in February 2011 is particularly telling. It is important to understand where matters stood when PB came on the scene and then to focus on three of PB's activities that went on, in varying degrees, at the same time during this period: (1) PB's efforts to assist in preventing Chevron from obtaining discovery from Stratus in a Section 1782 proceeding it had begun in December 2009 — discovery that eventually occurred and made clear that Stratus had had extensive contact with Cabrera and substantially written the Cabrera report, thus destroying or at least badly undermining the pretense that he had been an independent expert; (2) PB's role in recruiting and orchestrating the work of the so-called "cleansing experts," whose reports were submitted to the Lago Agrio court in order to provide a basis for a decision favorable to the LAPs; and (3) PB's role in drafting the final alegato — the closing argument or closing briefs — submitted on behalf of the LAPs to the Lago Agrio court.
In December 2009, Chevron brought a Section 1782 proceeding against Stratus and related individuals in the District of Colorado.
The District of Colorado granted Chevron's Section 1782 application on March 4, 2010.
A month later, the LAPs filed a motion for a protective order with the District of Colorado, claiming that the documents and testimony that Stratus had been ordered to produce were protected from disclosure by the attorney-client privilege and work product protection.
PB was heavily involved in drafting the Fajardo Declaration
Westenberger expressed his concern that Fajardo might "be subject to deposition[.] This is why we struggled with who would sign the declaration. If Steve [Donziger] signs, he will most certainly be deposed. Same for any other counsel in the US. We figured that with [Fajardo], they likely would not slow down the process by deposing him."
The Fajardo Declaration that ultimately was filed gave a bland description of the process by which the judicial inspections had been terminated, the global expert proposal adopted, and Cabrera in particular selected. But it failed to mention that Fajardo and Donziger had threatened the judge with a misconduct complaint unless the judge agreed to their demands and appointed Cabrera. And while it acknowledged that the LAPs had "delivered materials to Mr. Cabrera,"
Notwithstanding the Fajardo Declaration, the District of Colorado denied the LAPs' motion for a protective order and ultimately ordered Stratus to turn over its documents.
Nearly five months after the court denied the LAPs' motion for a protective order, Chevron had yet to receive the majority of responsive documents from Stratus and filed a motion to compel production. The District of Colorado granted Chevron's motion on October 1, 2011;
The Prieto email
In these circumstances, there is probable cause to suspect that at least some of those involved, as alleged extensively in the amended complaint,
PB's involvement in the Section 1782 proceedings was not limited to the one in Colorado. It has represented the Ecuadorian plaintiffs in at least six of the proceedings across the country
In May 2010, the District of Colorado granted discovery from Stratus, although documents were not produced until much later. Also in May 2010, this Court granted Chevron's application to subpoena the Crude outtakes from the filmmaker, Joseph Berlinger.
First, as explained above, the LAP team — by way of another Fajardo declaration — petitioned the Lago Agrio court to order supplemental reports on the issue of damages.
Yennock made clear that understanding what the Crude outtakes and the Stratus documents would reveal was crucial to determining whether to disclose the true nature of the LAPs' relationship with Cabrera. He wrote that "the pivotal nature of this submission, and the potentially devastating effect of making a representation that is later proven to be wrong or incomplete by way of the emails or the outtakes (assuming Chevron gets them), would seem to warrant a review [of the documents and the outtakes] if it can be done quickly."
An Emery Celli lawyer responded that there was not enough time to review the outtakes and the Stratus emails because "a court ruling — relying solely on Cabrera — is potentially imminent [in Ecuador] if we don't get something on file immediately."
Ultimately, the declaration informed the court that the LAPs had made submissions to Cabrera but did not actually "confess to having authored specific portions of the report."
This declaration went farther than that filed in Denver with its statement that the plaintiffs had provided Cabrera with "proposed factual findings and economic valuations of the . . . damages" and its contention that Cabrera adopted them "because he apparently considered them credible." But that too appears to have been deceptive, whether or not PB then was aware of the extent to which that was the case. There is at least probable cause to suspect that Cabrera was handpicked by the Lago Agrio plaintiffs because he would "play ball" with them, that the entire report was planned and written by the LAPs and Stratus, and that Cabrera "played ball" by simply affixing his name to it, acting all the while under the pretense — fostered by the LAPs — that the report was Cabrera's independent work.
