Dejoria v. Maghreb Petroleum Exploration, S.A. & Mideast Fund for Morocco Ltd.
| Decision Date | 11 August 2016 |
| Docket Number | A-13-CV-654-JRN-AWA |
| Parties | JOHN PAUL DEJORIA v. MAGHREB PETROLEUM EXPLORATION, S.A. and MIDEAST FUND FOR MOROCCO LIMITED |
| Court | U.S. District Court — Western District of Texas |
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court are: Defendants Maghreb Petroleum Exploration, S.A. and Mideast Fund for Morocco Limited's Motion for Entry of Judgment (Dkt. No. 67), Plaintiff John Paul DeJoria's Response in Opposition to Motion (Dkt. No. 72), Defendants' Reply (Dkt. No. 73), Plaintiff's Pre-Hearing Supplemental Brief on Waiver Issue (Dkt. No. 76), Defendants Response to Plaintiff's Supplemental Sur-Reply Brief (Dkt. No. 78).
The District Court referred the above-matter to the undersigned Magistrate Judge for a report and recommendation pursuant to 28 U.S.C. §636(b) and Rule 1(c) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges.
Because the events leading up to the dispute in this case have been thoroughly examined in the District Court's Order granting DeJoria's Motion for Non-Recognition and again in the Fifth Circuit's decision reversing the District Court (Dkt. Nos. 57 & 63), the Court will only briefly summarize the facts in this case.
Between 1998 and 2001, Plaintiff John Paul DeJoria, an Austin resident and entrepreneur, invested in an American company called Skidmore Energy, Inc. in order to fund an oil exploration and technology project in the country of Morocco. In order to carry on its business in Morocco, Skidmore formed and capitalized a Moroccan corporation called Lone Star Energy Corporation.1 Because under Moroccan law corporations operating in Morocco require a "local" partner/shareholder, Lone Star partnered with Mediholding, S.A., which is owned by Prince Moulay Abdallah Aloaoui of Morocco (King Mohammed VI's first cousin). In March of 2000, Lone Star entered into an "Investment Agreement" with the Kingdom of Morocco in which Lone Star agreed to invest in hydrocarbon exploration in Morocco in return for obtaining mineral rights concessions and other benefits from Morocco. In that agreement, Lone Star agreed to drill at least three exploration wells in Morocco and invest roughly $150 million to explore hydrocarbons in Morocco. In August of 2000, a Lichtenstein-based company, Mideast Fund for Morocco ("MFM") agreed to invest $13.5 million in Lonestar in exchange for 50% of Skidmore's shares and assets.
On August 20, 2000, King Mohammed gave a nationally televised speech during which he announced the discovery of what he described as "copious and high quality oil" in Morocco. Three days later, the then Moroccan energy minister, Yousesef Tahiri, traveled to the site of the "discovery" with DeJoria and his business partner Michael Gustin at his side, and held a press conference during which he exclaimed that the oil discovery was such that it was expected to yield enough oil to supply the Kingdom for roughly 30 years. By the summer of 2001, however, it was clear that the oil reserves were not as plentiful as announced. As a result, the business relationship between MFM and Dejoria fell apart. Lone Star removed Dejoria and Gustin from its Board ofDirectors and DeJoria and Gustin fled Morocco. Dejoria claims that he and Gustin feared for their safety. MFM claims that they fled Morocco in order to avoid having to answer for their alleged fraudulent representations.
MFM proceeded to sue Skidmore, Dejoria, Gustin, and a number of other Skidmore officers in their individual capacities in a Moroccan court. MFM asserted that Skidmore fraudulently induced its participation by misrepresenting Skidmore's actual investment in Lone Star. MPE later joined as a plaintiff in the suit and claimed that Skidmore's fraudulent misrepresentations deprived Lone Star of necessary capital. In response, Skidmore filed in U.S. courts two quickly-dismissed lawsuits against MPE, MFM, and other parties. After nearly seven years of considering MPE and MFM's suit, the Moroccan court ruled against DeJoria and Gustin but absolved five of their co-defendants—including Skidmore—of liability. The court entered judgment in favor of MPE and MFM for approximately $122.9 million.
