Chevron Corp. v. Donziger

• Decision Date: 14 May 2012
• Docket Number: 11 Civ. 0691 (LAK)
• Parties: CHEVRON CORPORATION, Plaintiff, v. STEVEN DONZIGER, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

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

11 Civ. 0691 (LAK)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: May 14, 2012

OPINION ON MOTION TO DISMISS AMENDED COMPLAINT

Appearances:

Randy M. Mastro
Andrea E. Neuman
Kristen L. Hendricks
Scott A. Edelman
William E. Thompson
Gibson, Dunn & Crutcher, LLP
Attorneys for Plaintiff

John W. Keker
Elliot R. Peters
Christopher J. Young
Jan Nielsen Little
Matthew M. Werdeger
Nikki H. Vo
Paula L. Blizzard
William S. Hicks
Keker & Van Nest, LLP
Attorneys for Donziger Defendants

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TABLE OF CONTENTS

Facts........................................................................2

The Complaint..........................................................2
Proceedings to Date......................................................5

Discussion ...................................................................6

I. Legal Standard for Rule 12(b)(6) Motion ...............................6
II. RICO - Section 1962(c).............................................7

A. Alleged Extraterritorial Application..............................8

1. Chevron's Allegations and the Norex Decision..............10
2. Answering the Extraterritoriality Question .................12

a. Emphasis on the Enterprise .......................13
b. EmphasisontheAllegedRacketeeringActivity.......17

3. Application to this Case................................19

B. Sufficiency ofPattern Allegation - The Single Scheme Argument.....21
C. Sufficiency ofPredicate Act Allegations.........................23

1. Extortion ...........................................23
2. Mail and Wire Fraud ..................................27
3. Money Laundering....................................30
4. Obstruction of Justice and Witness Tampering..............31

E. Causation.................................................33

III. RICO Conspiracy - Section 1962(d)..................................37
IV. Common Law Fraud ..............................................37

A. Chevron'sAllegations.......................................37
B. Reliance..................................................38

1. First-Party Reliance...................................39
2. Third-Party Reliance ..................................40

V. Tortious Interference with Contract...................................43
VI. Trespass to Chattels...............................................45
VII. Unjust Enrichment................................................47
VII. New York Judiciary Law § 487 ...................................... 49
VIII. Civil Conspiracy .................................................52

Conclusion..................................................................53

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LEWIS A. KAPLAN, District Judge.

Last year, an Ecuadorian trial court entered a multibillion dollar judgment ("the Judgment")¹ against Chevron Corporation ("Chevron") in an action brought by 47 individual Ecuadorian residents (the "Lago Agrio Plaintiffs" or "LAPs"). In anticipation of the Judgment, Chevron filed this action against (1) the LAPs, (2) their New York lawyer Steven Donziger, the Law Offices of Steven Donziger, Donziger & Associates, PLLC (collectively, the "Donziger Defendants"), (3) Stratus Consulting, Inc. and two of its personnel (collectively, the "Stratus Defendants"), and (4) a few other defendants.² Two of the LAPs (the "LAP Representatives") and the Donziger and Stratus Defendants have appeared. The remainder have defaulted.³

The matter is now before the Court on the Donziger Defendants' motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted.⁴ The Court assumes familiarity with the extensive history of this controversy in this Court and the Court of Appeals, which is fully set out in numerous published decisions.⁵

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Facts

The Complaint

The amended complaint in this case contains more than 432 paragraphs of allegations, supplemented by a 56-page, single-spaced appendix that sets forth specific details amplifying assertions in the body of the pleading. For purposes of this motion to dismiss, they all are assumed to be true, and the plaintiff is entitled to the benefit of all inferences reasonably drawn from them.