The Lago Agrio court granted the LAPs' request to file additional damages assessments, and the LAPs put together the new team. PB "hired the Weinberg Group to manage the [cleansing] process,"
As explained previously, the new experts were instructed to use Cabrera's data as a "starting point . . . to develop [their] own valuation[s]."
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.
The Lago Agrio court issued the Judgment in February 2011. It disclaimed reliance on the Cabrera report, but noted that it had considered other expert assessments, including some of the reports submitted by the new experts hired by PB, in rendering the Judgment.
PB was involved also in drafting the LAPs' post-trial submissions to the Lago Agrio court. Beginning no later than March 2010, it revised and re-wrote the alegatos — post-trial briefs — before they were filed.
PB's role has gone beyond that described above.
PB authored an undated memorandum called "Invictus," which laid out a plan to enforce the Judgment "quickly, if not immediately, on multiple enforcement fronts — in the United States and abroad."
PB also controls, at least to some degree, how the LAP team spends the money it receives to fund the litigation. In October 2010, the LAPs entered into a funding agreement with Treca Financial pursuant to which Treca agreed to provide for legal expenses in return for a stake in the Judgment.
Finally, PB itself has become an active litigant in cases related to this one. PB has brought three actions against Chevron in which PB itself is the plaintiff — two in the District Court for the District of Columbia
The Subpoena was served on June 15, 2012, and contained 58 discrete requests for the production of documents.
PB moved to quash on July 20, 2012.
On the issue of privilege, the Court held that (1) "there [was] reason to doubt whether many — if any — of the subpoenaed documents [were] protected by the attorney-client privilege,"
With respect to burden, the Court determined that it was premature to quash the Subpoena as unduly burdensome before its scope had been resolved.
The Court denied the motion to quash without prejudice to PB's privilege and burden claims, which it would consider in connection with any Rule 45(c)(2)(B) objections PB might raise. The Court deferred PB's obligation to produce a privilege log until further notice.
PB then served Chevron with 186 pages of objections to the Subpoena. The Court held a hearing on September 25 and 27, 2012 to address them, ruling on the majority during the hearings
Both sides agree that the Court's rulings substantially limited the Subpoena's scope and the extent of the effort that would be necessary to comply with it as modified. According to Chevron's experts, the effect of the Court's rulings was to reduce by 90 to 99 percent the amount of data that would have to be searched and reviewed in order to comply
Subsequent to the November Order, the Court received supplemental briefing on (1) the extent to which the Subpoena as modified is unduly burdensome, and (2) whether the Subpoena in its modified form sought materials in areas in which "the first of the two prongs of the crime-fraud exception [to the attorney client privilege] is satisfied."
PB contends that the Subpoena still is impermissibly overbroad. PB complains principally that Chevron seeks information from its "adversary's litigation counsel" that "it will likely obtain . . . from the parties or other nonparties."
Chevron argues that compliance with the Subpoena — at least given the extent to which it has been narrowed by the Court and the parties' agreements — would impose no undue burden.
It is important to recognize that the LAPs and their Ecuadorian lawyers and associates have refused to provide any meaningful discovery of documents and witnesses located in Ecuador or to include information from Ecuador in their own responses to discovery requests.
In both this action and the Count 9 action,
In the Count 9 action, defendants contended that they were unable to produce those documents because the Ecuadorian attorneys were not their agents and therefore were not subject to their control. After the Court held otherwise and ordered the documents produced,
In this action, defendants' obstinance with respect to discovery of evidence from Ecuador has reached a new level. Chevron moved on August 13, 2012 to compel the LAP Representatives and the Donziger Defendants to produce documents in the hands of their Ecuadorian lawyers and other associates.
While Chevron's motion was pending and unbeknownst to the Court or to Chevron, Attorney Smyser, counsel for the LAP Representatives in this case, by his own admission, "suggest[ed] to the Ecuadorian legal team that someone should consider seeking an Ecuadorian court ruling on the issue of document production."
The fact that this collusive lawsuit was brought in the name of one of the LAPs against his own lawyers likewise is troublesome, especially when one recognizes that the only attorney appearance listed on the decision is that of Fajardo. The fact that this was done behind the back both of Chevron and of this Court while a motion to compel was pending is even more troublesome. The Court notes also the following:
Note that the writer of the decision on line 2 spoke of the plaintiff in the third person — as "him." Two sentences later, however, in lines 8 and 9, the writer referred to the confidential information and the LAPs' attorneys as "our" information and "our" attorneys instead of the plaintiff's information and the plaintiff's attorneys. For present purposes, however, it is unnecessary to decide exactly how, why, and by whom the decision came to be written in this curious way.
