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Fourth Circuit Affirms Maryland District Court’s Ruling That Absence of Privilege Log Constitutes Waiver and Permits Chevron to View Documents from Ecuadorian Action

Chevron Corporation v. Aaron Page
Case No. 13-1382 (Sept. 24, 2014)
by Jhanelle A. Graham, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ca4.uscourts.gov/Opinions/Published/131382.P.pdf

In Chevron Corporation v. Aaron Page, the United States Court of Appeals for the Fourth Circuit was asked to decide on the consolidated appeals stemming from a multi-billion-dollar judgment rendered in Ecuador against the Chevron Corporation. Chevron sought discovery in several American courts to obtain evidence that the Ecuadorian plaintiffs and their lawyers fraudulently obtained that judgment. In the actions before the appellate court, Chevron sought documents from Aaron and Daria Page, two (2) Maryland-based attorneys who assisted Steven Donziger, the lead attorney representing the Ecuadorian plaintiffs. When Chevron subpoenaed documents relating to the Ecuadorian judgment from the Pages, they argued that some of those documents were privileged or protected from disclosure. The district court disagreed and ordered the Pages to produce the requested documents. The Pages, along with two (2) of the original plaintiffs from the Ecuadorian suit, filed an appeal to the Fourth Circuit. In a published opinion written by the Honorable Judge George Steven Agee, the Fourth Circuit dismissed the Pages’ appeal and affirmed the district court’s ruling permitting Chevron to access the requested documents.

The procedural history underlying the appeal is complex— in 1967, a consortium including Texaco Petroleum Company (“TexPet”) and Ecuador’s state-owned oil company (now known as Petroecuador) managed oil-drilling operations in Ecuador’s Oriente region. TexPet managed the consortium until 1990, when it transferred operational control to Petroecuador and sold its interests two (2) years later. Shortly thereafter, a group of Ecuadorian plaintiffs sued TexPet’s parent corporation, Texaco, Inc., in the Southern District of New York in 1993, for allegedly polluting the wildlife. See Aguinda v. Texaco, Inc., 303 F.3d 470, 473 (2d Cir. 2002). While Aguinda was pending, TexPet signed a 1994 settlement agreement with the Government of Ecuador and Petroecuador (“the Settlement Agreement”), agreeing to perform environmental remediation work in the Oriente region. See In re Chevron Corp., 650 F.3d 276, 284 (3d Cir. 2011). The New York court dismissed the Aguinda case in 2002 on forum non conveniens grounds, and a group of largely the same Ecuadorian plaintiffs refiled their suit against Chevron in Ecuador in 2003. This suit became known as the “Lago Agrio” litigation. Steven Donziger, an American attorney who had earlier been involved in Aguinda, assumed primary control as lead counsel in the Lago Agrio suit for the Ecuadorian Plaintiffs.

In 2011, the Ecuadorian Plaintiffs obtained an $18.2 billion judgment against Chevron in the Ecuadorian court, on grounds that TexPet had caused damage to the local environment. Chevron exhausted its appeals in Ecuador, but the Constitutional Court of Ecuador agreed to consider an extraordinary action seeking further review of the judgment. Several years after the Lago Agrio litigation was filed, Chevron initiated arbitration proceedings against the Government of Ecuador before the Permanent Court of Arbitration at The Hague, Netherlands. See Republic of Ecuador v. Hinchee, 741 F.3d 1185, 1187 (11th Cir. 2013). Specifically, Chevron alleged that the Lago Agrio proceedings were a fraud that Donziger and others orchestrated, claiming Donziger’s litigation team ghostwrote expert reports from Richard Cabrera, an “impartial,” court-appointed damages expert; Donziger and his associates allegedly commissioned a series of independent reports buttressing or “cleansing” Cabrera’s findings that were actually based on the same fraudulent data; and that Donziger and his associates forged an expert report from Dr. Charles Calmbacher, one of their own experts before purportedly bribing the Ecuadorian trial judge who authored the Lago Agrio judgment, by offering $500,000 to the judge in exchange for a favorable outcome. Further, Chevron maintained that the Pages, who worked for Donziger during the Lago Agrio litigation, directly involved themselves in this fraud by developing certain extortion strategies meant to pressure Chevron into settling, among other tactics.

To help establish its fraud and arbitration-related claims, Chevron sought discovery in the United States under 28 U.S.C. § 1782, which empowers federal district courts to order persons “to give testimony or produce documents for use in a proceeding in a foreign or international tribunal.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 246 (2004) (quotation marks omitted). Chevron planned to use the discovery in the ongoing international arbitration proceedings and the pending Ecuadorian appellate proceedings. In a § 1782 proceeding in the Southern District of New York, Chevron sought to compel Donziger to produce certain documents and submit to a deposition. Donziger moved to quash, arguing in part that the subpoenaed documents were privileged—particularly under the attorney-client and work-product privileges. Donziger, however, failed to file a privilege log when he raised these objections. Because Donziger failed to file a privilege log, the New York district court determined on October 20, 2010, in a decision termed “the Donziger Waiver,” that Donziger had waived any of the privileges that he claimed. See In re Application of Chevron Corp., 749 F. Supp. 2d 135, 140 (S.D.N.Y. 2010). Nonetheless, the district court afforded Donziger a chance to cure his waiver by filing a privilege log by a court-specified deadline, which Donzinger failed to do.

