Republic Ecuador v. Mackay

• Decision Date: 31 January 2014
• Docket Number: Nos. 12–15572,12–15848.,s. 12–15572
• Citation: 742 F.3d 860
• Parties: REPUBLIC OF ECUADOR; Diego Garcia Carrion, Dr., Attorney General of the Republic of Ecuador, Plaintiffs–Appellees, v. Douglas M. MACKAY; Chevron Corporation, Defendants–Appellants. The Republic of Ecuador; Diego Garcia Carrion, Dr., Attorney General of the Republic of Ecuador, Applicants–Appellees, v. Michael A. Kelsh, Dr.; Exponent, Inc., DBA Delaware Exponent, Inc., Respondents–Appellants, and Chevron Corporation, Intervenor–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

742 F.3d 860

REPUBLIC OF ECUADOR; Diego Garcia Carrion, Dr., Attorney General of the Republic of Ecuador, Plaintiffs–Appellees,

v.Douglas M. MACKAY; Chevron Corporation, Defendants–Appellants.

The Republic of Ecuador; Diego Garcia Carrion, Dr., Attorney General of the Republic of Ecuador, Applicants–Appellees,

v.Michael A. Kelsh, Dr.; Exponent, Inc., DBA Delaware Exponent, Inc., Respondents–Appellants,andChevron Corporation, Intervenor–Appellant.

Nos. 12–15572, 12–15848.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 4, 2013.

Filed Jan. 31, 2014.

Theodore J. Boutrous, Jr. (argued), Gibson Dunn & Crutcher, LLP, Los Angeles, CA; Ethan Douglas Dettmer, Joshua S. Lipshutz, and Enrique Antonio Monagas, Gibson Dunn & Crutcher, LLP, San Francisco, CA, for Intervenor–Appellant and Respondents–Appellants.

Gene C. Schaerr (argued) and Eric Bloom, Winston & Strawn, Washington, D.C.; Richard A. Lapping, Winston & Strawn, San Francisco, CA, for Applicants–Appellees.

Appeal from the United States District Court for the Eastern District of California, Lawrence J. O'Neill, District Judge, Presiding. D.C. No. 1:12–mc–00008–LJO–GSA.

Appeal from the United States District Court for the Northern District of California, Charles R. Breyer, Senior District Judge, Presiding. D.C. No. 3:11–mc–80171–CRB.

Before: BARRY G. SILVERMAN, CONSUELO M. CALLAHAN, and N. RANDY SMITH, Circuit Judges.

OPINION

CALLAHAN, Circuit Judge:

Chevron Corporation and two of its expert witnesses, Douglas M. Mackay and Michael A. Kelsh (collectively, “Chevron”), appeal from two district court decisions ordering the production of documents. The Republic of Ecuador (the “Republic”) and Diego Garcia Carrion (collectively, the “Applicants”) sought the discovery for use in a foreign proceeding under 28 U.S.C. § 1782. Contending that the 2010 amendments to Federal Rule of Civil Procedure 26 fundamentally changed the scope of work product protection for expert materials, Chevron argues that the district courts erred because many of the documents at issue were presumptively immune from discovery under Rule 26(b)(3)'s protection for trial preparation materials. We find no merit to Chevron's arguments, and accordingly, we affirm the district courts.

I

A

The parties are involved in a long-running legal dispute that has stretched across multiple decades, tribunals, and continents. This appeal represents one of many skirmishes in the ongoing conflict, including two nearly identical appeals that were recently decided by the Tenth and Eleventh Circuits. Republic of Ecuador v. Hinchee, 741 F.3d 1185, No. 12–16216, 2013 WL 6655490 (11th Cir. Dec. 18, 2013); Republic of Ecuador v. For Issuance of a Subpoena Under 28 U.S.C. Sec. 1782(a) (Bjorkman), 735 F.3d 1179 (10th Cir.2013). We briefly review the underlying facts to provide context for the issue on appeal.

In 1964, a subsidiary of Texaco, Inc. (“Texaco”) began oil exploration and drilling in eastern Ecuador. Chevron Corp. v. Berlinger, 629 F.3d 297, 301 (2d Cir.2011). Texaco subsequently began operating a consortium in the area that conducted drilling activities and operated a pipeline. Id. Ecuador's state-owned oil company, Petroecuador, acquired an interest in the consortium, subsequently becoming the majority shareholder in 1976, and eventually acquired full ownership in 1990. Id. Texaco ceased operating the consortium in 1992. Chevron Corp. v. Naranjo, 667 F.3d 232, 235 (2d Cir.2012), cert. denied,––– U.S. ––––, 133 S.Ct. 423, 184 L.Ed.2d 288 (2012).

In 1993, a group of Ecuadorians brought a class action suit in the Southern District of New York against Texaco seeking billions of dollars in damages for environmental pollution and contamination allegedly caused by the consortium's activities (the “Aguinda ” action). Berlinger, 629 F.3d at 301;see generally Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir.2002). At Texaco's urging and over the plaintiffs' opposition, the case was dismissed on forum non conveniens grounds in 2001 with Texaco consenting to jurisdiction in Ecuador. See Berlinger, 629 F.3d at 301–02 & n. 2.