But the bottom line here is that the LAP Representatives and the Donziger Defendants are defying this Court's order to produce information in the hands of their Ecuadorian attorneys and even their non-lawyer associates. Rather than attempt to facilitate the full and fair disclosure to which any litigant is entitled, they have engaged in extraordinary efforts to raise obstacles to such disclosure. This episode lends further strength to Chevron's contention that relevant disclosure from PB — which is at the heart of the LAPs' and Donziger's efforts both in the United States and, it appears in Ecuador and elsewhere — is extremely important and certainly unlikely to be forthcoming from Ecuador.
Chevron has fared no better in getting the LAPs (or their agents and experts) to submit to deposition
Donziger has been little more forthcoming in certain respects. When Chevron subpoenaed him in the Section 1782 proceeding, Donziger sought to avoid complying with the subpoena, first by moving unsuccessfully to quash it on burden and privilege grounds
Chevron's inability to obtain appropriate discovery underscores its need to get it from PB, to the extent it may do so consistent with governing principles. PB has been intimately involved in shaping and carrying out defendants' strategy since early 2010 — a role that necessarily involves awareness not only of what has transpired since it came onto the matter, but of what occurred before. It is against this backdrop that the Court proceeds to resolve the remaining issues concerning the Subpoena.
The Subpoena is directed to a law firm. Although PB has not formally appeared before this Court in this case, it has been involved in the Court of Appeals. It has assisted the LAPs in the Ecuadorian litigation, and it has appeared on their behalf in other U.S. litigation relating to the broad controversy at issue here.
There is an obvious tension between ensuring a lawyer's ability to represent the lawyer's clients vigorously and preserving an adverse party's right to obtain evidence necessary to prosecute its case. Where, as here, discovery is sought from attorneys, especially attorneys actively involved in litigation against an adversary seeking discovery from such attorneys, "[c]ourts have been especially concerned about the burdens imposed on the adversary process . . . and have resisted the idea that lawyers should routinely be subject to broad discovery."
As a preliminary matter, the Court turns first to Chevron's argument that Friedman has no bearing here because PB quite deliberately has not appeared in the district court in this case. It argues that Friedman is inapplicable because it involved depositions of opposing litigation counsel whereas this Subpoena seeks only documents and those from a firm that is not formally involved in this action.
While PB's avoidance of an appearance before this Court may be relevant in some respects, the Court sees no reason to disregard Friedman's wise teachings entirely on that account. It cannot be gainsaid that PB, whatever its formal role before this Court, is broadly involved in this controversy as an adversary to Chevron. Many of the concerns that arise when an adverse trial counsel is subjected to deposition — e.g., possible compromise of the attorney-client relationship or intrusion on an attorney's work product — also are present when a law firm involved behind the scenes is required to provide documents to an adversary. Chevron has presented no compelling reason that the Court should not be guided by the factors set forth in Friedman, taking account of all of the relevant circumstances.
That said, it must be recognized that this Subpoena presents a very unusual situation. The Subpoena in major part — but not entirely — seeks discovery with respect to subjects on which the LAPs' Ecuadorian lawyers and non-lawyer associates reasonably might be expected to have the most complete information. If they, their clients, and the Donziger Defendants were fully cooperative and responsive in discovery, there might be only very limited need to pursue discovery from PB. But the LAP Representatives and the Donziger Defendants have refused to produce documents or give fully responsive replies to other discovery requests, claiming that the Ecuadorians will not provide the information. Yet PB has been interacting with the Ecuadorians for over three years now and doing so with respect to many of the subjects on which the LAP Representatives, their Ecuadorian lawyers and associates, and the Donziger Defendants decline to provide discovery. As will appear below, it is entirely likely that PB has responsive documents — especially but not only emails and other correspondence with the Ecuadorians about critically important events in Ecuador — that in the circumstances of this case are not practically available from anyone else. Moreover, PB has been a primary actor in a number of key events.
With these preliminary comments, the Court turns to the Friedman factors. It begins with the question whether enforcement of the modified Subpoena would entail attorney-client privilege and work product difficulties that are so substantial as to refuse enforcement altogether and whether any such problems can be ameliorated. It then will proceed to the remaining factors.
A party invoking the attorney-client privilege must demonstrate that the communication as to which privilege is asserted was "(1) a communication between client and counsel, which (2) was intended to be and was in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice."
