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Chevron Corp. v. Donziger

United States District Court, S.D. New York

June 27, 2018

CHEVRON CORPORATION, Plaintiff,
v.
STEVEN DONZIGER, et al., Defendants.

          MEMORANDUM OPINION ON DONZIGER'S MOTIONS FOR DECLARATORY JUDGMENT AND DISMISSAL, FOR A PROTECTIVE ORDER AND FOR A STAY

          LEWIS A. KAPLAN UNITED STATES DISTRICT JUDGE

         This matter is before the Court in relation to Steven Donziger's motions for (1) a declaratory judgment and other relief [DI 2018], (2) a protective order [DI 2026], and (3) an “emergency administrative stay” [DI 2028]. On June 25, 2018, the Court decided the motions.[1] This opinion sets forth the reasons for those rulings.

         The crux of Donziger's applications in the three motions at issue here is a contention that Chevron Corporation (“Chevron”) - which was attempting to enforce both a money judgment against Donziger and an injunction that restrains him from, among other things, “undertaking any acts to monetize or profit from the [Ecuadorian] Judgment” that this Court already has held was obtained by fraud, “including without limitation by selling, assigning, pledging, transferring or encumbering any interest therein” - was precluded by the First Amendment from discovering (a) the sources of his recent and present income and assets as well as (b) other information going to the question whether he has complied with the injunction and other provisions of this Court's judgment.

         The Court assumes familiarity with its decision on the merits in this case and the Court of Appeals opinion affirmed that decision.[2]

         The Facts

         The Background

         Steven Donziger has engaged in a pattern of racketeering activity that has included extortion, mail fraud, wire fraud, violations of the Travel Act and other predicate acts.

         As this Court found after a lengthy trial, he and his cohorts have engaged for many years in a corrupt scheme, an object of which is to extort billions of dollars from Chevron. A lynch pin of that scheme was the fraudulent procurement of a multibillion dollar Ecuadorian judgment coupled with threats and attempts to enforce it in the United States and other countries around the world. Were that scheme to succeed, Donziger would be made a very wealthy man.

         The evidence at trial of Donziger's corruption and extortionate purpose was devastating. The record showed that Donziger and his Ecuadorian lawyers, as well as others with whom he worked, produced and obtained the fraudulent judgment and thoroughly corrupted that case. Among other things:

“They submitted fraudulent evidence. They coerced one judge, first to use a court- appointed, supposedly impartial, “global expert” to make an overall damages assessment and, then, to appoint to that important role a man whom Donziger hand-picked and paid to “totally play ball” with the LAPs. They then paid a Colorado consulting firm secretly to write all or most of the global expert's report, falsely presented the report as the work of the court-appointed and supposedly impartial expert, and told half-truths or worse to U.S. courts in attempts to prevent exposure of that and other wrongdoing. Ultimately, the LAP team wrote the Lago Agrio court's Judgment themselves and promised $500, 000 to the Ecuadorian judge to rule in their favor and sign their judgment.”[3]

         At the end of the trial, the Court found liability and granted equitable relief. It enjoined Donziger and the other defendants who appeared here from, among other things, seeking to enforce the Ecuadorian judgment in the United States, from profiting from it in any way, and “from undertaking any acts to monetize or profit from the [Ecuadorian] Judgment . . ., including without limitation by selling, assigning, pledging, transferring or encumbering any interest therein.”[4]The proof at trial was sufficiently compelling that Donziger did not challenge any of this Court's factual findings on appeal.[5] The Court of Appeals affirmed the judgment in full, [6] and the Supreme Court denied certiorari.

         There have been several developments since the affirmance of the judgment that set the stage for the present applications.

         The Supplemental Judgment Awarding Costs

         First, the Court entered a supplemental judgment against Donziger awarding to Chevron, the prevailing party, taxable costs in the aggregate amount of $811, 602.71.[7]

         Chevron's Contempt Motion and Application for Leave to Conduct Post-Judgment Discovery

         Second, on March 19, 2018, Chevron sought an order to show cause bringing on a motion, inter alia, to hold Donziger in civil contempt for violating the terms of the judgment and for leave to conduct post-judgment discovery relevant its enforcement.[8] It contended that Donziger was in violation both of (1) paragraph 3, which obliged him to execute a stock power transferring to Chevron all of his right, title and interest in shares of Amazonia, a Gibraltar entity formed to receive and distribute any funds collected with respect to the Ecuadorian judgment, [9] and (2) paragraph 5, which enjoined him “from undertaking any acts to monetize or profit from the [Ecuadorian] Judgment . . ., including without limitation by selling, assigning, pledging, transferring or encumbering any interest therein.”[10]

         Insofar as the motion alleges contempt of paragraph 5 of this Court's judgment, it contends principally that Donziger violated that provision by seeking to obtain funds from Elliott Management Corporation (“Elliott”) in exchange for an interest in the Ecuadorian judgment or any proceeds of it. It supported that contention with a declaration of an Elliott official. But, Chevron suspects other possible violations and sought discovery to determine whether he had done so with respect to other funders or potential funders.

