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In Re: Application of Chevron Corporation For v. Joseph C. Kohn

May 25, 2011

IN RE: APPLICATION OF CHEVRON CORPORATION FOR AN ORDER PURSUANT TO 28 U.S.C. SECTION 1782 TO CONDUCT DISCOVERY FOR USE IN FOREIGN PROCEEDINGS RODRIGO PEREZ PALLARES AND RICARDO REIS VEIGA
v.
JOSEPH C. KOHN, ESQUIRE AND KOHN, SWIFT & GRAF, P.C.
ECUADORIAN PLAINTIFFS, APPELLANTS IN NO. 10-4699 IN RE: APPLICATION OF CHEVRON CORPORATION FOR AN ORDER PURSUANT TO 28 U.S.C. SECTION 1782 TO CONDUCT DISCOVERY FOR USE IN FOREIGN PROCEEDINGS RODRIGO PEREZ PALLARES AND RICARDO REIZ VEIGA
v.
JOSEPH C. KOHN, ESQUIRE AND KOHN, SWIFT AND GRAF, P.C.
*REPUBLIC OF ECUADOR, APPELLANT IN NO. 11-1099



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. # 2-10-mc-00208 and 2-10-mc-00209) Honorable Jan E. DuBois, District Judge

The opinion of the court was delivered by: Greenberg, Circuit Judge.

PRECEDENTIAL

*(Pursuant to Fed. R. App. P. 12(a))

(D.C. # 2-10-mc-00208) (D.C. # 2-10-mc-00209) (D.C. # 2-10-mc-00208) (D.C. # 2-10-mc-00209)

Argued February 22, 2011

BEFORE: AMBRO, FISHER, and GREENBERG, Circuit Judges

OPINION OF THE COURT

I. INTRODUCTION

This matter comes on before this Court on appeal from the District Court's December 20, 2010 order granting Chevron Corporation (Chevron), and two of its attorneys, Rodrigo Perez Pallares and Ricardo Reis Veiga (collectively with Chevron "the Chevron applicants"), discovery from attorney Joseph C. Kohn and his law firm, Kohn, Swift & Graf, P.C. (KSG), pursuant to discovery applications that the Chevron applicants filed under 28 U.S.C. § 1782. Section 1782 provides that "[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal," subject to the express limitation that "[a] person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege." 28 U.S.C. § 1782(a).

The underlying foreign litigation giving rise to the section 1782 applications is an environmental class action in Lago Agrio, Ecuador (the Lago Agrio litigation), that the inhabitants of the Oriente region of eastern Ecuador (the Ecuadorian plaintiffs) brought alleging that Texaco Petroleum Company (TexPet), a subsidiary of Texaco, Inc. (Texaco), which merged with Chevron in 2001, contaminated the area and caused significant health problems for its residents. As we explain below, Kohn and KSG have been involved for many years on behalf of the Ecuadorian plaintiffs in the underlying litigation in both legal and financial capacities. The Chevron applicants sought section 1782 discovery for use in the Lago Agrio litigation itself, criminal proceedings arising from TexPet's Ecuadorian activities that have been instituted against Perez and Veiga*fn1 in Ecuador, and an arbitration that Chevron initiated against the Republic of Ecuador with the United Nations Commission on International Trade Law (UNCITRAL) pursuant to the United States-Ecuador Bilateral Investment Treaty (BIT).*fn2