The work product doctrine "provides qualified protection for materials prepared by or at the behest of counsel in anticipation of litigation or for trial."
The party invoking work product protection "bears the burden of establishing its applicability to the case at hand."
"As for work-product that shows `mental impressions, conclusions, opinions, or legal theories of an attorney,'" the Second Circuit has suggested that, "at a minimum such material is to be protected unless a highly persuasive showing [of need] is made."
"It is well-established that communications that otherwise would be protected by the attorney-client privilege or the attorney work product privilege are not protected if they relate to client communications in furtherance of contemplated or ongoing criminal or fraudulent conduct."
In order successfully to invoke the crime-fraud exception, a party seeking disclosure must demonstrate that there is "probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud."
Although one normally would expect that a subpoena such as this would encounter substantial privilege and work product obstacles, the extent to which that is so here is very much more limited than one might expect for three reasons. First, it is unlikely that there are many, if any, responsive attorneyclient communications. Second, Chevron has overcome the work product protection as to any documents that contain only ordinary work product. Third, to whatever extent there are any attorney-client communications or documents that constitute opinion work product, the crime-fraud exception may well vitiate any protection.
In considering whether PB's responsive documents include many attorney-client communications, one must keep in mind the characteristics and location of the clients whose privilege PB asserts. The LAP Representatives have been described by their counsel as "a campesino and a canoe operator living in the remote Ecuadorian jungle."
A second factor further supports the view that the extent to which attorney-client privilege will play a role here is extremely limited. Major foci of the Subpoena include evidence of communications between the LAP lawyers and non-lawyer associates, on the one hand, and Cabrera or Ecuadorian judges and officials on the other.
While it is unlikely that there are many responsive documents that even arguably come within the attorney-client privilege, the same is not true with respect to work product. But it is important to bear in mind that there are two kinds of work product — materials that are nothing more than documents prepared in anticipation of litigation and materials that, in addition, include mental impressions, conclusions, opinions, or legal theories of an attorney. As noted above, the former are discoverable on a showing of substantial need and inability to obtain their substantial equivalent elsewhere without undue hardship. Chevron has made that showing.
First, most of the events about which the Subpoena as narrowed seeks documents — e.g., the Calmbacher report, the appointment of Cabrera and submission of his report, and the authorship of the Judgment — took place to a material degree, although most certainly not entirely
PB contends, however, that Chevron has already received "millions of document pages" from the Section 1782 proceedings, Donziger, and the third parties it has subpoenaed in this action and does not need further discovery from PB.
While it is true that Chevron has received a substantial number of documents from Donziger and others in the Section 1782 proceedings, the documents it has obtained do not tell the whole story of what went on in Ecuador and elsewhere leading to the Judgment. Understanding that entire story is vital to the resolution of this case. Moreover, as noted above, it is clear that Chevron will be unable to obtain these documents from the people who were on the ground in Ecuador — e.g., Fajardo, Prieto, Saenz, and others — and were directly involved in orchestrating these events. Defendants have refused to produce documents or other information from their Ecuadorian agents.
And, although PB was not yet on the LAP team when the Calmbacher and Cabrera reports were written and submitted, PB was brought on specifically to deal with their fallout. Indeed, PB worked with the Ecuadorian lawyers, to whom it has referred as its "Ecuadorian co-counsel,"
Second, sight cannot be lost of the fact that PB is an alleged co-conspirator in this case. Chevron alleges that PB "developed the RICO Defendants' strategy for pursuing the assets of Chevron and its subsidiaries around the world on the basis of the fraudulent judgment in Ecuador, and has also been instrumental in the cover-up and obstruction of Chevron's U.S. discovery proceedings."
Chevron has shown that it has a substantial need for the documents responsive to the remaining specifications of the Subpoena with which the Court has concluded that PB should comply and that Chevron cannot obtain their equivalent elsewhere without undue hardship. As a practical matter, therefore, the question comes down to whether there will be substantial issues as to the second category of work product — so called "opinion" work product — if the Subpoena is enforced. That brings us to the crimefraud exception.
As the Court already has noted, Chevron has established that "a prudent person ha[s] a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud"
First, the Guerra declaration, in and of itself, establishes probable cause to suspect that the LAPs' representatives, including Fajardo, Donziger, and Yanza, bribed Judge Zambrano to obtain their desired result in the Ecuadorian case and the privilege of writing the Judgment and that they took advantage of the latter. The latter point, moreover, is supported by abundant evidence that portions of the Judgment are identical or substantially similar to internal documents prepared by the LAPs that never were filed with the Court.