         The Court signed the order to show cause. It observed in doing so that leave of Court was not required to conduct post-judgment discovery with respect to enforcement of the monetary portion of the judgment, [11] i.e., the $811, 602.71 costs award.

         In an opinion dated May 16, 2018, the Court denied the contempt motion insofar as it relied on paragraph 3 of the judgment and ordered an evidentiary hearing, originally scheduled for May 22, 2018, with respect to the alleged violation of paragraph 5 involving Elliott.[12] In addition, it ruled that Chevron was entitled to conduct post-judgment discovery with respect to its claim that Donziger had violated paragraph 5 of the judgment, relying on the Second Circuit's ruling to that effect in State of New York v Shore Realty Corp., [13] but temporarily delayed that discovery.[14]

         The Post-Judgment Discovery

         Third, Chevron propounded post-judgment discovery both to Donziger and to various non-party witnesses. As the foregoing suggests, some of that discovery is directed at locating property in which Donziger has an interest, property to which he is or may become entitled, or property that he may have transferred fraudulently, all so that Chevron by appropriate means may obtain that property or its proceeds in satisfaction of the money judgment. Other aspects of the discovery go, generally speaking, to determining whether Donziger has violated or is violating the provisions of the judgment that imposed a constructive trust and enjoined Donziger from engaging in certain activities.[15] Motion practice concerning that discovery is described below.

         Injunction Granted Against Defaulting Defendants

         Fourth, on April 23, 2018, the Court granted Chevron's unopposed motion for a default judgment against the many defendants who did not appear in this action, including the plaintiffs in the Ecuadorian case, at least one of their Ecuadorian lawyers, and others associated with them. The decree, like that against Donziger and the two other defendants who appeared in this case, enjoins the defaulted defendants from, among other things, seeking to enforce the Ecuadorian judgment in the United States, from profiting from it in any way, and “from undertaking any acts to monetize or profit from the [Ecuadorian] Judgment . . ., including without limitation by selling, assigning, pledging, transferring or encumbering any interest therein.”[16] Thus, all of the Ecuadorian plaintiffs now also are enjoined from seeking to monetize or profit from the fraudulent judgment.

         With that general background, we turn to the specific details relevant to resolution of Donziger's motions.

         Post Judgment Discovery Rulings

         Donziger

         In April 2018, Chevron, as noted, served discovery requests on Donziger and various non-parties. Those served on Donziger included a document request, an information subpoena, and a subpoena ad testificandum to take the deposition of Donziger.

         Donziger interposed largely boilerplate objections to substantially every discovery request[17] and ultimately took the position that he would not appear for a deposition. Despite his broad brush approach, he did not object to any discovery request on the ground now advanced in his motion for a protective order, viz. that compelled discovery of the identities of persons supporting his efforts, financially or otherwise, would violate the First Amendment.

         Chevron then moved to compel compliance.[18] Donziger's answering memorandum made essentially two points. He argued, first, that post-judgment discovery should be suspended because he hoped at some point to post a supersedeas bond.[19] Second, he contended that the parties should continue to confer concerning his previously interposed objections to specific discovery requests. He proposed that Chevron should be satisfied with “a descriptive summary or guidance as to [his] relatively simple financial condition, backed up by documentation.”[20] Once again, however, he did not contend that compelled discovery of the identities of persons supporting his efforts, financially or otherwise, would violate the First Amendment.[21]

         The Court ruled on the motion to compel on May 17, 2018.[22] For convenience of exposition, the Court divided the specific discovery requests into two rough categories. The first category, which it referred to as Money Judgment Discovery, was directed principally but not exclusively to identifying assets with respect to which the money judgment for costs may be enforced.[23] The second category, which it referred to as Paragraph 5 Compliance Discovery, principally seeks information with respect to whether Donziger has violated paragraph 5 of the March 4, 2014 judgment in this case, the provision that enjoined Donziger and the two Ecuadorian plaintiffs who appeared in this action from seeking to monetize or profit from the Ecuador judgment, including by selling, assigning, pledging, transferring or encumbering any interest therein.[24] It is pertinent to note, however, that at least some of the specific discovery requests actually seek information that is relevant both to collecting on the costs judgment and to the question whether Donziger has violated paragraph 5 of this Court's judgment.