The Ecuadorian plaintiffs and the Republic of Ecuador (collectively "appellants"), both of whom intervened in the District Court in this case, contend that the Court erred in granting the Chevron applicants' section 1782 discovery applications and assert several challenges to the Court's rulings. The Ecuadorian plaintiffs' primary challenge is to the Court's conclusion that, "[t]o the extent that any privilege or immunity from disclosure would otherwise apply to some or all of the discovery sought by Chevron or individual applicants, [Perez] and Veiga, any such privilege has been waived by public disclosure and does not apply to any documents related to the Lago Agrio Litigation[.]" In re Application of Chevron Corp., Nos. 10-MC-208 and 10-MC-209, 2010 WL 5173279, at *11 (E.D. Pa. Dec. 20, 2010). Specifically, the Ecuadorian plaintiffs contend that the Court misstated the law regarding waiver of the attorney-client privilege, causing it to omit fairness considerations in its analysis, and that consequently its ruling that the attorney-client privilege was waived for all documents in Kohn's file related to the Lago Agrio litigation primarily on the basis of the filming of the documentary Crude, which chronicled the Lago Agrio litigation, was too broad. They also argue "that the presence of strangers" during attorney meetings prevented the privilege from ever attaching to what otherwise might have been privileged information. Ecuadorian plaintiffs' br. at 23. n.7. As will be seen, the "presence of strangers" during attorney meetings being filmed for Crude is the critical factor in the disposition of this appeal. The Republic of Ecuador challenges the District Court's conclusion that it "failed to establish its right to assert the community-of-interest privilege with respect to the documents and deposition testimony sought in this case." In re Application of Chevron Corp., 2010 WL 5173279, at *11. We, however, will have no need to address that issue.

Inasmuch as we hold that the communications filmed for Crude and its outtakes were not covered by the attorney-client privilege when made due to the presence of the filmmakers at the time of the communications, we will reverse the District Court's orders because the public disclosure of non-privileged communications does not lead to a subject matter waiver of the attorney-client privilege for communications covered by the privilege. We, nevertheless, will remand the matter to the District Court so that it may consider the Chevron applicants' contention that certain communications in Kohn's file are discoverable pursuant to the crime-fraud exception to the attorney-client privilege.

II. FACTS AND PROCEDURAL HISTORY

This is our second encounter with a section 1782 discovery request relating to the Lago Agrio litigation, and because much of the background factual information in this case is the same as that we recounted in our earlier encounter in In re Chevron Corp., 633 F.3d 153 (3d Cir. 2011), we only will outline that background information briefly before setting forth in more detail those facts essential to the resolution of this appeal.

The Ecuadorian plaintiffs initially brought a class action suit against Texaco in 1993 in the United States District Court for the Southern District of New York (the Aguinda case), claiming that pollution from oil exploration and extraction activities had harmed individuals inhabiting the Oriente region of Ecuador and damaged the natural ecosystem in the area. After years of litigation, the court dismissed the Aguinda case in 2002 on forum non conveniens grounds, based in part on Texaco's representations that the Ecuadorian judiciary was impartial and free from corruption and that the Ecuadorian courts could provide a fair and appropriate forum in which to resolve the dispute in the Aguinda case. See Aguinda v. Texaco, Inc., 303 F.3d 470, 474-80 (2d Cir. 2002).

In 2003, after dismissal of the Aguinda case, the Ecuadorian plaintiffs instituted the Lago Agrio litigation against Chevron in Ecuador.*fn3 On February 14, 2011, shortly before we heard oral argument on this appeal, the Lago Agrio Court issued a comprehensive opinion adjudicating the case and entering judgment in United States dollars against Chevron, calculating the compensatory damages at $8.646 billion. The breakdown of the damages award was as follows: $5.396 billion for soil remediation; $1.4 billion for health care costs; $800 million for deaths due to cancer; $600 million for groundwater remediation; $200 million for damage to the ecosystem; $150 million for drinking water remediation; and $100 million for damages to indigenous culture. The judgment also included a provision granting an equivalent $8.646 billion in punitive damages payable if Chevron did not issue a public apology within 15 days of entry of the judgment.*fn4