Second, as explained above, additional evidence establishes, at a minimum, probable cause to suspect that a crime or fraud occurred with respect to
Third, the evidence concerning the representations made to the United States District Court for the District of Colorado in an effort to prevent the disclosure of the Stratus documents that confirmed that Stratus had written all or most of the Cabrera report — most importantly the Fajardo declaration filed there and in many other courts — establishes probable cause to suspect that the LAPs committed wire fraud and obstructed justice in that respect.
To be sure, PB contends otherwise. But its arguments are speculative and unpersuasive when one bears in mind the relevant legal standard that governs the first prong of the crime-fraud analysis — whether Chevron has provided a factual basis that would "strike a prudent person as constituting a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud."
This leaves one significant question with respect to the existence of probable cause — whether there is a sufficient basis to suspect that there was criminal or fraudulent activity with regard to the cleansing reports.
Chevron's fundamental contention is that the cleansing reports were developed at PB's instance in collaboration with the Weinberg Group as a means "to backdoor Cabrera's findings into the Ecuadorian record"
PB, for its part, says that nothing in the preparation, submission or subsequent litigation about the cleansing reports can be regarded as fraudulent. The LAPs sought leave of the Lago Agrio court to submit additional reports to show that the theories advanced in the Cabrera report, whatever its authorship, were sound. While four of the reports relied on data from the Cabrera report, that reliance was fully disclosed.
As an initial matter, PB is wrong in asserting that there was nothing that can be regarded as fraudulent with respect to the submission of the cleansing reports. As noted previously, the Fajardo declaration that was submitted to the Lago Agrio court in support of the application for leave to submit those reports was deceptive, whether or not PB knew it at the time. As noted earlier, "[t]here is at least probable cause to suspect that Cabrera was handpicked by the Lago Agrio plaintiffs because he would "play ball" with them, that the entire report was planned and written by the LAPs and Stratus, and that Cabrera "played ball" by simply affixing his name to it, acting all the while under the pretense — fostered by the LAPs — that the report was Cabrera's independent work." None of that was disclosed to the court. So there is probable cause to suspect that the reports got in through courthouse door as a result of fraud.
That said, the fact remains that Chevron has not pointed to anything in the cleansing reports themselves that appears to have been fraudulent. It may be that the experts would not have reached the same conclusions, or would have declined their engagements altogether, if they had been told the full truth about the relationship among the LAPs, Stratus, and Cabrera and his report. But their reliance on Cabrera in most cases was disclosed in their reports.
In the last analysis, then, the Court concludes that, on the present record, there is insufficient factual basis to suspect that the cleansing reports themselves were fraudulent, whatever may have been done to convince the Ecuadorian court to permit their filing.
In sum, the likelihood of privilege and work product issues so substantial as to defeat the attempt to enforce the Subpoena is greatly limited. PB has not shown any material likelihood of the existence of any significant number of responsive documents as to which the attorney-client privilege could apply. Insofar as the Subpoena seeks "ordinary" work product, Chevron has overcome the qualified protection that enjoys, at least with respect to responsive documents going to the subjects as to which it has established probable cause. It has satisfied the first of the two prong test that governs the crime-fraud exception as to a number of key subjects. This leaves determination with respect to documents concerning those subjects only the question whether particular responsive documents — regardless of whether they include so-called "opinion" work product or, less likely, attorney-client communications — were in furtherance of a crime or fraud. And even this issue can be further limited by a further narrowing of the Subpoena.
As noted above, Friedman requires that a Court confronted with an effort to obtain discovery from an attorney involved in litigating against the discovering party consider the need for the discovery. Similarly, Federal Rule of Civil Procedure 26(b)(2)(C) permits a court to limit the frequency or extent of discovery otherwise allowed if it determines that (1) the discovery sought is unreasonably cumulative or duplicative, or more readily obtainable from another source; (2) the party seeking discovery already has had ample opportunity to obtain the information sought; or (3) the burden or expense of the proposed discovery outweighs its likely benefit.