         In relevant part, the Court's ruling modified certain of Chevron's discovery requests to make them more specific and directed Donziger to comply with the Money Judgment Discovery requests and to submit to a deposition. But it extended the delay in required compliance with the Paragraph 5 Compliance Discovery requests.

         The Postponement of the Contempt Hearing and Its Effect on the Discovery Schedule

         On the same day as the Court's discovery ruling, Donziger moved to postpone the contempt hearing. The Court granted the request, ultimately moving the hearing to June 28, 2018. Chevron responded to the postponement, however, by requesting that Donziger be required to respond to all outstanding post-judgment discovery requests, including the Paragraph 5 Compliance Discovery, in advance of the hearing.[25]

         In a June 1, 2018 ruling, the Court granted only part of Chevron's request. It ordered Donziger to comply - fully and by June 15, 2018 - with certain of the Paragraph 5 Compliance Discovery “to the extent of producing documents and providing information bearing on the attempt to obtain funds from” Elliott and related entities.[26] It continued to reserve judgment with respect to the balance of the Paragraph 5 Compliance Discovery.

         The Sullivan Discovery Ruling

         Among the non-parties on whom Chevron had served post judgment discovery requests are Mary Katherine Sullivan and Streamline Family Office, Inc. (“Streamline”), a company she apparently controls. Sullivan, Chevron claims, participated in Donziger's efforts to raise funds from Elliott and others.

         Following the June 1, 2018 ruling with respect to discovery against Donziger concerning to the Elliott matter, Sullivan and others, according to Chevron, continued to refuse to comply with Chevron's discovery requests. Chevron sought clarification from the Court that its rulings with respect to discovery from Donziger applied also to discovery from non-party witnesses. Donziger did not oppose that request, which the Court granted.[27] But that was not to be the end of the story.

         Ms. Sullivan's counsel informed the Court of what her attorney said was their understanding of Ms. Sullivan's discovery obligations in light of the Court's rulings and sought a protective order (a) barring her deposition or, alternatively, (b) limiting the questioning to the identification of “assets available to satisfy [the] money judgment.”[28] In short, Ms. Sullivan sought to preclude any examination of her at all or, failing that, to foreclose deposition testimony with respect to the Elliott matter in which she is said to have participated.

         On June 15, 2018, the Court directed Ms. Sullivan, “without further delay, ” to (1) produce all requested documents and information concerning (a) the attempt to obtain funds from Elliott, any affiliates of Elliot, and/or any funds managed by Elliott or its affiliates, (b) Donziger's assets, liabilities and financial situation, and (c) any payments to Donziger, past or anticipated, out of proceeds of financing granted in whole or in part in exchange for any portion of any future collections on the Ecuadorian judgment, and (2) appear for an testify at a deposition on those subjects in advance of the June 28 contempt hearing.[29]

         The Present Motions

         The Declaratory Judgment - Dismissal Motion

         On May 31, 2018, Donziger filed a motion styled as “Defendant Donziger's Motion for Declaratory Relief and Motion to Dismiss Plaintiff's Application to Hold Donziger in Contempt for ‘Profiting'From the Judgment.”[30]

         The first aspect of the motion seeks a declaration that this Court's judgment:

         “in no way prevents:

“1. Mr. Donziger or third-parties from exercising their legal rights in non-U.S. jurisdictions to obtain enforcement and related recovery on the Ecuador Judgment, consistent with the NY Judgment and the Second Circuit's affirmance thereof;
“2. Mr. Donziger from providing legal and other services including assistance in raising funds to cover litigation expenses, debts, and fees, from third-party litigation finance investors predicated on an interest in any recovery other than his specific contingency interest (or any specific interest that Mssrs. Camacho and Piaguaje may have);
“3. Mr. Donziger from receiving payments out of such third-party litigation finance funds to cover his legal expenses and fees for providing legal and other services, consistent with the terms of any such agreement and any applicable law.”[31]

         He contends in substance that certain statements in the Court's April 2014 ruling granting in part and denying in part his motion for a stay pending appeal of the Court's March 2014 injunction[32] modified that injunction as he purports to relate in the statements quoted above.

         The second branch of the motion seeks “dismissal, ” pursuant to Fed.R.Civ.P. 12(b)(6), of Chevron's contempt motion. In substance, his argument seems to be that the allegations of Chevron's contempt motion are insufficient to make out a claim of violation of paragraph 5 of the injunction with respect to the Elliott solicitation, as allegedly modified by the Court's comments on the motion for a stay pending appeal, with respect to the Elliott matter.