Both Chevron and the Ecuadorian plaintiffs have signaled their intent to appeal from the judgment entered in the Lago Agrio litigation. It is our understanding that the Ecuadorian appellate court will exercise de novo review over both the Lago Agrio Court's findings of fact and conclusions of law. Moreover, the Ecuadorian plaintiffs' litigation team produced a memorandum in response to a Chevron section 1782 application in the Southern District of New York seeking discovery from Steven Donziger, the Ecuadorian plaintiffs' lead American attorney, stating that "during the pendency of that appeal, the judgment is not deemed enforceable under Ecuadorian law, and thus, would not appear to be enforceable anywhere else."*fn5 Chevron Supp. App. II at 480. The Ecuadorian plaintiffs' attorneys' memo further explained that "[b]eyond this initial level of appeal, it is our understanding that Chevron would be required to post an appellate bond equivalent to 100% of the judgment[,]" and for that reason the Ecuadorian plaintiffs' attorneys believe that if the Ecuadorian plaintiffs prevail on the initial appeal, "it seems likely that Chevron will pursue no further recourse in Ecuador." Id.

As the Lago Agrio litigation progressed, Chevron's opinion of the Ecuadorian courts changed dramatically, and Chevron now contends that the Ecuadorian judiciary is rife with corruption and that a fair trial was not possible in the Lago Agrio litigation. Assessing that its litigation prospects in Ecuador were not promising, correctly as it turned out, on November 23, 2009, Chevron commenced the BIT arbitration against the Republic of Ecuador, seeking a declaration that any judgment the Lago Agrio Court entered would be unenforceable by reason of the judgment having been fraudulently obtained. Furthermore, Chevron asserted that there is corruption within the Ecuadorian judiciary and that the Ecuadorian government interfered in the judicial process in the Lago Agrio litigation.*fn6

The BIT arbitral panel, which we understand is composed of two private lawyers and a law professor, held a hearing on February 6, 2011, and on February 9, 2011, issued interim measures ordering the Republic of Ecuador to take all measures at its disposal to suspend the enforcement or recognition of any judgment entered in the Lago Agrio litigation both inside and outside of Ecuador. We are unaware of whether the Republic of Ecuador has taken any steps to implement the provisions in the order.

Perhaps regretting its earlier efforts to have the Aguinda case dismissed in the Southern District of New York, Chevron filed a civil Racketeer Influenced and Corrupt Organizations Act (RICO) suit against Donziger and other attorneys that represented the Ecuadorian plaintiffs, though not including Kohn or KSG as defendants, in the Southern District of New York on February 1, 2011. As part of that suit Chevron is seeking a declaration that the Lago Agrio judgment is not entitled to recognition or enforcement outside of Ecuador because the Ecuadorian plaintiffs' attorneys procured the judgment by their fraudulent conduct, and, somewhat ironically given its past representations in the Southern District of New York, because the Ecuadorian legal system is not impartial and does not provide litigants due process of law. On March 7, 2011, the district court in the Southern District of New York granted Chevron's motion for a worldwide preliminary injunction barring the Ecuadorian plaintiffs from enforcing the Lago Agrio judgment. See Chevron Corp. v. Donziger, No. 11 Civ. 0691, -- F. Supp. 2d --, 2011 WL 778052 (S.D.N.Y. March 7, 2011).

During the course of the Lago Agrio litigation Chevron has filed a series of section 1782 discovery applications in federal courts across the United States seeking information related to that litigation and to its contention that the Ecuadorian plaintiffs, through their attorneys, have been involved in fraudulent conduct.*fn7 Specifically, the Chevron applicants contend that the Ecuadorian plaintiffs and their representatives conspired to ghostwrite reports entered into evidence in the Lago Agrio litigation by purportedly neutral and independent scientists, and also surreptitiously were instrumental in the institution of criminal charges against Perez and Veiga in Ecuador.

Before instituting these section 1782 proceedings, Chevron sent Kohn and KSG a letter on November 8, 2010, threatening to institute the proceedings against them. Kohn and KSG responded by filing a complaint for declaratory relief in the United States District Court for the Eastern District of Pennsylvania on November 12, 2010, because they perceived that they faced the dilemma of either "choos[ing] not to resist the forthcoming [section 1782] Application and disclos[ing] the materials sought, but risk[ing] suit from its former clients[,]" or "oppos[ing] the Application and withhold[ing] the requested materials, but risk[ing] continued irreparable harm to its reputation as a result of scandalous, totally ...


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