Here, the Subpoena seeks discovery which, although limited already to a considerable degree, touches on a variety of topics. In view of the desirability of focusing only on that which is most important, of limiting the discovery required from these adversary attorneys, and of avoiding unduly complicated or time consuming privilege issues to the extent that would be fair and reasonable, the Court has concluded that the Subpoena should be further limited, at least at the present time. Chevron has established probable cause — and thus satisfied the first of the two prong test that governs the crime-fraud exception to attorney-client privilege and work product protection — as to six subjects:
Accordingly, the Subpoena in substance will be limited further by confining its analysis, at least for now, to those specifications that seek documents relating to the foregoing subjects. The Court now proceeds to consider the remaining aspects of the Friedman analysis
Friedman directs the Court to focus on the role of the lawyer from whom discovery is sought both in the litigation in question and in relation to the subjects on which disclosure is sought. "The first of these considerations bears on the extent to which the discovery would disrupt the litigation by injecting one of the lawyers charged with its conduct into the case as a witness or by making the advocate's conduct or knowledge an issue in the proceeding."
First, enforcement of what remains of the Subpoena would not inject a lawyer charged with the conduct of this case as a witness. PB has deliberately avoiding appearing before this Court in this case, which is conducted on behalf of the LAP Representatives by other counsel.
Second, enforcement of what remains would not place an advocate's conduct or knowledge in issue. PB is named in the amended complaint as an alleged co-conspirator. Its actions and knowledge will be issues in this case regardless of whether the Subpoena is enforced.
Given the nature and extent of PB's involvement, it doubtless has firsthand knowledge that is important to the resolution of this lawsuit. PB was brought on to the LAP team one year before Zambrano issued the Judgment that allegedly was written by the LAPs. PB was involved in hiring and overseeing the cleansing experts — whose reports Judge Zambrano ultimately claimed to have relied upon — and it took the lead on drafting the final brief filed with the court. PB worked with the LAPs to draft the Fajardo Declaration, which was intended to delay discovery and convince courts across the country that the LAPs' involvement in the judicial inspection process and Cabrera report was entirely proper. And PB is leading the LAPs' efforts to enforce the Judgment throughout the world. Given PB's role as strategist since the time it became involved and as architect of the LAPs' closing arguments and submissions made to the Lago Agrio court, this Court has every reason to expect that PB has documents that bear directly on the question whether the Judgment was obtained by fraud, including documents containing statements by other persons directly involved in events at which PB was not present.
The last two Friedman factors focus on the need to obtain the discovery from PB and the extent to which that discovery has already been conducted. As the extent of discovery already conducted informs the degree to which Chevron needs discovery from PB, the Court analyzes these factors together.
Chevron contends that it needs discovery from PB because PB "likely possesses critical relevant documents that Chevron cannot obtain from any other sources precisely because PB played a key role in planning, executing, and perpetuating the fraud against Chevron."
PB is correct that, to the extent Chevron can obtain or has obtained documents from the third parties it has subpoenaed, it does not need them from PB. But it is doubtful that these parties will provide Chevron with the discovery it seeks from PB. None of the parties has been nearly as involved in this overall dispute since early 2010 as PB, which has had a hand in almost every major development in this action and related ones since it joined the LAP team. And, as previously described, although Chevron has obtained a substantial number of documents from Donziger and others in the Section 1782 proceedings, it has been unable to obtain any documents from PB's "co-counsel in Ecuador" — documents which are crucial to this case — except to the limited extent that they were emails or other communications produced by Donziger. Substantial information from and communications with those co-counsel and non-lawyers in Ecuador — emails, correspondence, and memoranda, if not more — are likely to be in PB's files.
Especially in light of defendants' obstinate refusal to provide Chevron with discovery from Ecuador, Chevron has shown that it needs discovery from PB.
In sum, the Friedman factors cut strongly in favor of requiring this limited production from PB, particularly in light of the fact that PB has never appeared before this Court.
In a recent submission to the Court, PB estimated that "it will take between 30 and 40 weeks to complete the review, production, and privilege logging of the email and non-email [electronically stored information]" required to comply with the Subpoena, even as modified by the September 2012 hearing and the November Order.
PB has not sustained its burden of persuasion.
As an initial matter, PB is no ordinary, unrelated non-party witness. It is an alleged coconspirator and some of its actions are at issue in this case regardless of whether the Subpoena as narrowed is enforced. Moreover, it stands to reap a fee that has been estimated at hundreds of millions of dollars if the Judgment is enforced and collected. Like any lawyer's contingent fee matter, whether the contingency is all or just part of the compensation arrangements, certain investments of time and money are necessary in order to obtain the potential benefit of a successful outcome. PB's attempt to portray itself as a nonparty with no interest in the matter is unsupportable.
