United States District Court, S.D. New York
For Plaintiff: Randy M. Mastro, Andrea E. Neuman, Reed M. Brodsky, William E. Thompson, Anne Champion, GIBSON, DUNN & CRUTCHER, LLP.
For Defendant Steven Donziger and Steven R. Donziger & Associates LLP: Richard H. Friedman, FRIEDMAN | RUBIN; Zoe Littlepage, Rainey C. Booth, LITTLEPAGE BOOTH; Steven Donziger.
For Defendants Hugo Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje: Julio C. Gomez, JULIO C. GOMEZ, ATTORNEY AT LAW LLC.
MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR A STAY PENDING APPEAL
Lewis A. Kaplan, United States District Judge.
An Ecuadorian court in 2011 entered an $18.2 billion judgment (the " Lago Agrio Judgment" ) against Chevron Corporation (" Chevron" ) in an action brought by 47 individuals referred to as the Lago Agrio plaintiffs (the " LAPs" ). Chevron brought this action against the LAPs, their lead U.S. attorney, Steven Donziger, and others involved in the Lago Agrio litigation and related events, claiming that the Lago Agrio Judgment was obtained by fraud as part of a scheme to extort money from the company. Following a lengthy trial with an enormous factual record, this Court made extensive findings, including that Donziger and the LAPs: (i) submitted fraudulent evidence; (ii) coerced a judge to use a global expert to issue a damages assessment and then to appoint to that role a man Donziger selected, paid through a secret account, and controlled; (iii) paid a Colorado consulting firm secretly to write all (or most) of the global expert's report, which was presented falsely as the expert's own work; (iv) misrepresented the facts and substance of their relationship with the global expert to U.S. courts; and, ultimately, (v) wrote secretly the Lago Agrio Judgment and promised $500,000 to the Ecuadorian judge in exchange for deciding the case in their favor and signing the judgment they prepared.
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, this Court granted only narrow relief intended to preclude Donziger and the two LAP Representatives from profiting from the misdeeds for which they were responsible. To that end, the judgment in this case (the " N.Y. Judgment" ) (i) imposed a constructive trust for Chevron's benefit upon any proceeds " traceable to the [Lago Agrio] Judgment" or its enforcement that Donziger or the LAP Representatives have received or might receive, (ii) required that Donziger " execute in favor of Chevron a stock power transferring" to the company " all of his right, title and
interest in his shares of Amazonia," a company organized to collect and distribute any proceeds of the Lago Agrio Judgment, (iii) enjoined Donziger and the LAP Representatives from " [f]iling or prosecuting any action for recognition or enforcement of the [Lago Agrio] Judgment" (or any new judgment based upon the Lago Agrio Judgment) " in any court in the United States,"  and (iv) prohibited Donziger and the LAP Representatives from attempting to " monetize or profit from the [Lago Agrio] Judgment, . . . including . . . by selling, assigning, pledging, transferring or encumbering any interest therein."  Significantly, the N.Y. Judgment did not restrict the other LAPs, who remain free to sell, assign, or transfer their interests, if any, in the Lago Agrio Judgment and to seek to enforce it anywhere in the world. Nor did it restrict any of the other named defendants who did not participate in this trial from doing so.
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. It merely prevents these three individuals -- who are among those responsible for the bribery of the presiding judge in Lago Agrio and otherwise procuring the Lago Agrio Judgment by fraud -- from profiting from that misconduct. Nevertheless, Donziger and the LAP Representatives now seek a stay in order to suspend pending appeal the very relief they stated would pose no problem.
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
for the benefit of Chevron and Donziger, as their interests ultimately may appear, and be voted, after ten days prior notice and absent a contrary order of this Court, as Donziger may direct.
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."  " The probability of success that must be demonstrated is inversely proportional to the amount of irreparable injury plaintiff will suffer absent the stay. Simply stated, more of one excuses less of the other."  The sliding scale notwithstanding, however, an applicant for a stay pending appeal must establish more than a " mere possibility" both of irreparable injury absent a stay and of success on the merits of the appeal. Thus, a showing of likely irreparable harm absent a stay pending appeal is indispensable, although the required strength of that essential showing may vary depending upon the strength of any likelihood of prevailing on the merits.
I. Movants Have Not Shown Any Threat of Irreparable Injury Absent a Stay Pending Appeal of the Limited Relief Granted Here
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, (2) the required transfer of his Amazonia shares to Chevron would deprive him of their value and of his right to participate in Amazonia's affairs and, worse yet, introduce Chevron into the internal workings of an entity formed to collect the Lago Agrio Judgment from Chevron, and (3) Donziger would suffer a loss of good will and reputational damage absent a stay. The LAP Representatives contend that the prohibition of the monetization of any interest they may have in the Lago Agrio Judgment would render them unable to finance their appeal unless the judgment of this Court were stayed. Both the LAP Representatives and Donziger claim that they will be deprived, absent a stay, of " real property" by the N.Y. Judgment, which would render that supposed injury irreparable.
These arguments cannot be squared with the record in this case, the terms of the N.Y. Judgment, common sense, or all three. There simply is no material threat of any irreparable injury if the N.Y. Judgment remains in effect until the Circuit has full briefing, an opportunity to study the extensive findings and record, heard oral argument, and decided the case.
A. The Judgment Does Not Threaten Irreparable Harm to Donziger's Law Practice
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."  This argument is empty rhetoric.
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.
1. Donziger's Compensation Arrangements
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. It provides that he is entitled to a Monthly Retainer and, in the event money ever is recovered on the Lago Agrio Judgment, a Contingent Fee that works out to 6.3 percent of the recovery. While any payments of a Contingent Fee would be " traceable to the [Lago Agrio] Judgment," and thus subject to the constructive trust imposed by paragraph 1, the same would not be true of Monthly Retainer payments unless those payments were traceable to the Lago Agrio Judgment. Thus, at least as long as no collections are made in respect of the Lago Agrio Judgment and funneled to Donziger as retainer payments, the N.Y. Judgment would not prevent Donziger from being paid, just as he has been paid at least $958,000 and likely considerably more over the past nine or ten years.
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
suggestion that preventing Donziger from collecting a Contingent Fee during the pendency of the appeal would inflict irreparable injury by depriving him of the ability to work on the case or to earn a living, much less destroying his law practice.
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. And while the Lago Agrio Judgment is enforceable in Ecuador, and certain limited Chevron assets have been attached there for the benefit of the judgment creditors, Donziger and the LAP Representatives have characterized the possibility that they actually will receive anything as a result of that attachment as " speculation."  Thus, there has been no showing that Donziger has received, or is likely during the pendency of this appeal to receive, any Contingent Fee. The risk even of a delay of his receipt of any Contingent Fee by virtue of the effectiveness of the N.Y. Judgment pending appeal is purely speculative.
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.
2. The Monetization Provision
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 ...