The New York district court ordered Donziger to produce “each and every document responsive to the subpoenas (irrespective of whether any privilege or other protection against disclosure has been or hereafter is or may be claimed).” The court also stressed that Donziger had deliberately delayed the § 1782 proceeding with unsubstantiated privilege claims as a litigation strategy. The Second Circuit affirmed the Donziger Waiver. Chevron later sued Donziger, the Ecuadorian Plaintiffs, and others in the Southern District of New York in February 2011. Chevron’s nine-(9) count complaint asserted claims under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act and certain New York statutes. After a bench trial, Chevron obtained a favorable judgment, and the district court concluded that Donziger “and the Ecuadorian lawyers he led [had] corrupted the Lago Agrio case” in a variety of ways, including fabricating evidence, coercing judges, and bribing judicial officials. Donziger, 974 F. Supp. 2d at 384. Accordingly, the district court enjoined Donziger and the other defendants in the New York action from enforcing the Lago Agrio judgment in the United States. Donziger, his law firm, and two (2) of the Ecuadorian Plaintiffs appealed that decision to the Second Circuit, which is still pending.

Chevron issued a pair of subpoenas to Aaron and Daria Page on May 20, 2011 in the District of Maryland, which were issued as an ancillary proceeding related to Chevron’s lawsuit in the Southern District of New York. Each included thirty three (33) different document requests relating to the Lago Agrio litigation and its surrounding circumstances. Although the Pages provided responses, objections, and some partial productions in June 2011, Chevron contended that these responses were inadequate. Chevron then moved in the District of Maryland to compel production, arguing that the Pages had inappropriately asserted privilege—primarily attorney work-product privilege—over some of the responsive documents. The Pages and two (2) Ecuadorian Plaintiffs opposed Chevron’s motion. On August 31, 2011, a Maryland magistrate judge granted Chevron’s motion to compel, concluding that the privileges asserted by the Pages did not apply, particularly because the Donziger Waiver acted to waive any privileges that applied to the Pages’ documents. In September 2011, the Pages produced the documents over which they had asserted privilege, but for reasons not relevant here, the Second Circuit effectively stayed discovery in the New York action. The Maryland district court responded by staying the Maryland magistrate judge’s discovery order and administratively closing the Maryland Rule 45 discovery proceeding, and further ordered Chevron to return or destroy the Pages’ documents.

Several months after discovery in the New York proceeding was completely stayed, the New York district court lifted its stay and permitted discovery to go forward on all remaining counts in that case. In response, the Maryland district court lifted its own stay in the Rule 45 proceeding and instructed Chevron to respond to objections to the magistrate judge’s decision. The district court overruled the objections and ordered the Pages to produce the documents again. In November 2011, while discovery pertaining to Chevron’s New York suit was stayed, Chevron filed a § 1782 application in the District of Maryland again seeking discovery from the Pages. The Pages, joined by the two (2) Ecuadorian Plaintiffs, again asserted privileges from disclosure as to some of the responsive documents. In January 2013, the magistrate judge ordered the Pages to turn over the documents that they possessed, citing the Donziger Waiver. Over objection, the district court affirmed the magistrate judge’s decision, and the Pages appealed.

First, the Fourth Circuit noted that it may “review only final decisions of district courts.” Noohi v. Toll Bros., Inc., 708 F.3d 599, 604 (4th Cir. 2013). Discovery decisions “bespeak their own interlocutory character,” as they constitute “only a stage in the litigation and almost invariably involve no determination of the substantive rights involved in the action.” MDK, Inc. v. Mike’s Train House, Inc., 27 F.3d 116, 119 (4th Cir. 1994). Ancillary discovery proceedings granting discovery are no different. Finding no exception under the facts of the case, the appellate court determined that the Pages failed to establish subject matter jurisdiction over the discovery dispute. Second, although the Fourth Circuit acknowledged that it has previously deemed attorneys disinterested, see, e.g., In re Grand Jury Subpoena, 341 F.3d 331, 334 n.2 (4th Cir. 2003), lawyers and their clients often share substantial interests that sometimes keep the attorneys from being truly “disinterested.” The Fourth Circuit determined that the Pages were not “disinterested” because: (1) the Pages asserted their own “privilege,” arguing that the subpoenaed documents were protected work product; (2) the Pages evidenced a willingness to face a contempt sanction, which was a “sure sign” for the appellate court that the Pages would not simply produce all the documents to avoid a sanction; and (3) the broader context of the litigation indicated that the Pages were not detached professionals who rendered disinterested services to the Ecuadorian Plaintiffs, but were alleged to have proactively assisted in a broad fraudulent effort engineered by their direct employer. Therefore, the appellate court held that the Ecuadorian Plaintiffs could not rely upon an exception to establish jurisdiction to hear their appeal from the district court’s Rule 45 order, where that exception applies only when there is “a real possibility the third party will not risk being found in contempt and will turn over the subpoenaed documents.” United States v. Jones, 696 F.2d 1069, 1071 (4th Cir. 1982).

Finally, the appellate court considered for the first time whether a decision on a § 1782 application is immediately appealable. Relying upon the fact that “[e]very other circuit court that has considered the jurisdictional issue presented here has found subject matter jurisdiction to hear an immediate appeal from an order on a § 1782 application,” the Fourth Circuit concurred with its sister circuits. Because the § 1782 order was a sufficiently final order, the appellate court had subject matter jurisdiction to hear an immediate appeal from a district court’s order granting discovery under that statute. Accordingly, the Court opined that the Donzinger Waiver applied to the Maryland action, and noted that to find otherwise would allow Donziger to escape his disclosure obligations because of the geographic happenstance of where the responsive documents otherwise under his control were found. The appellate court held, therefore, that comity was a compelling reason to affirm the application of the Donziger Waiver in the Maryland proceeding to the documents in the Pages’ possession.