Second, PB has overstated the burden of compliance, in terms both of the cost and the required time and has avoided engaging with options that give strong promise of reducing that cost and burden. For example:
Third, all of the cost and time estimates upon which PB relies antedate the further and substantial narrowing of the Subpoena effected by this opinion. They are obsolete.
But putting all that aside, PB's last estimate of the cost of reviewing and logging the documents in order to comply with the Subpoena was in the range of $1,060,000 and $1,290,000.
Nor is the Court persuaded that any part of the cost should be shifted to Chevron. Many of the events in which it was involved underlie Chevron's main allegations. "Where a nonparty was substantially involved in the underlying transaction and could have anticipated that [it] would reasonably spawn some litigation, expenses should not be awarded."
PB shall produce documents responsive to the following specifications, as modified by the November 2012 Order: 2, 14, 18, 19, 21, 22, 26, 28 through 32, 35, 49, and 55 though 58 and, in addition, specification 20 insofar as it seeks documents described in the margin.
To the extent PB claims that any documents responsive to these requests are protected by the attorney-client privilege or the protection afforded to "opinion" work product, such claims shall be asserted in conformity with S.D.N.Y. Local Civil Rule 26.2. To the extent PB claims that any documents responsive to these requests constitute fact work product, Chevron has overcome its burden, and PB must produce them.
Production both of documents and the privilege log shall take place on a rolling basis commencing no later than March 28, 2013, with continuing production of each to occur no less than weekly. The Court recognizes that there is some uncertainty in present circumstances as to how quickly compliance reasonably can be achieved. For the present, the complete privilege log shall be due and production of all responsive documents not scheduled on the privilege log shall be completed on or before May 1, 2013. While the Court will consider a well supported request for additional time, any motion for an extension of the May 1 date shall made no later than April 14, 2013.
SO ORDERED.
On September 15, 2009, Fajardo wrote to Donziger and others: "The puppeteer [allegedly referring to Guerra] is pulling the string and the puppet [Judge Zambrano] is returning the package. . . . By now it's pretty safe that there won't be anything to worry about. . . ." Stavers Decl. [DI 754] Ex. 3140. A month later, Fajardo wrote to Donziger and Yanza that "[t]he puppeteer won't move his puppet until the audience doesn't pay him something . . .." Id. Ex. 3154. Deposit slips in Guerra's bank records show that $1,000 was deposited into Guerra's account a month later by someone whom Chevron identifies as a LAP employee. Guerra Decl. ¶ 14 & Attachment K, L, M, & N; DI 752, Rule 56.1 Statement ¶ 205. Chevron has submitted other bank records showing further $1,000 deposits made into Guerra's account by the same employee.
Clapp Report. Chevron has submitted evidence showing that portions of the Clapp Report were included in an annex to the Cabrera Report. Mastro Decl. [DI 658], Ex. 3005 (Leonard Report) at 9-10, 13. Emails between Donziger and a Stratus employee make clear that they sought to keep the Clapp Report's true authorship secret, presumably to create the appearance that Cabrera had written it. See Hendricks Decl. [DI 34], Ex. 188 (Email from Doug Beltman at Stratus to Donziger stating "We have to talk to Clapp about that 5-pager, and how we have to limit its distribution. It CANNOT go into the Congressional Record as being authored by him."). The annex to the Cabrera report, however, "did not contain the entirety of the Clapp Report . . ., and portions that were not included appear in the judgment." DI 657, at 7; Mastro Decl. [DI 658], Ex. 3005 (Leonard Report) at 33-34. Chevron's expert notes that this includes a 34-word string which appears both in the Clapp Report and the Judgment, as well as two additional 16-word overlaps. Ex. 3006 (Juola Report) at ¶¶ 23, 24. The portions of the Clapp Report that appear in the Judgment appear nowhere else in the Lago Agrio court record. Id. at ¶ 29.
The LAPs do not dispute that sections of the Clapp Report appear verbatim in the Judgment and are nowhere else in the Lago Agrio court record. They argue only that "Chevron has not proved that the materials [including the Clapp Report] were not provided to the Judge in some informal manner such that the materials did not get signed and numbered as part of the record." DI 712, at 5. But the LAPs point to no evidence that the Clapp Report ever was submitted to the judge in a manner that did not result in its being part of the court record much less that any such submission would not have been improper. Given the identity of language in parts of the Clapp Report and the Judgment and the absence of that language anywhere in the court record, this too supports the conclusion that there is probable cause to suspect fraud.