In most instances, a decision ruling on a motion to dismiss would begin with a summary of the allegations of the complaint. In this case, however, that is unnecessary to the disposition of this motion, as most of Chevron's factual allegations are set forth in the Court's findings with respect to an earlier motion for a preliminary injunction.⁶ Where more detailed consideration of specific allegations is required, it is reserved to those portions of this opinion as deal with the substantive issues to which those allegations are pertinent. The Court emphasizes, however, that it decides this Rule 12(b)(6) motion based strictly upon the allegations of the amended complaint and matters incorporated therein by reference and that it has not relied upon evidence that has been before it on other motions. For present purposes it suffices to summarize most briefly the

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fundamental core of its claims and to outline the causes of action included in the amended complaint.

Although there is more to the case, Chevron's claims include assertions that Steven Donziger, a New York lawyer, and others based in the United States, here conceived, substantially executed, largely funded, and significantly directed a scheme to extort and defraud Chevron, a U.S. company, by, among other things, (1) bringing a baseless lawsuit in Ecuador; (2) fabricating (principally in the United States) evidence for use in that lawsuit in order to obtain an unwarranted judgment there; (3) exerting pressure on Chevron to coerce it to pay money not only by means of the Ecuadorian litigation and Judgment, but also by subjecting Chevron to public attacks in the United States and elsewhere based on false and misleading statements, (4) inducing U.S. public officials to investigate Chevron on the basis of false claims, and (5) making false statements to U.S. courts and intimidating and tampering with witnesses in U.S. court proceedings to prevent Chevron from obtaining evidence of the fraud.

The amended complaint contains nine causes of action:

Counts 1 and 2 assert substantive and conspiracy claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The details of their allegations are described extensively below. Broadly speaking, however, they allege that the Donziger Defendants, the Stratus Defendants, some of the other defendants (but not the LAPs),⁷ and a number of non-parties conducted and conspired to conduct the affairs of an enterprise through a pattern of racketeering activity in order, among other things, "to coerce Chevron into paying billions of dollars" to "stop

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an allegedly extortionate] campaign against it."⁸ The alleged predicate acts include extortion, mail and wire fraud, money laundering, witness tampering, and obstruction of justice.

Counts 3 through 5 assert claims against all defendants for fraud, tortious interference with contract, and trespass to chattels relating to the allegedly unlawful scheme described above.⁹

Count 6 asserts claims against all defendants for unjust enrichment on the ground that defendants have been and will be enriched as a result of the Judgment.¹⁰

Count 7 asserts a state law claim for civil conspiracy against all defendants, alleging that they conspired to commit the substantive state law violations.¹¹

Count 8 asserts that the Donziger Defendants violated Section 487 of the New York Judiciary Law.¹²

Count 9 sought a declaration that the Judgment was unenforceable and unrecognizable "on, among others, grounds of fraud, failure [by Ecuador] to afford procedures compatible with due process, lack of impartial [Ecuadorian] tribunals, lack of personal jurisdiction, [and] contravention of public policy."¹³ As detailed below, Count 9 has been disposed of previously.

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Proceedings to Date

In March 2011, this Court preliminarily enjoined the LAPs and others from, among other things, seeking enforcement or recognition of the Judgment outside Ecuador.¹⁴ That injunction rested on findings that (1) Chevron was threatened with immediate and irreparable injury, (2) it was likely to prevail on its claim the Judgment was not entitled to recognition or enforcement because Ecuador did not provide impartial tribunals and due process, (3) the record showed serious questions as to whether the Judgment had been procured by fraud, and (4) the balance of hardships weighed in favor of preliminary injunctive relief.¹⁵ The Court subsequently bifurcated, and later severed Count 9, which sought a declaration that the Judgment was not entitled to recognition or enforcement and a permanent injunction against enforcement efforts, set a trial date on that Count, and stayed proceedings on Counts 1 through 8 pending resolution of Count 9.¹⁶

In September 2011, the Second Circuit vacated the preliminary injunction and stated that an opinion would follow. The subsequent opinion did not pass, one way or the other, on this Court's findings with respect to the nature of the Ecuadorian tribunals or the evidence of fraud in the procurement of the Judgment. Rather, it explained that the panel had vacated the preliminary injunction on the ground...