Thereafter, DeJoria sued MPE and MFM in Texas state court, challenging domestic recognition of the Moroccan judgment under Texas's Uniform Foreign Country Money-Judgment Recognition Act (the "Texas Recognition Act"), TEX. CIV. PRAC. & REM. CODE §§ 36.001-36.008. MPE and MFM removed the action to federal district court based on diversity of citizenship. Dejoria filed a "Motion for Nonrecognition of Foreign Judgment" in the District Court arguing under the Act's mandatory grounds for non-recognition, that (1) the Moroccan judicial system does not provide due process; and (2) that the Moroccan court lacked personal jurisdiction. DeJoria also argued, as discretionary grounds for non-recognition, that the Moroccan judgment should not be recognized because (1) the cause of action on which the judgment is based is repugnant to the public policy of Texas; (2) the court rendering the judgment is a seriously inconvenient forum for the trial of theaction; and (3) Moroccan courts do not recognize Texas judgments. See id. at § 36.005(b)(3), (6) and (7). After reviewing the evidence presented by the parties on the state of the Moroccan judicial system and the royal interest in this particular suit, the District Court granted DeJoria's Motion for Non-Recognition, concluding that DeJoria had not been provided with procedures compatible with due process as required under Section 36.005(a)(1) of the Act. Dkt. No. 57. Because he disposed of the case on the due process issue, the District Court did not address the remaining grounds for non-recognition DeJoria had asserted.
MPE and MFM appealed the District Court's ruling to the Court of Appeals for the Fifth Circuit, arguing that the judgment should be reversed because DeJoria had failed to meet his burden to prove that the Moroccan judicial system as a whole does not meet due process standards as required under Section 36.005(a)(1) of the Act. In their Appellant's Brief, MPE and MFM did not address any of DeJoria's alternative arguments raised before the District Court and asked the Fifth Circuit to "reverse and remand, and instruct the district court to rule on DeJoria's four remaining grounds for nonrecognition." Appellants' Brief at 60 (Attach. A to Dkt. No. 72). DeJoria's responsive Appellee Brief argued that the District Court correctly found that the Moroccan judgment was unenforceable under § 36.005(a)(1). Dejoria also argued the Moroccan judgment should be affirmed "because it is supported by alternative grounds in the Record, including lack of reciprocal money judgment enforcement [§ 36.005(b)(7)] by Morocco and the Moroccan court's lack of personal jurisdiction over DeJoria [§ 36.005(a)(2)]." Appellee's Brief at 1 (Attach. A to Dkt. No. 72). Dejoria did not mention or brief the public policy and inconvenient forum challenges to recognition of the Moroccan judgment.
In their Appellants' Reply brief, MPE and MFM responded to DeJoria's arguments with regard to the due process arguments under § 36.005(a)(1) and DeJoria's alternative arguments of lackof reciprocal money judgment enforcement under § 36.005(b)(7), and that the Moroccan court's lack of personal jurisdiction over DeJoria under § 36.005(a)(2). Although DeJoria had not raised the public policy and forum inconvenience claims in his Response brief, MPE and MFM also argued that these two issues were fully briefed and ripe for the Fifth Circuit's "de novo consideration." Appellants' Reply Brief at 32.
The Fifth Circuit reversed the District Court's Judgment, finding that the District Court erred in concluding that non-recognition was justified under § 36.005(a)(1) of the Texas Recognition Act. See Dejoria v. Maghreb Petroleum Exploration, S.A.; Mideast Fund for Morocco, Ltd.,804 F.3d 373 (5th Cir. 2015), cert. denied, 2016 WL 632710 (2016). The Court concluded that: Id. at 384. The Court also addressed the two alternative arguments DeJoria raised in his responsive brief: that Morocco does not recognize judgments rendered by Texas courts (§ 36.005(b)(7)) and that the Moroccan court lacked personal jurisdiction (§ 36.005(a)(3)). The Court found that DeJoria had not established, as required by the Texas Recognition Act, that "Morocco would refuse to recognize an otherwise enforceable judgment simply because it was rendered in Texas" or that the Moroccan court lacked personal jurisdiction over DeJoria.
In a footnote, the Fifth Circuit stated that it would not address the public policy and inconvenient forum challenges because "[t]hese arguments were not raised on appeal and are thus waived." Id. at 384 n.12. The Court concluded its Opinion with the boilerplate directive: "For the foregoing, reasons the judgment of the district court is REVERSED and this matter is REMANDED for further proceedings consistent with this opinion." Id. at 389.
DeJoria then filed a Petition for Panel Rehearing and a Petition for Rehearing En Banc, arguing that the Texas Recognition Act, as construed by the Panel, violates DeJoria's due process rights, the Panel used an erroneous state-law de novo standard of appellate review to decide a federal judgment-recognition appeal, and that the Panel erred by resolving fact-intensive alternative grounds for affirmance against DeJoria, where the...
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