Fajardo Trust Email. The same can be said for the Fajardo Trust email. On June 18, 2009, Fajardo sent an email to Donziger and others concerning Ecuadorian trust law and the Andrade v. Conolec case. DI 401, Ex. 2174. Portions of that email — including a misquotation of the Andrade case — appear in the Judgment. The Court noted in its opinion on Chevron's motion for partial summary judgment that "Chevron has submitted no expert reports documenting alleged plagiarism in the Judgment from the Fajardo email, or indicating whether or not the Fajardo email was or was not a part of the Lago Agrio court record." Chevron v. Donziger, 886 F. Supp. 2d at 254 n.116. It recounted the LAPs' contention that any language that was common to the Fajardo Trust Email and the Judgment was merely "stock language" that could have been found4independently in the court record. Id. The Court therefore declined to find that there was no genuine issue of material fact that the Fajardo Trust Email had been submitted fraudulently to the court.
Chevron's new evidence overcomes these deficiencies, at least for present purposes. Chevron's expert now concludes that "parts of the [Judgment] must likely have had their origin in the unfiled Fajardo Trust email." Mastro Decl. [DI 658] Ex. 3005(Leonard Decl.), at 33. This includes identical word strings which are found nowhere else in the court record, id. at 30, and improper reliance on Andrade, which both the Fajardo Trust email and the Judgment incorrectly cite as dealing with "the legal basis of the trust," although the case itself says nothing about trusts. Id. at 31. Furthermore, following a complete review of the Lago Agrio court record, Chevron's expert now has concluded that the Fajardo Trust Email is found nowhere within it. Hernandez Aff. [DI 548] ¶ 26. The LAPs do not attempt to explain how the language from the Fajardo Trust email ended up in the Judgment despite the fact that it was never part of the Lago Agrio court record. Thus, the Fajordo Trust Email further supports the probable cause finding.
First, the issue for present purposes is whether "a prudent person [would have] a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud." In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731 F.2d at 1039. Regardless of the Prieto email, the ultimate question with respect to the proceedings in Colorado is whether there is probable cause to suspect that the Fajardo declaration that was submitted to the district court there was fraudulent because it suggested that nothing was amiss with respect to Cabrera and his report but failed to disclose a host of highly material facts quite plainly suggesting the contrary. As discussed above, probable cause exists to suspect fraud in that respect independent of the interpretation of the Prieto email. The Prieto email goes to the motive for that nondisclosure, not to its deceptive nature. Moreover, even if the Prieto email shed light on the latter issue, and even if PB's interpretation were plausible, "a finding of probable cause," as discussed below, "is not negated by `an innocent explanation which may be consistent with the facts alleged." United States v. McDonald, 01-CR-1168JSWDW, 2002 WL 31956106, at *5 (E.D.N.Y. May 9, 2002) (quoting A.I.A. Holdings, S.A. v. Lehman Bros. Inc., 97 Civ. 4978 (LMM) (HBP), 1999 WL 61442, at *5 (S.D.N.Y. Feb. 3, 1999) (citing United States v. Farma, 758 F.2d 834, 838 (2d Cir. 1985)).
Second, Chevron's interpretation of the email is more plausible than PB's. Prieto's expressed concern was not only with potential criminal exposure for the Ecuadorian lawyers. He was concerned also that disclosure of what had gone on between Stratus and the Ecuadorian lawyers could or would "destroy[] the proceeding," i.e., the Lago Agrio case. It is quite improbable that a disclosure of the Stratus documents by the Ecuadorian lawyers in breach of professional responsibilities, even in criminal breach of such responsibilities, would have destroyed the Lago Agrio case, whatever consequences it might have had for the lawyers themselves . Indeed, the Stratus documents were disclosed and the Ecuadorian court entered the Judgment anyway.
Finally, the suggestion that Prieto was concerned that the disclosure of the emails would have violated Article 335.1 of the Ecuadorian Judicial Code (DI 712, at 11) borders on the fanciful. Although the LAPs were desperately seeking to stop disclosure of the Stratus documents in Colorado, no such argument was made to that Court. Nor was any such argument made to this Court when Donziger's files were subpoenaed and produced in the 1782 proceeding or in the Count 9 action when the depositions of Ecuadorian lawyers were noticed. The notion that discovery from the Ecuadorian lawyers would violate Ecuadorian law first was raised in 2012 in this case, more than two years after the date of the Prieto email and almost two years after the submission of Fajardo's declaration to the Colorado district court.
