Republic of Ecuador v. Chevrontexaco Corp., 04 Civ. 8378(LBS).
| Citation | 376 F.Supp.2d 334 |
| Decision Date | 27 June 2005 |
| Docket Number | No. 04 Civ. 8378(LBS).,04 Civ. 8378(LBS). |
| Parties | The REPUBLIC OF ECUADOR and Petroecuador, Plaintiffs, v. CHEVRONTEXACO CORPORATION and Texaco Petroleum Company, Defendants. Chevrontexaco Corporation and Texaco Petroleum Company, Counterclaim Plaintiffs, v. The Republic of Ecuador and Petroecuador, Counterclaim Defendants. |
| Court | U.S. District Court — Southern District of New York |
International Labor Rights Fund, Washington, DC, Terry Collingsworth, Thomas Cmar, Natacha Thys, Derek Baxter, Meredith Cohen Greenfogel & Skirnick, P.C., New York City, Robert A. Skirnick, Meredith Cohen Greenfogel & Skirnick, P.C., Philadelphia, PA, Daniel B. Allanoff, for Plaintiffs / Counterclaim Defendants the Republic of Ecuador and Petroecuador.
Jones Day, New York City, Thomas E. Lynch, Jones Day, Washington, DC, Louis K. Fisher, Gregory A. Castanias, Michael Kolis, for Defendants / Counterclaim Plaintiffs ChevronTexaco Corporation and Texaco Petroleum Company.
In this action, the Republic of Ecuador ("Ecuador" or "the Republic"), and its state-owned oil company Petroecuador, seek a permanent stay of an arbitration proceeding commenced by defendants ChevronTexaco Corporation ("ChevronTexaco") and Texaco Petroleum Company ("TexPet"), as well as other injunctive and declaratory relief. ChevronTexaco and TexPet (collectively "Defendants") counterclaim against Ecuador and Petroecuador (collectively "Plaintiffs"), alleging breach of contract and failure to indemnify an implied agent, and seeking damages as well as injunctive and declaratory relief.
The matter is currently before the Court on two motions by Plaintiffs: a motion for summary judgment on their own claims, and a motion to dismiss Defendants' counterclaims under Rule 12(b) for lack of subject matter jurisdiction and failure to state a claim. Also before the Court are various motions incidental to these two dispositive motions, such as applications to strike certain filings as untimely and for permission to file sur-replies. For the reasons stated below, Plaintiffs' motion for summary judgment is denied, and Plaintiffs' motion to dismiss the counterclaims is granted in part, denied in part, and in part left unresolved pending supplemental briefing regarding Ecuadorian law.
Because of the different legal standards governing the various motions before the Court, it is impossible to establish a single and complete set of facts that can be assumed to be true for purposes of this entire Opinion and Order. Before turning to the individual motions, however, it is useful to outline the basic facts regarding which the parties agree,1 and the procedural history of this action, in order to place the motions and specific factual disputes in context.
In 1965, following a grant to them by Ecuador of an oil concession in the Oriente region of that country, known as the "Napo Concession," TexPet and the Ecuadorian Gulf Oil Company ("Gulf") entered into a Joint Operating Agreement (the "1965 JOA").2 TexPet was named the first "Operator" under the 1965 JOA. The 1965 JOA contained an arbitration clause, requiring the parties to submit disputes to the American Arbitration Association ("the AAA") in New York. It contained an indemnification clause providing as follows:
If the Operator shall exercise its best judgment and care to select competent personnel and competent contractors to carry out and discharge its duties and obligations under this Agreement, the Operator shall not be liable to the Parties in damages or otherwise for its acts or omissions in carrying out and discharging or failing to carry out and discharge its duties and obligations under this Agreement. The Parties shall indemnify and save the Operator harmless from all claims and demands which may be made against Operator by third parties due to, arising out of, or related to the performance by the Operator of its duties under this Agreement.
(Perez Aff. Ex. C ¶ 6.4.) It also contained a choice-of-law clause stating that "[t]his Agreement and the relationship of the Parties hereunder shall be governed by and interpreted in accordance with the laws of the State of New York ... except for those matters which are necessarily governed by the laws of the Republic of Ecuador." (Id. ¶ 23.1.) The 1965 JOA provided that it would "inure to the benefit of and be binding upon the successors and assigns of the parties hereto and each of them respectively." (Id. ¶ 26.1.)
