Chevron Corp. v. Naranjo

Citizens of Ecuador residing in the Lago Agrio region ("Lago Agrio Plaintiffs") filed a lawsuit in Ecuador which claimed that the predecessor of Chevron damaged the environment in which they lived from 1964 through 1992. On February 14, 2011, after seven years of litigation, the Ecuadorian trial court issued a decision against Chevron for $8.6 billion in damages, with $8.6 billion in punitive damages to be awarded unless Chevron apologized within 14 days of the opinion's issuance. Chevron did not apologize, and the pending judgment was thus for $17.2 billion ("Ecuadorian Judgment"). On February 1, 2011, Chevron filed an action in the Southern District of New York in part under New York's Uniform Foreign Country Money-Judgments Recognition Act (the "Recognition Act"), New York Civil Practice Law and Rules ("CPLR") §§ 5301-5309, which allows judgment-creditors to enforce foreign judgments in New York courts, subject to several exceptions. One of the mandatory exceptions requires that a court not enforce a judgment if "the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law." Chevron claimed that the decision by the Ecuadorian court was tainted by fraud, and also alleged that Plaintiffs' American attorney, Steven Donziger, wrested control of the Ecuadorian judicial process through political pressure that resulted in a judgment based on political manipulation rather than the rule of law The district court granted the injunction, confirming Chevron's theory of the judgment's invalidity and held that Chevron was, at a subsequent trial, either likely to prevail on the merits or at least show that the Ecuadorian court system is incapable of producing a judgment that New York courts would enforce under the Recognition Act, reasoning that the Ecuadorian judicial system "has been plagued by corruption and political interference for decades, that the situation has worsened since President Correa's election," and that there was "ample evidence of fraud in the Ecuadorian proceedings." The injunction enjoined the Lago Agrio Plaintiffs from commencing any action for the recognition or enforcement of the Ecuadorian Judgment by any court outside the Republic of Ecuador. The Second Circuit reversed and remanded to the district court with the instruction to dismiss Chevron's claim for injunctive and declaratory relief under the Recognition Act, holding that the Recognition Act did not permit a potential judgment-debtor, like Chevron, to preemptively seek a global anti-enforcement injunction. The court stated that the Recognition Act does not create an affirmative cause of action to declare foreign judgments void and unenforceable – rather, the sections on which Chevron relies are exceptions from the circumstances in which a holder of a foreign judgment can obtain enforcement of that judgment in New York. Challenges to the validity of foreign judgments under the Recognition Act can occur only after a judgment-creditor seeks enforcement in an "action on the judgment, a motion for summary judgment in lieu of complaint, or in a pending action by counterclaim, cross-claim or affirmative defense," and not before.