Statements Made in Presence of Filmmakers Are Not Privileged and Cannot Effect a Subject Matter Waiver — Crime, Alone, Insufficient to Trigger Crime-Fraud Exception
From In re Application of Chevron Corp., 2011 U.S. App. LEXIS 10510 (3d Cir. May 25, 2011):
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 Pérez 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. ***
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. *** 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 Pérez and Veiga 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).
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, [Pérez] and Veiga, any such privilege has been waived by public disclosure and does not apply to any documents related to the Lago Agrio Litigation[.]" *** 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.*** 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.***
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. 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.
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." *** 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. 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. ***
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.***
Though Kohn and KSG are not averse to providing the discovery that the Chevron applicants have sought, they took no position in the District Court concerning the propriety of the discovery applications or the applicability of any evidentiary privileges. They, however, voluntarily did produce an 833-page privilege log to all of the parties on December 6, 2010, an effort that Kohn and KSG state required "hundreds of attorney hours reviewing and cataloging some 15,000-plus emails, approximately 40,000 pages of hard copy documents, and nearly 5,000 electronically stored documents[.]" Id. at 5. Notwithstanding Kohn's neutral position in the District Court, there was opposition to the Chevron applicants' discovery applications because the Ecuadorian plaintiffs and the Republic of Ecuador intervened in that Court as interested parties and opposed the section 1782 applications. ***
Kohn apparently was filmed for Crude on three occasions, during and after meetings in Philadelphia on April 10, 2006, June 5, 2006, and January 31, 2007. ***
As we have discussed, the Ecuadorian plaintiffs initially filed their environmental contamination case as a class action in the Southern District of New York. While that case was pending, the Republic of Ecuador and TexPet entered into a 1994 Memorandum of Understanding and a 1995 Settlement and Release Agreement whereby TexPet
agreed to perform specified environmental remedial work in exchange for a release of claims by the Government of Ecuador and Petroecuador. This release, granted to TexPet, Texaco, Inc., and other related companies, encompassed by its terms 'all the Government's and Petroecuador's claims against the Releases for Environmental Impact arising from the Operations of the Consortium[.]'
Republic of Ecuador v. ChevronTexaco Corp., 376 F. Supp. 2d 334, 342 (S.D.N.Y. 2005). In 1998 the Republic of Ecuador and Petroecuador executed a Final Release certifying that TexPet had performed the required remediation and had met its obligations under the 1995 Settlement and Release Agreement, and that by its terms they released "TexPet and related companies from any liability and claims by the Government of the Republic of Ecuador, PETROECUADOR and its Affiliates, for items related to the obligations assumed by TEXPET in the 1995 Settlement." Id. (internal quotation marks and citation omitted).
The parties dispute the legal impact of the 1998 Final Release. The Chevron applicants argue that it bars the Ecuadorian plaintiffs from making any recovery in the Lago Agrio litigation; indeed, this contention has been one of Chevron's primary arguments in the Lago Agrio litigation, the BIT arbitration, and the Southern District of New York litigation. The Ecuadorian plaintiffs contend, and the Republic of Ecuador agrees, that the Final Release, if valid at all, is valid only against the Republic and that it was not intended to release TexPet from liability for claims by third parties. ***
Whatever may have been the scope of the Final Release, the Ecuadorian Comptroller General in 1997 initiated an audit that continued until 2002, questioning the adequacy of TexPet's remediation, and raising the question of whether Ecuadorian officials and TexPet representatives had committed criminal offenses in certifying the adequacy of the remediation work leading to the execution of the 1998 Final Release. The audit led to a criminal denuncia (complaint) by the Comptroller General's office in October 2003, which, in turn, triggered investigations into determining whether anyone was criminally liable for falsifying documents or committing environmental crimes in connection with the remediation and Final Release. The Prosecutor General of Ecuador began an investigation into the criminal complaint in 2004, but in 2006 the District Prosecutor found that the evidence was insufficient to pursue a criminal case against Pérez and Veiga.***
A. The Attorney-Client Privilege and Waiver
The Chevron applicants' arguments, and the District Court's opinion, presuppose that the attorney-client privilege protected the material in Crude and its outtakes from disclosure, for only if there was such a protection could the disclosure of that material waive the attorney-client privilege protecting Kohn's file. Thus, our initial inquiry necessarily is whether the Crude material was privileged in the first place. In order for the attorney-client privilege to attach to a communication, "it must be '(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.'" In re Teleglobe Commc'ns Corp., 493 F.3d 345, 359 (3d Cir. 2007) (quoting RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 68 (2000)). We explained with respect to the third requirement in Teleglobe that "if persons other than the client, its attorney, or their agents are present, the communication is not made in confidence, and the privilege does not attach." Id. at 361. Here, the communications captured on film clearly were not made "in confidence" due to the presence of the filmmakers at the time of the communications, and so the protections of the attorney-client privilege never attached to those communications. In such a scenario the waiver argument advanced by the Chevron applicants is unavailing because, inasmuch as the communications were not protected by the attorney-client privilege, there was no risk of a litigant using the privilege as both a sword and a shield in an effort to gain an advantage in litigation, and thus there is no role for a court to play as arbiter of notions of "fairness." ***