In February 1972, a military government took power in Ecuador. The military government wished to increase the Ecuadorian state's control over, and participation in, the development of Ecuador's oil reserves. In furtherance of this goal, on June 6, 1972, the government issued Supreme Decree No. 430, which, inter alia, required TexPet and Gulf "to agree to new oil concession contracts with the Republic and to relinquish a substantial percentage of Napo Concession lands." (Pl. R. 56.1 Stmt. ¶ 52; Def. R. 56.1 Resp. ¶ 52.) The Ecuadorian state-owned oil company Compania Estatal Petrolera Ecuatoriana or CEPE, which after reorganization later became plaintiff Petroecuador, immediately began to exploit those portions of the relinquished land where oil production was already ongoing. TexPet and Gulf requested compensation for the land they had relinquished, but these requests were rejected.
On or about March 27, 1973, Ecuador published Decree No. 317,3 which established a Model Contract containing certain new terms to which TexPet and Gulf were required to agree. A modified version of this contract was published on or about August 4, 1973 in Decree No. 925, and signed by Ecuador, TexPet and Gulf on or about August 6, 1973.
The contract published in Decree No. 925 and signed on August 6, 1973 (the "1973 Contract") substituted for certain previous contracts; whether the 1965 JOA was among those contracts replaced by it is one of the main points of contention in this case. As had been mandated by Supreme Decree 430 in 1972, "the 1973 Contract incorporated the terms of a 1971 Hydrocarbons Law that gave the Republic greater control over oil pricing and a larger percentage of royalties." (Pl. R. 56.1 Stmt. ¶ 58; Def. R. 56.1 Resp. ¶ 58.) The 1973 Contract also mandated that CEPE be allowed an option to purchase a stake in the Napo Concession, or Napo Consortium (as Plaintiffs describe the organization formed to explore the Napo Concession), in 1977. The 1973 Contract did not contain an arbitration clause.
On or about January 10, 1974, Ecuador issued Supreme Decree No. 9, mandating that CEPE would begin participating in the Napo Concession or Consortium in 1974, rather than in 1977 as had been indicated by the 1973 Contract. In ensuing negotiations, "the Republic informed Texaco4 and Gulf that CEPE's 25% participation in the Napo Consortium would begin on June 6, 1974, whether or not the Republic and the companies had reached an agreement on compensation." (Pl. R. 56.1 Stmt. ¶ 63; Def. R. 56.1 Resp. ¶ 63.) Given this ultimatum and fearing complete expropriation of the Napo Consortium by the Republic if it did not comply, TexPet executed a contract or "Acta" on or about June 14, 1974 (the "1974 Contract").5 The other signatories to the compelled 1974 Contract were Gulf, CEPE, and the Republic; Plaintiffs assert that the Republic and CEPE were "acting jointly as one party" (Pl. R. 56.1 Stmt. ¶ 68), but Defendants deny this.
Under the 1974 Contract, CEPE acquired a 25% share of all of the Napo Concession's operations, including "proportional parts of all investments, operational costs, obligations, royalties, [and] sales of crude for internal consumption...." .) The 1974 Contract also provided for acquisition of a share of the Trans-Ecuadorian Pipeline by either CEPE or the Republic of Ecuador, but this provision was unilaterally voided by the Republic in 1975. The 1974 Contract did not itself contain a clause providing for arbitration; it did, however, contain a clause stating that "[t]he totality of the activities that will develop in the Joint Operation will be regulated by an operating agreement entered into by the parties"6 ), the effect of which the parties dispute.
By 1976, Gulf became uncomfortable with its position with respect to the Republic, and began to withhold certain funds from the Republic. The Republic responded by threatening expropriation of Gulf's Napo Consortium assets. Fearing that it would lose its stake in the Consortium without receiving any compensation, Gulf negotiated an agreement, finalized on May 27, 1977, by which Gulf's remaining 37.5% stake in the Consortium was transferred to CEPE (which Plaintiffs assert was again acting as one party with the Republic). This agreement (the "1977 Contract") contained clauses addressing CEPE's lack of obligation for certain claims of or against Gulf, the effect of which the parties again dispute.
From 1977 to 1990, the Napo Concession or Consortium continued to operate with TexPet and CEPE/Petroecuador as the only partners and TexPet as the Operator. On January 22, 1985, however, TexPet and CEPE entered into an agreement providing for CEPE to take over as Operator on one year's notice (the "1985 Agreement").
On July 1, 1990, pursuant to an agreement signed by representatives of Petroecuador and TexPet the previous day (the "1990 Agreement"), Petroamazonas, a subsidiary of Petroecuador, replaced TexPet as the Operator of the Napo Concession. On March 25, 1991, Petroecuador, TexPet, and Petroamazonas entered into an "Operating Agreement" for the "Petroecuador-Texaco Consortium" (the "1991 Agreement"), which agreement specified that it would "be effective [retroactively] as of the first day of July 1990 and remain in effect...
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