In the interim, Texaco entered into a settlement agreement with the Republic and Petroecuador in 1998, agreeing to perform remediation projects in exchange for a release from liability. Naranjo, 667 F.3d at 235. In 2001, Chevron purchased Texaco. Id. at 235 n. 2. Chevron has since asserted that the release covered any public claims related to the environmental harm because, at that time, the Republic owned the rights to any such claims. For their part, the Aguinda plaintiffs entered into an agreement where they waived any claims against the Republic and Petroecuador (which was allegedly responsible for a significant amount of the pollution). Chevron v. Donziger, 768 F.Supp.2d 581, 597–99 & n. 18 (S.D.N.Y.2011), rev'd sub nom. Naranjo, 667 F.3d at 234.

In 2003, a second group of Ecuadorians, including many of the Aguinda plaintiffs, brought suit against Chevron in Lago Agrio, Ecuador (the “Lago Agrio ” action). Berlinger, 629 F.3d at 302. Invoking a 1999 environmental law, the Lago Agrio plaintiffs asserted public claims that Chevron contends the Republic had previously released. Id. The Lago Agrio court ordered an independent expert to conduct a global damages assessment. Donziger, 768 F.Supp.2d at 603;Berlinger, 629 F.3d at 302. The court eventually entered a judgment of over $18 billion against Chevron. The judgment was recently cut in half but otherwise upheld by Ecuador's highest court. Hinchee, 741 F.3d at 1186–87, 2013 WL 6655490, at *1.

While the Lago Agrio action was ongoing, the plaintiffs' attorneys commissioned a documentary which was eventually released as Crude: The Real Price of Oil. Naranjo, 667 F.3d at 236. Based on some of the footage, Chevron engaged in a broad-based—and largely successful—effort to obtain the outtakes of the film and related materials through applications under 28 U.S.C. § 1782. Id. Chevron contends that the outtakes show widespread fraud by the plaintiffs' attorneys and the Ecuadorian judiciary. Id. at 237. Chevron presented this evidence to the Lago Agrio court, but the court continued to rely on the independent expert's data and returned the substantial judgment against Chevron. Id. One of Chevron's responses to the Lago Agrio action was a demand for arbitration against the Republic pursuant to the bilateral investment treaty between the United States and Ecuador (“BIT Arbitration”). Berlinger, 629 F.3d at 303.

B

On June 3, 2011, the Applicants filed a § 1782 application seeking discovery from Mackay in the Eastern District of California for use in the BIT Arbitration (the “ Mackay ” action). They filed a similar application in the Northern District of California on June 21, 2011, seeking discovery from Kelsh and his former employer, Exponent, Inc. (the “Kelsh ” action). Chevron intervened in both actions.

Mackay and Kelsh both served as Chevron's experts in the Lago Agrio action. Mackay is an adjunct professor at the University of California–Davis who offered opinions regarding the state of the soil and groundwater in the affected areas, as well as the parties' respective sampling and analysis. Kelsh is an epidemiologist who submitted reports rebutting the independent expert's assessment regarding health problems allegedly caused by Texaco's operations. Chevron submitted reports from both experts to the tribunal in the BIT Arbitration. The Applicants contend that the discovery will show that Chevron and its experts engaged in selective sampling to achieve favorable results.

Both district courts granted the § 1782 applications. Chevron subsequently produced hundreds of thousands of pages of documents but also withheld thousands of documents, asserting that they were privileged. The Applicants objected to Chevron's privilege claims, and the parties eventually raised their disputes with the district courts.

In the Mackay action, the magistrate judge found that Chevron was required to produce all documents listed on its privilege log other than Mackay's draft reports and certain “[c]ommunications directly between Dr. Mackay and counsel.” The district court denied Chevron's motion for reconsideration.

In the Kelsh action, the magistrate judge found that Chevron did not have to produce draft reports, draft worksheets, communications among Kelsh and his assistants, or communications between Kelsh or his assistants and Chevron attorneys. In re Republic of Ecuador (Kelsh), 280 F.R.D. 506, 512–14 (N.D.Cal.2012). The magistrate judge, however, otherwise ordered Chevron to produce the documents it was withholding. Id. at 516. The district court subsequently affirmed the magistrate judge's order. Chevron now appeals, and we have jurisdiction pursuant to 28 U.S.C. § 1291. See In re Premises Located at 840 140th Ave. NE, 634 F.3d 557, 565–66 (9th Cir.2011).

II

We typically review a district court's discovery rulings for abuse of discretion. R & R Sails, Inc. v. Ins. Co. of Pa., 673 F.3d 1240, 1245 (9th Cir.2012). However, where the question is not whether the district court properly exercised its discretion under a federal rule, but rather turns on the legal issue of whether the court properly interpreted the rule's requirements, we review that question de novo. Whittlestone, Inc. v. Handi–Craft Co., 618 F.3d 970, 973 (9th Cir.2010).

III

Chevron argues that the plain language of Rule 26(b)(3) generally protects expert materials as trial preparation materials prepared “by or for” a party or a party's representative. It urges us to confine our review to the text of the rule but contends that even if we look beyond it, the notes of the Advisory Committee on the Federal Rules of Civil Procedure support its interpretation. Chevron makes no arguments specific to the documents at issue or the experts involved in these proceedings; rather, the crux of Chevron's argument is that Rule 26(b)(3) always provides presumptive protection for all testifying expert...