         The Protective Order Motion

         On June 15, 2018, Donziger moved for a protective order

“precluding any discovery in these post-judgment proceedings (including discovery sought from third-parties) that would tend to reveal the identity of any funder or other material supporter of the Ecuador Litigation and/or the internal operational, organizational, administrative, or financial management practices of the teams of individuals and organizations that directly and indirectly oppose Chevron in the Ecuador Litigation (‘Ecuador Litigation Team'), and/or more broadly engage in Ecuador Litigation-related advocacy (‘Aguinda Supporters').”[33]

         The essence of the argument is that such discovery would violate alleged First Amendment rights of Donziger funders and “material supporters” of his efforts as well as “the teams of individuals and organizations” that support them. He asserts that disclosure of the identities of supporters would subject them to “reprisals” by Chevron.

         The So-Called “Emergency Stay” Motion

         On June 19, 2018, Donziger filed yet another motion, that one for “an emergency administrative stay of provision 1(c)” of the Sullivan order of June 15, 2018 - which requires Sullivan to provide discovery in advance of the contempt hearing regarding “any payments to Donziger, past or anticipated, out of proceeds of financing granted in whole or in part in exchange for any portion of any future collections on the Ecuadorian judgment” - pending a decision on his protective order motion. As the Court's June 25 denial of the protective order mooted this motion, it requires no further discussion.

         Discussion

         I have set out in detail the unnecessarily complex history of the matters now before the Court. At the end of the day, however, the substance of the parties' disputes reduces to a few simple points. It is useful to put them on the table before proceeding to analysis of Donziger's submissions.

         1. While Donziger would portray himself as a rescuer of the helpless dwellers of a polluted rain forest from depredations of Chevron, the facts are quite different. As this Court found, Donziger:

“and the Ecuadorian lawyers he led corrupted the Lago Agrio case. They submitted fraudulent evidence. They coerced one judge, first to use a court-appointed, supposedly impartial, ‘‘global expert'' to make an overall damages assessment and, then, to appoint to that important role a man whom Donziger hand-picked and paid to ‘‘totally play ball'' with the LAPs. They then paid a Colorado consulting firm secretly to write all or most of the global expert's report, falsely presented the report as the work of the court-appointed and supposedly impartial expert, and told half-truths or worse to U.S. courts in attempts to prevent exposure of that and other wrongdoing. Ultimately, the LAP team wrote the Lago Agrio court's Judgment themselves and promised $500, 000 to the Ecuadorian judge to rule in their favor and sign their judgment.”[34]

         In short, the Ecuadorian judgment is a fraud and Donziger's activities extortionate.[35] And that is no less true because this Court, out of considerations of comity, did not enjoin the plaintiffs in the Ecuadorian case from seeking to enforce the Ecuadorian judgment in countries other than the Untied States.

         2. Donziger had every opportunity to contest this Court's findings on appeal but conspicuously did not do so. The Second Circuit affirmed the injunction barring him from profiting from his misdeeds in any way and from seeking to monetize the Ecuadorian judgment, “including by selling, assigning, pledging, transferring or encumbering any interest therein.” A largely identical injunction now has been entered against all or substantially all of the Ecuadorian plaintiffs and others in the Donziger complaint.

         3. Donziger now is liable to Chevron on an $811, 670 costs judgment. He has not obtained any stay of enforcement. The judgment is enforceable now. Chevron is entitled to try to collect it. It is entitled to conduct discovery in an effort to locate assets subject to execution or other process. It is entitled to find out from where he derives any revenue that he has received or is likely to receive because it may well have the right to execute on or otherwise reach that revenue as well as any money owed to him by others.[36] It is not obliged to take Donziger's word that a simple statement by him as to his financial position would suffice.

         4. In addition, Chevron, in its view, has caught Donziger violating this Court's injunction with respect to Elliott. It has sound reason to suspect that he has done so in other instances, although the Court has not reached any conclusion as to either. Donziger contends that whatever exactly he did with respect to Elliott - and he has not submitted any affidavit or declaration disclosing his version of the events - did not violate the injunction. Once the facts regarding are known, perhaps he will prove correct. But the Court has ruled that a hearing is appropriate to determine whether the evidence ultimately will warrant a finding of contempt with respect to Elliott and granted limited discovery in order to facilitate that hearing. Moreover, the evidence at that hearing may affect the Court's ...


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