Footnote 17. Of course, we recognize that in a typical case the difference between a finding that a communication was not privileged in the first place, and a finding that a communication was privileged but that the privilege was waived by subsequent disclosure of that communication to a third party, will be meaningless, because in a typical case a party is seeking to discover the communication in issue, and in either scenario the communication in issue will be discoverable because it is not protected by the attorney-client privilege. Here, however, the Chevron applicants are not seeking to discover the communications in issue, as they already have access to the Crude outtakes as a result of an earlier successful section 1782 application. Rather, the Chevron applicants are attempting to use the Crude outtakes as a means to effectuate a broad subject matter waiver of the entirety of Kohn's communications related to the Lago Agrio litigation. Because the basis for their position is that the Ecuadorian plaintiffs selectively disclosed privileged communications in Crude to gain an advantage in litigation, it matters that the communications in Crude and its outtakes were not covered by the attorney-client privilege, because the risk of a party using the privilege both as a sword and a shield by selectively disclosing communications to gain an advantage in litigation simply does not exist when the selectively disclosed communications were not privileged when made.
This case is distinguishable from our prior decision in In re Chevron Corp., 633 F.3d 153. There, the attorney-client privilege covered the communications in issue because they were made in confidence between privileged persons for the purpose of providing legal assistance. We held that by later disclosing those initially privileged communications to a third party — the court-appointed expert Cabrera — the Ecuadorian plaintiffs waived any claims of attorney-client privilege as to those communications. Here, on the other hand, because the communications were not made "in confidence" due to the presence of the Crude filmmakers, they were not privileged to begin with, and there was no privilege to waive by their disclosure. Accordingly, there is no justification for finding any waiver of the attorney-client privilege for Kohn's communications relating to the Lago Agrio litigation on the basis of disclosures made during the filming of Crude and its outtakes, even if those disclosures were selective, given that the communications disclosed were not privileged when made. ***
B. The Crime-Fraud Exception ***
Though the Chevron applicants are correct that the District Court made it clear that it believed that the crime-fraud exception to the attorney-client privilege was applicable to the Kohn communications, the Court ultimately did not rule that the exception applied. In the circumstances, because a determination of whether the crime-fraud exception is applicable is not purely a legal question, but rather requires a fact sensitive inquiry involving the exercise of discretion, we believe that the District Court should consider the crime-fraud exception issue in the first instance and we decline the Chevron applicants' invitation to decide at this time whether the exception is applicable.***
Notwithstanding our determination not to decide whether the crime-fraud exception is applicable, we think it prudent to observe, given the current state of the record and the District Court's comments on December 20, 2010, that it is not clear that the Chevron applicants have met their burden of establishing a prima facie case that the exception is applicable with respect to Kohn's otherwise privileged communications. ***
A party invoking the crime-fraud exception in an attempt to vitiate the attorney-client privilege
must make a prima facie showing that (1) the client was committing or intending to commit a fraud or crime, and (2) the attorney-client communications were in furtherance of that alleged crime or fraud. A prima facie showing requires presentation of evidence which, if believed by the factfinder, would be sufficient to support a finding that the elements of the crime-fraud exception were met.
In re Chevron Corp., 633 F.3d at 166 (quoting In re Grand Jury Investigation. 445 F.3d 266, 274 (3d Cir. 2006)). Though the Chevron applicants present evidence that they claim demonstrates a fraud or crime in the prosecution of the Lago Agrio litigation, in our prior opinion we clarified that
evidence of a crime or fraud, no matter how compelling, does not by itself satisfy both elements of the crime-fraud exception to the attorney-client privilege because to establish the second element of the exception the party seeking to circumvent the privilege by invoking the exception bears the burden of making a prima facie showing that there were communications between the client and attorney in furtherance of that fraud.
Id. at 166-67. ***
[W]e acknowledge the seriousness of the fraud that the Chevron applicants have alleged has been involved in this litigation. In addition to an Ecuadorian court entering a massive judgment against Chevron, the liberty of two individuals may be at stake. Yet the circumstances supporting the claim of fraud largely are allegations and allegations are not factual findings. Furthermore, the Chevron applicants are asking that American courts make a finding that the attorneys in a civil case in Ecuador can control the Ecuadorian criminal justice system. Though it is obvious that the Ecuadorian judicial system is different from that in the United States, those differences provide no basis for disregarding or disparaging that system. American courts, though justifiably proud of our system, should understand that other countries may organize their judicial systems as they see fit.
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