Waiver of Privilege and Crime Fraud Exception at Play in International Litigation over Ecuadorian Judgment against Chevron

By Louis M. Solomon

The most recent installment in the U.S. proceedings in which Chevron is trying to avoid the $8 billion judgment entered against it in an Ecuadorian court (which we have posted on many times) takes the form of a decision by a Magistrate Judge in the Southern District of New York on Chevrons claims of waiver of privilege relating to the written communications of various of the plaintiffs' lawyers.   Chevron Corp. v. Salazar, et al., 11 Civ. 3718 (LAK)JCF) (S.D.N.Y. Aug. 2011) [enhanced version available to lexis.com subscribers ] .  The international litigation issues in the decision include:

The Magistrate Judge addressed the issue whether a prior determination of waiver made by the District Court concerning Attorney Steve Donziger was transferable to the documents at issue such that those documents, or the communications found to have been waived, were waived even in the hands of other counsel for some of the plaintiffs.  The Court held that the waiver applied to all such documents/communications:  "Thus, any document within the scope of the Donziger waiver is stripped of its privileges for the purposes of this action".

With respect to the crime fraud exception, the Court engaged in a choice of law analysis.  The issue was made harder, said the Court, because "much of the alleged wrongdoing took place in Ecuador and was directed toward an Ecuadorian court".  Relying on prior case law, the Court ruled that:  "Whether foreign law should play a role in defining the contours of the attorney-client privilege in any given case is a determination within the sound discretion of the court".   Among the considerations to be considered are whether the conduct challenged was a crime or other wrong under either the U.S. nor non-U.S. regimes.  Because "what constitutes a crime will vary from one jurisdiction to the next", the crime-fraud exception "is forum specific".  Here the Court found that the claimed conduct, procuring a judgment through fraud, would be a sufficient wrong under New York law (which has jurisdiction over the plaintiffs' counsel) to warrant invocation of the crime fraud exception.  The Court further ruled that the scope of the waiver was not broader than the specific areas found by the District Court.

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